Marwell and Ames, 1981. “Economists free ride, does anyone else?” Journal of Public Economics 15: 295-310. They conducted a public-goods game by giving individuals 250 “tokens” and asking them how many tokens they wanted to invest on an “individual exchange” versus a “group exchange”; payoffs were set up to create a tragedy-of-the-commons situation, i.e., each individual can maximize their own payoff by free-riding, but if everybody invests in the group exchange then everyone is better off than if everybody invests in the individual exchange. They found that contributions to the group exchange from economics graduate students were about half those from others (20% versus 41%). They also asked questions about “fairness” and noted: “There was surprising unanimity of thought [among everyone except the econ grad students] regarding what was considered fair… [In contrast, m]ore than one-third of the economists either refused to answer the question regarding what is fair, or gave very complex, uncodable responses. It seems that the meaning of ‘fairness’ in this context was somewhat alien for this group. Those who did respond were much more likely to say that little or no contribution [to the group exchange] was ‘fair’. In addition, the economics graduate students were about half as likely as other subjects to indicate that they were ‘concerned with fairness’ in making their investment decision.”

Carter and Irons, 1991. “Are economists different, and if so, why?” Journal of Economic Perspectives 5:171-177. Their ultimatum game experiment found that economics students made lower offers and had lower minimum acceptable offers, and they argue that “economists are born, not made”: “[W]e use a simple ultimatum bargaining experiment to test whether economics students behave more in accordance with predictions of the rational/self-interest model of economics. Finding that a behavioral difference does exist, we then conduct tests to discriminate between the selection and learning hypotheses… To summarize, we find that economists are different, but they are already different when they begin their study of economics.”

R. Frank et al., 1993. “Does studying economics inhibit cooperation?” Journal of Economic Perspectives 7:159-171: “A variety of evidence suggests a large difference in the extent to which economists and noneconomists behave self-interestedly. We believe our survey of charitable giving and our prisoner’s dilemma results lend additional support to the hypothesis that economists are more likely than others to free-ride… We also found evidence consistent with the view that differences in cooperativeness are caused in part by training in economics.”

B. Frank and Schulze, 2000. “Does economics make citizens corrupt?” Journal of Economic Behavior and Organization 43:101-113. Their experiment involved giving students an opportunity to receive a bribe (up to a maximum of about $72) for recommending a plumber. Of the 190 students sampled, one name was randomly chosen to actually receive whatever bribe they had designated: “In this paper, we report on an experiment on corruption which investigates various determinants of corruptibility. We found that economics students are significantly more corrupt than others, which is due to self-selection rather than indoctrination.”

Frey and Meier, 2003. “Are political economists selfish and indoctrinated? Evidence from a natural experiment”, Economic Inquiry 41:448-462. This study is very similar to my work with Elaina Rose in that it looks at donations by students, in this case at the University of Zurich, where students are asked if they want to donate small sums to “a fund that offers cheap loans to needy students” and/or “a second fund supporting foreigners who study at the University of Zurich.” They find that “[p]olitical economists (to use the classical term) are not more selfish than the average student, but students of business economics are” and that “[the] higher level of selfishness of business students is due to self-selection, not indoctrination.”

Rubinstein 2006. “A sceptic’s comment on the study of economics”, The Economic Journal 116: C1-C9: “A survey was carried out among two groups of undergraduate economics students and four groups of students in mathematics, law, philosophy and business administration. The main survey question involved a conflict between profit maximisation and the welfare of the workers who would be fired to achieve it. Significant differences were found between the choices of the groups.”

Wang et al., forthcoming. “Economics Education and Greed”, Academy of Management Learning & Education: “The recent financial crisis, along with repeated corporate scandals, raise serious questions about whether a business school education contributes to what some have described as a culture of greed. The dominance of economic-related courses in MBA curricula led us to assess the effects of economics education on greed in three studies using multiple methods. Study 1 found that economics majors and students who had taken multiple economics courses kept more money in a money allocation task (the Dictator Game). Study 2 found that economics education was associated with more positive attitudes towards greed and towards one’s own greedy behavior. Study 3 found that a short statement on the societal benefits of self-interest led to more positive ratings of greed’s moral acceptability, even for non-economics students. These effects suggest that economics education may have serious, albeit unintended consequences on our students’ attitudes towards greed.”

Bauman and Rose, 2011. “Selection or indoctrination: Why do economics students donate less than the rest?” Journal of Economic Behavior and Organization 79: 318-327: “A substantial body of research suggests that economists are less generous than other professionals and that economics students are less generous than other students. Following Frey and Meier (2003), we address this question using administrative data on donations to social programs by students at the University of Washington. Our data set allows us to track student donations and microeconomics training over time in order to distinguish selection effects from indoctrination effects. We find that there is a selection effect for economics majors, who are less likely to donate than other students, and that there is an indoctrination effect for non-majors but not for majors.”

Yoram’s conclusions

My work with Elaina Rose has been dismissed (e.g., by Steve Landsburg) on the grounds that students who choose not to contribute to a group dedicated to reducing tuition fees for students could be concerned about the welfare of taxpayers rather than just free-riding.

My first conclusion is that I find this alternative explanation to be possible, and so I agree that Elaina Rose and I have not proved that economists students are more selfish than others. But I hasten to add that we never claimed to have proved this. The idea that we proved something came (in my opinion) from Landsburg’s odd perspective and from David Henderson’s equally odd discussion of how Rose and I were guilty of “affirming the consequent”.

My second conclusion is that I find this alternative explanation to be implausible, especially in light of the preceding literature, and therefore I believe that our work supports the conclusion that economists are more selfish than others. That is all that we claim in our paper, and it is all that I claim in my NYT op-ed. In the words of R. Frank et al. (1993), “As always, questions can be raised about experimental design.” But you shouldn’t miss the forest for the trees.

And yet I never became an Apple fanatic. In my eyes the iPod was unappealing, the iPhone unaffordable, the iPad unnecessary. I still don’t see why people would camp out overnight for them, and the fact that they do makes me begrudge the Apple products that I have—belatedly and without fanfare—adopted.

As an individual, I am embarrassed that I could have been so wrong (and peeved that my father seems to be unloading so much of my inheritance at the local Apple Store :). As an economist, I am delighted to live in a market-driven society where Jobs could be proven to be so right.

Update: Also worth reading is Mike Daisey’s “Against Nostalgia” (NY Times, Oct 6). I saw Daisey’s one-man show, The Agony and Ecstasy of Steve Jobs, when it came to Seattle earlier this year. Daisey’s show makes excellent food for thought, especially when combined with a view of the hardships I’ve seen here in China. (Many people work incredibly hard, and I can understand why they might see working long hard hours in a sweatshop making Apple products as a step up.) Intro macro classes could benefit greatly from chewing on these whole-wheat matters instead of just passing off the white-flour lessons about how trade benefits everyone, and I’m happy to say that my Cartoon Intro to Macro spends 3 chapters (Trade and Technology, The Classical View of Trade, and Complications) exploring these issues.

The good news is that there’s a solid quote, from the last page of “Address of Wm. McC. Martin, Jr., Chairman, Board of Governors of the Federal Reserve System, before the New York Group of the Investment Bankers Association of America, Waldorf Astoria Hotel, New York City, October 19, 1955″.

The bad news is that the quote makes it clear that Martin didn’t come up with the quote himself:

The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.

I suppose the next step (gulp) would be to try to track down the writer in question. It looks like “the recent increase in the discount rate” refers to an increase on September 9, 1955, but it could also refer to the increase of August 15, 1955.

Update #1: Here’s the report card in brief: Four books are highly recommended: Colander (A), Mankiw (A), Krugman/Wells (A), and Baumol/Blinder (A-). Eight books are recommended with reservation: Case/Fair/Oster (B), Parkin (B), O’Sullivan/Sheffin/Perez (B), Hubbard/O’Brien (C+), Hall/Lieberman (C+), Cowen/Tabarrok (C+), Frank/Bernanke (C). Four books are not recommended: McConnell/Brue/Flynn (C-), Schiller (D+), Miller (D), Arnold (D-), and Gwartney/Stroup/Sobel/Macpherson (F). Click here for a JPG of this summary.

Update #3: Ed Dolan writes to suggest adding his book (Introduction to Microeconomics, 4th edition; BVT Publishing; $39.99), which he says “has been in print since 1975… In the early 1980s, it became one of the top-selling texts, with copies sold in the six figures per year… Now published by BVT Publishing…an innovative publisher of full-feature, full-package college texts that has had the courage to break the price line of the major-publisher cartel. As you can see from the BVT web site, they sell my book, and similar books in other fields, for about a third of what major publishers charge.” Professor Dolan sent me a PDF of his chapter on “The economics of climate change and environmental policy”, and I’m impressed. I haven’t given it a thorough review, but a not-completely-thorough review suggests that it belongs in the “Highly recommended” category, perhaps even towards the top. There’s good material from the IPCC and excellent content about carbon taxes, cap-and-trade, and intergenerational trade-offs. One concern is that the book doesn’t do enough to specify the time frames for climate impacts, e.g., there are statements like “2 degrees of additional warming could produce anywhere from 6 inches to as much as a meter of additional sea level rise” without quantification of whether we’re talking about sea level rise by 2100 or 2500. Short-term versus long-term impacts are a huge issue and the book could do more to differentiate them. Again, however, my sense is that this book belongs in the “Highly recommended” category, and as Professor Dolan notes it’s a bargain at $39.99.

Roger wrote this in the comments section:

[T]here is a lot of misunderstanding and misrepresentation displayed in this post. Perhaps I did not convey my points clearly. I did not discuss costs or benefits. It was not a talk about climate impacts. My proposal is not a $1 a barrel fuel tax. I did say that there is a consensus on the tenets of climate science. And more. Fortunately, my new book covers all of these points so that there should be no ambiguity in my views.

I try hard to be a straight shooter and to not misrepresent what people say, so I took the trouble of looking through the video:

Let’s take what Roger wrote in the comments section of my previous post and look more closely, from the bottom up:

1. I did say that there is a consensus on the tenets of climate science.

This is not true. The closest he comes are these two bits (with approximate times indicated if you want to check the video, and apologies if I don’t have the transcript 100% accurate):

21:15 The risks posed by increasing carbon dioxide can be represented by a bathtub. So the bathtub is the atmosphere, we’re putting in carbon dioxide… it’s accumulating… No-one disputes these facts… Now scientists debate a number of different values. One of them is how high is our bathtub, is there a level at which the bathtub spills over? …Now there’s also a debate about, well, what happens when the bathtub overflows? Is it going to be catastrophic? Is it just minor damage that we can mop up? These are all very legitimate debates that are out there in the scientific community, and they are debates that I would assert cannot be resolved scientifically on the timescales of decision-making. We have a classic risk-management problem.

43:30: In 2003 Ken Caldeira [and co-authors]… said “To achieve stabilization at a 2 degree warming” — so that’s a bathtub at 450ppm — “we would need to…”

These quotes do not express a scientific consensus about anything, and they certainly do not contradict what I wrote in my original post:

6. Also perplexing to me is that Roger didn’t even mention (positively or negatively) the IPCC or the scientific consensus about carbon emissions leading to higher global temperatures &etc. This was an important omissions because I would guess that a significant fraction of the audience he spoke to today probably doubts the IPCC conclusion about human activity affecting global temperatures, and if Roger does believe the IPCC (as his Wikipedia page suggests) then he should have come out and said it. He failed to do so even though it would have taken only 30 seconds, and in my opinion that failure is inexcusable for someone whose goal is to educate.

I stand by my original claim, namely that Roger didn’t even mention the IPCC or the scientific consensus about carbon emissions leading to higher global temperatures &etc. And I stand by my opinion that that failure is inexcusable for someone whose goal is to educate. Consider the following:

41:20: The debate about Heathrow is about building a third runway… Here’s some Greenpeace protesters in the back of a British Airways airplane… “Climate emergency, no 3rd runway.” Now let me place this into context. This is China. [Showing a map of China.] China is planning to build 100 new airports by 2020.

The response of the crowd is laughter. This is not the kind of response you’d expect from a crowd of folks who know the scientific consensus about carbon emissions leading to higher global temperatures &etc. It is the kind of response you’d expect from a crowd of folks who are climate skeptics. I don’t fault Roger for the crowd being climate skeptics, but I do fault him for failing to challenge them in any meaningful way. A climate skeptic could have sat through Roger’s talk and nodded approvingly all the way through.

2. My proposal is not a $1 a barrel fuel tax.

Let’s roll the tape:

45:47: In a nutshell, the argument I make is we need a low carbon tax—or fuel tax, doesn’t matter—$1 a barrel of oil, oil costs about $80/barrel now, $1 a barrel surcharge, no-one would notice, raises $100 billion. A $5/ton carbon tax would increase the price of gasoline by $0.04 a gallon, would raise $500 billion. What would we do with that money? We would invest in innovation… The idea is we would use today’s energy to pay for developing tomorrow’s. The scale that I propose is something like what the U.S. government invests in health, $30 billion a year, or defense, $100 billion a year.

This is not much different than what I wrote in my earlier post:

9. Roger’s proposal for dealing with climate change is to have a small carbon tax (on the order of $1 per barrel of oil, which amounts to about $2.50 per ton CO2 or $0.025 per gallon of gasoline) with the revenue going to clean energy R&D.

Perhaps he didn’t do a good job of expressing himself in his talk, but I am definitely not misrepresenting what he said in his talk.

3. I did not discuss costs or benefits. It was not a talk about climate impacts.

This is mostly tangential because I didn’t assert that Roger’s talk was about climate impacts. (Just the opposite!) But I moderately disagree with Roger’s claim that he “did not discuss costs or benefits.” Consider for example these statements:

44:10: Science is not going to compel action on climate change. Of this I am certain. But it turns out there are other reasons to decarbonize our economy.

45:12: So there’s a compelling reason [because of poverty &etc] to at least accelerate the process of decarbonization that has nothing to do with arguments about climate science. Now, whether those justifications get us all the way to 80% reductions or so on by 2050 I don’t know. But I do know it makes a much more compelling basis for starting down that path than the arguments we’ve seen so far.

I would argue that Roger is implicitly doing some cost-benefit analysis here. Otherwise how does he reach these conclusions?

4. [T]here is a lot of misunderstanding and misrepresentation displayed in this post. Perhaps I did not convey my points clearly.

I completely disagree that my original post misrepresents what Roger said during his talk. It’s true that I may have misunderstood, but any misunderstandings were caused by Roger failing to express himself accurately.

1. I think he had two main points, the first being that policymakers can’t decide what to do about climate change on the basis of climate science alone. This is an excellent point, but: No duh.
2. His second main point was that reducing carbon emissions (say by 20% by 2020) is going to be incredibly difficult. This is also an excellent point, and is somewhat less “no duh” than the first point. Also, Roger gets extra bonus points for having excellent specifics, e.g., that reducing emissions 20% by 2020 in the UK would require the equivalent of adding 40 nuclear power plants by 2020.
3. I was struck by how much of his talk (especially addressing the 2nd point) matched what someone from the Sierra Club would say. What Roger said was “reducing carbon emissions 20% by 2020 is going to be a huge challenge, and we’re not going to make it.” What a Sierra Club person would say is “reducing carbon emissions 20% by 2020 is going to be a huge challenge, so we need to start now.”
4. One other difference between what Roger said and what a Sierra Club person would say is that the Sierra Club person would have talked about the impacts of climate change under business as usual. In contrast, Roger said nothing about the impacts of climate change (under business as usual or anything other scenario).
5. As an economist, I found Roger’s lack of discussion of climate impacts to be extremely disturbing. If—totally hypothetically—the science said that hitting 450ppm would cause the planet to explode, I’m pretty sure Roger’s talk would have looked different. (At least I hope so!) The economic point here is that cost-benefit analysis has two halves—costs and benefits—and you can’t do it by just talking about one of the two halves. Why Roger failed to talk about both halves has me totally perplexed and leaves me questioning how much he actually knows about economics. (For the record, he’s not an economist, so I think this is a legitimate question, not an insulting one. He’s a political scientist, but his talk was not about the intersection of science and politics; his talk was fundamentally about economics.)
6. Also perplexing to me is that Roger didn’t even mention (positively or negatively) the IPCC or the scientific consensus about carbon emissions leading to higher global temperatures &etc. This was an important omissions because I would guess that a significant fraction of the audience he spoke to today probably doubts the IPCC conclusion about human activity affecting global temperatures, and if Roger does believe the IPCC (as his Wikipedia page suggests) then he should have come out and said it. He failed to do so even though it would have taken only 30 seconds, and in my opinion that failure is inexcusable for someone whose goal is to educate.
7. Roger spent a great deal of time focusing on carbon emissions per unit of GDP, a variable that economists don’t usually have much interest in. After listening to Roger’s talk I still don’t have much interest in that variable in terms of either economics or policy, but I do appreciate how it allows him to tell a story about hard it is to reduce emissions: “Here’s the fastest that anybody’s ever been able to reduce emissions per unit of GDP, and reducing total emissions 20% by 2020 will require us to reduce faster than that. Wow that’s going to be hard!”
8. The hypothetical above about the planet exploding if we hit 450ppm makes it clear by Roger’s story is incomplete from an economics perspective. An analogy will help explain other limitations of his approach: Let’s say we’re talking about global populations of tuna, and that scientists are telling us that tuna are being caught at an unsustainable rate and that we need to cut the number of tuna we catch by 20% by 2020 in order to maintain a stable tuna population. Then Roger comes over and tells us that what we really ought to be looking at is not the number of tuna being caught every year but the consumption of tuna per capita in different countries around the world. Then Roger shows us graphs about rising populations in the developing world and the rising consumption of tuna per capita all over the world and tells us how difficult it will be to reverse this trend: how many more chickens we’d need to raise, etc. Finally, Roger comes to the seemingly inescapable conclusion that the number of tuna being caught every year is going to keep on rising. Anybody with half a brain can see that there is something missing from this story: What happens if there are biological limits to how many tuna we can catch? Anybody with a full brain should see that this analogy casts doubts on the value of Roger’s approach to climate change: What happens if there are physical limits in terms of the quantity of fossil fuels we can consume? What happens if there are biogeochemical limits in terms of the quantity of fossil fuels we can consume before blowing up the planet? This is not the time to pass judgment on these questions—for myself, I worry about the second question but not the first one—but it is the time to be concerned about the fact that these kinds of questions don’t even come up in Roger’s analysis.
9. Roger’s proposal for dealing with climate change is to have a small carbon tax (on the order of $1 per barrel of oil, which amounts to about $2.50 per ton CO2 or $0.025 per gallon of gasoline) with the revenue going to clean energy R&D. One point worth making here is that this is not a new idea; it goes all the way back to Thomas Schelling’s presidential address to the American Economic Association (“Some economics of global warming“) in 1992. Of course, a point doesn’t have to be novel to be worthwhile (otherwise those of us promoting revenue-neutral carbon taxes would have shut up long ago!) but Roger could have done more to provide context and perhaps to explain why this idea has had such difficulty in gaining traction over the past twenty years. Again, introducing this important idea would have taken only 30 seconds.
10. A deeper point about Roger’s proposal (which is in line with the folks at Breakthrough Institute, where he was a senior fellow) is that it is deeply government-focused: We’re going to have a carbon tax to fund government programs in clean energy R&D, and those government programs are going to move us in the directions we need to go on climate. This is very different than the usual prescription from economists, who tend to focus on providing incentives for private companies to do R&D. I’m not saying Roger is wrong, but I do think that it’s a surprisingly big-government idea to advocate in front of a room full of folks devoted to “free-market solutions“. The fact that Roger didn’t get any push-back (at least not during the part of the Q&A that I could stick around for) indicates to me that at a fundamental level he was failing to connect to the audience.

You can see the computer age everywhere but in the productivity statistics.

The source is Robert Solow, “We’d better watch out”, New York Times Book Review, July 12 1987, page 36. The full article is linked here as a PDF because I was unable to find an electronic version. (I actually tracked down a hard copy from the UW library system!)

PS. Various sources online accurately source the quote to this article, but many others source it to The New York Review of Books (which didn’t have an edition on July 12 1987).

Congratulations to me for tracking down this citation! Next up (but I fear impossible): William McChesney Martin’s famous quote along the lines of how the Fed’s job is to take away the punch bowl just as the party’s getting started.

Update March 2011: The “punch bowl” mystery has been mostly solved!

2. Right now most conservatives don’t much care about climate change, but some of them do care. These include local folks like Todd Myers and national folks like Greg Mankiw, David Frum, and many more.

3. The number of climate-conscious conservatives is likely to grow. Some conservatives are undoubtedly creationist-minded lost causes (just like some progressives are Marxist-minded lost causes :), but there are plenty who just have an extra-healthy dose of skepticism; if IPCC predictions continue to be validated by reality, that skepticism will wane over the course of this decade.

4. The environmental community should do everything in its power to boost the ranks of climate-conscious conservatives. This is because being a one-party issue is not a good way to make change happen (see gay rights, the religious right, etc.) and because conservatives are not going away (see #1 above). A year ago climate blogger Joseph Romm wrote that “the country can only contemplate serious environmental legislation when we have the unique constellation of a Democratic president and [large] Democratic majorities in both houses, an occurrence far rarer than a total eclipse of the sun.” Yesterday Romm wrote that “it’s clear we’re not going to get an economy-wide cap and trade bill.” Maintaining this state of affairs is bad bad bad, and although it may be a while until climate-conscious conservatives become a significant force it is entirely possible that serious climate legislation (like BC’s carbon tax) will have to wait until it does.

5. The best way to boost the ranks of climate-conscious conservatives is to take conservative concerns and preferences seriously. This includes the concerns and preferences of the relatively small group of already-green conservatives, but also those of potential converts.

6. Many of those concerns are about the growth of government, and many of those preferences are for revenue-neutral carbon taxes. In fact, some Republicans feel so strongly about public finance issues that they support revenue-neutral carbon taxes even though they don’t care about climate change. (George Will came to one of my classes this last year, and after explaining why he thought global warming was a hoax he told us that he hated the payroll tax and therefore he supported replacing the payroll tax with a carbon tax, or indeed with a “yogurt tax”; I asked him if he knew that Al Gore agreed with him and he said that an idea should not be held responsible for the people who believe in it :)

7. These conservative concerns and preferences are different from progressive concerns and preferences. In the unlikely event that you’d like proof, consider that Todd Myers of the free-market Washington Policy Center says that the Washington State Democrats refused to allow them to submit (and pay for!) this ad in their convention newsletter.

8. In order to take conservative concerns and preferences seriously, the environmental community needs to differentiate itself from the progressive community.

9. This is difficult because many environmentalists are also progressives. Concern about climate change is not just an excuse for expanding government, but there’s a good reason conservatives worry that it is.

10. The way forward is for the environmental community to reach out to conservatives. Yes there is mutual mistrust, but the onus is on the environmental community because enviros needs conservatives more than conservatives need enviros. Yes these efforts might not yield dividends for 5-10 years, but the time to start is now. Yes it is distressingly possible that revenue-neutral tax shifts will not poll well right now (among conservatives or among progressives!), but exploring those options is a way to demonstrate goodwill and to show that the environmental community is taking conservative concerns and preferences seriously.

The bottom line is that there is a huge difference between (1) trying to find common ground and failing, and (2) moving in other directions without even looking for common ground. Failing to look for common ground will simply lead to more mutual hostility and delay the growth of climate-conscious conservatism. In contrast, looking for common ground and failing will allow environmentalists to honestly and respectfully engage with conservatives (“we tried finding common ground, but the polling came back negative, and that’s why we’re pushing progressive ideas xyz that you don’t like”) and both groups will be better positioned to try again down the road. And of course there’s always a chance—somehow, someday… maybe even today!—that (3) trying to find common ground will succeed.