"Freshwater vs. Saltwater" divides macro, but not finance

In a recent article, Miles and I discussed the divide between "saltwater" and "freshwater" macroeconomics. Of course some people claimed that this divide is a thing of the distant past, or mostly hype. But a new paper by Ali Onder and Marko Tervio shows that the divide is still a real thing. Instead of comparing theories or ideas, they simply look at who is citing whom. Applying cluster analysis to the citation networks, they find that economists from the American coasts ("saltwater") tend to cite other economists from the coasts, while economists from the interior of the country ("freshwater") tend to cite others from the interior. "Freshwater" and "saltwater" are cliques.

But here's an interesting fact: the "freshwater-saltwater divide" appears to be only in certain fields of economics. In particular, macroeconomics and econometrics were very divided, while finance was much less divided than other fields:

This definitely fits with my own personal experience. Finance feels very non-balkanized. It feels less like macro, and more like the physics culture I remember from my undergrad days; people disagree on lots of stuff, but they stay abreast of what the other side is doing, and they're almost always willing to entertain and discuss competing ideas. And there seems to be less cliquishness - remember, Eugene Fama and Richard Thaler work in the same department. 

So the question is...why?

There's an easy explanation for why finance is the least divided: It has the best data. Financial data is high-frequency and very rich, has many clear natural experiments, and is supplemented by things like surveys and even experiments. Thus, it makes sense that in finance, data could win arguments, while in other fields it's not so easy to tell who's right. Even if the data doesn't definitively answer arguments - is long-run asset return predictability driven by behavioral spazzing, or by the time-varying risk premia of rational agents? - the proponents of competing ideas are at least forced to acknowledge and address each other's work. 

This idea also explains why macro is divided: it has very uninformative data. When data doesn't tell you a lot about the world, it's natural for researchers to separate into "schools of thought" based on intuition, modeling preferences, and prior beliefs. Without any way to tell who's right, freshwater and saltwater macroeconomists don't even have to acknowledge that the other group exists. (And from what I've seen they frequently don't!) 

But this idea doesn't explain why econometrics is so divided. Econometricians work with every kind of data, so by definition they have the best. And econometrics is the branch of econ that is least dominated by complex theories. So why is there such a divide between "freshwater econometrics" and "saltwater econometrics"? It's a mystery to me; in terms of ideas, I have no idea what the big disagreements in 'metrics even are. Is it a frequentist/bayesian thing? Time-series vs. cross-section? Pure theory vs. applied? Hopefully some older profs can explain this to me.

Of course, there are some other explanations for why econ might be divided. Politics is one; after all, the freshwater network is descended from the "Chicago school" of the 60s and 70s, and hence might just be more conservative. But I think we'd then expect to see public finance (taxes) and labor be more politicized than they are. Those are the fields that have the most importance for distributional questions, and distribution is what politics is mostly about. So politics doesn't seem like the main explanation here.

Spatial proximity is also a candidate explanation, but doesn't explain why Berkeley cites Harvard more than it cites Chicago.

So there's no obvious explanation that completely explains the freshwater-saltwater divide that we see. But it's real. And if you want to escape it, consider going into finance!

Update: Steve Williamson has an interesting comment:

Another thought. You've persisted with the view that when the science is crappy - whether because of bad data or some kind of bad equilibrium I guess - there is disagreement. When the science is good, apparently there is no disagreement. Here's something else that could be going on. In macro the stakes are big. Different decisions about macro policy could have big effects, and there are plenty of advisory jobs in governments and in central banks that macro people compete for. If you can convince people that your ideas are the best, then your tribe gets a bigger flow of resources. And convincing the people who hand out the money may not require good science, only a big mouth. What's at stake in finance? The flow of resources to finance people comes from Wall Street. All the Wall Street people care about is making money, so good science gets rewarded. I'm not saying that macroeconomic science is bad, only that there are plenty of opportunities for policymakers to be sold schlock macro pseudo-science.

The possibility that macro tribalism is all about blatant resource-grabbing had of course occurred to me, but that's a little more cynical than I'm prepared to get! 

Also, I'd kind of like to know exactly who Steve thinks is selling "shlock macro pseudo-science" to policymakers... 

Update 2: Seeing Williamson's comment, Matt Yglesias points out on Twitter that successful macroeconomic modeling should be in huge demand on Wall Street. For example, if Wall St. firms were to learn that QE really does cause deflation - as Williamson's recent paper alleges - they should be able to make enormous profits. Williamson agrees.