Akerlof on Sins of Omission

George A. Akerlof, perhaps best known for his ‘Market of Lemons’ problem, published an article, in the Journal of Economic Literature, titled ‘Sins of Omission and the Practice of Economics’. There was something about the idea of this paper, and its concept, that drew me to it immediately. What he basically speaks about, is the concept of ‘hard and soft’- he speaks about the association of sciences in the hierarchies of hard and soft, with a subject like Physics at the top and say, history at the bottom. Now, in empirical methods, a quantitative method may be considered hard, as opposed to a qualitative method.

The paper specifies a model, called ‘Sins of Omission’, in which an academic researcher selects a topic along two axes- hardness, and importance. While he may value both, there is a certain weight that is associated with hardness, that then leads to a socially non- optimal trade off between the two- he is biased. So why is this hardness bias even a problem? What are its consequences? Akerlof cites a few- an extension of this bias, is a bias against new ideas, wherein old and accepted paradigms take the advantage. In an environment like this, it is very easy for young researchers, like you and I to find ourselves leading towards sins of omission because of this demand for compliance.

There is a long-drawn debate around whether qualitative methods fit economics, a rather quantitative science. And very honestly, being a graduate of Mathematics myself, numbers, and equations and the association of these with precision is definitely comforting. But when Economists make up the majority of think tanks that drive policy research, which then very directly is implemented upon the people, isn’t a deviation from the strict paradigm of hardness necessary? To incorporate qualitative methods along with the quantitative methods that drive our research.

A relevant example for the ‘Sins of Omission’ model is the 2008 financial crisis. In its aftermath, the question most commonly asked was why was it that people had not predicted the crash at least exactly as it was happening? To which Rajan said that the prediction had not been made because it would have required detailed knowledge of theory of institutions in fields of finance, real estate and macroeconomics- not a mainstream intersection at the time.

Now, while continued research in mainstream economic fields and deeper dives into the bottomless pit that is knowledge remains important, crucial almost; it is also important for researchers to find ground in other specialisations, that may otherwise be considered ‘soft’. Analyses on problems like climate change- its impact, race and caste discriminations are becoming more and more crucial in our rapidly shifting world. Its important to not only view inequality from a class perspective but move onto intersectional analysis, to view the impact of class, along with axes such as gender and caste in measuring inequality. Why is it that minority women are worst hit, and most vulnerable? What can the people at positions of responsibility do about this? There is a need to expand horizons.

Note: There is an inherent sense of exclusivity and lack of accessibility that has plagued academia, where there is so much interesting research that remains inaccessible to the majority of students, so in my attempt to overcome this, in whatever minuscule way possible, I have decided to attach references of papers I find interesting and relevant, there’s just so much to read!

1.https://assets.aeaweb.org/asset-server/files/9185.pdf