Sunday, June 19, 2011

The Economist-Father and the Father-Economist

Here's an interesting quote from Justin Wolfers at Freakonomics:
I’m a committed neoclassical economist. I learned it when I was at a point in my life when rational self-interest (broadly defined) seemed the right way to understand the world. But what kind of economists would we be if we learned our economics only after we were parents? It’s an interesting thought experiment, and truth is, I don’t know the answer. But slivers of evidence—my own introspection, conversations with other economist-parents, and even intriguing research showing the impact that daughters have on Congressman-dads—all tell me that it would be different.
Here is Robin Hanson in an excellent response:
But none of that makes me doubt the value of neoclassical econ. How could it? First, econ makes sense of a complex social world by leaving important things out, on purpose – that is the point of models, to be simple enough to understand. More important, econ models almost never say anything about consciousness or emotional mood – they don’t at all assume people choose via a cold calculating mindset, or even that they choose consciously. As long as choices (approximately) fit certain consistency axioms, then some utility function captures them. So how could discovering emotional and unconscious choices possibly challenge such models?
I find myself conflicted upon reading this interaction. I don't always agree with Wolfers, but I don't always disagree either. This is one of those times where I am somewhere in between.

On one hand, I think Wolfers makes an interesting point that something as profound as fatherhood can shape how an economist views the world. On the other hand, I agree with Hanson that we need not reject the fundamental axioms of neoclassical economics to accept the humanity of fatherhood. A model is a simplification of the world that should not include every detail (otherwise, the problem is intractable).

Maybe Wolfers' post is really just suggesting that we economists value research on preference formation a little more highly, such as this paper on addiction:
The authors develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time. Strong addiction to a good requires a big effect of past consumption of the good on current consumption. Such powerful complementarities cause some steady states to be unstable. They are an important part of the authors' analysis be-cause even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention. Their theory also impies that "cold turkey" is used to end strong addictions, that addicts often go on binges, that addicts respond more to permanent than to temporary changes in prices of addictive goods, and that anxiety and tensions can precipitate an addiction.
As I understand it, a father can be addicted to kids. And, contrary to the tone in this abstract, not all addictions are bad. Happy Father's Day.

Update (6/22/11): Wolfers posted a followup in which he describes an e-mail exchange he had with Robin Hanson about the public exchange of blog posts. An interesting read.

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