How Steve Levitt Might Save Economics

Josh Wright —  26 April 2007

There’s been enough attention paid to the question of whether Steve Levitt is ruining economics.  I did my share to contribute to the focus on this question.  My bad.  But now even Levitt himself has responded to Scheiber’s claim that he is ruining economics.  His response: “No I haven’t, and you wouldn’t know it if I had because you don’t know any economics.”  Ok, that is paraphrasing but I think captures the spirit of the response.

Levitt is unnecessarily defensive in his post, taking a few shots at Scheiber’s lack of formal training,  amateurish attempts to write about economics in the past, failure to do homework about Emily Oster’s work, and that the closest he got to the Harvard economics program was dating somebody in it.  Anyway, the Scheiber stuff is all atmospherics.  Who cares what he has to say about Levitt or his work.  The issue here worth discussing is whether fascination with “clever” identification strategies is good or bad for economics? 

Levitt addresses that too:

The incredibly important point that he misses is that often being clever is the way one cracks an important problem. He can denigrate the questions I have made progress on tackling, but it seems to me that understanding how crime responds to punishment, why crime fell in the 1990s, why Blacks are lagging Whites so badly educationally and economically, whether firms profit maximize, whether campaign spending affects election outcomes, and whether elected officials follow the will of the electorate are pretty reasonable topics for an economist to study. Sure, my approach to each of these was different than what everyone else was doing, but the questions I have asked have (usually) had both serious policy questions and economic issues at their heart, and I delivered some answers when others were not.

Well said.  I’m a little perplexed that there is a debate about whether providing empirically sound answers to important questions (maybe narrow and important, but important) is good or bad for economics.  Geoff’s comment to my previous post nails this:

The folks like Levitt who do this work, who can perceive problems and think through creative solutions to them, are applying real economic intutition. They may use a lot of math, to be sure, but the underlying logic is generally quite simple (not as in “easy” but as in “not-complicated”) and complex mathematics is not necessary to explain or to understand what’s going on. It is economics in the style of Tullock and Alchian and Coase. These are real lessons learned through application of a powerful system of analysis.

But to the motivation of the title of this post.  I don’t think “clever” research is a real challenge for economics.  I think that debate is mostly a distraction.  The challenge is not about Levitt at all.  The biggest challenge to the relevance of economics research moving forward is the fetishization of formal mathematical theory that sometimes distracts researchers from working on problems that help explain real world phenomena.  There is, of course, an optimal amount of valuable theoretical research that should be done.  Formal theory is important to the development of economics as well and always will be.  But in my view, the ratio of theory to empirics in modern economics, in my view, is far too high. 

One might thnk that at least one important consequence of Levitt’s research agenda, in addition to adding to our economic knowledge (which used to be enough, didn’t it?), will be a contribution to making popular again economics that is more connected to explaining real world phenomena of all types with economic intuition, models, and data.  If that happens, Levitt isn’t ruining economics.  He’ll be saving it.  Or at least making it more relevant.  And definitely more fun.  If Levitt is going to take the brunt of the attack for “clever” research, at a minimum, we ought to be willing to give credit for sending the pendulum back towards the empirically-oriented side of the spectrum by making it “cool” to worry about the real world again.