Professor Justin Wolfers joined the department this Winter after teaching Business and Public Policy most recently at the University of Pennsylvania. He is currently working on two projects – one analyzing happiness over time, the other on forecasting elections – and will teach Econ 101 this coming Fall. Below is an abbreviated version of our conversation with him.
What compelled you to study economics?
When I was in 11th grade in Australia, the country entered a very deep recession which raised unemployment substantially. I had just started studying economics in high school…at that time one of the things you did in high school economics was track data, and each month as I’d study for my next test, the unemployment numbers went up. Translating the abstract notion of those numbers into the reality of peoples’ lives – people who had lost their livelihoods, their identity, the effects it had on their families and so on – had a really big effect on me. That’s when I decided I would study economics in university.
You’ve studied a wide range of topics, including some more “offbeat” topics like the death penalty, happiness, and college basketball, to name just a few. Can you talk about the ways in which economics has expanded its scope?
The starting point here is the Nobel Prize-winning economist Gary Becker. Gary made it clearer than any economist had before that economics is a set of tools, not a field of inquiry…That set of tools can cast light and help you understand human behavior in many, many different domains. There’s the theoretical side [of economics], where we tend to think of people as making purposeful decisions, so then we have to think about their opportunities, their constraints, the institutions within which they’re operating, the psychological biases that might be affecting them. We can use that to try to get a sense of what likely outcomes are and how we can change it through policy. And the other side of it is that when it comes to empirical analysis economics is the Queen of the social sciences. We’re simply doing a better job of making sense of the tidal wave of data that’s been generated. For example, a lot of the work I do on happiness – it’s not that I’m a better psychologist or that I can tell you how to be happier. But I have millions of observations on my hard drive of the happiness of individuals around the world, and the statistical tools economists use have transformed those data into insight more efficiently than those of our brethren in other social sciences.
How do you see the field continuing to evolve?
The biggest technological change that’s occurring for the social sciences is the widespread availability of data. Everything we do generates data, from when you swipe your loyalty card at Starbucks to when you stop at a red light to when you get on an elevator to what time it was when I logged on my computer this morning. We’re generating more data that describes the world around us, and our ability to crunch data is enormously improved by Moore’s law and modern computing. So economics, like all the social sciences, is becoming enormously more empirical. That’s only going to continue. Historically, the challenge in economics has been when you don’t have enough data – how can you make sense of the world? You used economic theory to fill in when you didn’t have data. The challenge now is that we have too much data. What we have to do is use economic theory as a way of structuring our understanding and analysis of those data. And that’s a huge issue that will pervade all of the social sciences. Economics is dealing with it arguably better than sociology, political science or psychology. But we cannot rest on our laurels, because our friends in computer science are dealing with it even better.
What about being at UM are you particularly looking forward to?
First off, I have spectacular colleagues. This is my first time teaching in an economics department – I’ve spent my career in business schools. So to have some of the world’s great macroeconomists, labor economists, econometricians, international trade economists, development economists, theorists and so on just down the hallway is really exciting. I believe that you shouldn’t just specialize in one part of economics, you should know it all, and so given this belief, having have all those amazing people just down the hallway is going to be a great learning experience.
The other is that Michigan is a big state school, much like the school I went to, the University of Sydney…There’s something really beautiful about the idea of a state school – that we are not just perpetuating inequality, but hopefully giving real opportunities to kids who may not have had them. It feels good to be able to teach economics sometimes to kids who are the first generation of their family to go to college…That’s something I’m really excited about.
Do you have any advice for current economics students?
Understand that economics is a powerful lens for viewing the world. It’s not just about the stock market and dollars and cents, it’s about everything from the small decisions you make every day, to how we run our companies, to how we can create a better society. So when it comes to economics, I’d say think broadly. I do think the most exciting applications of economics are from applying it to our everyday lives. That may not be in your textbook, but there’s nothing to stop you from thinking that way.