Andrew Gelman smacks me down on social science rivalries

Somehow I missed it when it first came out, but back in December Andrew Gelman wrote a great smackdown of a Bloomberg piece by yours truly. I had written that the reason economists get paid much more than sociologists was that they have more technical skills, especially statistics. Gelman retorts:

Smith writes a bunch of things I disagree with — but then, as a political scientist, I guess it’s no surprise to see me disagreeing with an economist!... 

Freudian psychiatrists got a lot of money and a lot of prestige back in the 1950s, and they didn’t know any statistics at all. But they had one useful skill, and that was the ability to convince rich people that their services were personally valuable. In the national discourse, psychiatrists were taken seriously. They were mocked, but they were a central part of the culture and their pronouncements were respected. And they managed to do so without following Smith’s advice to “stop whining and tech up.” 

So perhaps a better piece of advice, if sociologists (and psychologists and political scientists?) want to join economics at the big boys’ table and up their salary and their influence, would be: Stop whining and make your work more appealing to rich people.

Gelman is right. My post left out some big, important things.

First of all, yes, teching up is not necessary for an academic field to get paid big bucks in the private sector (and hence, bigger bucks in the academic sector). Freudian psychology shows that sometimes you can pull off the feat without technical skills.

Second of all, as others have also pointed out since I wrote my post, teching up is not sufficient to get money in the private sector. Your techniques also have to have applications. Gelman terms this "making your work appealing to rich people", but I think usually it's just making your techniques appealing to business (Freudian psychology, with its direct marketing to rich individuals, is the exception rather than the rule). This is why operations research profs get paid more than stats profs. Pretty similar skills, but stats profs would have to pay a higher transaction cost to jump to the private sector - they'd have to learn how to do private-sector stuff. Operations research people already know that stuff, and could switch really quickly. 

Usually, when you have profs with business-related skills, they are in business schools or engineering schools. The less applied disciplines housed in the "literature, science, and arts" schools - physics, math, econ, etc. - are usually paid a lot less. Econ is the biggest exception, and it is not only because of economists' technical skills. 

It's also because economists have figured out ways to make the private sector purchase their techniques directly, without the need for too much retooling. These include, but are not limited to:

1. Legal consulting

2. Macroeconomic forecasting

3. Various assorted other kinds of business consulting

4. Market design (this is new!) 

These, of course, are in addition to at least one hugely important area where economists can apply their skills with retooling: Management consulting.

For sociologists to emulate this financial success completely, it would require that they find ways to get paid for doing sociology. This seems unlikely to happen (though by all means, go for it!). But if they improve their stats techniques so that with a bit of retooling the average sociologist could go to work at a management consultancy or similar firm, they will raise the value of their outside option. At the same time, if they put more stats and applied math in the undergrad sociology curriculum, they will make sociology graduates more appealing to the business world, thus raising demand for the sociology major and probably making it more inelastic at the same time. This was another big thing my Bloomberg post left out.

Whether sociologists want to do this, of course, is another question.

But it's interesting to note that Andrew Gelman's field, political science, has teched itself up a great deal in recent decades, including with game theory (a technique that first found purchase in economics), and with statistics (as Andrew Gelman's own career demonstrates). So even though my prescription for raising sociology salaries is incomplete, it does describe the path that poli sci has chosen to take, and that Gelman himself has chosen to take within poli sci! So that's something.

Gelman's point about Freudian psychology also raises another interesting question. He seems to think that Freudian psychology is (and I am using my own words, not his) basically a bunch of bullshit that rich people were tricked into paying for - a belief that seems very widespread nowadays. But if economists are getting paid to dish out bullshit, what's the bullshit that they're getting paid to dish out?

Gelman claims that Gary Becker's "imperialist" econ stuff is obviously wrong:

Gary Becker’s writing doesn’t scare me, but a lot of it strikes me as wrong, indeed so obviously wrong that it causes me to question how it gets so much respect within the field of economics. I’ve talked with some economists whom I know and respect, and they in turn respect much of Becker’s work, so the story here is far from simple. But let me say this again, my concern about work such as Becker’s — and, I believe, the concern of many other social scientists — is not fear of imperialism, it’s disquiet at such extreme ideas being treated as mainstream.

That's harsh! But even if it were true, I don't think it would be that relevant, since economists don't really get paid to do Beckerian stuff in the private sector.

If economists are getting paid to bullshit, a la Freudian psychologists, who is paying them? Management consultancies might make economists use a teensy tiny little bit of econ theory, but mostly they're just running regressions and doing other stats stuff. As for market design, that ain't bullshit.

That leaves 1. Law and economics, 2. Macroeconomic forecasting, and 3. Various other forms of business consulting.

Law and econ seems like it will inevitably contain some big element of bullshit, because all legal stuff contains large amounts of bullshit. Lawyers are legally obligated to fling whatever bullshit they can fling. But economic considerations are important in legal matters. There's no way around that, really. You could say that the economics being done in legal cases is not the right economics, or not the best, but it's very hard to make an argument that economics in general should just be kicked out of the courtroom.

As for macroeconomics forecasting, that is indeed mostly bullshit, but it's bullshit for which the source of demand - the desire to know the future of the economy - is deep and fundamental. There's no getting rid of this one, I don't think.

That leaves the nebulous 3. Various other forms of business consulting. This is way too nebulous and diffuse to characterize. Some - I have no idea how much - is probably very valuable and useful. But then you have stuff like the corporate shilling in Inside Job. Anyway, if you are pissed at the econ profession, and you think that economists are getting overpaid to do economics for the private sector, it is probably somewhere within this category that you want to look. Good luck with that!


Updates

In the comments, Ryan Decker writes:

Probably one of the bigger components of the last category is transfer pricing. I think it would be hard to argue that economists bring nothing of value to that process (though it involves lots of collaboration with accountants and lawyers).

I didn't even realize that economists did much of this, actually! All the people I know who work in transfer pricing are, indeed, accountants and lawyers. But it makes sense that a lot of economists would be hired for this. And yes, I think this is a pretty clear case of creating real value ("real" as opposed to a fleeting fad, an artifact of imperfect institutions, etc. - yes, I know there's no good definition for "real value").

Another chunk of (3) might be strategy consulting by industrial organization economists. It seems like there should be a lot of that, but I have no idea how much there actually is, or how well it actually works.