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June 28, 2009
David Warsh, Proprietor


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Against Gerontocracy

 The appearance of a new economics journal seldom makes waves. The American Economic Association’s flagship American Economic Review, founded in 1911, is still the most widely consulted journal in the field. The two main university-owned journals, Harvard’s Quarterly Journal of Economics and Chicago’s Journal of Political Economy, were established even earlier. The AEA’s Journal of Economic Literature,  has sought since 1969 to keep track of the swelling tide of work with survey articles, book reviews and annotated bibliographies. Since 1987, the Journal of Economic Perspectives has boiled down for the non-specialist the most interesting recent work.

Four “field journals” that appeared last year (in macro, micro, applied and policy economics) seem unlikely to change much, though they will admit many more persons to the conversation than before. And while commercial publishers are always looking for titles they can sell to libraries, the cumbersome handbooks in various fields that have made so much money for them in the past no longer excite authors as much as formerly. The exceptions to this rule, worth stories in themselves, have been breakaway journals in fields where big changes are underway:  the Journal of Economic Theory in the 1970s, the Journal of Economic Behavior and Organization today.

 

The Annual Review of Economics, which formally appears for the first time in September, may be the most interesting exception yet.  For one thing, it is coming into existence under the stewardship of Kenneth Arrow, of Stanford University, among the two or three greatest economists of the second half of the twentieth century, still taking an active interest in its frontiers in the twenty-first century.

 

For another, it follows a time-tested recipe that is among the most successful in all of scientific publishing.  The first Annual Reviewof Biochemistry – appeared in 1932, the brainchild of a young assistant professor of biochemistry at Stanford named J. Murray Luck.  Biochemical knowledge was exploding in the 1920s.  Luck wrote to fifty well-known biochemists around the world to propose an annual volume of critical reviews on the research of the preceding year or two, in hopes of keeping track of its rapidly-changing structure. A core group organized themselves as a non-profit company, no shareholders, no dividends, no division of earnings in the event of a break-up – nothing to do but grow.  From the first issue, the enterprise was a great success.

 

Today, there are 37 Annual Reviews of focused disciplines within the biomedical, physical, and social sciences, including three new ones in economics – The Annual Reviews of Economics, of Financial Economics, and of Resource Economics.  The Annual Review of Psychology, at sixty, among the oldest titles in the series, is the top ranked journal in the field today.  (Dan Ariely, of Duke University, and Michael Norton, of Harvard Business School, have a particularly interesting article on Conceptual Consumption in the current volume.) The Annual Review of Political Science, launched in 1998, has surpassed the American Political Science Review in rankings of citation impact.

 

Most important, the new economics journal sets the bar in the profession in an interesting way, resolving the inevitable tension between graybeards and the agenda-setting kids in favor of the young. Generations are minted frequently in economics, roughly every fifteen years. The developments of the 1970s and ’80s are history now; their progenitors have begun to receive Nobel prizes.  Even the controversies of the ’90s have begun to resolve.  Following the lead of such early adopters as Caroline Hoxby and Steven Levitt, economists in the early ’00s pursue a thoroughly social science. (The hard and tricky work assessing the great problem of the present day, parsing of the financial crisis, only recently has begun.) Things have changed greatly in economics in the last fifteen years, thanks to the invention of many new analytic tools, almost all of them enabled by powerful computers.

 

Thus volume one of the Annual Review of Economics maintains a tight focus on current controversies, according to associate editor Timothy Bresnahan, also of Stanford University.  The articles are pitched to the level of a lecture in the second year at a good graduate school, and “a certain short, get-to-the-point flavor.”  The real selling point of the volume, though, is that the authors, most of them under forty, are a veritable Who’s Who of the leadership of where the profession is thought to be going next.  “It’s going to be their game,” says Bresnahan.  There is nothing else like it in economics, he says; it probably couldn’t have been done without the immense prestige of Arrow. “It turns out that the $50 bill on the sidewalk was real.  People just leapt at the opportunity.” 

 

Sam Gubins, president and editor-in-chief of Annual Reviews (a professor of economics at Haverford College for fourteen years before opting for a career in management), says the operating principle today is little different for any of the other journals than in the early days:  “We bring together six or eight top people for a day, they sit around a table talking about who’s doing what, the staff invites sixteen or so pieces, acceptances are very high, deliveries are very high, the papers are highly cited.  So it’s more than just a gateway to a field: it’s a way to point to all the interesting work that’s going on.” The first year’s articles have been delivered, volume two has been commissioned, volume three is in the works.  (

 

In the case of economics, this steering committee means not just Arrow and Bresnahan, but an editorial board consisting of Daron Acemoglu, of MIT; David Card, of the University of California at Berkeley; Esther Duflo, of MIT; James Heckman, of the University of Chicago; Narayana Kocherlakota, of the University of Minnesota; David Laibson, of Harvard; Charles Manski, of Northwestern University; and J. Peter Neary, of Oxford.  The twenty pieces they commissioned for volume one include:

 

 Pol Antràs, of Harvard, and Esteban Rossi-Hansberg, of Princeton, on “Organizations and Trade” (Mapping the international division of labor).

  

Abhijit V. Banerjee, of Harvard, and Esther Duflo, of MIT, “The Experimental Approach to Development Economics” (Development economics gets its own version of clinical trials).

 

Marianne Bertrand, of the University of Chicago Booth School of Business, on “CEOs” (various interpretations of recent changes in the executive suites).

 

Olivier J. Blanchard, of MIT and the International Monetary Fund, on “The State of Macro” (After the explosion of the 1970s, there is growing consensus, because facts, at least, don’t change).

 

Raj Chetty, of Harvard, “Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods” (The latest attempts to pin down the analysis of taxation, social insurance and behavioral welfare economics).

 

George W. Evans, of the University of Oregon, and  Seppo Honkapohja, of the University of Minesota,  on “ Learning and Macroeconomics” (Realsm about rational expectations).

 

Ernst Fehr, of the University of Zurich, Lorenz Goette, of the Federal Reserve Bank of Boston, Christian Zehnderon, of the University of Lusanne, on “A Behavioral Account of the Labor Market: The Role of Fairness Concerns” (Labor markets are social institutions).

 

Drew Fudenberg, of Harvard, David K. Levine, of Washington University, on “Learning and Equilibrium” (on the mechanics of getting to know you).

 

Xavier Gabaix, of the Stern School, New York University, on “Power Laws in Economics and Finance” (unexplained regularities of various sorts, from the size of cities and firms to trading volume and stock market returns).

 

Gino Gancia, of Pompeu Fabra University, and Fabrizio Zilibotti, of the University of Zurich, on “Technological Change and the Wealth of Nations” (technology is the important elements in explaining income differentials among nations, but the question is what governs its change and adoption?)

 

Joseph Gyourko, of the Wharton School, University of Pennsylvania, on “Housing Supply” (The S&P/Case-Shiller Home Price Indexes were a good start, but there is much we don’t know about housing-market fundamentals).

 

Gordon H. Hanson, of the University of California at San Diego, on “The Economic Consequences of the International Migration of Labor” (What we don’t know about migration policies and their shortcomings in terms of global welfare).

 

Jonathan Heathcote,of the Federal Rserve Bank of Minneapolis,  Kjetil Storesletten, of the University of Oslo, and Gianluca Violante, of New York University, on “Quantitative Macroeconomics with Heterogeneous Households” (How many different types of people are there?)

 

Michael D. Hurd, of RAND Corp., on “Subjective Probabilities in Household Surveys” (What survey methods don’t tell you).

 

Matthew O. Jackson, of Stanford, on “Networks and Economic Behavior” (Word-of- mouth and other facts of social life are coming into economics in a big way).

 

Michael Kremer, of Harvard, and Alaka Holla, of Innovations for Poverty Action, on “Improving Education in the Developing World: What Have We Learned From Randomized Evaluations?” (Cost-effective ways to boost school participation, field-tested around the world). 

 

John A. List, of the University of Chicago, onSocial Preferences: Some Thoughts from the Field” (What ain’t necessarily so in the booming field of social preferences – altruism, reciprocity, fairness, inequality aversion and so on).

 

Nathan Nunn, of Harvard, on “The Importance of History for Economic Development” (The boom in historical economics, from Stanley Engermann and Kenneth Sokoloff, Daron Acemogolu and Rafael  LaPorta to Paul David and Jared Diamond  – multiple equilibria enough to convince almost anyone that history and geography matter).

 

Nicola Persico, of New York University, on “Racial Profiling? Detecting Bias Using Statistical Evidence” (Not hopeless, but it’s not easy).

 

Cecilia Elena Rouse, Lisa Barrow on “School Vouchers and Student Achievement: Recent Evidence, Remaining Questions” (Despite the intuition that rough-and-tumble competition should improve the education system,  there’s not much evidence that more widespread use of vouchers would lead to big improvements in performance).

 

In addition, Arrow contributed a personal overview, characteristically generous and tough-minded, “Some Developments in Economic Theory Since 1940: An Eyewitness Account.”  He concludes:

Economic analysis has tended to be based on individual behavior. There is assumed to be only one set of institutions, namely, markets.  Perhaps governments also matter, when dealing with market failures, also called externalities. But clearly social institutions and social interactions among individuals also matter, and perhaps significantly.  I note, for example, that two-thirds of public expenditures in the United States (those on health, retirement and education) are essentially for the production of private goods, yet are accepted and only argued about on the margin. Even the concern about climate change, addressed to the welfare of generations far in the future, must be regard as a strong social obligation not naturally reducible to individual motivation. It is also easy to identify information channels outside the market and to note other social restrictions on behavior. Network theory has been imported into economics as a tool, though it may not be all that useful or needed.

 The other  new Annual Reviews to appear this autumn as well are Financial Economics, co-edited by Robert Merton, of Harvard Business School, and Andrew Lo, of MIT,  and Resource Economics, edited by Gordon C. Rausser, of the University of California at Berkeley, editor, and Kerry Smith, Arizona State University, and David Zilberman, of the University of California at Berkeley, associate editors. The latter includes a  retrospective essay by Robert. Solow, of MIT, including, as an appendix, a previously unpublished explication of the notion of “backstop technology,” introduced in 1973 by William Nordhaus, of Yale.

 

“The first several years of this are obviously going to be great,” says Elhanan Helpman, of Harvard, who left the Annual Review of Economics editorial committee in order to lobby for publishing more work in international economics as a co-editor of the Quarterly Journal of Economics. “After that, we’ll see.  But it just may work.”

 

Oh, yes, price?  $78 for individual subscriptions, print and online; $1,620 for institutional site licenses for the collection, or $1,350 for Internet access alone. That’s a pretty good deal all around.  And for a little while longer, until the volume is declared officially published,  any of the the economics articles may be downloaded from the Web for free!

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