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Thursday, January 4, 2018

NIcholas Stern Interviews Tony Atkinson: Poverty, Inequality, and the Economics Profession

All economists are at least somewhat familiar with the work of Tony Atkinson, who died a year ago on January 1, 2017. The Annual Review of Economics offers a tribute in "Tony Atkinson on Poverty, Inequality, and Public Policy: The Work and Life of a Great Economist," by Anthony Barnes Atkinson and Nicholas Stern (2017, pp. 1-20).  More specifically, Lord Stern interviews Sir Tony. Here are some snippets, among many of the lively exchanges that caught my eye. 

The Value of Measuring and Publicizing Poverty
Atkinson: [I]t’s one principle I work on: I won’t do something unless I actually see, firstly, that it’s something where I actually want to know the answer because I think it’s intellectually interesting but, secondly, that there is some potential way in which it’s feeding into what actually happens.

The European Social Indicators is a good example of that, because it came about because the European Union was, under Jacques Delors, becoming quite concerned about social dimensions and the fact that there was significant poverty in the European Union, which Delors did quite a lot to identify. There was movement, as it were, at the beginning of the 2000s to give it some more priority. And it turned out by coincidence or by chance that the Belgians had the presidency, and the Belgian Minister of Social Affairs was one of my former students. ... Well, economists might well say, “Oh, it’s cheap talk.” We know that there are 125 million people in the European Union living in poverty, according to standard measures. But actually, it changed the climate of discussion because each country is peer-reviewed every year as to what their performance is according to indicators, and it is more than mildly embarrassing when, as in Germany at the moment, poverty is going up quite rapidly.

Restoring Official Measurements of Inequality in the United Kingdom, and Elsewhere

Atkinson: [C]learly, since about the early 1990s, I’ve been trying to get the government and other bodies to restore income distribution to being something that they actually publish data on. You have to remember, in this country—the UK—we dropped the income distribution statistics somewhere in the 1980s. After that, there were none.

Stern: We had a Royal Commission on the Distribution of Income and Wealth—

Atkinson: —which I was a member of, indeed. And we were sacked.

Stern: By Margaret Thatcher?

Atkinson: Yes, indeed. And after that, the income distribution statistics were stopped. The OECD [Organisation for Economic Co-operation and Development], for example, after putting their toe in the water in the 1970s, didn’t return to the subject for another 20 years. So the report that I did with Tim Smeeding and Lee Rainwater in 1995 for OECD (Atkinson et al. 1995) was the first time they’d had a publication on income distribution for 20 years.
On the importance of looking at deviations from pure general equilibrium thinking
Atkinson: I can remember the lecture given by Jacques Dreze, which you may have been at, which was called “the firm in general equilibrium theory.” He said, “How do you get the firm into general equilibrium theory? Well, you blow up a paper bag, and then you puncture it. ... And so, you’ve let all the air out. The firm has no real existence.”
The Importance of Knowing How Economic Data is Generated
Atkinson: I think the other thing is that our understanding of data on the more macro side is much inferior to what it was. In the early days of national accounts, they were constructed by people who did macroeconomics, as well, people like Richard Stone, Paul Samuelson, James Meade, and so on.

Stern: The best of the best.

Atkinson: Exactly. They were doing work on constructing national accounts, so they knew perfectly well what they were using. Keynes, for example, knew how his younger colleagues were making up those numbers. I fear that, today, that’s one of the areas where people just don’t understand what they’re using, and the origin of the numbers should not just be a footnote point. ... And I came across this when I wrote a review of how government output is measured, because the United States—still, as I understand it—measures government output according to the input. Some US economists say this is a general policy, but it is not; the European Union, and the UK as part of it, has been using an output-based measure for quite a long time. When we looked at this issue, we discovered that about half the difference in the recorded growth rates between the UK and the US was due to this difference in method.
On the problems of narrowness and publication pressure for young economists
Stern: Are we really helping create the all-around economist in a way that, perhaps, came more naturally earlier? 
Atkinson: One has to recognize there was this question, again, about change over time. When you and I were students, we could actually read the major journals—there were probably, at most, a dozen—and one could at least cast one’s eye down and see what was going on. They were all a lot less fat than they are today, too. So, I think one has to recognize the subject is partly the victim of its success. The profession is so much bigger, and there’s so much more research going on. But I think this has come at a cost. We have become too specialized, and people define themselves as being specialized economists, whereas I just think of myself as an economist. 
Now, if you meet people, they’ll say, “I’m a labor economist,” or, “I’m an IO [industrial organization] economist,” as if they belong to that tribe. I think that’s fine, but of course you then get seminars taking place on labor economics, which actually would’ve benefited enormously from the seminar on industrial organization that happened at the same time. And people just don’t talk to each other, and I think that’s a loss; at least all my cohorts had an appreciation of what was going on elsewhere. 
Stern: Is there something we could do? 
Atkinson: Well, I think it’s partly a question of training; that is, one needs to have more courses teaching people the appreciation of something rather than the identification of a thesis topic. But also I think the loss, in many places, of the general seminar is an example of an issue with the academic departments; when I was there, Harvard, to its credit, did have three general seminars a term, which were well attended. Probably 60 or 70 people, at least, would come to them. And the talks were, on the whole, at very appropriate levels. Of course, there are various forms of diffusion through media; they all serve this function. But I think it’s perhaps more an issue of persuading younger economists that this is something they ought to take more seriously than they do. ...
Whenever I talk to a would-be graduate student, I say, “What is it you want to know?” I’m sure you do the same. Not having an answer to that question is a weakness, and, in some way, it’s partly due to the professionalization. People are doing economics as a profession rather than because they’re really interested in the answers. ...
Well, I think the position of young economists is actually very difficult at the moment, at least as far as the academic sphere is concerned, because we’ve now moved to a pretty unforgiving judgement based on journal publication. This means they’re under great pressure, which is often very hard for them to satisfy in the sense that everyone is trying to publish in top journals. I think this pressure affects the choice of subject matter and the style of economics. It’s much easier to publish, I suspect, theoretical than applied economics in major journals; it is certainly easier to publish theory than applied economics concerned with countries other than the US. I think that young economists are being pressured into a very difficult situation where their academic careers are related to things that are often quite opposed to what they want to do. If you ask them what the question is that they want an answer to, many of them have a very good response: They’re doing economics because there is something they really want to find out, they’re really concerned about some particular issue, or they’ve read something that really inspired them and that they want to follow up. I often find it very difficult to advise them. My instinct is to say, “Follow your instincts,” but, on the other hand, they may never get jobs.