Sunday, January 08, 2006

Review: What's the Matter with "What's the Matter With Kansas"

What's the Matter with "What's the Matter With Kansas"

When I heard a new book group was going to meet this month at Stacy's Coffee Parlor in Falls Church, Virginia to discuss "What's the Matter with Kansas" by Thomas Frank, I thought it was a good time for me to take a look a book being recommended by a lot of people I know.

If you are looking for a book bemoaning the fact that Kansas is now a red state, reminding you of the fact that there is great economic disparity, that farming continues to employ fewer and fewer people, that family farms are suffering, for a book that rants against capitalism and conservatives, and that defines who is liberal and who isn't, then "Kansas" is for you. I was looking for a lot more, however—in particular, I was looking for insight and explanation.

Having studied economics at both the undergraduate and graduate level, I was particularly interested in Frank's treatment of Vernon L. Smith, winner of the 2002 Nobel Prize for economics, and professor at George Mason University in Virginia. Labeling Smith's work, much less understanding it, is extremely challenging. Smith was one of two recipients of the 2002 award. Here's what the Prize committee released about this award:

"Psychological and experimental economics

Traditionally, much of economic research has relied on the assumption of a “homo œconomicus” motivated by self-interest and capable of rational decision-making. Economics has also been widely considered a non-experimental science, relying on observation of real-world economies rather than controlled laboratory experiments. Nowadays, however, a growing body of research is devoted to modifying and testing basic economic assumptions; moreover, economic research relies increasingly on data collected in the lab rather than in the field. This research has its roots in two distinct, but currently converging, areas: the analysis of human judgment and decision-making by cognitive psychologists, and the empirical testing of predictions from economic theory by experimental economists. This year’s laureates are the pioneers in these two research areas.

. . .

Vernon Smith has laid the foundation for the field of experimental economics. He has developed an array of experimental methods, setting standards for what constitutes a reliable laboratory experiment in economics. In his own experimental work, he has demonstrated the importance of alternative market institutions, e.g., how the revenue expected by a seller depends on the choice of auction method. Smith has also spearheaded “wind-tunnel tests”, where trials of new, alternative market designs – e.g., when deregulating electricity markets – are carried out in the lab before being implemented in practice. His work has been instrumental in establishing experiments as an essential tool in empirical economic analysis."


Now it would be one thing if Frank were to come along and dispute Smith's work and to point out any errors—fraudulent or otherwise. But he doesn't. What he does is label Smith a "high priest of capitalism with an unshakable faith in his god's goodness and mercy." I don't claim to be an expert on Smith's work, but contrary to Frank's implication, I don't find any evidence that Smith makes any reference to god, to goodness, or to mercy, and he shouldn't—he's a social scientist.

Frank goes on to accuse Smith of guilt by association with Koch Industries. According to Frank, Koch Industries is the nation's second largest privately held company, based in Wichita, who's founder was a charter member of the John Birch Society, whose heirs have been involved with the Cato Institute, Libertarians, Republican candidates, zany free market policy recommendations, etc. "Koch money has also been instrumental in advancing the academic career of Vernon L. Smith. He was brought to George Mason University by a Koch Foundation grant . . . "

First, I would point out that Smith didn't arrive at George Mason until 2002—the year of his award. Smith expresses his indebtedness to many, including the Purdue faculty from 1955 to 1967 for their support of his first experiment.

Second, I do sympathize with Frank's emotional guilt by association reaction. For instance, every time I see an advertisement for a manufacturer of weapons of mass destruction (WMD) on the NewsHour with Jim Lehrer, I wonder whether Lehrer is in the pockets of what Eisenhower labeled our military industrial complex. But Lehrer's association with WMD manufacturers doesn't cause me to discount everything Lehrer has to say, nor should the fact that Koch likes what Smith says cause anyone to discount the validity of Smith's work.

One can of course ask whether it is fair to extend my criticism of Frank's section about Smith and Koch et. al. to a broader criticism of "Kansas" as a whole. I think this extension is entirely appropriate, in great part due to the fact that a core thesis advanced by Frank is that Kansans don't behave in their own self interest. I think it is no coincidence that Frank writes about Smith, because Smith has devoted his professional career to this very question—to what extent do people behave in their own best interests? I don't think that Frank does anything to advance that discussion.

The first paragraph of Smith's Prize Lecture seems instructive. Quoting David Hume, the lecture begins:

"When we leave our closet, and engage in the common affairs of life, (reason's) conclusions seem to vanish, like the phantoms of the night on the appearance of the morning; and 'tis difficult for us to retain even that conviction, which we had attained with difficulty . . . (Hume, 1739/, p 507)"