To help economics become a field of more diverse thought, perhaps the profession should take a look at what sorts of research is rewarded, former Federal Reserve Chairwoman Janet Yellen contends.
On a panel at a Pathways to Gender Equality conference in Washington, D.C., Friday, Ms. Yellen, the first female chief of the central bank in its more than 100-year history, emphasized the importance of diversifying economic research methods and topics.
The economics profession, Ms. Yellen said, tends to value mathematical modeling and is increasingly becoming a harder science, which could be biasing economists against new ideas.
“What’s happened in economics is that anything that could be called anecdotal or case study types of methods are simply ruled out,” Ms. Yellen said. “To my mind this is a serious methodological bias that is blinding the profession to very important phenomena.”
Ms. Yellen highlighted economists’ failure to predict the financial crisis as one example of how the system lowers the incentives for certain types of important work. An economist’s discovery of a key piece of information about one firm’s financial exposure to certain types of risky securities probably would not have been enough by itself for a publishable research paper, even though in retrospect it might have foreshadowed the crisis.
“The incentive would not have been to pursue that and to make anything of it at all,” she said.
Ms. Yellen also spoke Friday on gender issues in economics, a topic she explored in a speech last year in which she highlighted the benefits of government policies that boost women’s participation in the workforce.
Fed research suggests the underrepresentation of women and minorities in economics is potentially harmful for policy.
“Women and men have significantly different approaches and views on public policy issues, which means that women’s voices and those of minorities need to be heard,” Ms. Yellen said Friday.
She underscored the value of diverse perspectives in fostering deliberation and nonconformity.
“My friend [International Monetary Fund Managing Director] Christine Lagarde often jokes that we might not have had a financial crisis if it had been called Lehman Sisters rather than Lehman Brothers,” Ms. Yellen said. “And I agree.”
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from Real Time Economics https://ift.tt/2RvNiIn
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