Wednesday, June 24, 2020

Some Thoughts on Harald Uhlig, etc.

Elite academic economics is currently undergoing a sort of reckoning with its culture of racism and, in a very basic sense, white supremacy: that the field and its most decorated members are white people, that anyone who isn’t white either proved their unusual superiority compared to others of their background by gaining entry into such a world, or were imposed on “us” by outsiders thanks to affirmative action programs, and that if they do make it in, they better not do anything to upset the apple cart, such as out a tenured member of a top department for repeatedly expressing himself in ways that show he misunderstands race hierarchy (at the most generous possible interpretation) and holds in contempt anyone who might try to educate him.

Race at the University of Chicago Economics Department

I knew Harald Uhlig slightly in graduate school. I had his portion of first-year econometrics on Bayesian methods (barely), which was a terrible course as are most Econ PhD metrics courses in which the instructor barely lifts a finger to take the students’ understanding beyond wherever it began. I never personally witnessed any of the behavior for which he came into question, but as I recalled these past weeks with colleagues, in our year Uhlig’s portion of the course was in the second half of the winter quarter, i.e. after the Martin Luther King holiday. After the first year, I barely came into contact with him, though he was the department chair in those years.

I’ve been shouting about the economics profession’s poor record on race for years now, both as a subject of scholarship and as it relates to the field’s own history and perpetuation of the worst kind of academic elitism that codes “science” and “scholarship” as white and eagerly casts those things when done by non-white people as biased and motivated. It’s a quality the field has worn as a badge of honor: ‘you can tell we’re the superior discipline due to the fact we’re all white. We will make our departments and institutions all white and exclude anyone who isn’t white from having influence over them exactly so that you know we’re rigorous and will defer to us and our interests.”

Perhaps the most disgusting aspect of this, to me, in retrospect is as follows: in my day, the Chicago department had no Black faculty and only a tiny handful of Black PhD students. The undergraduate classes I TA’ed and, later, lectured had almost no Black students either (I believe there were a total of two over the four sections I TA’ed or lectured, each with between 20 and 30 students), though the undergraduate student body of the university had a significant share of Black students. It was very clear that this was not a space Black people viewed as available to them, and that the department preferred it that way. *And yet* the one Black economist I ever heard anyone in that department praise, and openly express the view that “I wish he were here/we tried very hard to recruit him and would have paid him virtually anything but couldn’t pull it off” was Roland Fryer, lately disgraced out of his position at Harvard due to a climate of sexual harassment he fostered in the institute he ran there.

Fryer is known for scholarship that questions the existence of racial discrimination as an explanation for racial inequality. He coauthored an article with Steve Levitt casting doubt (supposedly) on the significance of the Bertrand and Mullainathan resume audit study of Black names. He espoused the now-discredited idea that racial health disparities in the contemporary US have a genetic origin—they are the result of an advantage for salt retention in the trans-Atlantic slave trade (which would have made the disproportionate prevalence of hypertension among the contemporary Black population the result of genetic selection, rather than present-day disparities in access to healthcare or healthy living environments). He’s a noted advocate of the idea that disparities in educational performance are the result of the absence of male role models from inner city Black communities, and also of a social stigma against “acting white,” i.e., succeeding at school. And, most recently, he authored a notoriously flawed study that claims that police use of force is no worse for Black arrestees than white ones. All of this paints a picture of racial inequality that is exactly the picture the received wisdom of the Chicago economics department would want painted, which is to say, Fryer is the one Black scholar they find acceptable, because he tells them what they want to hear. The profile of him the New York Times published in 2005, authored by Stephen J. Dubner, is tellingly entitled “Toward a Unified Theory of Black America.” Here are some quotes from that profile:

To Fryer, the language of economics, a field proud of its coldblooded rationalism, is ideally suited for otherwise volatile conversations. "I want to have an honest discussion about race in a time and a place where I don't think we can," he says. "Blacks and whites are both to blame. As soon as you say something like, 'Well, could the black-white test-score gap be genetics?' everybody gets tensed up. But why shouldn't that be on the table?"


Fryer well appreciates that he can raise questions that most white scholars wouldn't dare. His collaborators, most of whom are white, appreciate this, too. "Absolutely, there's an insulation effect," says the Harvard economist Edward L. Glaeser. "There's no question that working with Roland is somewhat liberating."

Here you have a Black scholar saying that economics is uniquely able to sort through the controversy and ascertain What Matters, which is to say, the retrograde behavior and genes of Black people in bringing about their own economic and social subordination. No wonder this is the one Black guy that department wanted to hire.

Meanwhile, where there weren’t many (or any) Black people in the department at Chicago, there was plenty of scholarship about race. Gary Becker, James Heckman, Steve Levitt, Derek Neal, and Robert Fogel (not to mention Stigler, Friedman, and others who were gone by the time I got there) have all published highly-regarded, and in some cases notorious theories and studies of racial inequality and its history.

What this says is that the department has as its foremost concern an ideological project and that it views Black scholars and Black students as a threat to that project, if only because their presence threatens claims to intellectual superiority, unless they prove themselves to be advantageous to it—useful and willing foot soldiers in their war. This is why part of my critique of Democracy in Chains was that MacLean’s harsh presentation of Buchanan and his scholarship and intellectual progeny was too narrow, that by putting the focus on one scholar and one relatively small school of thought he engendered took the onus off a much more influential one—the Chicago School—which could well be indicted in nearly the same terms.

Economics has, genuinely, moved beyond the attitude that was popular in the field in the 2000s and exemplified by Fryer, Steve Levitt, Dubner himself, and others: knowing skepticism and irritating second-guessing of other disciplines, on the basis of ostensibly superior “intuitions” and cutesy little well-actually type objections to glaring findings of gross inequalities, racial or otherwise. It would be unfair to say now, as was often said ten years ago, that the field is allergic to Big Questions.

In fact, the backlash to the intellectual climate ca. 2005, when that profile of Fryer was written, is to some degree behind the outrage at Uhlig: the senior members of his department now are the ones whose work was popular then, and that work hasn’t aged well. There was always a big question as to who would be the intellectual heirs to the grand Chicago School tradition. If it’s the people that very department chose to tenure in the 1990s and 2000s, then the tradition has fallen a long way. The exciting developments happening in economics now are well afield of what that department and its most prominent living, senior members have to offer—as evidenced by many of them having strayed to more lucrative pastures in corporate consulting.

Academic Freedom

As of June 22, Uhlig has been restored to his editorship of the Journal of Political Economy after an ‘investigation’ of his classroom conduct lasting approximately a week, resulting in exoneration.

A number of economists with significant popular followings expressed dismay at this—a seeming opportunity to take a stand on a direct matter of public import, to show that economics is morally validated by its progress and evolution, utterly crushed. That this did not accord with their conception of the field as trying hard to become better,and with their own self-image as advocating for that improvement ‘from within,’ was quite evident in their public reactions.

But this result is hardly surprising, even if it was, in the moment, jarring. The University of Chicago’s policy on racial discrimination in the classroom is narrow, and Uhlig is also protected by it under the principle of academic freedom:

Harassment based on the actual or perceived factors listed above (i.e., race, in this case) is verbal or physical conduct or conduct using technology that is so severe or pervasive that it has the purpose or effect of unreasonably interfering with an individual’s work performance or educational program participation, or that creates an intimidating, hostile, or offensive work or educational environment.
A person’s subjective belief that behavior is intimidating, hostile, or offensive does not make that behavior harassment. The behavior must be objectively unreasonable. Expression occurring in an academic, educational or research context is considered a special case and is broadly protected by academic freedom. Such expression will not constitute harassment unless (in addition to satisfying the above definition) it is targeted at a specific person or persons, is abusive, and serves no bona fide academic purpose.

It would take only a brief investigation to ascertain that there’s no real allegation from anyone that Uhlig violated this policy. His classroom conduct is alleged to have called out a specific student or students, but if it did, it would be hard to make the case that they interfered with the student’s participation in an educational program. Notably, if the student “powered through” despite Uhlig’s conduct, that would work against any claim he later has that the conduct was abusive. Therefore, Uhlig is exonerated.

This outcome is a slap in the face to the brave students and former students who blew the whistle on Uhlig’s inappropriate conduct. BUT: the process was followed. That whatever process was in place might be grossly inadequate to the task at hand (cleansing the field of a legacy of white supremacy) places those who trust to an ‘inside strategy’ in a bind. These institutions and these policies are not going to consent to change themselves.

Moreover, there’s a pernicious aspect to the Uhlig saga best exemplified by the blog post John Cochrane wrote on the controversy, in which he expressly called on alumni and financial supporters of the university to make their voices heard on Uhlig’s behalf. Who knows whether they did or not—they probably didn’t have to. But why would someone like Cochrane, the former AQR Capital Management Professor of Finance at the University of Chicago’s Business School and now a fellow at the Hoover Institute, a conservative think tank affiliated with Stanford University and situated on its campus, feel that they would? Most often when donors make their views heard on the suitability of employing a faculty member, it’s to get that person fired or at the very least, silenced—not to protect him or her.

Indeed, there’s a history of exactly that happening in the economics profession, but all of that is many decades in the past. Several high-profile instances of donor involvement in faculty dismissals for ideological reasons took place between the 1880s and 1900 or so, including at the University of Chicago. Those episodes were part of the process that created the modern notion of academic freedom, which in this instance served to protect Uhlig even as it has not protected faculty in other disciplines from exactly the kind of donor ideologically-motivated retaliation that once afflicted economics.

In my past writings on the history of the economics profession, I’ve pointed out the ongoing plutocratization of higher education as a reason to expect an erosion of academic freedom norms in future, and warned economists that they themselves might be the victims of it as they were in the past. But Cochrane points out what’s far more likely: donors coming to the aid of economists viewed to be their proteges and ideologically sympathetic, contributing to the very disciplinary inequality that motivates many current critiques of economists’ history of academic imperialism (including that practiced by Fryer). After all, subordinating our research and public pronouncements to the whims of the donor class has been a highly lucrative strategy on the part of the economics profession, paying dividends in all sorts of ways, while the rest of academic totters on in its decreasingly funded, precarious state.

So where does this leave us? Again, the posture of Uhlig’s critics appears to be that economics can and should jettison its history of white supremacy without surrendering any of the disciplinary prestige that adorns contemporary practitioners at the most elite departments. This outcome to the Uhlig brouhaha shows, starkly, that that is impossible—it’s one or the other. And I fear that if given the choice, many incumbent economists, especially the fanciest, will decide they can live with the Uhligs of the world as their colleagues after all—or else their own status may come into question.

Monday, April 6, 2020

Why Are Essential Workers Paid So Little and Non-essential Workers Paid So Much? An Appraisal of Labor Income Inequality in Light of COVID-19

[I drafted the following in response to a question posed by Chris Ingraham, a reporter at the Washington Post. My response is quoted, along with those of other economists, in a piece that appeared in that publication on April 6, 2020. My full answer appears below.]

The coronavirus has underscored how many of the workers we deem essential in a society -- sanitary workers, grocery clerks and warehouse workers, to name a few -- are also some of the lowest paid. From an economic standpoint, why do these essential workers get paid so little while people in arguably less useful jobs, like entertainers and hedge fund managers, get paid so much more?

The standard economist’s answer to this question is that the reason for pay inequality in the labor market is skill inequality: different workers have more or fewer skills, these skills have a certain value in terms of what they can produce, and the workers who have the more valuable skills get paid more. The trend in labor economics research, well before COVID-19, was in the direction of questioning that basic understanding. Variation in individual worker characteristics (“skills” or otherwise) cannot explain observed phenomena in the labor market, especially wage inequality. We can learn from some of those newer insights in answering the question of why workers who’ve proven to be so essential in this crisis are poorly-paid and many of the highest-earning workers in the economy are evidently quite dispensable.

The mechanism by which wages are supposed to equal skills (or, alternatively put, “labor productivity” or the “marginal product of labor”) is that workers who are paid less than what they’re worth present a profitable opportunity to alternative employers. They can be lured away from their existing job with the offer of slightly higher pay—enough to make the move worth their while, but leaving some of the gap between pay and productivity intact for the alternative “outside” employer to make a profit on the deal. In a competitive equilibrium, that gap gets competed away to zero and all workers with the same skills make the same salary, regardless of where they work.

I point to three separate pieces of evidence that labor markets are not competitive, and consequently, that workers’ skills don’t determine what they earn:

So if skills don’t explain why “essential” workers in the COVID-19 crisis get paid so little and those sitting at home diddling on Excel spreadsheets get paid so much, what does? I think a big part of the explanation is the erosion of the institutions that once improved workers’ standing and bargaining power vis a vis employers, while employers have commensurately gained power. Retail and service workers have been notoriously hard to unionize, and sectors where unions have historically lacked power have gained overall employment share. It’s hard to outsource service-sector labor overseas, but it’s not hard to threaten workers with domestic outsourcing: their replacement by less experienced, lower-paid workers should they make significant wage demands on their own.

Meanwhile sectors like grocery stores, hospitals, and nursing homes have undergone massive consolidation on the grounds that they would be more efficient if they were larger, and they’d therefore be able to charge consumers lower prices—workers be damned. That’s arguably the case in grocery stores—supply chains have been squeezed, while prices are low and workers and producers gain a miniscule fraction of every dollar spent by grocery shoppers. That reflects a tradeoff that prefers consumers over workers, at least in the short term. In healthcare, on the other hand, there’s no arguing with the reality that this country has the most inefficient healthcare system in the world. By far the highest expenditures, and terrible health outcomes to go with those. It’s impossible to say the status quo serves consumers at the expense of workers. Instead, the stakeholders who’ve benefited from the current system are the owners of powerful healthcare providers, the privileged executives who’ve figured out how to profit massively from an opaque system, and the employers on whom most of us are dependent for access to healthcare. That last element is seldom foregrounded in the health policy debate, but it should be central: American workers are paying through the nose for health insurance, in the form of lower wages and higher premiums for employer-provided health insurance. Does that mean they’re benefiting in the form of better care and better health? Absolutely not.

The United States isn’t unique in having terrible labor standards for low-wage workers. Germany lifted labor regulations in many sectors in the early 2000s, creating a dual-track labor market where precariously employed low-wage workers have no job stability and few entitlements to social insurance. The result is a large pool of dead-end jobs lacking traditional benefits, such that they recently enacted a statutory minimum wage for the first time in the country’s history. Previously, there had been de facto higher, collectively-bargained minimum wages by industry, when all workers were statutorily covered by collectively-bargained contracts. Brazil moved in the other direction under its previous Workers Party government: an increasingly regulated labor market, wherein workers are entitled to certain pay levels on the basis of their job title and experience. The result has been a reduction in earnings inequality as well as a significant reduction in poverty. Labor market regulations and collective bargaining tend to be egalitarian, because they remove the discretion to set pay (and conditions of work) from bosses and transfer them, in some degree, to workers. This, and not skills, is the reason for earnings inequality between workers, and the enormous discretion American bosses have to dictate take-it-or-leave-it terms to dependent workers is the core reason why our “essential” workforce is in such dire straits.