Looking Forward to the Biology Century

Larry Summers:

FT.com / Columnists / Lawrence Summers - America must not surrender its lead in life sciences: If the 20th century was defined by developments in the physical sciences, the 21st century will be defined by developments in the life sciences. Lifespans will rise sharply as cures are found for chronic diseases and healthcare will come to be a larger share of the economy than manufacturing. Life science approaches will lead to everything from further agricultural revolutions to profound changes in energy technology and the development of new materials....

It is natural to ask whether the US will lead in the life sciences in this century as it did in the physical sciences in the last. It is a profoundly important economic question, but one whose implications go far beyond to embrace issues of national security and moral leadership. At present, if one looks at levels of investment or at research output or at the prestige of leading institutions, the US is clearly leading in the life sciences. But past performance is no guarantee of future success. In the first third of the 20th century, Europe and Europeans were the dominant source of discoveries in physics....

If America is to maintain its leadership in life sciences in the 21st century, important steps must be taken. Most abstract but most important, there needs to be respect for the scientific method and its results. In sharp distinction to the situation in other industrial countries, there is an increasing move away from respecting the scientific method in US schools....

Second, funding.... During the past three years, when there has been more possible in the life sciences than there has ever been, when we are on the cusp of achieving important breakthroughs in everything from stem cells to the treatment of cancer, government funding for science research has been cut in real terms. This has been particularly hard on young researchers starting out in their careers....

In today's economy an outstanding graduate of a leading business school earns a substantially higher salary than a potential Nobel prize winner graduating with a PhD in biology. Several years after graduation the differences are even more pronounced. It should not be a surprise that in light of this economic reality more of our talented young people are not headed towards careers in basic research in the life sciences.

Third, we need to control the role of politics in allocating science dollars, which are currently tossed around like so many political footballs.... [I]t is not a step towards a healthier 21st century to allow the views of a vocal minority in effect to cut off funding for embryonic stem cell research -- which is likely to lead to revolutions in the treatment of Parkinson's disease, diabetes and cancer within the next generation.

Finally, we need to support clusters of extraordinary performance. If competition is individualistic, the US is going to have a very difficult time because salary levels adjusted for talent are going to be much lower in other parts of the world. Rather than focus on each individual as an island unto him or herself, the US needs to focus on fostering clusters of innovation %u2013 such as Silicon Valley in information technology, Boston in the life sciences, New York in finance -- where each talented individual derives his or her strength from all that is around. Competing with that on price is much more difficult...

Comments

[bigTom]

Well, the process of getting there is pretty tough too. Then there is the fact that a funding shift may mean no jobs available in an individuals field. Science is getting to be frighteningly math heavy as well -even in the life sciences, and that means real hard sustained work just to keep up. The only real reward is the pleasure of doing that which one likes.

[ken melvin]

Ah, the guns and biology conundrum. Everyone knows guns are more essential life than biology.

Been true since the 80s now that engineers and scientists are dime a dozen. Worse, the dumb bastards can never tell budgeting what research will cost.

[steve]

It's funny to see Summers pound the pulpit for higher science wages. Doesn't the market know best? Don't business people "earn" their higher compensations by producing more economic good for society? Where is the market failure? :-) If you start advocating for industrial policy, where will it end?

http://infoproc.blogspot.com/2005/02/tale-of-two-geeks.html

[scory]

I'd suggest that it's not just that there's relatively little market for Ph.Ds in molecular genetics and biophysics, but that the supply of students who can undertake graduate level molecular genetics and biophysics is very small, in part because both secondary education fails to prepare students in the required mathematics and that relatively few universities can prepare a large number of undergraduates to matriculate into graduate programs.

This is a modern phenomena; if you look at secondary and post-secondary education in the United States from roughly 1950 to 1980, education was structured and supported to produce a lot of engineers and material scientists. And, in a not-unrelated development, the United States dominance in engineering was tremendous, and lead to "centers of excellence" such as Silicon Valley and Route 128.

It's arguable that various changes to the tax code have created a huge market for various types of lawyers, economic analysts, management consultants, in many cases at the expense of scientists and engineers. If the tax incentives changed, I suspect the market for and utility of many of these specialists who provide so much "value" to their organizations would evaporate.

Summers' call for policies supporting the development of life science infrastructure sounds downright prudent to me; in the end, the policy would likely lead to the creation of new industry and new products.

[jamzo]

i have an idea

let's do what we can to provide high quality education to every child in the united states

[Ponzi Q. Globalization]

Beloved corporations like Microsoft and Intel have already learned that they can get good technology R&D cheaply by outsourcing to places like China and India. These are American companies benefiting from innovation abroad. Why is it such a benefit to America to have the R&D and innovation done by Americans in America?

Isn't Summers an economist? If so, then why is he not for free trade? We need not innovate in any science here in America in order to prosper. Given our high living standards, it's a waste of money. Economic orthodoxy states that it's an absolute good for all nations to focus on what they have a comparative advantage in. The U.S. is not exempt from this. Let the Chinese and the rest of the world do the scientific dirty work. We in America will do the work that suits us. And, as Alan Blinder has pointed out, the work that suits America is personal services, not innovation in biotechnology. Subsidies for innovation or R&D or whatever are a form of protectionism and must be shunned.

Amen.

[xeno]

Ponzi Q. Globalization: If so, then why is he not for free trade? We need not innovate in any science here in America in order to prosper.

This is a very good observation. Anyone who claims that

1. Markets and competitive advatage work and therefore restrictions on outsourcing are not needed.

2. Markets and competitive advantage do not work and therefore goverment funding of R&D and R&D tax breaks are needed.

is of course a hypocrite.

[D-Slam]

I second the comments of an earlier poster, who noted the irony of an economist calling for higher wages for scientists without hinting at any market failure to justify this.

I work in a trading room, and I know one woman there with a Phd in Chemistry and an MBA who said "I don't regret the PhD, but it's pretty hard to make it in science. People who stay in science do post-doc after post-doc, and end up being 40 before they get to have anything that vaguely resembles an adult life."

[wkwillis]

I work as a security guard. Per hour of actual 'work', this pays better than being a post-doc, which is why I am not a post-doc.
No just that, my patents belong to me. I could get seriously rich some day.

[D-Slam]

"The reason is simple: people go to the biology school for various reasons, they go to business school specifically to make money."

Yes, but the question is: why is it *possible* to make so much more money in finance than it is in biology? Is there a market failure here? Are things as they should be?

[Walt]

steve: If you knew absolutely anything about Summers' work as an economist, you wouldn't think it was funny at all.

[Anthony Damiani]

But past performance is no guarantee of future success. In the first third of the 20th century, Europe and Europeans were the dominant source of discoveries in physics....

Not to undermine his overall point, but Europe lost this lead in large part due to nonstructural causes: that is, the events of the world wars, which devastated their industrial base and the surrounding persecutions which drove most of their top physical scientists into exile-- Einstein, Meitner, Szilard, etc. Heck, Fermi actually defected during his Nobel prize acceptance.

[steve]

Walt, I actually agree with Summers' suggestions (I say so on my own blog). My questions are rhetorical, for the free marketeers in the audience. But I think you either need to argue that there is a market failure here, or admit that (in general) markets aren't good at provisioning lots of important things, like basic science, education, certain types of R&D, etc. -- probably anything in which liquidity is more than 5-10 years out.

An additional tricky point is where the industrial policy ends. Summers is for intervening to keep life sciences dominant in the US. Did he support Sematech in the 80s when it looked like Japan would crush us in semiconductors (Sematech turned out to be unnecessary, but people like Lester Thurow were plenty worried at the time)? What about high-end networking equipment (Cisco vs Huawei), or IT services (IBM vs Wipro), etc.? I doubt he is for government intervention in all areas of technology, so what is the rationale?

BTW, Summers is wrong to focus solely on life sciences and give the impression that most of the advances in the 21st century aren't *still* driven by physical science advances (e.g., Moore's law, nanotechnology, etc.). It's still the case that physical science and scientists are inventing the tools and techniques that undergird much of the progress in biology, just as in the last century.

[aoile]

Just to be very clear for people who have never understood economics: Summers is being extremely doctrinaire here. He has identified two different externalities associated with the presence of PhDs in the life sciences: (1) a network externality, whereby the productivity of each life scientist is enhanced by the work of others, and (2) an economic externality, whereby the research of one PhD generates more economic opportunities than that PhD (or his employers) can exploit.

Very legit, very above board. There is a great deal of orthodox economic research about the creation of comparative advantage (as P Krugman puts it succinctly, why the hell would Washington have a comparative advantage in building airplanes and operating systems?) and the encouragement of technological innovations; this initiative combines both of them.

[bigTom]

I have to agree with Steve. Physics is still the master science. Many of the most important life-sciences contributors had training in physics and/or math, and changed fields based upon evolving opportunities. The trend for difficult math/physics to gain in importance in all the other sciences seems to be unstoppable. We can add to that the third method of science, computational. The first two are experiment, and mathematical theory.

[steve]

aoile: for my edification, if externalities are such that society can invest in a particular area to gain comparative advantage, is that or is that not related to market failure? It seems the assumption is that governmental intervention (investing more than the market would by itself) leads to greater utility for that society, so the market by itself isn't maximizing our utility, therefore a market failure. (Everything here is a bit ill-defined, but perhaps what I wrote is clear.)

BTW, those externalities you mention exist for areas beyond life sciences. Is there any specific economic result that says we should fund life sciences in particular (other than the scientific observation that they are just beginning a golden age of discovery)? Why not semiconductor technology or optical networking or internet search?

[John Emerson]

"The reason is simple: people go to the biology school for various reasons, they go to business school specifically to make money."

Yeah, but mediocre business people make more than science people ten times smarter than them. And as people above are saying, the effective result is that we don't have enough scientists.

[Walt]

Steve: My point is that Summers is not a free market fundamentalist. (And as aoile points out, he's not particularly heterodox in that way, either.) They don't force you to profess that the market is perfect in all ways before they let you become an economist.

[Maynard Handley]

"If America is to maintain its leadership in life sciences in the 21st century, important steps must be taken. "

The first of which might be having a chattering/political class that understands the difference between a mean and a standard deviation.

[steve]

Walt, thanks for the clarification. I actually like most of what I hear from Summers...

[Maynard Handley]

(1) Is it actually true that we do not have enough scientists? As someone who trained as a scientist, who loves science, who thinks we should spend far far more on science, it is not clear to me that this is true. More money thrown at science could probably be used well (certainly in the physical sciences I know of plenty of projects that could use more money). But would more bodies thrown at science, especially mediocre ones, be of much use? What we all want is not simply more people enrolled in biology PhDs, but more truly brilliant biologists. That's a different request, and one that is not well solved by considering the question as pure numbers game.

(2) Is it actually true that higher wages would result in more brilliant biologists? Anyone who has been half awake over the past five years should be aware of the mounting research on happiness (or utility if you prefer); among the significant findings of which are that
- beyond a threshold of safety and comfort, increased income does precious little to improve people's happiness and
- among those things that durably improves happiness is constantly learning new things and constantly facing challenges, ie the daily work of a scientist.

I am all for distributing money to the poorest in the world because they have not yet reached that threshold at which more money ceases to bring much more happiness.
I am all for throwing more money at science and reducing the non-productive and unpleasant BS that scientists have to go through to acquire equipment and funds.
BUT I am also for spending money sensibly, not based on folk notions that have been proven false; and spending more money on the salaries of scientists strikes me as less useful than other ways of spending the money. (Of COURSE if the alternatives are burning the money in Iraq or removing the capital gains tax, I'd rather higher salaries. But if the alternatives are, rather, say better plant and better equipment, that may well be a better way to spend the funds.)

[Julian Elson]

"They don't force you to profess that the market is perfect in all ways before they let you become an economist."

What? Then what was the secret oath they made me take in Rosenwald 011 while wearing a ceremonial Bob Barro facemask for? Ah well. Maybe that's just a U Chicago thing.

[hack]

Scientific knowledge and skill is a commodity. As with semiconductors, there is a relatively low yield: out of any number of potential scientists at say the high school level, very few will turn out to really be any good at the postgraduate level. Therefore it is much more economical to move production overseas, where the raw materials are cheaper. It is natural that our higher valued first world students be applied towards higher yield endeavors, such as MBAs and lawyers. It all makes perfect sense.

[aoile]

Steve: The network externality is not a "market failure" in the normal sense of the phrase, largely because the dynamics of this sort of "externality" do not easily lend themselves to analysis in terms of Pareto improvements. For example, if Boeing had not become a hub of aircraft manufacture, there still would have been somewhere in the world that assumed Boeing's role. E.g., if every nation in the world had poured money into "founding Boeing," it would have been an enormous waste of money.

The knowledge externality, on the other hand, is basically just a classic externality, and if the externality is not realized in a market (a given technique is hard to discover and easy to replicate), that is a market failure, just like excessive pollution.

You are correct that the network-externality argument applies to a certain extent in many fields. Summers is arguing that life sciences are "the next big thing," like power looms in 1800, aircraft in 1930, or computers in 1975. Moreover, the U.S. is strategically well positioned to become the major player in a life-sciences revolution, should such a thing occur. Finally, there are two externalities that call for government support at the same time, and the mode of government intervention (hiring highly-paid researchers) is extremely clear.

I have two main quibbles with the idea. I'm not sure where the labor substitutions is going to come from; I imagine that most science-inclined people who want a better job become doctors, rather than managers or lawyers, and if we get people to switch out of medical school and into PhD programs, we haven't accomplished much. With Hack, I wonder what percentage of Americans are capable of completing a respected science PhD.

(Although I don't think Hack understands the force of the network-externality; the reason why we don't outsource stock-jobbing and financial data-analysis to the Third World is that we have strongly established financial hubs that enable intelligent people working in NYC to be much more productive. We want to develop that kind of hub in new sectors!)

[sd]

reno wrote:

"The reason is simple: people go to the biology school for various reasons, they go to business school specifically to make money."

I'd like to interject here. As it turns out, I'm one of those (boo, hiss) MBAs making very good money. And it turns out that my wife is a PhD biologist. So I have some insight into the relative attractiveness of the two career paths.

My wife is a post doctoral fellow at a top 10 research university. She also has a PhD from a top 10 research university. She is 32 years old. My (consulting) firm hires undergraduates (not MBAs) for entry level consulting positions at 2X my wife's salary. Let me re-state that - we hire 22 year olds with no work experience and pay them twice what my PhD holding wife makes. In their third year out of undergrad, they make 3X. Post MBA, its 4X. Right now, a year older than my wife, I make 5-6X. So I won't even begin to deny that we don't have a problem with how lucrative (or not) a scientific career is.

But pay is not the only factor here - far from it. The fact is, even apart from the relatively lavish salaries that we pay entry level consultants, we treat them extremely humanely, extremely well. They are expected to work hard, but it is also expected that they have a full and rewarding life outside of work. We spend massive amounts of time making sure that their career experience is rewarding and is developing them as professionals. We try very hard to create an institutional ethos in which everyone - including the most senior Partners in the firm, recognizes that from time to time the most junior member of a team can have an insight that changes the way we think about a problem.

And on those occasions when someone doesn't succeed - when it becomes clear that they aren't cut out for this line of work - we go to great lengths to help them find a new position, calling on the firm's extensive alumni network to find an opportunity that is a better match for their talents and interests.

I manage teams at work. Every single month my team is surveyed anonymously on their satisfaction with the work, the professional experience, and the quality of team management. If my teams display a clear and sustained dip in satisfaction, my bonus is reduced and it is materially harder for me to advance in the firm. My team's survey scores - all of the survey scores - are posted in a public place in the office. And of course, if someone is really unhappy, they can jump ship to another job more to their liking at any point in time.

Now, let's compare that with graduate study in the sciences. Graduate students are, more often than not, treated like shite. Sure, a lucky few end up in a lab with an advisor who is not a emotionally adolescent malcontent, but the operative work is "few." Most graduate students are asked to work exceptionally long hours with little or no concern for their overall wellbeing. They are treated as children, and most of them would sooner poke out their own eyes than challenge the thinking of their all-powerful advisor. When a grad student's career doesn't work out, he or she is kicked to the curb with little remorse, and most faculty members openly and gleefully disparage any career path that one might end up on with an unfinished PhD education.

Among tenured faculty there is zero - and I mean zero institutional penalty for treating graduate students and postdocs badly. Short of sexual harrassment and illegal activity you can get away with damn near any abuse of your students. And if a student gets fed up with the abuse, his or her options are painfully limited. You can switch labs, and lose all of your progress. You can switch schools, and lose all of your progress plus have to re-take the 1st year PhD coursework. Or you can drop out and take a lab tech job where you will be given damn near zero respect and autonomy.

Further, any student who leaves a lab faces a real risk of having their career effectively blackballed. If a junior consultant left my firm and I called friends at other firms and urged them not to hire him, I'd likely be sued and would certainly be fired. But academics do this all the time.

Further, the unwritten rule in academic science is that you spend the bulk of your 20s earning your PhD (have kids and it stretches to your early 30s), then you have to move to another city to get a post-doc, then likely another move to another city for a second post-doc, then another move to another city for a tenure track job, at which time you have 6 years to prove yourself or else you move again and repeat the cycle. Great if you're single or your spouse is a professional potter. Less great if you happen to have married someone else at one of those elite schools you've spent 15 years at and - surprise, surprise - they have a career too.

In short, if academic science paid every bit as much as the jobs that smart MBAs get, it would still be a massively, demonstrably, unambiguously shittier life up to (and maybe beyond) the point, 15 years after entering the funnel, when you emerge with a tenured faculty post. Yes, if you are deeply passionate about science then you may well enjoy the work more if you go to grad school. But I have seen a ton of my wife's friends have the love for science beaten out of them by an irrational, capricious, and inhumane process of educating academics.

Yes, out here in the business world we pay people a helluva lot more than they would make on an academic career track. But a funny thing happens when you pay someone a ton of cash - you start realizing that they are a precious resource. That if they are valuable to you they are likely valuable to others and thus they have other options. You start investing heavily in their professional and personal growth because only when they are a confident and mature thinker can they really make contributions that justify their pay.

[Meh]

sd is right on the money here. It's true that many scientists are not deeply "in it for the money" but the system has skewed beyond all proportion.

There's not a lot to add to his comment. But I'd highlight the fact that the PhD + postdoc time (say 6-10 years in length) is largely very poorly paid. There's often subsistence provided "in kind" (university housing, health insurance and the like) but day to day living you're often close to behind the 8-ball. If you believe that (at least in aggregate) people make rational decisions, then declining numbers of science PhD students is entirely unsurprising.

[Monte Davis]

scory: "It's arguable that various changes to the tax code have created a huge market for various types of lawyers... If the tax incentives changed, I suspect the market for and utility of many of these specialists... would evaporate."

OK, let's all hold our breath until the tax code changes to reduce the market value of lawyers. (Not bashing here -- I expect most legislators to be lawyers and wouldn't have it otherwise -- but let's get real.)

[Monte Davis]

Ponzi Q: "Why is it such a benefit to America to have the R&D and innovation done by Americans in America?"

A radically subversive question, and worth pursuing. I don't know the answer, but I do know that the vital importance of home-grown science and R&D is usually taken as axiomatic -- and that makes me suspicious on general principle.

One element of the meme is surely the force-fed advent in WWII of radar, nuclear weapons, jet aircraft and ballistic missiles... then the ICBM race and space race. Understandable, but it's not at all obvious that that experience translates into "Chinese nanotech or Indian computer science gonna get yo mama"...

[Ponzi Q. Globalization]

"For example, if Boeing had not become a hub of aircraft manufacture, there still would have been somewhere in the world that assumed Boeing's role. E.g., if every nation in the world had poured money into "founding Boeing," it would have been an enormous waste of money."

We Americans do not have a monopoly on brains. American multinationals can fund biotech innovation abroad and get more for their money. The innovation will be done, just not by Americans in America. American businesses will still get the rewards from the innovations. What's so bad about that?

"Summers is arguing that life sciences are "the next big thing," like power looms in 1800, aircraft in 1930, or computers in 1975. Moreover, the U.S. is strategically well positioned to become the major player in a life-sciences revolution, should such a thing occur. Finally, there are two externalities that call for government support at the same time, and the mode of government intervention (hiring highly-paid researchers) is extremely clear."

It's not clear to me. But I guess I'm one of those people who have never understood economics.

What's wrong with having America business funding R&D in biotech or whatever the next big thing is overseas? Giving the differences in living standards and labor regulations, they can get a bigger bang for their buck. What's not to like?

If Americans get screwed out of doing this type of work, so be it. They can go into the one line of work where Americans seem to have a comparative advantage, personal services, and I'm sure everyone will be better off. It's not a zero sum game, you know.

All this sounds like industrial policy to me. And being a good believer in those most perfect of human intellectual inventions, free markets and free trade, I am appalled at its promotion on this board.

[a]

Radar - British
Jet Aircraft and baillistic missiles - German
Nuclear weapons - Europeans working in America

Anyway, I humbly suggest that the Federal government stop providing research funding for economists and give it instead to the life sciences. Maybe it's not much, but it's a start.

I also agree with dale's comment over at Economonitor. Summers is basically supporting his class. The government intervening in the market to help manufacturing: why the idea! But the government is supposed to intervene to help PhD candidates without so much as the slightest justification why the market isn't supposed to be able to work this out for itself.

[Ponzi Q. Globalization]

"Anyway, I humbly suggest that the Federal government stop providing research funding for economists and give it instead to the life sciences. Maybe it's not much, but it's a start."

Economists are needed to provide an ideological framework that justifies the screwing of the weak for the benefit of the powerful. They are thus more important to those who matter than any scientist.

The economists most listened to already are established and thus can even promote policies that screw their own kind without fear. The economists who are not established must follow the orthodoxy. Apart from the pressure to conform, economic theory is very complicated and, thus, it is too difficult for a novice to deviate from the orthodoxy.

However, most economists are not masochists. When enough economists suffer sufficiently from extensions of the policies they promote today, then the economic theory will adjust to so that its implementation will ease their suffering.

[Roger Albin]

"Among tenured faculty there is zero - and I mean zero institutional penalty for treating graduate students and postdocs badly."

Actually not true. Faculty compete to attract good students and post-docs. Treat people badly and your supply dries up. There are certainly exceptions to this rule but its true to a reasonable approximation.

There are 2 major problems:
1) Generating scientific personnel: We do a relatively poor job of producing our own scientists. This is compensated for in good measure by the fact that we attract a lot of talented people from abroad. And these people aren't just the obvious immigrants from China or India. American universities are stocked well, for example, with talented Canadians.
2) Funding: As Summers points out, we're not investing enough in grant support for research. The Bush administration in particular has been terrible in terms of supporting science.

But, fortunately for us, we still do better than anyone else in the world in terms of fundng science, which is one of the reasons we can attract all those talented people from abroad. This unlikely to change in the foreseeable future. This isn't, however, a reason to be complacent, and increased investment in US science is likely to produce excellent returns.

[a]

Sorry that was dale at Economist's View, not Economonitor.

http://economistsview.typepad.com/economistsview/2007/01/larry_summers_i.html#c28373472

[a]

"increased investment in US science is likely to produce excellent returns."

Um well that assertion is what the whole discussion is about.

1/ Why do you think it will produce excellent returns? Because it has in the past? Returns on manufacturing have been pretty good, if you consider the fact that the U.S. would have lost WWII if it had not all those factories. (The science that helped the U.S. win WWII, e.g. nuclear bombs, came from Europe...)

2/ Who should benefit from those returns, if they do turn out to be excellent?

[D-Slam]

"All this sounds like industrial policy to me. And being a good believer in those most perfect of human intellectual inventions, free markets and free trade, I am appalled at its promotion on this board."

Ponzi: this is a very nice parody of right-wing think tank economics.

It is true that economists are aware of externalities and market failures, but it is also true that they are downplayed so much in ones education (I have a terminal Master's myself from a Chicago wannabe school) that such thinking acquires a vaguely disreputable air. In my experience, after the blizzard of math, the only thing the econ grad student remembers about actual policy questions are the vulgar free-marketisms from Econ 101. That may be the *purpose* of the blizzard of math... like a cult initiation ceremony.

[Roger Albin]

"The science that helped the U.S. win WWII, e.g. nuclear bombs, came from Europe...)"

No. The usual figure for the number of physicists who came to the USA during the 20s and 30s is about 100 (from David Kennedy's Freedom from Fear), including some remarkable individuals like Einstein (rather small role in war effort), Fermi (significant role), Bethe (very large role), etc. But, they were joining a vigorous and already impressive American scientific community. Their impact would have been much, much smaller if the USA hadn't had the facilities and personnel to work with the European emigres who arrived. Nuclear weapons are a poor example if you are trying to that science played a large role in winning WWII. Atomic weapons ended the war and had enormous significance for the post-war era but had no real role in determining the eventual outcome of WWII. Its also easy to over-rate the contribution of the European exiles. Read any of the histories of the Manhatten project and you'll see the consistently large roles played by American born (and trained) physicists and engineers.
A much better example of a novel technology that played a major role in winning the war was radar. Developed originally by the British, radar technologies were transformed by American scientists and engineers in ways, the proximity fuse for example, completely unanticipated by its British inventors. The American radar development effort was largely a product of native born (and USA trained) American scientists like II Rabi and Luis Alvarez.

[Cyrus]

"Anyway, I humbly suggest that the Federal government stop providing research funding for economists and give it instead to the life sciences. Maybe it's not much, but it's a start."

The NIH has a larger budget than all other Federal science funding agencies, combined.

[a]

Roger Albin: Your answer isn't a "no", in spite of your efforts. First, you add "engineers" to "scientists" - I'd grant you the importance of American can-do. Secondly, of course you can say that without the Americans the Europeans wouldn't have gone anywhere. But the reverse is true, and your statement does nothing to establish the relative importance of the two sides.

[anne]

I suppose it's only me, but since I find biotechnology reasearch emphasized at university on university, since I find biotechnology research going on all through Cambridge and about university campuses nationally, since I find the international drug companies the most profitable component of the S&P stock index for the last 25 years, since I find states focusing on biotechnology research, I am not much worried.

Why not have a federal-state revenue sharing program that allows for drastic cuts in tuition or no tuition at public colleges and encourage students to follow inclations to learn as they wish?

[D-Slam]

Someone posted a link to "dale's" comment on economist's view above, which essentially was "what? industrial policy for science, but none for manufacturing? Why?" The answer is that there are (presumed to be) positive network externalities in science/technology work that do not exist in manufacturing. Brains become brainier by hanging out with other brains (although you'd wonder why this still applies in the Internet age), so best to have all those brains hanging out within your borders rather than outside them. OTOH, manufacturing workers do not become more productive by hanging out with other manufacturing workers, manufacturing can be chopped up, diced, sliced and outsourced piecemeal with little effect on productivity; therefore no incentive for an industrial policy in manufacturing. I think there might be a bit more to Summer's speech than naked class interest (but maybe not).

[a]

"Brains become brainier by hanging out with other brains..." Even if that's true, that doesn't imply the government should intervene. There are plenty of other sources for funding in America - e.g. universities with their multi-billion dollar endowments, old rich men and women who want to give their money to foundations for research. Why does the government have to intervene in this specific case? Other than that it happens to benefit people like us, while helping manufacturing benefits people like them?

[xeno]

D-Slam: Brains become brainier by hanging out with other brains (although you'd wonder why this still applies in the Internet age), so best to have all those brains hanging out within your borders rather than outside them. ... I think there might be a bit more to Summer's speech than naked class interest (but maybe not).

How significant are these extrnalities in comparison with the outright subsidy which is
- public-sponsored science education in the public schools (U of Cal, Cal State),
- public-sponsored research (NIH) and
- R&D tax breaks for private companies (billions)?

There is no reason to invoke hypotetical second-order effects - as usual, the masters use the goverment to re-distribute the public's money to themselves and "invisible hand of the markets" is there to "explain" why the servants should get squat and be happy.

It is truly scandalous that even otherwise decent people as economists allow themselves to be drafted in defense of corrupt oligarchy or (at best) document growth of inequality without telling the public what exactly it means.

[Barry]

A few comments -

First, it's true (and a nice catch) that one would expect somebody with a business degree to make more money than somebody with a science degree. IMHO, the problem is that a BBA out-earns even most science Ph.D.'s from the equivalent universities. The only Ph.D.'s who would out-earn that BBA would be the very small minority (even from the elite universities) who become tenured faculty. And even then it might only be those who get tenure at an elite university; the majority getting facutly positions at Average College probably aren't making that much. And that's for the minority who leap numerous hurdles, most of which deliberately pass only the minority, and which generally don't have good fall-backs.

(2) Maynard: "Is it actually true that higher wages would result in more brilliant biologists? Anyone who has been half awake over the past five years should be aware of the mounting research on happiness (or utility if you prefer); among the significant findings of which are that ..."

Presumably worse wages and worse working conditions result in fewer brilliant biologists. Many will be driven out. Still more will presumably be forced into working on the ideas of others, as post-docs, until their 30's.

Posted by: aoile: "(Although I don't think Hack understands the force of the network-externality; the reason why we don't outsource stock-jobbing and financial data-analysis to the Third World is that we have strongly established financial hubs that enable intelligent people working in NYC to be much more productive. We want to develop that kind of hub in new sectors!)"

The thing to worry about is that such hubs might not be as solid as before. As it gets easier to communicate and share knowledge, it gets cheaper to offshore/offsite more jobs. As more jobs are offshored/offsited, it gets easier to build the higher layers on top of those, in new places. IIRC, Wall Street is offshoring some Ph.D. level quant jobs to India; I've got to assume that that will affect future job growth and network effects of such jobs.

[David Lloyd-Jones]

To answer the question why Washington has any comparative advantage in aircraft building: I've always assumed that Boeing's paramountcy was based on the fact that Bill Boeing was a bird watcher.

Lockheed products are clearly the creations of brilliant hackers. Airbus and Macdonell-Douglas have all the signs of fine engineering.

Boeing aircraft are obviously made by a bird-watcher.

[failingeconomist]

I thought that Summers column was entirely bizarre. First, there's nothing like predicting for the future something that's already true. As Krugman keeps telling us, health care already takes 16% of the economy. Manufacturing (at least according to this:
http://www.allbusiness.com/manufacturing/computer-electronic-product-manufacturing/1182847-1.html)
is 12% of GDP.
Secondly, basic research of the kind that might indeed be subject to a market failure (for reasons of time to market perhaps, or uncertainty)and thus suitable for government funding: well, they're non-rivalrous aren't they? So does it matter whether they're done in the US? Innovation and product development, yes, they do matter, but is anyone saying that they are subject to the same market failures?
Finally, clusters: yes, hugely important, but has anyone yet worked out how central government encourages such? Local, to a small extent, universities, sure, but a centralized bureaucracy hasn't as yet shown itself to be all that hot at it, have they?

[steve]

aoile: thanks for the explanation. Always great to learn something. Now I know the difference between an externality and a market failure :-)

sd: I agree with the general point you're making (see link below), but I think you are exaggerating (or overgeneralizing) just a bit. There are incentives for advisors/principal investigators to be good, nurturing bosses, and many are. There are also lots of business environments that are exploitative and nasty.

But, it is clear to me that societies that are too market driven will have a tendency to underfund long term research (forgoing the positive externalities aoile identifies), thereby losing out on a higher standard of living in the long run.

http://infoproc.blogspot.com/2005/02/tale-of-two-geeks.html

Also, see here for what the graduate applicant pool in physics looks like these days:
http://infoproc.blogspot.com/2007/01/graduate-admissions-human-capital-and.html#comments

[Larry]

Sorry to disagree with someone as distinguished as Dr. Summers, but our smartest people DO need to go into finance, because that's where the bulk of the decisions are made about which innovation to fund, for how much, and on what terms. If we get that right, then lots of other things fall into place.

Progress in science/technology/biology is more rapid than ever in history. It is clearly not an underserved area. Lifespans were fixed throughout human history until last century. Now even with today's "paltry" funding, cancer deaths have started to decline, and many other health indicators are strongly positive.

With or without the changes that Dr. Summers advocates, the 21st century will likely be the one in which we conquer death. And with or without those changes, most of the key discoveries will happen in the US and in other countries that emulate our entrepreneurial culture. It's that culture, not the science itself, that turns breakthroughs into benefits, as companies like Xerox (negatively) and Apple (positively) demonstrate.

The real problem that Americans face is the likelihood of bankrupting ourselvs along the way, as we continue to cover the lion's share of the world's costs for medical research. The US currently spends multiples of the rest of the world on cancer, AIDS, and many other maladies. Those "outrageous" drug prices that we pay provide the money that pharma needs for its 1 billion+ investment in each new drug. In that way, as in so many others, the rest of the world freerides on our efforts.

[steve]

I guess I should explain why I post the links below. One is to explain how masochistic you have to be these days to choose the science track. The other is to point out that part of the reason the science track is tough is the amount of global competition (e.g., bright foreign students coming here for grad school from India, China, Eastern Europe). Part of the reason we can get away with such low compensation for scientists is that we now buy most of our scientists from this low cost pool. In the present situation they tend to stay here after their PhDs (the best ones, anyway), but as noted repeatedly on this thread it's very possible in the future that they'll return home to research clusters in their home countries.

Science as a competitive field globalized long before autos or light manufacturing. We've been competing with low cost foreign workers for a long time, and the consequences are low salaries and lots of Americans avoiding science.

http://infoproc.blogspot.com/2005/02/tale-of-two-geeks.html
http://infoproc.blogspot.com/2007/01/graduate-admissions-human-capital-and.html#comments

[Ponzi Q. Globalization]

"...basic research of the kind that might indeed be subject to a market failure (for reasons of time to market perhaps, or uncertainty) and thus suitable for government funding: well, they're non-rivalrous aren't they? So does it matter whether they're done in the US?"

Of course not. We've progressed past the need to do cutting edge research these days. As I said before, let the Chinese and Russians and others do this type of dirty work. And it sure beats the alternative: the ultimate evil that is statist industrial policy.

"Innovation and product development, yes, they do matter, but is anyone saying that they are subject to the same market failures?"

There is no market failure here. Given the high costs to do anything here in the good old U.S. of A., it is better if innovation and product development are done abroad if possible. And with each passing day, because of technology and the neo-liberal globalizationized regulatory regime, it becomes more possible.

Americans should stick to the types of work in which they have a comparative advantage. Here I agree with Alan Blinder that America should focus on personal services.

So to heck with biotechnology and science/technology research in general. Let them go the same way we let go of making televisions and other stuff. There's one big global labor pool now. Let us take advantage of it! Or should I say, let corporate 'America' take advantage of it! Because what's good for corporate 'America' is good for America. And we will all share in the prosperity that trickles down from the executive suites and brokerage firms someday.

This is Economics 101 people.

[quartz]

An issue do far barely mentioned, but which I think has an important piece in the overall debate about how will fare in science and research, especially in biosciences, is the seemingly out-of-control growth of intellectual property rights, which have passed a tipping point from stimulating innovation to inhibiting innovation and certainly reducing global network effects. When information, like gene sequences, rather than inventions or innovations are patented the flow of information is seriously stifled. I've seen a number of debates on this topic among eminent scientists and researchers where there is pretty strong consensus on the topic and this comes up again and again.

[Maynard Handley]

"
Presumably worse wages and worse working conditions result in fewer brilliant biologists. Many will be driven out. Still more will presumably be forced into working on the ideas of others, as post-docs, until their 30's.
"

PRESUMABLY? As I said, folk theories of how the world works.
How about we make the decision based on something with a little more basis in research than "presumably".
Isn't it more than just a little ironic (or, to use a more accurate word, pathetic) that in a discussion about increasing the role of science, we have people's suggestions based on vague hunches, and in fact an active hostility to the idea that perhaps we approach the subject by first doing a little research?

As others have already mentioned, larger problems, for example, appear to be
- the pay of students during the PhD and postdoc years (as opposed to the point at which they have become established scientists, which is what is here being discussed) and
- the medieval apprenticeship type conditions under which science students serve

[kb]

"the proximity fuse for example, completely unanticipated by its British inventors."

Uh, except for the fact that the british had been developing a proximity fuse since before the war, and handed over the details of the work to the US as part of the tizard mission in 1940.

[aoile]

Just a few more notes...

sd: What school's PhD programs do you have in mind? My experience dovetails better with later commenters, that labs want a good rep to attract good post-docs who will help the PI bring in the grant money, but it could be that I'm thinking of a higher cut of grad school.

Larry: Summers has in mind the sorts of managers and lawyers who have an extremely good shot at the upper middle class life, rather than the quant finance people who create millions of dollars in value each year.

PQG: Har har har. If you stated outright what you think is hypocritical or contradictory about Summers' position, then maybe we could engage in fruitful dialogue.

Barry: It depends on what level you think the network externality operates. One theory is that it is all about transportation costs (t), and so dv/dt > 0, where v is the value added by the network. Another theory is that a network externality arises out of a way of life. You can meet with other financiers/scientists/whatever over lunch, you can hop to a new job without moving your kids to a new school, there are always conferences to attend and scuttlebutt to pass on. Even as the people working in a particular office changes, the skills, expectations and techniques developed in the office remain stable. Larval f/s/w are quickly interpellated into their new roles. Professional (rather than purely financial) competition takes place. People share insights with their squash partners. And so on and so on. For that kind of network effect, dv/dt < 0, because it becomes easier to make the hub your home base and transport people, ideas and products to arbitrarily distant locations.

[Barry]

aoile, that second sort is precisely that which is created by offshoring. Bangalore is now a place not only where such things happen, but the places from which such jobs were sent are less so.

Maynard, if you have problems with my 'presumably', perhasp you should read Invisible Adjunct's blog. It's inactive, but the archives are still available.

[andres]

Just to second steve's earlier post: Summers is not one of my favorite people, but he is not a Chicago Boy and is well versed in the various theories of market failure. To argue about the need for government intervention in biotechnology is not hypocritical on his part.

Indeed, from an evolutionary standpoint, the excessive specialization that comes from an absolute commitment to free trade becomes highly vulnerable to any change in external circumstances. If we specialize in pharmaceutical design and testing while letting Chinese, Indian, and Russian biologists and chemists do all of the actual work for us, we could be in serious trouble if one or more of the larger countries decides to revolt against the intellectual property/patent regime that props up pharmaceutical profits.

Also, Summers is too polite. Two of the pathologies that he mentions--lack of respect for the scientific method and the excessive anti-research influence of a vocal minority--are the totally predictable byproduct of the Republican Party's political strategy, and is in fact a microcosm of the eventual catastrophe that led many of central Europe's best scientists to flee the continent in the 1930's. He should say that in so many words.

[Jonathan Goldberg]

Yet another comment of the current prospects facing someone going into science:

http://www.physics.wustl.edu/~katz/scientist.html

When I studied the small amount of economics I did, back in the administration of President Coolidge, I was taught that the market tended to underinvest in research due to inability of firms to capture all its benefits. Witness the decline in IBM's research activities from when it practically WAS the computer industry to the present. Likewise ATT.

A factor of two underinvestment was the number I recall.

This is addition to the network externalities/centers of innovation effect. As was commented above, it would have been a tremendous waste if a lot of people had tried to replicate Boeing. However, the EU spent a lot of time and money doing just that; Airbus is the result. Anyone know how they did on their investment?

[aoile]

Oh, certainly Barry. But I think we need to distinguish between different claims:

(1) Currently dominant hubs are disintegrating.
(2) Communication and transportation costs are falling.
(3) New hubs are forming in advanced developing nations.
(4) Offshoring is occuring because of the cheapness of foreign input factors.

I doubt (1), while (2), (3), and (4) are certainly true. However, "(2) promotes (1)" is probably false, as indicated above, while "(2) promotes (3)" is probably true. It would make sense to say "(3) promotes (1)," because there will almost certainly be marginal substitution from an old network to a newly formed network. However, it does not make sense to say "(2) promotes (3), and thereby promotes (1)," because (2) both promotes (3) and inhibits (1); its effect is to strengthen hubs general. It is correct to say "(2) promotes (4)," because part of the "cost" of foreign inputs is transportation, but it is difficult to see "(4) promotes(3)." This occurs indirectly, of course; the kind of networks we are talking about can't form unless there is a thick substratum of economic activity, and import growth could be a part of that. But is it correct to say that skilled labor in Indian hubs is "cheap" in the same way that Indian call centers are cheap? In a sense, any economic activity takes place because it is "cheapest" for the activity to take place there. But when we make a claim like (4), we generally aren't thinking of, say, how cheap it is for us to pay millions of dollars to Goldman execs. The claim "(4) promotes (3)" is misleading because the rise of the hubs has to do with their superior productivity, not the low factor prices; you would expect the factor prices to be high relative to prices outside the hub.

I hope that didn't seem like a useless excercise... the point is that we should not confuse a trade policy that leverages comparative advantages into gains from trade with a failure to promote network externalities where possible. I'm sure that you still have a rejoinder up your sleeve, though...

[Tim M.]

I think it would be interesting to know the R&D strategy of Google or Yahoo. These companies spend a lot of money on research - what is their horizon? While there is an obvious drive for short term results (yahoo has to make their e-mail competitive with Google's, for example), they have so many employees that they must have some working on projects with distant pay-offs.

Also, as many have already pointed out, Yes, offering more financial compensation in science will bring in more talent. The argument "science is hard, so it's good that not a lot of people are doing it" is non-sense - the research teams at elite hedge funds are staffed by people who would do excellent academic research (and many of them are former professors). The number of people willing to do science at 1/100th the salary of a hedge fund is greater than the number of people willing to do science at 1/1000th the salary of a hedge fund.

[Larry]

aoile: "Summers has in mind the sorts of managers and lawyers who have an extremely good shot at the upper middle class life, rather than the quant finance people who create millions of dollars in value each year."

Of course he does, but so what. All those managers and lawyers are part of the support system for keeping the economy in shape, and their work collectively is critical.

andres: "If we specialize in pharmaceutical design and testing while letting Chinese, Indian, and Russian biologists and chemists do all of the actual work for us, we could be in serious trouble if one or more of the larger countries decides to revolt against the intellectual property/patent regime that props up pharmaceutical profits."

The current intellectual property regime is in big trouble anyway, not to mention the pricing model for the drug companies, but the most likely direction for other countries is to become more like us, as they develop IP of their own that their folks have a vested interest in protecting.

[Ponzi Q. Globalization]

"PQG: Har har har. If you stated outright what you think is hypocritical or contradictory about Summers' position, then maybe we could engage in fruitful dialogue."

I don't know about hypocritical and contradictory. I just don't think the justifications that economists use for sacrificing one group of Americans on the altar of globalization while trying to save another are all that convincing.

Economics is not a science. The models it whips up are subject to a lot of cool mathematical analysis, but the models themselves are too simple to be of much use. Men have staked their lives on important predictions of physics, chemistry, and biology. Who in their right mind would stake their life on an important economic prediction?

Yet many of our lives are now staked upon a prediction of economists. This prediction involves one of the most important effects of neo-liberal globalization -- the effective creation of a single global labor pool in every field where this is possible. The prediction is, of course, that the prosperity of most Americans will be increased by creating this single global labor pool.

Frankly, it seems screwy to me. It seems to give capital a much too powerful position with respect to labor. But time will tell if it is correct. That is, if we continue to follow this path.

[DILBERT DOGBERT]

Philip Greenspun (MIT Computer Science) had a funny post on his old blog about science/computer science careers. It is fun to google around for it. He also has a cute dating game game that is good for a laugh or two. How much the girl takes off her clothes depends on your ans. He also has a great article about how he lost his startup company to the sharks. This is also a good google game as he is under a no disclosure agreement from his settlement with the sharks so he had to remove the link. It still hangs out on the intertubes somewhere.
I was just having this same discussion with a friend who is a SETI freek and also well connected via Morgan Stanley. He said we need more scientists and engineers and I asked him if he was starting out again would he do science/engineering or try to get in on the gravy train via an MBA. The funny thing is that the people that I know of in venture capital started out in science/engineering.
Enjoy

[Barry]

"- the medieval apprenticeship type conditions under which science students serve"

Posted by: Maynard Handley

Thanks for bringing that up, Maynard. When thinking about this, I thought about what the definition of 'apprenticeship' should be. IMHO, one of the critical characteristics of an apprenticeship is that it's an activity gone through to start a career; it's not a career in itself. It might be necessary, or it might be purely an exploitative requirement of the established practitioners, or some combination of the two; however, people would very rarely undergo it for it's own sake.

In the case of Ph.D.'s and post-docs, the original set-up was that the man (almost always a man) put in 5-7 years of grunt labor, with his wife helping out. At the end of that, he got a faculty position, and worked hard for 6 years. Then he was usuall admitted to the full profession.

However, for the past few decades, the situation has been one of generally *not* being admitted to the profession, but rather discarded.

[aoile]

Larry: I think the point that Summers is trying to make, though, is precisely that whatever those managers and lawyers create goes only to their firms (probably the marginal manager is contributing his salary; and indeed, it could be that part of the value he contributes to the firm comes at the expense of some other firm). That's great, but when we have a sector where we can develop two externalities simultaneously by scaling up an endeavor the government has participated in for decades (funding basic science research), there is a distinct possibility that the marginal scientist is contributing a great deal more than his salary.

PQG: None of us would stake our lives on economic predictions in a literal sense. But economic predictions are serious business; for better or worse political leaders have to follow economic ideas (see Keynes on common wisdom, dead academics, etc.), and if they are wrong the consequences are disastrous. Think of all the people who died in famines during the Soviet and PRC collectivizations. Think of all the people who have died in Africa because so few development schemes have worked there. I think you fundamentally agree with this, but you don't want to accept that ANY policy choices rely on some theory, and that a qualified version of neo-liberalism is the best game in town at this point. Just last night I was reading Hardt and Negri... they have many interesting things to say, but they are laboring under a Sisyphean burden: a defunct set of economic theories and problematics that mystify and complicate simple issues and cause them to overlook important issues entirely. I'm sure you are better informed than they, but if you are willing to sum up the effects of globalization as "giving capital a much too powerful position with respect to labor," I suggest you look at the validity of your own unacknowledged presuppositions.

[VennData]

What would economists say if the American “innovation” PPH – Biotech HOLDRS by… Merrill Lynch!! – resulted in capital flowing to the index components, spread evenly – well... by market cap – across the whole of biotech?

And what if investors became slightly “overweight” ala that last century’s must-have-national investment priority offshoot, the dot.com. Where… instead of finding “jobs” for 26 year olds as CEOs, all that money gets thrown at highly abused biology PhDs (and near PhDs) and one – or more – of them “invent” something great (e.g. one eBay for every hundred pets.com?)

Well… Merrill Lynch will have kept biotech strong in America! That’s what.

OK, the wunderkinder from Mother Merrill that “created” PPH might be MBAs who USED to be “scientists.” And OK, for now anyway, PPH only has a .58 correlation with BBH so it’s either got value or it’s a loser we don’t know yet.

Well what about HQH? And the duplicative effort of HQL (duplication equals waste… or competition… ahh…) what about them? They even pay dividends! These American innovations might – MIGHT – mean more life science output driving employment since you’ll get capital from one of those fund’s MBAs at Michael’s (over coelacanth sashimi or cycad salad or whatever they eat at power lunches.)

…and sometime in the NEXT century some government-financed PhD dissertation in economics ties it all up by demonstrating that in the 21st century America’s competitive advantage in power-lunching deal-doing topped Europe’s affinity for earnest, ski-resort-based deal-doing… what about that?

Well …then Larry Summers will be the Irving “stocks have reached a permanently high plateau” Fischer-guy of our century.

Save your receipts.

[VennData]

JG, IBM leads in patents year in year out.

http://enterprisenetworksandservers.com/monthly/art.php?2912

http://www.internetnews.com/bus-news/article.php/3653426

[Ponzi Q. Globalization]

"...economic predictions are serious business; for better or worse political leaders have to follow economic ideas"

There are plenty of economic ideas to go around. Leaders tend to pick and follow those that bolster their own positions. They are also saddled by past choices. In the recent past, our leaders chose economic ideas that (for example) increased the power of multinational corporations and international finance and screwed union workers.

"but you don't want to accept that ANY policy choices rely on some theory"

Economic theory is based on a simplifications of reality so extreme that it should be used only to aid in the discussion about alternative policies and not dictate policy choices. Economic and political theory (what's the difference?) easily becomes ideology and the reasoned arguments that backed up the theory turn into the unquestioned tenets of the One True Way. Then you get events like the famines you mentioned.

"...that a qualified version of neo-liberalism is the best game in town at this point."

How qualified? Qualified so that labor laws are put into trade agreements along with laws governing capital and goods? Or are you with the Citigroup executive Robert Rubin in saying, "I would not hold back from going ahead on a trade agreement because another country refused to accept labor standards. If we were going to have a bilateral agreement with India and they refused labor standards, I still very much want to do the agreement."?

"Just last night I was reading Hardt and Negri... ... I'm sure you are better informed than they"

My irony is funnier than yours.

"if you are willing to sum up the effects of globalization as "giving capital a much too powerful position with respect to labor," I suggest you look at the validity of your own unacknowledged presuppositions."

This is not the only problem I have with 'globalization'. I mentioned others that you chose to ignore.

I do think that in America creating a single global labor pool puts those with existing wealth in a much more powerful position than those who have to work for a living. Do the benefits of having sweatshop labor make our stuff and cheap scientists and engineers provide R&D and innovation make up for the destuction of so much domestic production and the sword of Damocles constantly dangling over the heads of many of our workers? I obviously don't think so. But, again, if the current system continues on its not universally merry way, then only time will tell.

[aoile]

"Economic and political theory (what's the difference?) easily becomes ideology and the reasoned arguments that backed up the theory turn into the unquestioned tenets of the One True Way. Then you get events like the famines you mentioned."

See, while this is largely correct (rather than unquestioned tenets I would think of the process as submerged discursive rules that skew further discussions) there is no escape outside of theory. If it soothes your conscience you can try to eschew all theory as a safeguard against ideology, but that only thrusts one further into the grips of wholly unacknowledged prejudices.

"I would not hold back from going ahead on a trade agreement because another country refused to accept labor standards. If we were going to have a bilateral agreement with India and they refused labor standards, I still very much want to do the agreement."

Difficult question. If the fundamental issue is that Indian workers are less productive in every sector than Americans and Europeans, so for Indians to realize any gains from trade their workers must earn less (in wage and benefits); if the primary constituency for labor standards are first-world labor unions who really would prefer not to lower tariffs at all, but do not want to seem entirely self-interested; if first-world consumers have proven fairly sensitive to campaigns to expose third-world abuses; if, most importantly, India is a mature democracy, just as capable of setting its own labor standards through democratic processes as the US, and whose disadvantaged citizens vote more than disadvantaged Americans; then yes, trade agreements don't really need labor standards. If, on the other hand, current Indian labor laws results from the same sorts of processes that lead to political disasters like rejecting Kyoto and invading Iraq in the US; if, in other words, trying to force certain regulations on India has a paternalistic justification; if labor regulations are not intended to strangle the migration of certain economic activities to India, but rather to make the transition more orderly for both countries; and if to whatever extent it benefits union and/or regional constituencies at the expense of the rest of American workers, this is the most efficient way of compensating those areas for their losses; then yes, it would be worth bargaining for labor standards in the free trade deal.

Here is one way to think about it: I see "labor standards" as a trade issue as being quite similar to "anti-piracy." We probably agree that "anti-piracy" is a horrible policy, pushed by an odious lobby, that marginally benefits a sliver of Americans at a substantial cost to Americans and at a great cost to our third-world trade partners.

"My irony is funnier than yours."

I am dead serious. I'm not sure whether you think the comparison is insulting to them or you. Obviously they are immensely erudite; on economics, conversely, they are a century behind the times (at points they don't quite grasp the significance of recent work in Marxian and heterodox economics). {And -- I mean this is the most aimiable way possible -- your irony is flat, flat, flat. It is amusing simply because attempted hyperbole could not be more dead, more lacking in the subtle wink, if one tried.}

"... a much more powerful position..."

How would you want to measure this? We expect both the average real wage and the interest rate (for constant risk) to go up as markets expand. Would something like time series regressions of wage-elasticity against growth in imports and exports be the smoking gun for you?

"... the destuction of so much domestic production and the sword of Damocles constantly dangling over the heads of many of our workers?"

What do you have in mind with the "destruction" bit? Are you referring to the undermining of autarky, the transition costs, or the destruction of communities? I would say the first one is only important if you think we are fighting a war with China soon, the second is moderately important (if there were .99 of dislocation for .01 of net gains from trade, free trade would be clearly harmful... at 1.00 for .20, I think we are on safer ground), and the third is difficult to quantify. You are right about the "Sword of Damocles" bit, if you are referring to underinvestment in skills because of uncertainty about the eventual value of those skills, but I'm not sure how large the effect is.
"... only time will tell."

This I think we can agree on. :)

[D-Slam]

aoile: "a qualified version of neo-liberalism is the best game in town at this point"

1. Judging by the contents of my recent Master's, it is also the *only* game in town. For those who wish to be educated as "economists", this is the only paradigm they will ever be exposed to unless they are extraordinarily curious and self-motivated (in my experience, the vast majority of economists are not). As of yet I am not convinced that this monoculture is due to genuine scientific superiority rather than path-dependence or congeniality with the interests of the Ruling Elite (tm).

2. Even if the current orthodoxy made for good positive economics (by and large, I think it doesn't), it might make for lousy normative economics. Maybe real people care about different things than the little model people care about, so uncritically embracing the policy prescriptions that come from our models might not be a good idea.

I think it is possible in some circumstances for the best available model to be worse (by being actively misleading and spuriously "precise") than no model at all.

(I confess this is an area of active contemplation for me, and I might come to change my mind).

[Ponzi Q. Globalization]

aoile:

"If it soothes your conscience you can try to eschew all theory as a safeguard against ideology, but that only thrusts one further into the grips of wholly unacknowledged prejudices."

My conscience needs no soothing. To me being a slave to an ideology is ridiculous. When I see men and woman much smarter than myself having to fit every thing they think and say to some overarching ideology I am amused. I used to be disgusted.

Perhaps very intelligent people are drawn to universal systems. The chaos of real life offends their greatest asset -- the ability to understand how things work -- and, thus, their sense of self-worth is diminished.

Anyway, you may need an ideology as a bulwark against 'unacknowledged prejudices'. Many others do not.

"your irony is flat, flat, flat."

Haven't you heard? It's a flat world.

(I may just have to pick up that Hardt and Negri book.)

"How would you want to measure this?"

I'll leave that up to you economists. You must be good for something.

"What do you have in mind with the "destruction" bit? Are you referring to the undermining of autarky, the transition costs, or the destruction of communities?"

No.
Yes, partially. Remember we all live in transition, not in equilibrium.
Yes, partially. Try modeling this last one.

D-SLAM:

"As of yet I am not convinced that this monoculture is due to genuine scientific superiority rather than path-dependence or congeniality with the interests of the Ruling Elite."

BEEP BEEP BEEP. There is another system.

If one thinks like an economist and asks how an economist maximizes his or her utility, then the answer should be obvious.

[aoile]

Ponzi, what can I say? People have beliefs, and they act on those beliefs, and judge others based on those beliefs. You have some sort of belief structure about globalization, and those beliefs are either correct or incorrect. You have reason to believe they are correct insofar as the beliefs are based on valid inductions from properly understood evidence, and generalizations from theoretical models based on sufficiently generalizable premises. If you understand what evidence, what theories, what premises and inductions sustain your beliefs about a topic, you can engage in self-criticism, and have confidence in your own beliefs. If you don't understand why you believe what you believe, if you refuse to think about how you came to believe these things...

[a]

"You have some sort of belief structure about globalization, and those beliefs are either correct or incorrect."

Of course, what is likely is that some of the beliefs are correct, and some are incorrect. As written it makes it sound that all the beliefs are either correct or incorrect.

"You have reason to believe they are correct insofar as the beliefs are based on valid inductions from properly understood evidence, and generalizations from theoretical models based on sufficiently generalizable premises."

I really doubt this. I see no reason why a "theoretical model" is more apt to produce a correct belief than not. I can create a theoretical model that the world is flat - who cares? A theoretical model should (if it wants to lead to scientific knowledge, anyway) produce predictions which can be tested. How many theoretical models in economics can be tested?

"If you understand what evidence, what theories, what premises and inductions sustain your beliefs about a topic, you can engage in self-criticism, and have confidence in your own beliefs."

Well that's not true. A lot of people are confident in their beliefs (and are entitled to be confident in their beliefs) without indulging in such understanding.

[Ponzi Q. Globalization]

"People have beliefs, and they act on those beliefs, and judge others based on those beliefs."

The problem is when you refuse to give up your beliefs when reality contradicts these beliefs.

The problem is when reality itself is molded to fit the beliefs even when there are better explanations that wouldn't need modifications of reality.

The problem is when your ideology or religion or whatever forces you into conclusions that make no sense in the real world yet you still stick by the conclusions.

A big problem is this. Economists model the world. These models are such that they can be rigorously analyzed. But the models are simpler than reality. Too often, the conclusions they draw from these models ignore these simplifications and the model then determines policy in the real world.

I'm not saying don't use theory and I'm not saying that Economics is useless as a discipline (actually, my tone may have implied it -- hell, I may have actually said it but jokingly). What I am saying is that Economics should be a guide not a dictator.

OK, I can see you are growing tired of the back and forth. I am too. Plus, I have to figure out why the feather I dropped from the top of my home hit the ground later than the rock. My model neglecting air resistance may need some tinkering.

[Clyde Roach]

J. Bradford DeLong

Re: Article, “Rich get richer—that’s not good”
Dear Sir:
I read your article in the Miami Herald, Jan 31, 2007.

The whole article smacks of teachings that spring from the “Communist Manifesto”.
I will confine my remarks to the last three paragraphs, quoted below.

“This kind of inequality should be a source of concern. Bill Gates, Paul Allen, Steve Ballmer and the other millionaires and billionaires of Microsoft are brilliant, hardworking, entrepreneurial and justly wealthy. But only the first 5 percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly among U.S. citizens or others than if they were to consume any portion of it.
An unequal society cannot help but be an unjust society. The most important item that parents in any society try to buy is a head start for their children. And the wealthier they are, the bigger the head start.
Societies that promise equality of opportunity thus cannot afford to allow inequality of outcomes to become too great.”
J. Bradford DeLong, professor of economics at UC-Berkeley, was assistant treasury secretary during the Clinton administration.

First: Your writing exhibits your assumption that the rich are getting richer, and the poor are getting poorer. If this is your assumption, I suggest that you reconsider the facts. Since the inception of the country, the gap between rich and poor has steadily narrowed. In the early stages of our country’s development, barons of finance owned a greater percentage of the wealth than the billionaires of today. And, there were no welfare programs.
Government statistics concerning poverty take into account only earned income. Wealth received by the poor, such as: housing, healthcare, SSI, and a host of other Federal, State and private programs, are not taken into account. To see the true picture, you must take these benefits into consideration.

Second: You say: “But only the first 5 percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly among U.S. citizens or others than if they were to consume any portion of it.” I see no mathematical foundation for this statement. It does not make sense that a business man would use only five percent of his income to expand his business and create more jobs.
As for sharing 95% of a persons wealth with the population, That makes as much sense as the “Townsend Plan”. As you may recall, the plan was a wealth redistribution plan.

Third: To say, “An unequal society cannot help but be an unjust society.”, I consider ridiculous. Karl Marx said something similar. We are a diverse Nation of unequals. Nothing on God”s earth can make us equal.

Sincerely
Clyde Roach
76890 SW 66st.
Miami, Fl. 33143

[aoile]

One reaction to learning that according to Newtonian theory, all else equal, heavier and lighter objects fall at the same rate is "Hmm, I wonder why in some cases lighter objects do seem to fall... in fact, some objects, like kites, don't fall at all!"

Another response is "Psssh, bullshit! Everyone knows that objects with more gravity fall faster than objects with less gravity. Haven't you ever seen a feather fall? I don't understand why you intellectuals want to find a theory for everything, even when you are plainly wrong!"

At one point, different theories have been devised and revised to explain reality. When you decide to eschew theory (not a theory, but theories in general) as too cerebral or too unrealistic, you have unknowingly decided to embrace the long dead theories (like Aristotle's theory of graveness) which control unreflective minds.