The $300,000 Man
Bob Barro doesn't deserve a
salary of $300,000 per year. But then, who does? The ability to do innovative
economic research is at least as rare as the ability to sink a basketball
through a hoop--and a lot rarer than many other abilities that routinely
command six- or even seven-figure salaries. So there is nothing particularly
outrageous in principle about the record-breaking offer that has just induced
the Harvard economist to move to Columbia University.
Still,
the April 8 New York Times story that confirmed the rumors about Barro's
deal has caused quite a stir here in academe. Nobody, as far as I can tell,
begrudges his good fortune: Barro is, by anybody's standards, a first-rate
economist. But a description I once saw of Stephen Hawking's reputation among
physicists applies to Barro quite well: He is "esteemed but not revered" by his
colleagues. That is, there are a couple of dozen other economists who can, with
reasonable justification, regard themselves as being in the same league. Are
they all now going to be demanding comparable paychecks?
Well, probably not. But there is certainly the possibility
of a pay and perks explosion among a small circle of high-profile economists.
Why--and what does it say about economics as a profession?
The first
thing you need to do is drop any stereotype you may have about economists as a
bunch of suit-wearing, slogan-parroting guys divided into squabbling
ideological factions. I have never seen Barro in a suit (the photo in the
Times was a revelation). More important, nobody makes a career in
academic economics by repeating traditional slogans. "Free trade good,
protectionism bad" may get you a job at a think tank, but not at Harvard.
Academic success depends on a reputation for cutting-edge research--which
typically means either clever mathematical models or ingenious statistical
exercises that redefine some important issue or explode some piece of
conventional wisdom. And while there are, of course, factions and cliques
within economics--don't get me started--there is, in general, a surprising
degree of agreement about what constitutes good work. Mainly this is because
leading university departments value technical skill and originality rather
than ideology (in fact, the profession is startlingly apolitical, given how
politics-driven economics is outside the ivory tower).
Now it turns out that the ability to write
"home run" economics papers--yes, that's the phrase everyone uses in hiring
meetings--is a quite rare one. Anyone who manages to do it two or three times
becomes, in the eyes of the whole profession, a "star"--again, that's the word
people actually use--and immediately becomes a very desirable commodity. A
department with five or six star faculty out of, say, 30 will be highly
visible. It will be the kind of department that can make a strong case to the
university administration that it should receive preferential financial
treatment, because it contributes to the prestige of the university as a whole,
and hence ultimately to the institution's ability to raise money. A department
without stars, no matter how excellent its teaching or worthy its long-run
contributions to human knowledge, will not be able to make that case. And so
any economist who has managed to establish himself (or, rarely, herself) as a
universally acknowledged star can routinely expect to receive offers from many
of the leading departments.
But not,
until now, $300,000 offers. What's going on? I think that a major part of the
explanation lies in the development of economic theory over the past couple of
decades and a somewhat dysfunctional response of the profession to those
developments.
It is now becoming clear in retrospect that the '70s and
'80s were a sort of golden age for the academic star system. Some big new
ideas--"asymmetric information" (the seller knows if a car is a lemon, the
buyer does not), game theory, "rational expectations" (the market is as smart
as the economist modeling it), monopolistic competition, etc.--opened up
dramatically new ways of thinking about a number of economic issues. (One of
the truly ludicrous things about Brian Arthur's fantasy about how stodgy economists refused
to listen to his radical ideas is that it is set in an era that everyone knows
was in fact marked by a manic neophilia, a worship of the wild and crazy.) And
for a smart, teched-up guy it was a perfect environment for career building:
Just be the first person to work out how asymmetric information could be
applied to industrial organization, or game theory to international trade
theory, and--presto!--a star was born. It became not only possible but common
for a successful young economist to become famous within a few years after
graduate school, to become a full professor at a top school in his late 20s or
early 30s. (No sour grapes here: My own career followed exactly that script.)
And to this day, top departments regard instant stardom as the normal career
track for the kind of person they want to hire.
But
something has gone wrong with the star formation process. The people are as
smart as ever, but the state of economic theory has changed. The big,
liberating ideas of the '70s and '80s have been absorbed--we are liberated up
to here--and now the problem is one of application, of really careful work that
helps us decide which wild and crazy ideas actually make sense or fit
the facts. A good barometer of the change is the John Bates Clark Medal, which
is given every two years to an economist under 40 (which, incidentally, makes
it harder to get than the Nobel). From the '70s to the early '90s the Clark
generally went to home run hitting theorists, but the last couple have gone to
empirical labor economists whose reputations have been built not on a couple of
thrilling papers but from an accumulation of careful, data-intensive research.
The days of instant stardom, in other words, appear to be largely over.
And yet the demand for stars continues
unabated. Indeed, it has probably increased due both to cultural
contagion--this is the Age of Celebrity in all walks of life--and to the
heightened competition among universities for increasingly footloose donor
dollars. So what happens? Well, ambitious departments are in more or less the
same position as producers of action films who, having been unable to find
bankable new stars, are still bidding against each other for the services of
Arnold Schwarzenegger or Bruce Willis. If a young economist should show even a
simulacrum of old-fashioned star quality, he is likely to be deluged with
offers, but for the most part the race for academic prestige has become a game
of musical chairs in which everyone still wants the same old enfants
terribles , and there are not enough of them to go around. (In my own field
of international trade, the joke is that there are only three people in the top
10.) Result: Juicy offers for a handful of aging superstars.
It's not such a terrible
thing. When you consider how large a role economics plays in our national
debate--and how much of the public discussion of economics is dominated by
cranks and poseurs--seeing a serious economist like Barro get offered what is
still, by private sector standards, a fairly modest paycheck doesn't seem
particularly out of line. But I do worry that the Barro offer sends the wrong
signals to younger economists--that by telling them the profession still
insists on the appearance of superstardom, that it only values home runs when
we really ought to be looking for a solid series of base hits, it will
encourage what is already a disturbing propensity to favor attention-grabbing
showmanship at the expense of deeper, more time-consuming work.
