The 2023 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (colloquially referred to as the Nobel Prize in Economics) was awarded to economist Claudia Goldin.
To preface this article, I don’t believe there should be a Nobel Prize in economics, as I’ve pointed out before. My reasoning on this is in line with previous Nobel winner F.A. Hayek who said, “The Nobel Prize confers on an individual an authority which in economics no man ought to possess.”
There is no need for a leading scholar in the field of economics. The logic of economic laws combined with the application of institutional details is a method accessible to all. By conferring a Nobel, the committee risks conferring a “priestly” advisor status to a profession that should be filled with lowly philosophers—to borrow a metaphor from George Mason Economics professors Boettke, Coyne, and Leeson.
However, the fact is there is a Nobel prize in economics (or a Sveriges Riksbank Prize in Memory of Nobel for the nitpickers out there). Since there is a prize, I think it’s worthwhile to highlight when prizes are awarded to economists who, like Hayek, reflect the humility needed for the profession to succeed. I think Claudia Goldin is a good choice for exactly this reason.
When thinking about Nobel prizes in economics, I think it’s useful to differentiate between prizes given to those interested in trying to control the future of the economy and prizes given to students of how economic laws have manifested throughout history.
In my opinion, the 2019 Nobel Prize awarded to Duflo and Banerjee represents the former. Duflo’s published address to the American Economics Association titled The Economist as Plumber has the following abstract:
“As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models give us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.”
To Duflo, the right way forward is for economists to tinker and adjust things in the economy in order to benefit the interests of society. This however, is the wrong way forward. As I’ve written previously,
“Why can’t economists offer solutions the way plumbers do? To put it simply, the economy is not a closed system of pipes. There are no definite pipes and therefore no clogs, backups, or leakages…Why should we believe someone with a degree, a blackboard, or a computer can do a better job planning people’s lives than they can themselves?”
So what, then, should economists do? First, the economist has a role to play in using economic reasoning as a “prophylactic against popular fallacies” in policy-making. This is why economist Ludwig von Mises argues,
“Economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him.”
But this isn’t the only proper role for an economist. The economist can also be a student of civilization and history. Economic history as a field is severely underrated. In a world that demands prediction as a means of controlling economic outcomes, economic history humbly looks back at how economic rules manifested in times already past. By its nature, the field of economic history considers what actually happened rather than what can be controlled.
This isn’t to say that some don’t try to use findings in history to forecast future facts and tinker with the economy, but the field is less predisposed to this sort of thing.
Goldin’s work fits in with this view of the economist as a student of civilization. Consider the explanation of the Prize given on the Nobel website. The press release says,
“This year’s Laureate in the Economic Sciences, Claudia Goldin, provided the first comprehensive account of women’s earnings and labour market participation through the centuries. Her research reveals the causes of change, as well as the main sources of the remaining gender gap. Women are vastly underrepresented in the global labour market and, when they work, they earn less than men. Claudia Goldin has trawled the archives and collected over 200 years of data from the US, allowing her to demonstrate how and why gender differences in earnings and employment rates have changed over time.” (emphasis added)
Notice what’s being highlighted in the description of her prize—it isn’t policy recommendations. Goldin is being praised for her hard work searching through historical archives to study women’s role in the labor market. This information was then used to sort out which explanations of the wage gap were best. Here’s a graphic that illustrates her findings.
I’ve noticed some on Twitter scoff at some of Goldin’s findings as obvious. This is a mistake for three reasons. First, people underrate the extent to which the findings seem obvious because they’ve already been unknowingly fed the results of Goldin’s work without knowing it.
Academic findings are often distributed to the public in such a way that the public does not learn who or where the findings come from.
Second, even insofar as this explanation may seem plausible without evidence verifying it, there are many explanations that sound plausible for complex social phenomena. The question is which of the plausible explanations is the most influential on real-world phenomena? Goldin sorted out the best answer from a myriad of plausible answers.
The laws of economics are often straightforward to understand. It does not surprise the average person that people buy less of something when the price goes up. But how those laws manifest is not always obvious, and historical analysis can help the student of civilization uncover how it has happened in the past.
Finally, though the Nobel committee highlights her work on the wage gap in the press release, Goldin is a prolific researcher engaged in many topics. This thread does a deeper dive on many of her contributions.
It is a mistake to think of great advancements in economic inquiry as needing to be grand exercises in political planning done to plan a “better” society. Advancement often comes in the nitty-gritty work of diving into historical archives to create a data set no one has ever thought of before.
Goldin’s work reflects economists as truth-seekers, or, to use her word, detectives. In her paper The Economist as Detective, Goldin concludes with several pieces of wise advice including,
“Then be the best detective you can be. Don’t just ‘round up the usual suspects’; don’t simply look under the existing lamppost. Locate new suspects. Turn on lights where they have never shone before. Follow Holmes’s dictum that ‘There is nothing like first-hand evidence,’ as well as his admonition that “Any truth is better than indefinite doubt.”
Although I maintain that we should abolish the Nobel Prize in economics, I can’t help but be happy to see it awarded to someone searching for truth away from the usual lights.
Image credit: Dreamstime
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