The Perfect and the Free

Why PAPRSS?

Today I launched a new website, www.paprss.org, "Public Access Peer Review for the Social Sciences."  Here are the problems it seeks to solve.

Historically, there were three fundamental rationales for academic journals.  They disseminated work, they signaled the quality of work, and they subjected manuscripts to an editorial process that in theory improved them.

Technology has rendered the dissemination function obsolete.  In fact, by placing papers behind paywalls, academic journals often inhibit rather than promote the dissemination of research.

Quality signaling is now and has always been imperfect.  Editorial decisions hinge on two basic questions: whether the research is competently executed, and whether it is of interest to the journal's readership.  Many well-conceived and well-executed studies are rejected on the grounds that they are not projected to be of interest to a journal's readership.  This projection is based on a tiny sample of readers, in many cases a single journal editor.  Technology now presents us with the means to allow the readers in a field to decide what is of interest to the field, rather than a small non-random sample.

The editorial process may or may not improve the quality of a finished paper.  It certainly takes time.  Top journals in economics subject authors to a process that can stretch on for years and involve multiple rounds of revision.  The back-and-forth negotiations over edits are hidden from public view.  Reviewers may request revisions that a sound majority of readers would consider unwise, but authors have no mechanism to appeal to a wider readership.  Reviewers, hidden behind a veil of anonymity, may exhibit various forms of bias or harbor undisclosed conflicts of interest.

PAPRSS seeks to give researchers the opportunity to receive referee report-style feedback in a public forum, where non-anonymous commenters can rebut or reinforce reviewer suggestions and authors can provide updates.  It is closer in spirit to a conference session with discussant comments, as reviewers do not hide their identities and make comments for the public and not solely for the author. As in the conference format, authors will have an opportunity to respond to a posted review, and others will have the opportunity to post (moderated) comments. Authors can revise papers in response to reviews and comments. Moderators and editors on the site will encourage civility and constructive dialogue in all communications.  All users -- authors, reviewers, and commenters -- will be asked to declare relevant conflicts of interest as a prerequisite for participating in conversation about a manuscript.

PAPRSS is intended to supplement the standard journal publication process.  It will not make up-or-down publication decisions on manuscripts, it will only post reviews for those manuscripts.  It does not intend to secure distribution rights for work, only to provide links to work posted elsewhere.  It is an "aggregator" rather than a publisher.  The highest value of PAPRSS will be for work that has yet to complete the peer review process.  Assistant professors coming close to their tenure review may value PAPRSS for providing more rapid independent signals of work quality than the traditional peer review process.  In fact, in its initial roll-out PAPRSS will only consider posting reviews of junior scholars approaching a promotion review (whether on tenure track or not).

When a manuscript reviewed on the PAPRSS site is accepted for publication, the published may require the removal of non-paywalled links.  In such a scenario, PAPRSS will continue to feature a post regarding a manuscript, but link to the official paywall.

For readers, PAPRSS will provide curated sets of links to papers of interest by subfield, with short reviews providing information that might help inform decisions to read or to place on reading lists.

If you think this is at all a useful idea, PAPRSS needs both supply and demand.  Senior scholars are encouraged to volunteer to be available to write blog post-like reviews.  Eligible authors are encouraged to request reviews for their work.

Reflections on Tenure Appendix A: Notes for Junior Economists

This is a brief extension to the series of posts drawing upon my experiences as a member of a University-level promotion and tenure committee.  In that role I reviewed about 200 tenure dossiers, including those of a few economists.  So if you practice the dismal science, here are a few notes for you.

1. Everything in my earlier post about getting tenure applies.  That post is intended to be pan-disciplinary.
2. Don't be alarmed if your CV shows no publications for 2-3 years after you completed your doctorate.  That's completely normal given how long it takes to push an article through to publication.
3. After that 2-3 year fallow period, if you're placing 1-2 articles per year in good peer reviewed journals, nobody will complain about your rate of productivity.  You can even go lower than that if you are really hitting "top" journals.  If you go higher and aren't placing everything in "top" journals, you might get advised to slow down.  I did!
4. There may be other fallow periods on your record, attributable to childbirth, the distractions of moving across institutions, or other life priorities. Your letter writers and senior colleagues should not hold these things against you, particularly at institutions that have "clock stoppage" rules for such events.  Neither I nor anybody can guarantee that letter writers or senior colleagues will do what they should do. But light is continuously driving out darkness on this front.
5. For everything everybody says about the tyranny of the top 5, know this: economists writing tenure letters read papers.  They don't write letters saying "well, this person has two hits in the AER, so that's all you need to know."  That is the predominant style of letter writing -- CV reading -- in med schools, but not among economists.  I've personally written letters for (successful) candidates that said "this paper is really much better than its journal placement might suggest."
6. You may think that your job market paper is your best paper.  The odds are that your letter writers will disagree.  Your JMP was a labor of love and it's not crazy to be attached to it, but the more time you spend doing research the better you get both at picking important questions and answering them convincingly.
7. Most common question I get from junior colleagues: should I send out unpublished work with my materials?  It's a case-by-case decision.  Given point 4, if you send it, letter writers will read it.  Given point 5, your more recent work is probably pretty good work.  On the other hand, sending out work that hasn't been through rounds of feedback and revisions is risky.
8. Once you submit your materials, if good things happen (R&Rs, acceptances) pass that information along to your review committee or chair!

Did Sherwin Rosen (accidentally) cause the rise in income inequality?

In 2003 Thomas Piketty and Emmanuel Saez introduced one of the more famous graphs in modern economics.  Since updated to 2017, it looks like this:

Described verbally, the graph shows the time series of income inequality in the United states over a century, measured as the percent of all income accruing to those in the top 10% of the distribution.  Once upon a time, this share was quite high.  It dropped dramatically during World War II, a phenomenon often attributed to wartime wage and price controls. It then remained at a relatively steady and low level until sometime right around 1980, at which point the series reaches an inflection point and begins to rise.  It's a rise less dramatic than the 1940s drop, but it has persisted for decades, to the point that inequality by this measure now exceeds that observed at any point in the last century.

What event precipitated the inflection around 1980?  What broke the United States out of a nearly-four-decade period of stable, low inequality?  There are theories.  Reagan-era tax policy changes may have altered the distribution of reported income.  Things like the decline of labor unions, the shrinking real value of the minimum wage, the rise in low-skilled immigration, international trade, skill-biased technological change, they come up. But can we peg them to that very clear turning point?

Let me pose another hypothesis: that inequality at the very top end of the income distribution began to rise because a prominent new scientific argument gave intellectual cover to those in a position to claim a greater share of the economy's spoils.  What prominent new argument?  Sherwin Rosen's classic paper, "The Economics of Superstars," published in the American Economic Review in 1981.

Let's take a step back. Economic theory suggests that in competitive labor markets, workers are paid the value of what they produce for their employer. The key word here being "competitive." Vast numbers of workers are not paid the value of what they produce.  Take schoolteachers.  Recent research suggests the value that high-performing teachers add to society might run more than a quarter-million dollars per year, based on the future outcomes of the students they teach.  Yet the average teacher is paid closer to a fifth of that amount. The standard theoretical retort to this sort of observation goes back to the word "competitive." Labor markets may not, in fact, be competitive all the time.  Teachers living in one location, for example, may discover that there's only one school system for which they might reasonably work.

There's a broader shortcoming to economic theory in the labor market, which posits that people must be paid to work because otherwise they would just consume leisure all the time. This argument disregards the key role that work plays in determining self-worth. People, in many cases, have a need to work and will do it for free if they can't find a way to be paid for it.

Set theory aside. The key point: in reality compensation reflects much more than the value of what one produces. It reflects bargaining power, social norms over what is acceptable, non-monetary aspects of employment like prestige, fringe benefits, and working conditions, and more.

Enter Rosen.  The key argument of his paper: modern technology has produced scenarios where the very best performers in certain fields provide value to a vast number of people.  Collecting even a small payment from each of them yields a very large reward.  "Performer" being a key descriptor of the type of work being done.  That word appears six times in Rosen's text.  "Author" appears five times, "musician" three times (along with "violinist" and other such terms), "arts" appears twice, "athlete" appears twice (along with "football" and "basketball" once each).

"Businessman" appears just twice.  Once in a footnote, and once in a concluding quotation taken from earlier work by Alfred Marshall. Rosen intended his idea to be applied in the main to occupations for which new technology had enabled a mass market to enjoy the work of the very best performers.  The notion that the argument might apply to the very best chief executives or financiers appears nowhere in Rosen's own words.

Yet in the decades since the release of "The Economics of Superstars" the interpretation has shifted, to serve as an explanation for rising compensation of executives and other businessmen rather than performers more traditionally defined.  A Google news search for the terms "Sherwin Rosen," "superstar" along with the word "musician" yields nine hits.  Replace the word "musician" with the term "CEO," a term that appears nowhere in the original text, and the hit count quintuples.

So let me claim Rosen's work, which in the most charitable description thought of applications to business leadership only tangentially, was co-opted. Given the key role of social norms in determining what is an "acceptable" level of executive compensation, the scientific cover afforded by the argument that some leaders are, too, "superstars" may be part of the paradigm shift that clearly occurred after 1980.  Recognize this: Rosen's work, referenced by many as an explanation for the phenomenon of escalating inequality, antedates what it is claimed to explain.

Maybe executives and financiers are indeed "superstars."  The question then is this.  What, in the technology of investing or corporate management, plays the role that television, radio, and other technologies played in Rosen's description of the performing arts?  And how did that technology manage to emerge only after Rosen wrote his article?  There's certainly an argument to be made that Rosen was merely prescient, rather than co-opted, though it should be said that the speculative commentary concluding his paper references "cable, video cassettes, and home computers" (p.857) rather than finance or corporate management. Any effort to distinguish prescience from co-optation would rest heavily on the answers to these two questions.

An intriguing final footnote: Rosen suggested (p.856) that the superstar theory should also apply to economists.

On the monetization of expertise

Ten years ago I received a call from the U.S. Department of Justice's Civil Rights Division. They were in the midst of pretrial proceedings involving a prominent landlord in the Los Angeles area, who stood accused of ethnic discrimination in his apartment buildings.  I had published a few studies on racial and ethnic segregation in American cities; discrimination is a prominent theme in this work.  I agreed to assist the DOJ in their investigation.  My assistance consisted almost entirely of writing a rebuttal to an expert witness report the landlord had commissioned, which attempted to make the argument that the under-representation of certain ethnic groups in the landlord's buildings reflected segmentation of the housing market.  That is, the landlord argued that he rented fancy apartments and certain ethnic groups weren't interested in those.

After I submitted my rebuttal, the landlord settled.  It was the largest settlement DOJ had ever received in a rental market discrimination case.

I was compensated for my work.  To the tune of about $30,000, as I recall. 

Not just anyone could have performed the work that I did in this case, and had it gone to trial the "Daubert" standard on who may qualify as an expert witness would have excluded quite a few people (e.g., graduate students) who might otherwise be completely competent to carry out the statistical analysis.  The U.S. government earned quite a bit more in the settlement than what they paid me to conduct the work.  And at the end of the day, I could take some satisfaction in having intervened on the side of tenants facing (alleged -- as part of the settlement the landlord admitted no wrongdoing) discriminatory treatment.

Outside consulting is quite common for academic economists.  At the outset of the Obama administration, five prominent economists filed voluntary disclosures detailing the sources of their income: Alan Krueger from Princeton, Lawrence Summers from Harvard, Austan Goolsbee from Chicago, Cecilia Rouse from Princeton, Rebecca Blank of Michigan (now chancellor of the University of Wisconsin-Madison), and Raphael Bostic of USC (now president of the Atlanta Fed).  Each of them reported at least $45,000 in compensation from sources other than their University employer.  Summers, in particular, reported over $8 million in compensation from sources other than Harvard, including the hedge fund D.E. Shaw, Citigroup, Goldman Sachs, JP Morgan, Lehman Brothers, and many others.  Krueger reported nearly $200,000 in income from sources other than Princeton, plus $166,000 in advance payments on a textbook contract.  Krueger's income from these sources nearly equaled his University salary.  In some years, my own outside income has similarly come close to equalling my University salary.

It's true that the median academic economist, perhaps even the academic economist at the 90th percentile, earns less than what they might had they opted for a job in the private sector. But the returns to expertise can be high: Krueger's reported compensation reached $735,000; Goolsbee's $558,000; Rouse's $398,000; Summers' $9.1 million. And this is 10 years ago. We are not talking assistant professor salaries here.

In some respects, we can think of all these activities as "the market at work." The DOJ, Citigroup, and others have a demand for expertise, and qualified economists provide the supply.  We're making the world a better place by delivering something of value. Someone down the line, whether a tenant facing discrimination or an investor seeking a better return, benefits from our willingness to be compensated for our expertise.

In the case of academic expertise, however, there's a potential problem. The value of our expertise depends critically on its scarcity: the more common the knowledge or perspective, the less any client will be willing to pay for it.  More exact, the value of expertise depends on its perceived scarcity, the extent to which a client can be convinced that no other provider can substitute for us.

At the same time, our fundamental task as academics is to disseminate knowledge, to make it ubiquitous rather than scarce.  The academic norm, as well, is to acknowledge the wisdom of those who have preceded us, to note the shoulders of the giants upon which we stand. Therein lies a fundamental conflict.  How can we balance the reality that we profit from our expertise with our pledge to endow our students and colleagues with equivalent expertise, and to acknowledge that ours is but one of many minds at work on a problem?  Those of us who have attained a reputation as experts will better monetize our expertise if we can restrict the supply of competitors, or more effectively make the case that we are the perfect consultant to suit the client's needs. And our own actions can effectively restrict the supply, shift those perceptions.

Do economists really exercise that kind of power?  Consider the publication process, which has evolved to commonly require multiple rounds of revision prior to publication in the most prestigious outlets, a process that can easily take years even in the unlikely event that a paper is published at the journal of first submission.  These prestigious outlets themselves base their publication decisions on the constraints imposed by an arcane, irrelevant medium -- print.  The net effect is to slow down the productivity of economists, which restricts the supply of new experts entering any field.  Consider as well the governance of the economics profession, which has continuously bestowed the top honors and signals of expertise within a limited range of prestigious departments.

I don't mean to theorize that some back-room deal resulted in the publication and governance structures we have today. The expertise conundrum is a form of prisoner's dilemma. Collectively, we are all best off if the widest range of minds are at work on the most vexing and important problems.  Individually, given the potential to monetize expertise, we are best off if nobody else comes to be seen as quite as expert as we are in our domain.  Thus in the absence of altruistic action we individually face incentives to retard the acquisition of expertise, and support structures that enhance perceptions that expertise is limited to a very few scholars at the top of the profession.  It doesn't help that the most senior scholars in any field, with the greatest potential to monetize their portfolio of past work, play a strong role in anointing the next generation of experts through editorial decisions and tenure letters. 

It would be reasonable to argue that there is a sufficiently strong altruistic norm among academic economists that these concerns are misplaced. People don't go into academia for the money. It is one thing, though, to say that scholars don't choose a career for the money, and quite another to say they are incapable of being corrupted by it.

Whether we believe academic economists are altruistic or corrupted, we should acknowledge that we have made the road to a successful career narrow and difficult in a way that benefits established scholars at the expense of new ones.  The hardship involved in traversing this road may most dissuade those who are now under-represented in our profession. How do we solve this problem?  Possibly by reforming the institutions that have exacerbated barriers to entry into the realm of experts. Or possibly by devising credible new ways to circumvent them.

If this is indeed a problem of corruption, is it unique to economics?  I have no reason to think it is.  Conflict-of-interest problems are rampant in the medical sciences.  But given the particular subject matter in some fields of economics -- making money -- our discipline has no shortage of prospective clients.