Saturday, February 11, 2006

what is the best new work in economics?

It seems to me that the economics profession is dividing. This isn't the old "Keynesian/neo-classical macro divide". Smart people will disagree over what is the "best new work" depending on whether they are structural or reduced form researchers, behavioral or neo-classical researchers, and whether they do non-experimental or experimental applied work.

If I told the senior faculty of the University of Minnesota that they could hire any of Harvard's economics department 30 tenured faculty for $125,000 each, how many would they poach? My humble guess is that they would grab 3 of the 30. My point is that when we think about the "best" that implies that we agree on a single vertical ranking. Mike Tyson was the best boxer. Kasparov was the best chess player. Smart economists would differ sharply in how they rank their fellow economists.

Why is the profession dividing? I don't think there is a "core question" that everyone is focusing on. After the Great Depression, this event "focused" the best minds on why it happened and what government could and could not do to mitigate its effects. Today, Top researchers such as Levitt and Glaeser work on a wide variety of topics rather than narrowly focusing on being the world's leading specialist on x.

When I think about what excites me about modern economics, I would place high:

1. The last Clark Medalist's work on endogenous institutions. It does amaze me that we have so few data points for testing such important hypotheses. There is a fine line between a case study and a convincing two stage least squares study!

2. field experiments in settings where real people are making important life decisions

3. empirical non-market social interaction papers

4. structural estimation of games --- these papers are hard to read but empirical game theory must play a key role in the future of economics

5. Heckman's ongoing research on heterogeneity and sorting

6. research on the media's role in the economy

7. in environmental economics, the induced innovation hypothesis