SAMUEL BOWLES (by Francesc Trillas)

(Presentation of the Inaugural Lecture at the Department of Applied Economics, UAB, 26 September 2011)

It as a great pleasure and honour to have Sam Bowles from the Santa Fe Institute and the University of Siena to give this Inaugural Lecture, which marks the start of our academic year in the Research Master and the Doctorate in Applied Economics.

When we asked Samuel Bowles about the topic of his lecture, he gave us four or five options, among them the evolution of inequality for the last 20000 years or the emergence of property rights some 10000 years ago. We chose the relationship between economic incentives and social preferences because we thought it would be more closely related to the policy-oriented preferences of our faculty and students, and because it integrates theory and evidence from experiments and from the field. But any of the other topics was very tempting, and shows the ambition and breadth of interests of our speaker.

He may not know that I know that he is also the auhtor of a theater play entitled “My Dinner Party with Karl, Leon and Maynard:  A Play in 1 Act and 7 Scenes”. I am sure you can guess who Karl, Leon and Maynard are.

Samuel Bowles is one of the most interesting economists and social scientists of our times. His book “Microeconomics”, a very unusual microeconomics book, is one of the best, probably the best, economics book I have ever read. He has just published another book, with Herbert Gintis, “A Cooperative Species” and has a long list of journal publications in a variety of fields.

I encourage all of you to read his work. Reading parts of it has taught at least me a few lessons. Challenging the orthodoxy implies respecting it and knowing it well. It also implies using more, not less, complex and mathematically demanding methods than orthodoxy.

SB is an example of openness to other disciplines, not as an imperial venture or as a superficial show of wisdom, but as a profound endeavour to improve our knowledge of human societies using the scientific method.

If you want to know about exciting fields such as behavioral and evolutionary economics, or the role of institutions, you can find all of this in Sam Bowles’ books. You will learn about the difficulties of separating equity from efficiency, or the importance of how to achieve cooperation and coordination in social dilemmas, or the explanatory power of economic power and social classes.

Microeconomists off the hook (maybe) (by Pedja dell'Arno)

Paul Krugman delivered a speech at the Eastern Economic Association where he reflected on the role of economists in the current crisis. He said "maybe I can let microeconomists off the hook. But macroeconomics is, above all, about understanding and preventing or at least mitigating economic downturns". I wonder if that is true. I mean, it is probably true about macroeconomists, but micro people should perhaps also share at least part of the blame, since modern macro, if I am not mistaken, has been based on microfoundations. Perhaps these microfoundations were not that sound after all. If the microfoundations  of macro have been based only on the micro of 30 years ago, before the irruption of behavioral, institutional and evolutionary economics, probably they lack some of the most interesting issues that microeconomics has to say. Still, even with the recent contributions, microeconomics is just a methodological guide to ask scientific questions about social reality, who knows if rich and sophisticated enough to help answer the big questions of our time.

Not "what", but "how" (by Francesc Trillas)

In many social and economic problems, sometimes it is quite clear "what" has to be done. It is less clear "how" to do it. Also for more personal problems: it is easy to advise an obese person to eat less and exercise, it is more difficult to tell him "how" to manage to achieve it in a sustained way. Three (related) examples come to my mind:
-Many claim that some decisions should be left to experts, and not to amateur politicians. However, it is less clear how in a democratic society, the majority will delegate their decision making powers on élites that may not share their distributive preferences.
-Competition and merit should play a larger role in the allocation of resources. However, there are losers from competitive processes, and the losers will make their voices be heard in a democratic polity.
-The selection of politicians should be focused on looking for the best citizens and the reform of political parties should focus on improving the quality of policy-makers. However, politics is labour-intensive and some citizens invest their human capital in this career, and will not easily accept to be replaced by part time well trained elites.
Perhaps, as Bowles reminds us in his book "Microeconomics", the problem is that any efficiency-enhancing reform is accompanied by distributional changes. In European countries, it is very common to suggest (allegedly) efficiency-enhancing reforms without proposing ways to alleviate the distributive tensions that accompany them.

Reading on institutional economics (by Pedja dell'Arno)

I missed a critique (Journal of Economic Literature, 2007) by economic historian Gregory Clark of the 2006 book by Avner Greif on "Institutions and the Path to the Modern Economy." Now I managed to read it and it is an excellent article. This critique is one of the recently appeared pieces that criticize the alleged over-ambitious project of the New Institutional Economics, which tries to present market preserving institutions as the main driver of economic development, following the work of Ronald Coase and Douglas North. Other authors that have pieces (or sometimes paragraphs) containing criticisms of NIE are Samuel Bowles, Pranab Bardhan and Ha-Joon Chang.
These criticisms sometimes focus on aspects of the economics of institutions that some authors would not acknowledge as central to the whole enterprise, like the necessary survival of efficent institutions, or the recommendation of a limited role of government.
In my view, perhaps there are inherent problems in trying to institutionalize institutional economics. One of the lessons of this school, precisely, is that institutions do not travel well, and that attempts to sustain collective action are time and space-dependent.
Still, the best contribution of the economic analysis of institutions in the recent past is to emphasize the role of rules and organizations (of different nature) and transaction costs in modern economies, as practiced for example by Avinash Dixit. Elinor Olmstrom and Oliver Williamson were given the Nobel Prize for this reason.