Answer: No, We Were Not in a Recession

Jeremy HorpedahlLeave a comment

About one year ago, I wrote a post with the title “Are We in A Recession?” At the time there was much talk, both in the popular media and among economists, about whether we were in a recession or not, and what “technically” counts as a recession. Now with hindsight, I think we can pretty clearly say that we were not in a recession last summer, nor at any point in 2022.

One thing is true: GDP did decline for two quarters in the first half of 2022. In fact, even the more nuanced “real average of GDP and GDI” declined for two quarters. But as I explained in that July 2022 post, that’s not how the NBER defines a recession. It often coincides with their defined recession, but they used a separate set of indicators. And while some economics textbooks do use the two quarters of declining GDP definition, as I explained in a follow-up post, that’s not the most common textbook definition.

The first half of 2022 is a good candidate for a possible recession, but when we look at the NBER’s preferred 6 measures of economic activity, it seems pretty clear that this was not a recession. If you start the data in the last few months of 2021, you do have small declines in two measures through July 2022 (real personal income and real manufacturing sales), but this looks nothing like past recessions, which have large declines in all or most of the 6 measures.

OK, but that was then, this is now. Are we in a recession now or headed into one? You can find lots of models and surveys or different groups of economists out there. I’m not sure that any particular one is the best, so I won’t dive into those. But if we look at the average of GDP and GDI again, we do notice that 2022q4 was negative and 2023q1 was very weak. Maybe that was a recession?

Again, we can start the NBER indicators around that time to see. Starting from September 2022, we can indeed see that there is some weakness in a lot of the measures for the next 2-3 months. But when we look out 6 months or so from then, we once again only have 2 of the 6 indicators that are below the September 2022 level, and the declines are mild (less than 1 percent). You can play around with the start date a bit, but I think September is the best candidate for a peak, and it’s still pretty weak.

OK, OK, you say, but that’s still all the past. What about the future? Sorry dear reader, I don’t have a crystal ball or the economic equivalent (a model). All I can say is what the data shows right now (which is always backward looking), and as of right now most broad measures of the economy aren’t declining. Yet!

This doesn’t mean everything is great in the economy. Inflation is bad. Poverty is bad. Inequality is, often, bad. We always have these things. But are they getting better? Or are they getting worse? A recession is a particularly bad thing, and something that is often hard to precisely define and measure (for good reason: the economy is complex and hard to measure!). All indication of the available data is that, whatever other bad things are happening right now, a recession is probably not one of those things.

Solar Cookers: Save Money, Save Lives, Save the Planet by Cooking with the Sun’s Rays

Scott BuchananLeave a comment

The Case for Solar Cooking

We all know we ought to reduce our CO2 generation to mitigate global warming and to conserve limited fuel reserves. Without descending into a tussle over exactly how man-made it is or whether it is part of a natural cycle which may turn soon to plunge us into yet another ice age, it does seem clear that the earth is experiencing a warming trend with possible serious consequences, and it is obvious that fossil fuel reserves (oil, natural gas, coal) are finite.

Although domestic cooking in developed countries comprises only a tiny fraction of total energy consumption, this is not true in some regions. Some 2 billion people still cook over fires of wood, charcoal, or animal dung. It is usually the women doing the cooking over these fires, inhaling smoke with all its consequences. Also, it is again women who largely end up gathering the fuel. All this gathering and fire-tending consumes time which takes away from other tasks like raising food. Also, women are often assaulted in the forests while they are foraging for wood.

It is possible to construct devices which capture enough of the sun’s rays to cook food (more technical details below). Many NGOs try to help people in poor, mainly sunny/tropical regions and in refugee camps to purchase or construct solar cookers. It is possible to set up cottage industries for locally making and selling these devices at low cost. It is just a win-win-win.  Solar Cookers International specializes in this work, and has developed and shared some of the most useful technology here. They claim some four million solar cookers are in use, and present figures for how much CO2 emissions and money for fuel are saved.

Why is this relevant to us in the West? Well, if we care to help the lot of the less-fortunate, we can give money to support these solar cooking initiatives. As noted, they can help the well-being of people, especially women, in many ways. A less-obvious  impact of us using solar cookers in our own homes is that folks in other lands are aware of our life-styles. It turns out that a non-trivial barrier to wide-spread adoption of solar cooking is that they are suspicious of Western aid workers promoting a method of cooking that no one back in the developed countries uses. If solar cooking could be more visible in our lifestyles it would have a significant effect in lands where it is really needed.

And getting around to our more personal motivations – it is kind of intriguing and rewarding to cook directly from the sun. On a hot day, it can mean cooking a casserole without heating the oven/kitchen. You can do great projects with kids (your own or others), designing and making and using solar ovens. And of course, you can signal your virtue by reducing your CO2 footprint.

If you find yourself in some situation when you have no other means to cook, a solar cooker could be a life-saver. To temper this reality, however, in most  temperate regions there will be many days without sufficient sunshine to make these work. Also, they are often much slower to heat up and cook than conventional stoves, so you need to plan ahead. That said, if you have a sunny morning or afternoon, you can put your pot of rice or whatever out to cook in the sun, go about your business, and come back in 2-3 hours, knowing your “solar crock pot” will have simmered your dish without burning it.

Types of Solar Cookers

I find the technical details here fascinating, but I will skip the juicies here and just briefly describe how these things are made and how they work. In all cases, there are some mirrored reflecting surfaces which concentrate the sun’s rays onto a cooking pot. For reflecting surfaces, one can glue aluminum foil onto cardboard. However, the foil grows dull with time, so it is better to use some kind of aluminized plastic surface, such as car windshield reflectors, mirrored craft adhesive sheeting, or even the insides of potato chip bags. Usually, the pot is in some kind of enclosure which is transparent to let the sunlight in but traps heat around the pot.  

There are a number of configurations that work. A description of various designs, with illustrations, is here  and here.

Perhaps the most minimalistic solar cooker is the panel cooker. Here, the pot is enclosed in a clear  oven bag or within two glass bowls. Segmented or curved reflective panels are arranged to reflect the sun on the pot from multiple angles. Solar Cookers International’s Cookit ($50) is said to be the most widely produced solar cooker, and it is of this design. There are many DIY designs floating around, including ones made from bent car windshield sun screens. A high-end, high-performance panel solar cooker is the Haines 2 ($100). These panel cookers lose effectiveness in cold, windy conditions, due to excessive heat loss.

Another design that people make a lot at home (see the internet) is a box solar cooker. Typically, you use a smaller cardboard box within a larger box, with the spaces between the two boxes filled with some kind on insulation (e.g., crumpled newspaper). A hinged glass lid and some reflecting panels on top of the box complete the device. A very expensive ($450) but very effective box-type solar cooker is the All-American Sun-Oven. This can function year-round, but takes up a lot of space in storage.

In tropical regions with the sun high overhead, there is some use of a plain, large parabolic mirror which can focus a very hot spot of sunlight onto the bottom of a pot or pan suspended above the mirror.

A more recent, high-tech approach is the line of solar cookers from Go-Sun. These feature smallish parabolic reflectors that focus the rays on a long, skinny cooking tube inserted in a double-walled glass tube with vacuum insulation. These cookers have only medium size capacity, but cook food really hot, really fast (e.g., can bake biscuits) and are not affected by cold weather. So, they are the most convenient and versatile cookers in many ways, although they do best with relatively solid foods like hot dogs or breads or cut-up meat or vegetables, not with liquidy loads like stew or soup or simmering beans. (Full disclosure: I caved in to my itch for one of these things, and have put it on my birthday list).

Guidance counselors are good

mdmakowskyLeave a comment

A new paper, “Beyond Teachers: Estimating Individual Guidance Counselors’ Effects
on Educational Attainment” by Christine Mulhern observes significant contributions from guidance counselors to student outcomes:

It’s the last bit that rings truest to me: that counselors are most salient to low-achieving and low-income students because they lack other resources, specifically information. As I’ve noted before, information deserts are real, particularly for potential first generation college students. As modern applied economists, we are obsessed with identification and causality, but don’t sleep on distribution of impacts observed. Her finding that “counselors vary substantially in their effectiveness” is worth consideration and further exploration. Where does that variation come from? The excellence of the best counselors or the negative impact of the very worst? I’ve only a handful of experiences interacting with counselors, but my expectation is that it is both. Given that counselors tend to be woefully paid, I expect that they frequently sort across schools on non-pecuniaries i.e. how pleasant it is to work somewhere, which seems like yet another channel through public school students in affluent neighborhoods will find themselve advantaged.

But that’s enough speculative extrapolating for one day. Read the paper.

Oppenheimer Film Thoughts

Joy Buchanan2 Comments

Even though I had already heard that it will disappoint high expectations, I wanted to be in on the conversation. I’m going to link the film to some other posts and ideas.

https://twitter.com/dylanmatt/status/1682600691741630465

I haven’t seen Barbie, but I agree with Ross:

I can see why Tyler was disappointed. However, if you don’t go in with those high expectations, it still is a thoughtful period piece. It’s more interesting than the next Marvel installment.

Los Alamos National Laboratory, Attribution, via Wikimedia Commons

Though it almost drowns in the unwieldy plot, this is a movie about talent. Hitler was alienating and killing Jews in Germany, which affected the kind of talent mobilized on both sides of the war. There are several explicit references to antisemitism and motivation among physicists. Matt Yglesias observes, “They beat Heisenberg to the bomb — in part because Niels Bohr refuses to help the Nazis…”

I had written about talent and wars earlier, also concerning World War II but a different kind of doctor. “In 1939, Keynes had hired János Plesch, a Hungarian Jewish doctor who had relocated to London after fleeing Nazi persecution.”

How to manage talent becomes the challenge once brilliant scientists have been recruited to Los Alamos. The scientists did coordinate their activities enough to succeed in making the bomb, but some of the drama hinges on their rebellions against Oppenheimer. Now that machines are becoming smart, this ties into a previous post about managing artificial intelligence. “A question this raises is whether we can develop AGI that will be content to never self-actualize.”

Yet another theme of the film is the Communist movement in America in the 1930’s. I have studied this through the biographies and essays of Joy Davidman. Davidman was a committed member and then left the Party, as did several characters in the film.

And yet another tiny theme was women scientists on the project. There is a woman who complains that she was asked to be a typist even though she went to Harvard for science. Oppenheimer briskly puts her on one of the scientist teams. It goes by fast. I felt like the director was saying, “If you went to see Hidden Figures, here’s a 20 second recap of Hidden Figures for the people who like that, NEXT!” This is an example of hurrying everything in order to stuff 8 movies into 3 hours. The Advanced Placement Program® (AP) has a blog on “Women Scientists of the Manhattan Project” I know from my research on getting people to code, that women today study AP Computer Science at a considerable lower rate than male high school students.

Easy FRED Stata Data

Zachary Bartsch1 Comment

Lot’s of economists use FRED – that’s Federal Reserve Economic Data for the uninitiated. It’s super easy to use for basic queries, data transformations, graphs, and even maps. Downloading a single data series or even the same series for multiple geographic locations is also easy. But downloading distinct data series can be a hassle.

I’ve written previously about how the Excel add-on makes getting data more convenient. One of the problems with the Excel add-on is that locating the appropriate series can be difficult – I recommend using the FRED website to query data and then use the Excel add-on to obtain it. One major flaw is how the data is formatted in excel. A separate column of dates is downloaded for each series and the same dates aren’t aligned with one another. Further, re-downloading the data with small changes is almost impossible.

Only recently have I realized that there is an alternative that is better still! Stata has access to the FRED API and can import data sets directly in to its memory. There are no redundant date variables and the observations are all aligned by date.

Continue reading →

80% Efficient Markets: Why I Buy Individual Stocks

James Bailey4 Comments

The conventional wisdom among economists is that large, liquid asset markets like the US stock market are incredibly informationally efficient. The Efficient Market Hypothesis (EMH) means that these markets near-instantly incorporate all publicly available information, making future prices essentially impossible to predict (a random walk with drift). As a result, economists’ investment advice is that you shouldn’t try to beat the market, because its impossible except through luck; instead you should aim to tie the market by owning most all of it via diversified low-fee index funds (e.g. SPY or VT).

This idea usually sounds crazy when people first hear it, but it works surprisingly well. You’d think that at least half of participants would beat the market average each year, but active strategies can generate such high fees that its actually much less than that. Further, people who beat the market one year aren’t more likely than average to beat it the next, suggesting that their winning year was luck rather than skill. Even Warren Buffet, who economists will sometimes concede is an exception to this rule, thinks that it is best for the vast majority of people to behave as if the EMH is true:

In 2008, Warren Buffett issued a challenge to the hedge fund industry, which in his view charged exorbitant fees that the funds’ performances couldn’t justify. Protégé Partners LLC accepted, and the two parties placed a million-dollar bet.

Buffett has won the bet, Ted Seides wrote in a Bloomberg op-ed in May. The Protégé co-founder, who left in the fund in 2015, conceded defeat ahead of the contest’s scheduled wrap-up on December 31, 2017, writing, “for all intents and purposes, the game is over. I lost.”

Buffett’s ultimately successful contention was that, including fees, costs and expenses, an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over 10 years. The bet pit two basic investing philosophies against each other: passive and active investing.

This has been the approach I’ve taken for most of my life, but over the last 3 years I’ve gone from ~99% believing in efficient markets to perhaps ~80%. Missing on crypto felt forgivable, since it was so new and unusual; I recognized that in the early days of a small, illiquid market the EMH might not apply, I just misjudged what counted as “early days” (I figured that by 2011 “everyone” knew about it because Bitcoin had been discussed on Econtalk; its up ~1000x since).

But with the Covid era the anomalies just kept piling up. All through February 2020, the smart people on Twitter were increasingly convincing me that this would be a huge pandemic; the main thing reassuring me was that stocks were up. But by late February they finally started crashing; instead of trusting the markets, I apparently should have trusted my own judgement and bought puts. Then investors starting buying the “wrong” Zoom instead of the one whose business benefitted from Covid:

Then we saw “meme stock mania” with many stocks spiking for reasons clearly unconnected with their fundamental value. Many at Wall Street Bets were clear that they were buying not because of business fundamentals, or even because they thought the price would go up, but because they liked the company, or wanted to be part of a movement, or wanted to send a message, or “own the shorts”.

Anecdotes got me to start taking some of the anti-EMH economics literature more seriously. For instance, Robert Shiller’s work showing that while it might be near-impossible to predict what a single stock will do tomorrow better than chance, predicting what the overall market will do over the longer run is often possible.

By revealed preference, is still mostly buy the EMH. About 80% of my net worth (not counting my home) is in diversified low-fee index funds. But that means 20% isn’t; its in individual stocks or actively traded ETFs with more-than-minimal fees. Why do this? I see 4 reasons buying individual stocks isn’t crazy:

  1. Free trading: Buying a bunch of individual stocks used to incur huge fees. Now, many brokerages offer free trading. Even if the EMH is true, buying a bunch of individual stocks won’t lose me money on average, just time.
  2. Still diversified: Buying into active funds instead of passive ones does tend to mean higher fees, and that is a real concern, but they do still tend to be quite diversified. Even buying individual stocks can leave you plenty diversified if you buy enough of them. Right now I hold about 45, with none representing more than 0.5% of my portfolio; one of them going bankrupt causes no problems. If anything I’m starting to feel over-diversified, and that I should concentrate more on my highest-conviction bets.
  3. Learning: Given the above, even if the EMH is 100% true, my monetary losses due to fees and under-diversification will be tiny. The more significant cost is to my time- time spent paying attention to markets and trading. This is a real cost, enough that I think anyone who finds this stuff boring or unpleasant really should take the conventional econ advice of putting their money in a diversified low-fee index fund and forgetting about it. But I’m starting to find financial markets interesting, and I think keeping up with markets is a great way to learn about the real economy- they always suggest questions about why some companies, sectors, factors, or countries are outperforming others. In some EMH models, the return to trading isn’t zero, but instead is just high enough to compensate traders for their time. In this case, people who find markets interesting have a comparative advantage in trading.
  4. Outperforming Through New Information: All but the strongest version of the EMH suggests that those with “private information” can outperform the market. Reading about the very top hedge funds I think they really are good rather than lucky, and the reason is that they have information that others don’t. Sometimes this is better models but often it is simply better data; Jim Simons got historical data on markets at a frequency that no one else had, and analyzed it with supercomputers no one else had. That’s a genuine information advantage, and I don’t think it’s a coincidence that he wound up with tens of billions of dollars. This should be incredibly encouraging to academics. We can’t all be Jim Simons (who was a math professor and codebreaker before starting Renaissance Technologies; Ed Thorpe was another math prof who got rich in markets), but discovering and creating private information is exactly what we do all day as researchers. My hard drive and my head are full of “private information” that others can’t trade on; of course right now most of it is about things like “how certificate of need laws affect self-employment” that have no obvious connection to asset prices, and there is a lot more competition from people trying to figure out markets than from people trying to figure out health economics. But discovering new information that no one else knows is not only possible, it is almost routine for academics, and its not crazy to think this can lead to outperforming the market.

Overall I think economists have gone a bit too far talking themselves and others out of the idea that they could possibly beat the market. I’ll discuss some more specific ideas in the next few weeks, but for now I leave you with 3 big ideas: you can’t win if you don’t try; winning is in fact possible; and if you are smart about it (avoid leverage, options, concentration) then defeat is not that costly.

Disclaimer: This is not investment advice. I say this both as a legal CYA, and because I don’t (yet?) have the track record to back up my big talk

A Pessimistic Take on Inflation

Jeremy Horpedahl1 Comment

Last week I wrote an optimistic take on inflation. The rate of general price inflation has fallen a lot in recent months, and wage growth is now clearly outpacing inflation. That’s all good news.

Today, the Fed will announce their latest interest rate decision. Will the good news on inflation lead the Fed to stop raising interest rates? I’m not very good at making predictions, but today I’ll give a pessimistic take on inflation which suggests the Fed (and everyone else) should still be concerned about inflation.

The pessimistic take can be summarized in two charts. First, this chart shows the year-over-year change in the core PCE inflation index. As most readers will know, core indexes take out food and energy prices. This is not a “cheat” to mask important goods, it’s done because these are particularly volatile categories of goods. If we want to see the true underlying trend in inflation, we should ignore price fluctuations that are driven largely by weather and geopolitics.

While there is some moderation in inflation in this chart, we don’t see anything like the dramatic decline in the CPI-U, which fell from about 9 to 3 percent over roughly the past year. True, there is some decline over the past year, but only about 1 percentage point, and it has been stuck at just over 4.6 percent for the past 6 months. This is not a return to normalcy, as this rate historically has stayed in the band of 1-2 percent.

The second pessimistic chart is M2, a broad measure of the money supply.

The dramatic increase in M2 during 2020 is clear. That’s a big source of the inflation issues we’ve had over the past 2 years. There is some cause for optimism in this chart: M2 has clearly shrunk from the peak in Spring 2022. In fact, using a year-over-year percentage change, M2 has been negative since last November.

But if we look very recently, there is less cause for optimism. Since late April, M2 has stopped falling. In fact, it’s up a little bit. Is this a sign that the Fed doesn’t really have inflation under control? Perhaps. The increase isn’t huge, and there’s always some seasonality and noise to this data so we shouldn’t overanalyze this small deviation from the general decline in the past year plus. But we’ll need to continue watching this data.

What Should a Businessman Be Willing to Die For?

Scott BuchananLeave a comment

The late Dallas Willard, a professor at USC, wrote on a variety of subjects touching on moral philosophy. In 2006 he addressed the topic, “The Business of Business”. He noted that the spontaneous, obvious answer today to the question, “What is business (manufacturing, commerce) for?”  would be: “The business of business is to make money for those who are engaged in it.”

But there is a tension here. Willard notes that that is NOT how businessmen/professionals present their raison d’etre : 

“No business or other profession that advertises its ‘services’ announces to the public that it is there for the purpose of enriching itself or those involved in it. With one accord they all say their purpose is service, not serve-us. I have never met “professionals” who would tell their clients that they were there just for their own self-interest.”

This ambiguity in the role of businessmen/women (or “merchants”, as they used to be called) is not new. Willard reaches back to the writings of John Ruskin who remarked in 1860, “The fact is that people never have had clearly explained to them the true functions of a merchant with respect to other people.” Ruskin went on to place what we today call “business” among the  “Five great intellectual professions” necessary to the life of “every civilized nation.” With respect to the nation:

“The Soldier’s profession is to defend it.

The Pastor’s to teach it.

The Physician’s, to keep it in health.

The Lawyer’s to enforce justice in it

The Merchant’s to provide for it.”

Ruskin added: “And the duty of all these men is, on due occasion, to die for it.” The soldier to die “rather than leave his post in battle,” the physician “rather than leave his post in plague,” the pastor “rather than teach falsehood,” the lawyer “rather than countenance injustice.” (Indeed!)

But what of the merchant? What is it that the merchant (businessman) would die for rather than do?

Well, the main function of the merchant or manufacturer in Ruskin’s view is to provide for the community, not simply make money for him/herself:

It is no more his function to get profit for himself out of that provision than it is a clergyman’s function to get his stipend. The stipend is a due and necessary adjunct, but not the object of his life, if he be a true clergyman, any more than his fee (or honorarium) is the object of life to a true physician. Neither is his fee the object of life to a true merchant. All three, if true men, have a work to be done irrespective of fee…. That is to say, he has to understand to their very root the qualities of the thing he deals in, and the means of obtaining or producing it; and he has to apply all his sagacity and energy to the producing or obtaining it in perfect state, and distributing it at the cheapest possible price where it is most needed.

Ruskin also noted that since the merchant has direct control over those who work for him, “…it becomes his duty, not only to be always considering how to produce what he sells in the purest and cheapest forms, but how to make the various employments involved in the production or transference of it most beneficial to the men employed.”

Furthermore, if the enterprise falls on hard times, it is the duty of the CEO (or other top management) to share fully in the hardships suffered by the other employees: “As the captain of a ship is duty-bound to be the last to leave the ship in disaster,…so the manufacturer, in any commercial crisis or distress, is bound to take the suffering of it with his men, and even to take more of it for himself than he allows his men to feel; as a father would in a famine, shipwreck, or battle, sacrifice himself for his son.”

In a similar vein, activist lawyer and later Supreme Court Justice Louis Brandeis in 1912 said at a Brown University commencement address:

The recognized professions…definitely reject the size of financial return as the measure of success. They select as their test, excellence of performance in the broadest sense—and include, among other things, advance in particular occupation and service to the community. These are the basis of all worthy reputations in the recognized professions. In them a large income is the ordinary incident of success; but he who exaggerates the value of the incident is apt to fail of real success…In the field of modern business, so rich in opportunity for the exercise of man’s finest and most varied mental faculties and moral qualities, mere money-making cannot be regarded as the legitimate end.    

Willard drily remarked, “Texts by Ruskin and by Brandeis, along with similar ones, are not popular references in our schools of business today.” My own personal observations are that the nobility of the management and entrepreneurs seems to scale somewhat inversely with the size and age of the enterprise. It gets tricky to start assessing degrees of moral rectitude here, because in classical exchange theory, any voluntary transaction (buying/selling goods, agreement to work for certain wages) brings benefits to both parties, and to society as a whole, quite apart from any conscious intent of altruism.

At large end of the scale, we see CEOs who drive big companies into the ground and then waltz away with multimillion dollar golden parachutes; no sharing of the employees’ hardships at all.

And for many Wall Street dealmakers, it truly is all about the money: float a couple billions in junk bonds, take control of some company, force the company to pay you fees, load the company with your crappy debt, and walk away with a cool billion or so. Or take a short position in a publicly traded company, publish a bogus report (“short attack”) alleging horrible malfeasance at the company, driving share prices down, close out your short position at a huge profit, and move on to the next victim. These seem to be purely predatory actions, taking advantage of the system to make a buck with no clear redeeming social value.

At the other end of the scale, the (often youngish) folks starting a new software firm, the  idealistic couple chucking fast city life to try to make a go of a coffee house or BnB in a small town, the plumber with an associate, all of these I think are very serious about providing the public with a good product/service, and may tend to take care of their employees and also to put a lot of their own personal skin (savings, a lot of extra time) in the game to get these enterprises going. The younger Henry Ford famously fought to pay his employees high wages, over the objections of company shareholders, who wanted more profits to accrue to them. I know personally two men in the greater Trenton, NJ area who (as an expression of their religious values)  intentionally conduct computer-related businesses such that they can provide employment to disadvantaged local young men.

Maybe when an enterprise gets large enough that, to management, its employees and its customers become numbers rather than individual people is the point where the transition to pure greed as the fundamental motive occurs, even if it proves prudent in support of profits to maintain policies and communications which promote the welfare of customers and employees.

On EJMR, status competitions, and tapeworms

mdmakowsky10 Comments

The EJMR paper presentation dropped at the NBER summer meetings. If you were a 90s kid who loved hacker movies, you were not disappointed. Some are worried it’s an exercise in doxxing (it isn’t). What I think is worth a bit more reflection is the “big reveal” that EJMR toxic posters were not limited to the periphery of the profession. Quite to the contrary, large swaths were matched to the IP addresses of elite universities. Besides disabusing people of the notion that toxic behavior and ideas might decrease with prestige, accomplishment, or intelligence, I think it serves as a healthy reminder that 1) Any anonymous message board will devolve into a cesspool if left unmoderated (see Law, Gresham’s) and, 2) Any status game can devolve into a negative sum game if left unmoderated.

Academia is a status tournament

From a purely careerist standpoint, academia is a long run status tournament built around rankings and tiers. It starts from the moment you apply to graduate schools, hoping to get into the highest ranked school. Some are admitted, some are not. Those admitted are sorted across tiers of schools. Once in a school there is the (sometimes true) perception that students are internally ranked, sorting to faculty advisors, projects, and data access. Some graduate, some leave early with a masters degree, some leave with nothing. Those who graduate are sorted into academic and non-academic jobs. Those that are pushed by the faculty on to the academic market sort into better and worse schools. The best prospects are swapped across the best schools (it’s generally uncouth to hire your own students, at least immediately). Once they are established in tenure track positions, the tournament continues in its least compressed, but also most heightened form, as scholars conduct research, write papers, tour seminars, apply to workshops and conferences, submit to journals, apply for grants and fellowships, and generally fight their way towards tenure. Tenure, to be noted, is a stage of this tournament, but it’s not the end (the end happens at funerals and Nobel Prize ceremonies.)

“You aren’t tenured by your department. You’re tenured by the profession.” – academic proverb

The tournament is subtle and unrelenting. For those who seek to climb the ladder or remain on top, the strategies are more varied than you might expect. It is, point of fact, not all about research productivity, scholarly contributions, and intellectual advancements. It’s also about public goods, including data curation, lab management, feedback on other people’s research, journal editing, idea sharing, even referee reports. From the most cyncical careerist point of view, however, it remains a status game, which means what matters at the end of the day is not how good you are, but how good other people think you are. Or how good people think other people think you are. Or how good…you get the k-level reasoning idea.

Can you see where the trouble seeps into this tweedy swamp of ambition and ego? The inherent subjectivity of it. The biases some of us have, the biases all of us have. The dark arts of manipulating image, conversation, and public opinion. The herding around ideas. The bureaucratic and scholarly gamesmanship that can hold back one paper and elevate another. Every story your paranoid lizard brain can dream up explaining why a node in the tournament decision tree turned against you and in another’s favor.

Which brings me back to EJMR.

I’ll make a statement you don’t have to believe: I expected the worst behavior to be at the good schools. Why? Because they are embroiled in the most ruthless, unforgiving level of the tournament, and most of them are losing. That’s not a hypothesis, that’s just a mathematical reality. For every 25 students in a top PhD program, I’d guess 10-12 end up in academia. Of those, 6-10 are at an R1. Of those, 1-2 are in a top school. Of those, maybe 1 gets tenure at said top school.

From the perspective of the most competitive souls, that’s 96% who are losers. Not in the absolute sense, but in the “at some stage of the game someone else was chosen over them” sense. In the relative, zero-sum, status seeking sense. That doesn’t mean 96% of academics are angry, but it does make for a large pool of potentially angry people. People who, in a moment of weakness, might feed that dark tapeworm of the soul whose only sustenance is the denigration and suffering of people they envy. That desperate willingness to believe the only reason you didn’t “win” is because your competitors were vile and dishonorable? That’s a tapeworm buffet.

The dark tapeworm is an emotional parasite, isolated and lonely in it’s host. EJMR, in its toxic final form, allowed thousands of depressed, angry tapeworms to find community and feed each other. To affirm the belief festering within each of them that they were cheated. That they would have gotten the job, published, admitted, invited, tenure. That they would have won just one more round, and risen just one more level, if it wasn’t for them. The cheaters.

It’s not surprising that the targets of EJMR hate were disproportionately (but not exclusively) women and people of color. I’m not going to tour you through the misogny and racism on EJMR, but I will note that it’s a good reminder that intelligence isn’t the prophylactic against grotesque beliefs and behavior that you might hope it is. Quite the contrary, it’s almost (almost) heartwarming to see that status envy and anger turn everyone into the same monsters, looking to attack and blame the same people, whether you’re an unemployed trucker in Arkansas worried about making rent or a 5th year PhD student at Harvard nervously managing the shame of having to settle for an industry job that starts at $190k a year.

Returing to the thesis of this post, let’s not forget that tournaments are perfectly fine. They can even be positive sum games. A golf tournament only has one winner, but the more honorable the competitors are, the more they collectively raise the status and opportunities of others in their tournament, the higher the quality of their collective product, which means a bigger prize pool for everyone. There’s a reason the prize money isn’t winner-take-all: they know that a certain amount of cooperation amongst competitors is necessary for the tournament as a whole to thrive.

And that’s why this paper is important. Beyond shining a light on grotesque and dangerous behavior, it’s a wake-up call that the status tournament in academic economics is out of control and veering into negative sum territory. EJMR got a foothold because students and faculty had questions nobody felt they could ask or answer without anonymity. A secret curriculum. A gnawing, desperate fear that you don’t understand the rules. How do I get in the NBER? Can I use the same data as another student? Can I renege on a job if a better one is offered? Does journal X count for tenure? EJMR thrived and achieved critical mass. But that critical mass, combined with anonymity and the abandoning of content moderation, became a breeding ground for emotional tapeworms and here we are.

So how do we kill it off? Well, we can go after the most aggressive and disgusting posters on the website, but that feels a bit like attacking a forest fire with a fire extinguisher. In the long run, I suspect the solutions will be public goods. Not unlike undermining the labor supply of a terrorist group by supplying clean water and healthcare, I think the profession needs to start providing the public goods that were the original EJMR lifespring. Journal submission records. Hiring decision transparency (i.e. when a job is filled or still considering candidates). Invitation, acceptance, and rejection statuses in real time. Repositories of course notes and slides. A hidden curriculum made visible.

And, yes, an anonymous message board (or a identified board with a special anonymous section), but with strict content moderation. We know it can be done. You don’t see any of the same filth on statalist or the economics subreddit. We have professional associations, including the AEA, whose sole purpose is to provide public goods. I’m not going to dissuade anyone, particularly those attacked, from going after EJMR operators or posters through legal channels. But it we want to rip it out of the earth, root and vine, I see no better way than to beat it in the marketplace. And in doing so, we might even smooth over the rough edges of the status tournament we’re trying to build lives and careers in.

Because maybe the collective production of new knowledge at the bleeding edge of economics could even be a positive sum game?

Success in starting

Joy Buchanan1 Comment

At a Chinese restaurant, I got a fortune that said, “Success is in starting a new project at work.” It struck me as very funny, and it resonates with other people on Twitter.

Starting a new project at work does not translate to success in academia. The danger is usually in starting too many projects and finishing too few.

Starting a new research project, whether alone or with coauthors, is exciting. You fall in love with a new idea.

The hard part is sticking with that idea until the very end of the publication process. This is more comparable to staying married. The project will see you at your worst, and you will discover that the project is not as wonderful as it seemed initially. You might end up re-writing the manuscript several times, years after the initial infatuation has worn off.

Academics do need to start projects. It is important to start the right projects. A reason to not start too many projects is to preserve time for the best work. A downside to being overloaded is that you might have to say no to a new project when an actual good opportunity comes along.

In my post on the Beatles documentary Get Back, I observed the way that the bandmates start new songs together. It reminded me of coauthors convincing each other to start a new project.

Their creative process resembles co-authoring a research paper. When Paul is working out a song and humming through places he hasn’t worked the lyrics out yet, that reminds me of the early drafts of a paper. You don’t have to have the whole Introduction written. The hook of a song is a bit like the main result of a research paper. Persuading yourself and your coauthor that you have a project worth finishing is the first step. Coauthors have unspoken agreements on how the project is going to proceed. The tacit knowledge of the collaborative process is one of the most important things you can learn in graduate school.

Darwyyn Deyo wrote several posts for us on the research process, including: “The Research Process: Identifying the Ideas that Motivate You”

Greg Mankiw’s career advice intersects with starting projects:

Advice for new junior faculty (2007)

My Rules of Thumb (1996)

This quote from Rules of Thumb was surprising: “None of this is part of a grand plan. At any moment, I work on whatever then interests me most. Coming up with ideas is the hardest and least controllable part of the research process. It is somewhat easier if you have broad interests.” He goes on to say: “I sometimes fear that because I work in so many different areas, each line of work is more superficial than it otherwise would be. Careful choice of co-authors can solve this problem to some extent, but not completely.”

He really refutes my fortune cookie with this line, “Deciding which research projects to pursue is the most difficult problem I face in allocating my time.” Success is about starting the right projects and no others.