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Thursday, March 10, 2016

The Nature of Economic Knowledge: Divergent vs Convergent

Mike Smitka, Economics, Washington and Lee University

Discourse in economics presumes that knowledge is convergent: more empirical research and better theory will together refine our knowledge and helps us approach a "true" understanding. That implicit methodological assumption is not only wrong, but leads to the flawed application of economics. In practice, economics is perhaps better thought of as divergent.

The literature on dowries provides an illustration. In India in the 1980s saw newspaper headlines reporting a spate of bride burnings by unhappy mothers-in-law. Coverage of rural areas was presumed spotty, so it's unclear whether this was anything new. It did though correlate with a rise in dowries (or brideprice). That contrasted with records suggesting that in the past the norm was payment of a groomprice, not a dowry.

...we should never expect consensus, even while we hope for collegiality...

Vijarenda Rao was interested in Becker's economics of the family, and investigated the issue for his PhD thesis. Men preferred brides younger than themselves. (More generally, women exhibit hypergamy.) Because of a growing population, the number of women was larger than men a few years older. The faster the population growth, the more "price" that a husband fetched rose. Empirical work seemed to bear that out, with his seminal paper "The Rising Price of Husbands: A Hedonic Analysis of Dowry Increases in Rural India", Journal of Political Economy 101:4 (August 1993).

That proved too simple a story. First, a graduate student interested in dowries, Lena Edlund, wanted to use his data in her own work; she wasn't able to replicate his results. He couldn't either, which led to a comment and a politely-phrased reply/retraction. (In my reading of the literature, Rao continues to be acknowledged for comments on dowry papers, no acrimony involved.) So that called for more, and more careful, empirical work. For example, Maristella Botticini (1999) worked with a set of Italian renaissance archives: “A Loveless Economy? Intergenerational Altruism and the Marriage Market in a Tuscan Town, 1415-1436.” Journal of Economic History 59:1, 104–21. There are now studies for multiple countries and time periods, including China, India and the north .

In parallel, the theory literature expanded. Rao posited a "marriage squeeze" as Indian women (or their parents) paid to make a desirable match as the number of marriageable expanded relative to older men. This in effect was a one parameter model. Siwan Anderson showed, however, that once women could choose men of varying age, and not just those of a fixed age, these results vanished. Similarly, she showed that once hypergamy was made more general, introducing caste and not just age, then not only did dowry inflation reappear, but it took a specific form [women can marry up (but not men) as progeny take the father's status].

The number of researchers working on dowries expanded. Some worked under or with Aloysius Siow at University of Toronto, others with Rao. Co-authorship and paper acknowledgments show that these students and others work with each other. There is now a community of scholars interacting in this area. Finally, they have succeeded in getting articles into into highly visible outlets. There's "Why Dowries?" by Botticini and Siow in 2002 in the American Economic Review, the profession's flagship journal, and a 2007 survey article by Anderson, “The Economics of Dowry and Brideprice,” in the Journal of Economic Perspectives.

But what has happened along the way? What emerges is a complex literature with a burgeoning set of models and empirical studies. In my reading this has not led to a more precise understanding of what has happened to dowries, or why. The picture is much richer, but the result has been more questions rather than answers.

This is I believe a general result, particularly in microeconomics, in which knowledge does not converge on a clear image of a particular phenomenon. Rather, work diverges. This may be a good thing, in that human society is complex and we ought not find simple stories compelling. But it is not what the formal process of running regressions and testing for significance suggests. That implicitly assumes that we can over time refine our models to get a clear picture. That's not the methodology that we see at play when we examine the development of a field over time.

This hearkens back to the picture of science as a social endeavor painted by Thomas Kuhn in his later work, such as the essays in the 1977 collation, The Essential Tension: Tradition and Innovation in Scientific Research. It is also consistent with the rich tapestry constructed by Paul Diesing in his 1991 book, How Does Social Science Work? – Reflections on Practice. Finally, if in fact knowledge creation in economics is a divergent process, then we should never expect consensus, even while we hope for collegiality.