The Ambrosini Critique

Delong:

One of the embarrassing dirty little secrets of economics is that there is no such thing as economic theory properly so-called. There is simply no set of foundational bedrock principles on which one can base calculations that illuminate situations in the real world. Biologists know that every cell runs off instructions for protein synthesis encoded in its DNA. Chemists start with what the Heisenberg and Pauli principles plus the three-dimensionality of space tell us about stable electron configurations. Physicists start with the four fundamental forces of nature. Economists have none of that. The “economic principles” underpinning their theories are a fraud–not bedrock truths but mere knobs twiddled and tunes so that th right conclusions come out of the analysis.

What are the “right” conclusions? It depends on what type of economist you are, for [there] are two types. One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia.

There’s a third type of economist that cooks a pot of history to discover interesting patterns for the sake of discovering interesting patterns. Ironically, given the existence of the first type of economist, you should only listen to the third type for policy advice.

A few weeks ago, Mike was asking me about the long term unemployed. I’m running some regressions using CPS data so I have the data he asked about just hanging out on my desktop. Public service:

The unemployed during this recession¹ are different than those that don’t become unemployed. They’re younger, less educated, more likely to be male and less likely to be married.

Now, the long-term unemployed (greater than 25 weeks unemployed) are different from the short-term unemployed. They are even less educated, less likely to be white, less likely to be married and slightly older.

Data:

The never unemployed average 40.1 years old, the short-term unemployed 35.5 and the long-term unemployed are 36. Contrary to Tyler Cowen, unemployed workers above 40 with a college degree are not much more likely to be long-term unemployed (they’re 24% of the 40+ long-term sample compared to 21.9% of the 40+ short-term unemployed sample). Relative to all college educated workers, college educated workers older than 40 are just more likely to be unemployed.

1. I looked at 2008 and 2009 data for folks that worked one week or more [↩]

Ok. I can’t wait anymore. Someday this paper (co-written with my advisor) will show up here. The paper reviews trends in immigration in California and summarizes the findings of one of Peri’s working papers. In that more technical paper, Peri found a clever way to control for all three confounding effects I’ve discussed before that can contaminate estimates of the effects of immigration on native employment outcomes. Consistent with most of the literature, he finds no negative effects of immigration in this respect.

Also, here’s Peri talking about immigration:

Categorize this chart in the “must see the data to believe” bucket.