The Political Economist

In a  previous post I discussed the changing nature of the economics profession and the importance of achieving the experimental ideal in social science research. I briefly discussed the logic and even some methodological approaches that are useful in achieving randomization, or at least as-if randomization in order to make our treatment and control groups as similar as possible for comparison. In this post I'll use an example that I like to teach to students to illustrate how we can make causal inferences using natural experiment research designs. A quick reminder: natural experiments are not experiments per se. They only provide us a good way to exploit observational data to emulate an experimental setting.  Let's use the very basic example and look at the relationship between student grades and earnings – a topic is usually heatedly discussed among students – do better grades result in higher salaries? Consider the following correlation between grades and earn...

A well-deserved Nobel prize for a man that helped establish a new field of behavioral economics , disrupted the academic milieu in the rigid field of finance, and successfully started implementing his ideas as actual policies in a number of countries (most famously through the Nudge Unit in the UK - officially Behavioural Insights Team  - set up under Cameron's administration, and the White House Social and Behavioral Science Team , set up under Obama's administration). It wouldn't be exaggerating to say that Thaler's scientific contributions were among the most applicable of all Nobel prize winning contributions in economics thus far (even more than Roth's kidney markets, Fama's EHM and Shiller's Irrational Exhuberance, or Deaton's  measurements of poverty and inequality, to name just a few most recent notable laureates).  It's been 15 years since behavioral economics has been recognized for the first time by the Nobel Committee, awardi...

I attended two great conferences last week. The first one was an econ conference I co-organized  with my  friends and colleagues Dr Dejan Kovac and Dr Boris Podobnik , which featured  three world-class economists from Princeton and MIT: professors Josh Angrist , Alan Krueger , and Henry Farber . The second was the annual American Political Science Association conference in San Francisco. I am full of good impressions from both conferences, but instead of talking about my experiences I will devote this post to one thing in particular that caught my attention over the past week. A common denominator, so to speak. Listening to participants present their excellent research in a wide range of fields, from economics to network theory (in the first conference), from political economy to international relations (in the second), I noticed an exciting trend of increasing usage of scientific methods in the social sciences. Methods like randomized control trials or natural exper...

In the previous text I presented several economic hypotheses explaining why the developed world has entered what could possibly be a prolonged period of economic stagnation. In today's text ( note: long read ) I will present my own opinion, arguing that what we are experiencing is a temporary slowdown which could last for several decades, but one that could also provide the greatest opportunity for the next huge boost in living standards. I hypothesize that the underlying factor behind both the current temporary stagnation (particularly in productivity and real wages) and the upcoming rise in living standards is - technology .  As I've emphasized several times on the blog before, I believe we are currently, for the past 30 years, in the period of the Third Industrial Revolution . And in our times, it's only heating up, with the potential to bring to some new disruptive innovations that could change our world as much as the previous two industrial revolutions had. The ...

My article got published today at the New Scientist ! One of the biggest science magazines in the world. See the text here ( there is no paywall, you just register and read it for free ). It was even on the front page: New Scientist website front page 03 Nov 2106 The text is about the scientific experiment behind our prediction survey . It starts by examining why the pollsters are getting it wrong lately and whether or not there is any science at all behind polling. Then it introduces our prediction survey idea and how we're doing an experiment on US elections to see whether or not science can actually improve polling.  For those who don't bother to register in order to read it on the New Scientist webpage, I have copied the text here (enjoy!): As US election looms, time is ripe for a new science of polling "Growing scepticism about traditional methods for predicting election outcomes is fuelling a search for a more scientific approach to polling, says Vuk ...

After the very intriguing part 1 covering two fascinating books whose contribution extends across a few scientific fields, this one lays out two books with a more contemporary historical emphasis.  Clark, Gregory (2011) A Farewell to Alms: A Brief Economic History of the World. Princeton University Press Clark’s book is first and foremost a wonderful economic history textbook. Although it carries in its title the word “brief” it represents quite a comprehensive overview of the patterns before, during and after the Industrial Revolution that can be accredited with having created the modern world. It is a good book, full of empirical data and a very detailed overview of the facts behind the patterns responsible for modern development. It is thus more a scientific work that a popular one (closer to Diamond’s Guns, Germs, and Steel, than Harari’s Sapiens). The book is separated into three parts, each important in painting the picture of why and how the Industrial Revoluti...

The link between income and happiness  has been one of the most hotly contested relationships among social scientists. Many researchers from various branches of social sciences have repeatedly denied the existence of a causal relationship between income and happiness (despite overwhelming evidence on how the  great rise in living standards  was led by the significant increase of post-Industrial Revolution incomes per capita), with the obvious normative conclusion being that having more money is not that important to us after all.  Well it just happens that it is important. In an article published last month in the New Yorker entitled "The Case for Free Money" , the author  James Surowiecki  (the Wisdom of Crowds guy) makes a compelling case in favor of universal basic income - a policy proposal (rejected in a referendum in Switzerland earlier this year) where every adult citizen of a country would each year receive a guaranteed basic income. I...