Capitalisn’t: Why a Lack of Diversity Is Hurting Economics

Luigi: As I said in the last podcast, this is, unfortunately, the last episode Kate Waldock is with us. This is very sad for me. But we’re going to try to make the best of it by touching on a topic that is very dear to her: the lack of diversity in the economics profession and what the effects are of this lack of diversity and what the ultimate causes are.

Kate: Yeah, I’m not very good at handling goodbyes and/or my emotions. So, that’s all I’m going to say about that, or else I’m going to start crying. But I think it’s worth noting that this is a topic that was brought up a few months ago, a couple of months ago, shortly after George Floyd’s death. And I’ve got to give some props to Luigi, who said this is a really, really important topic. And, yes, it’s important for us to talk about it now, and we talked about policing and diversity issues a couple of months ago.

But he wanted to keep the conversation going. Luigi was like, “We should wait until a little bit of this has died down and then do this episode later on, so that we sustain attention to this important topic.” So, I thought that was a good idea, Luigi, and thanks for suggesting that.

Luigi: In an episode about diversity, we decided to listen to many diverse voices. We’re going to ask similar questions to several people that belong to the profession and are underrepresented minorities.

Kate: For the last time, this is Kate Waldock.

Luigi: Now, this is emotional.

Kate: Oh.

Luigi: And, from the University of Chicago, this is Luigi Zingales.

Kate: You’re listening to Capitalisn’t, a podcast about what’s working in capitalism today.

Luigi: And, most importantly, what isn’t.

Kate: Most economists agree that the field of economics is not very diverse. A Brookings study of over 4,000 professors across various disciplines at top universities was done a few years ago. And what they found was that even though the proportion of Americans that were Black at the time of the study was 12 percent, they only made up 3 percent of econ professors. Even though the proportion of Latin Americans in the population was 16 percent, they only made up 5 percent of economics professors.

And even though women make up about half of the population, they only accounted for about 20 percent of economics professors. Also, there isn’t much evidence that these numbers have been improving significantly over time.

Andres Liberman: Absolutely. Finance, in particular, which is my area of expertise, is not a very diverse profession.

Kate: That’s Andres Liberman, chief data officer at Burn to Give. Until recently, he was a professor at NYU’s Stern School of Business.

Andres Liberman: And particularly within the senior ranks, it’s even more evident. And I think science boils down, in my opinion, to challenging theories and current ways of thinking. Although I’m absolutely convinced that our points of view should not impact our results, they definitely change the type of ideas and the perspectives we bring to the table. So, ultimately, the research we bring to the table really depends on who you are and where you come from. And this is particularly so in social sciences, where you’re looking at humans, and so, your history, your interaction with human beings, affects the way you think about human problems. Plus, the next big idea can come from anywhere. Academics should be open and welcoming to this “anywhere.”

Luigi: Andres explained very clearly that there are some costs to the profession of not having sufficiently diverse ideas, sufficient circulation of ideas. In my view, even more important than that, is the economics profession closed to new people and new ideas? And a lack of diversity might be a signal or might be a sign of a profession that is not actually very welcoming and a profession that is very clubbish.

Peter Henry: The same set of people look at the same set of problems for a couple hundred of years, there’s only so much innovation that’s going to happen. You bring in a new set of people with the same set of tools, they’re going to look at different things, and the profession’s going to get more interesting.

Kate: That was Peter Henry, the William R. Berkley professor of economics and finance, and former dean of NYU’s Stern School of Business, who was dean when I was there as a PhD student. And he says that the lack of minority representation shrinks the marketplace of ideas, and we as economists, we’re all about markets, right? We need competition of ideas, because we talk about competition all the time on this podcast. This goes beyond just American minorities. You can also think internationally, something that Dean Henry is familiar with as a first-generation immigrant from Jamaica.

Peter Henry: Whether you’re a Black person from the Caribbean or a Black person from Nigeria, your interaction with the world economic system, the US economic system, is different than a white American’s or a white European’s. The value of that is, there are a bunch of different questions that you ask than a person who comes from that European experience. I’ll give you a tangible example of that.

I remember reading the colonial origins literature. The bottom line is, it’s good to be colonized by the rich. Here I am from Jamaica. I know of a little country called Barbados. I say to myself, we were both British colonies, basically the same people brought to the Caribbean to do the same thing, but we had very different economic trajectories in the post-independence period. Why is it? It’s nothing to do with our British heritage. There were different policy choices that were made in the context of the same institutional environment. But that question that I brought to development economics, I don’t think that question gets asked necessarily by a white American.

Luigi: The diversity around foreign students and professors in the profession points to another huge issue in economics, which is the fact that the profession is very US-centric. And very US-centric also in the kind of problems that they are interested in and that they analyze.

Andres Liberman: Let me give you a particular example. I’ve always been open to working with data from a lot of different countries, not only from the US, and in many cases, I’ve found while presenting, while submitting to journals, while discussing with other people, I’ve been met with questions of whether the results generalize again “to the US.” So, a general result is a result that generalizes to the US economy.

So, really, the starting point of any analysis many times has been, “Do I learn anything about the US economy from your results?” And so, the value of the contribution and therefore the probability of getting in a journal and therefore the probability of moving up in the ranks has depended on this US-centrism. Greater diversity brings these new ideas and these new challenges that I think are incredibly important to advance science and to advance knowledge.

I think this is hard to do, particularly in a world like academia, where accepted opinions are so slow-moving. Because academics are used to thinking slowly, they are used to using their entire arsenal of reason and skepticism to defend established knowledge, to attack new ideas and fresh ideas. And, rightly so, we are very critical, and that helps separate the good from the bad ideas. But this leads to the unfortunate consequence that you’re going to reject novelty, and many times people who are diverse are going to come to the table with novel and fresh ideas.

Kate: What do you think explains this obsession with the United States? Is it just because the schools where both of us were trained and have worked are in the United States? Or is there something else going on?

Andres Liberman: No, I think that’s fundamental. The element of the science of economics really is US-centric. If you look at the most important contributors in the last century, really, the contributions have mainly come from the US. There are notable exceptions, of course. But the social science of economics and finance really has been developed with a view toward explaining phenomena that we have observed in the US, primarily. This is the way we were trained. This is the way most people are trained today. It has helped us learn a ton about the world when doing so, but there are some phenomena that really escape this set of empirical facts.

People sometimes behave differently in other places, and I think that is super interesting as well. We shouldn’t necessarily judge the generality of those facts based on whether they apply to US individuals or not.

Rohan Williamson: If you think about cars—

Luigi: That’s Rohan Williamson, former dean of McDonough Business School at Georgetown University and a former car engineer. I love his car metaphor.

Rohan Williamson: Think of cars, if you think of Italian cars, German cars, American cars, and Japanese cars, they’re very different. If you’re [a car guy], and I’d say I’m a car guy, they’re very different in how you think of what’s a nice car. If you ask anyone from those groups, what do you look for, what would be your ideal car, I guarantee you’d get four different answers. Because they approach it differently, and the value system is a little bit different. This perspective and a variant perspective is really important.

Lisa Cook: Because lived experiences are important.

Kate: That was Lisa Cook, professor of economics and international relations at Michigan State University.

Lisa Cook: And I would echo the words of Janet Yellen when she said that it was the lack of lived experience that led to the groupthink that led to the financial crisis.

Kate: We didn’t just want to talk to tenured or senior-ranking professors, though. We also wanted to talk to people who are still in the process of becoming economists. One of our guests is Anna Gifty Opoku-Agyeman, cofounder of the Sadie Collective, an organization geared toward helping Black women enter the fields of economics and finance.

Anna Gifty Opoku-Agyeman: I think that question can be answered through economics, in a sense. If there is a bunch of ideas in a room, then at some point, those ideas are going to compete against each other, and the best idea will rise to the top. When we think about diversity and inclusion in economics, it’s really about making sure that we get the best economic idea for whatever topic. And a really good example of this not happening is the 2008 financial crisis.

Dr. William Spriggs has been quoted as saying that had Federal Reserve economists been paying attention to the analysis and the commentary of Black and brown economists, they would have noticed right away that something is coming. These sorts of early signs were all happening in Black and brown communities, way before they were happening in the larger national population. So, our entire economy depends on economic policies being a reflection of the economy that is serving everyone.

If you are not including everyone in terms of the economic perspectives being analyzed and being used as recommendations for policymakers, everyone suffers. Regardless of your race, ethnicity, gender, sexuality, whatever. All of us suffer from not being able to contribute to the larger economic discourse.

Luis López: If you increase diversity in the economics profession, you will increase the type of research that we’ll see out there.

Kate: And, finally, that’s Luis López, an assistant professor at UIC’s business school, and he says that the lack of diversity in terms of recruitment filters all the way up to the top, and that can be dangerous.

Luis López: Recently, there was this article published in The Wall Street Journal that talks about the challenges of working on topics such as race and discrimination and getting that research published in the top econ journals. It pretty much makes the criticism that even though editors may welcome that type of research and sometimes even publish that type of research, it is very difficult to publish it, because the bar is particularly high. One reason that the article points out is that the amount of referees who would review this research and who may be sympathetic toward that type of topic could be somewhat slim.

Kate: And López actually had a personal experience with this.

Luis Lopez: With my thesis advisor, Brent Ambrose, and a colleague, Jim Conklin of the University of Georgia, we recently published a paper at The Review of Financial Studies on mortgage-pricing discrimination. We focus on the credit fees that borrowers ultimately have to pay to obtain credit. What we ultimately end up finding is that minority borrowers end up paying more in broker fees than comparable white borrowers when the loan is originated by a white broker. If the courts would see these price differences, it is possible that they could even consider them illegal.

We had a hard time getting it published. It took us about two and a half years since our initial submission. We started—

Kate: That’s really surprising to me. Because it seems like an important paper.

Luis Lopez: Yes. We thought so, too.

Kate: We’ve heard a lot of different opinions, different viewpoints, and I think one of the main themes that we’re seeing emerge is that diversity is important because you need different opinions and different viewpoints. You need different voices to ask a diversity of questions, to answer questions competitively, so that we challenge what we think are established assumptions. And that leads to new ideas, new innovation, and a better understanding of the way that humanity works, because that’s essentially what we study as economists.

There’s also other reasons that diversity is important. One being that diversity itself is an issue that needs to be studied. Sometimes you just have a better view of that or you’re more willing to push that agenda if you yourself come from a different background.

Luigi: But, if you look at the Supreme Court of the United States, today it probably is one of the most diverse Supreme Courts. On the other hand, they all come from Yale and Harvard, and they all, except, I think, Clarence Thomas, come from the East Coast. So, how do you measure diversity? If they all come from the same place in terms of cultural formation as a scholar, isn’t that lack of diversity? If they come from the same part of the country, isn’t that some lack of diversity?

Kate: Yeah, absolutely. Socioeconomic diversity is just as important as gender diversity and racial diversity. A lot of this really goes . . . It boils down to where you’re from and what sort of education you received at an early level.

There’s another point that I think is controversial and doesn’t really come up as much. It’s not cited as one of the main reasons that diversity is important. People talk about different viewpoints, asking different questions, challenging questions from different perspectives. But they don’t often talk about methodology. I think that this is something that we’ve discussed on this podcast before.

Economics is a little bit narrow, because the methodologies that are accepted now only allow us to answer a narrow set of questions—questions that don’t necessarily represent everything that’s going on in the economy. I think a lot of people don’t fully understand what that means. For example, I get, or at least I got when I was a business-school professor, this question of, “Oh, do you spend all your time writing case studies? Here’s an interesting fact. Maybe you should write a research paper about it.”

What I don’t think regular people, noneconomists, understand is that we can’t do that kind of research. If I had written a case study as a junior professor, I probably would have gotten fired. I was doing enough crazy stuff already. Writing case studies is highly discouraged. And if I ask a question just about how things are, that’s considered overly descriptive and not a type of research that you’re supposed to do. So, I think that there needs to be a diversity of methodologies as well. Part of the reason I’m switching into law is because I think that I’ll have much more freedom to answer a broader set of questions with a different set of tools in law that I don’t have in finance.

Luigi: But I would like to emphasize something that Lisa Cook said about the relation between lack of diversity and what sociologists call groupthink, because I think that’s very important. Groupthink is a phenomenon where very cohesive groups tend to all fall for the most extreme position, and they reinforce each other into that extreme position, missing what is obvious. I think that one of the advantages of having a very heterogeneous and diverse group of people is that it’s not that easy to form these cohesive groups that think alike. And there is more room for an actual debate on ideas, rather than, “This is my idea, and this is right, and everybody who does not share this idea with me is not even a legitimate economist.” Very often we hear this to marginalize people with ideas that don’t fit the traditional view.

To me, it’s very important that everybody feels accepted to be different, physically but also intellectually. And I think that in a place where you don’t accept physical diversity, you also don’t accept intellectual diversity. In a place where you’re not used to physical diversity, you’re not open to intellectual diversity. And, to me, that’s one of the biggest costs.

So, now that we understand what we’re missing, we want to explore the various reasons why this lack of diversity exists. And we started to put this question to Anna Gifty.

Anna Gifty Opoku-Agyeman: First and foremost, a lot of groups that are considered diverse don’t find out about economics at all. What ends up happening is somebody will find out about economics much later in their career, such as myself. And they’ll have to do a lot of sort of legwork to catch up to be considered “competitive.” I put it in quotes, by the way, for people who are listening, that’s why, “competitive” for graduate school.

For example, I had a situation with someone recently who was told to do a bunch of different things with regards to catching up. Got to take math classes. Got to do a predoc, yada, yada, yada. And it’s very overwhelming when you’re hearing that as somebody who thought you were doing the right things the entire time, and then someone tells you, “Actually, there’s 50 other things that you need to do to catch up.”

Kate: On a personal level, I can identify with a lot of this. Even though I came from an extremely privileged high school and town where I grew up, I still had no idea about how to become an economist, or really what economics was, when I first started studying it as an undergrad. To be honest, I just wanted to become an investment banker or work in sales and trading and make a lot of money when I grew up. And it seemed like studying economics was the best way to do that.

At some point, I tried it. I dipped my feet in the investment-banking world and realized that I hated it. So, I asked my undergraduate advisor, “What do I do? Is there any way that I can go to grad school?” He said, “Why don’t you think about a PhD?” I was like, “There’s no way I can afford six years of education.” He told me that I didn’t have to pay for it. In fact, most PhD students get a stipend, and I just had no idea about this. I had no idea that you even needed a PhD to become a professor. And that’s in part because I don’t have any PhD economists in my direct family.

And so, when I embarked on this journey to become an economist, I was a little bit behind, according to him, in terms of my courseload. I hadn’t taken all the rigorous math that you needed, all the advanced econ courses that you needed to get into the top programs, and so I crammed them into basically one year, my senior year of school. Fortunately, I had an advisor, Jeff Myron, who was incredibly kind and supportive. And whenever I felt discouraged by the math or overwhelmed by the hard courses I was taking, he was simply like, “Yeah, you’re fine. You can do it. Stop worrying.” And I imagine that I wouldn’t have been able to stick it out if I had had a different experience, if I had had an advisor who wasn’t so supportive.

Anna Gifty Opoku-Agyeman: Well, I think first and foremost, it’s the lack of knowledge of what to do initially to prepare for a career in economics. I think that also comes from the fact that people don’t actually know what economists do. A lot of people assume economists are confined to the finance and banking space. I would say actually economists exist more so outside of that space than within that space. If you look at financial analysts and that sort of thing, they’re doing economics and econometrics work, but they’re not considered economists.

So, in that sense, I think one thing that economists need to do better is just advertise economics. For me, it really boils down to a conversation with a colleague that was talking about how he was studying community college remediation and using math to do it. I was like, “Dude, I like studying education. How are you using math to study education?” That was really what kind of locked me into it.

And another concept I really liked was human capital, and that was introduced to me through my first economics course ever. My professor spent a substantial amount of time telling us how human capital was tied to African economic development. I was just like, “This makes so much sense. Why didn’t anybody explain this to me?” That’s a big chunk of why people aren’t interested in economics. And I will say, let me just say for the record, it’s not because Black and brown people can’t do math. I think a lot of people will say, “Well, it’s just too rigorous. I’m not sure if they can handle it.” They can. In fact, Black people actually graduate at higher tiers in math degrees at every level as compared to economics.

So, it’s not about a lack of mathematical or quantitative training. If we’re seeing that the trends of diversity and inclusion are much better than other STEM disciplines, it’s really about what are economists doing to actually make this field accessible?

Kate: I want to go back to an earlier point that you said, which is that this has nothing to do with Black and brown people not being able to do math. They can do math, it’s been established. Have you ever gotten that sort of comment or that sort of suggestion? “Oh, you know the math is pretty serious.”

Anna Gifty Opoku-Agyeman: Yes. And I will go ahead and shout out Dr. Dania Francis and her coauthors, who have actually empirically shown this. In high school I was told that I couldn’t major in math. I was told that it would be too hard for me. And I did well in that person’s class, but they seemed very convinced that because of the number of questions I asked—and I ask a lot of questions—I wouldn’t be able to handle the rigor. Literally, that conversation shifted me from even considering math as a major until much later in my collegiate career, and I actually remembered that moment when I decided to change my major.

And so, I was told that as a high schooler, and Dr. Dania Francis and her coauthors show that there’s empirical evidence that suggests that guidance counselors underrecommend Black girls for AP calculus courses. Courses that would suggest that people can actually do math and it could be a potential signal, depending on what kind of career these young women want. So, that actually happens, and I’m living proof of that.

Lisa Cook: The notion that Black people are defective in some way is pervasive in economics.

Luigi: That’s Lisa Cook again.

Lisa Cook: What do we know about the SAT? What is the variable that is most consistent with SAT scores? All you’re telling me is that your parents are wealthy. Parents’ income. Are you getting the smartest kids, or are you getting . . . Let’s say, for admissions for college, are you getting the smartest kids, or are you getting the wealthiest kids? I’ve met a lot of well-educated people in my lifetime. I haven’t met as many smart people. Where does this come from, especially if we think talent is distributed uniformly across populations?

When I was interviewing people for admissions at Harvard when I was at the Kennedy School, I would ask some questions that my colleagues didn’t even think of asking. We sometimes think in a very elitist way, and I think that’s the profession.

Kate: Cook also says economics keeps running into these entrenched issues of diversity because the profession really has a systemic problem with the way that it views diversity.

Lisa Cook: Economics spends its time trying to prove whether discrimination exists. Other social sciences try to weigh in on how to fix it. This distinction allows this to continue. We shouldn’t be talking about the low level of patenting by African Americans 100 years after its peak. It’s astonishing. There’s something systemic here. We have such a narrow view of what race does in our estimates. The role it plays in our estimates. We believe everything that . . . all the work that that variable is doing. And we’re not admitting what’s behind it. What’s behind that variable?

Behind that variable is systemic racism, and we’re not admitting that. We’re not saying that. And we’re not suggesting how to overcome that. So, I’m just saying that I think we have let the science become religion. And indoctrinated us to think about race in a certain way. I don’t think it’s a healthy way. It’s a way that keeps people from being invited in.

Luigi: Also, Lisa Cook claims that economics still has not worked out how to address its history of racism.

Lisa Cook: You probably know that we changed the name of the Ely Lecture to the AEA Distinguished Lecture. Why did we do that? There are some people who represent ideas that are just so offensive, they would be an impediment to people engaging in economics. And this is one of them. This is a father of the AEA, right? And he was a eugenicist, a racist, a misogynist. And that’s not welcoming to people in the profession.

Luigi: The American Economic Association commissioned a survey on the state of relationship in the economics profession vis-à-vis women and minorities. The report that has been released, at least in a condensed form, is not pretty, because it suggests harassment of women is very diffuse, and even treatment of minorities does not seem to be, let’s put it in a mild way, the best possible.

Lisa Cook: They leave certain departments. They don’t go to certain seminars. They avoid certain gatherings of economists. This is what a number of the Black women were reporting. I guess I’m one of five Black women who is in an economics department as a full professor. Well, look at those data. Look at all we have to do to avoid discrimination, whether it’s due to gender or sex. We don’t just report being discriminated against, we count. We counted the number of things that we had to do.

So, I’m saying we’ve got to address the fact that these things happen to Black people and to Black women. I can’t tell you how many times I walked into NBER meetings, and people will ask me if I’m a sociologist. Just because I’m Black. So, it’s not just a myth. We can keep asking why is it that African Americans don’t show up here. Well, you’re taxing them. You’re taxing them a lot to be here. And I’m hoping that we can figure out a way, now that we can acknowledge the tax, how do we diminish that tax? And I’m hoping that we’re doing something in the AEA, now that I’ve been elected to the executive committee and with all of the initiatives that are happening, I’m hoping that we’re finding a way to minimize that tax.

Kate: It’s interesting to compare economics to other STEM fields. And who better to talk to about this than Rohan Williamson, who was trained as an engineer? I asked him: STEM and economics are both quantitatively heavy. So, if this is an issue of quantitative skill, then why is it the case that economics seems to be lagging behind STEM on the diversity front?

Rohan Williamson: No, it’s different, because I think engineering has a longer history of also trying to deal with it. I think one of the advantages, you think about being an engineer, when you get a bachelor’s degree, you’re an engineer. And you can work and learn at the firm that you’re working at, and it’s not necessary, especially if you’re going to be in a field like you’re going to design cars and planes, you could do it without a PhD. So, it’s less work and less schooling, for one. And I think it’s one of those disciplines that’s there, at the lowest levels, to say, the main ingredient is good quantitative skills.

And the other advantage to engineering is there are fairly developed engineering nurturing programs in the US for women and minorities. That’s not there in economics. And this is something that came up in economics about 50 years ago through the AEA, and not a lot has been done, and the percentage is about the same as it was 50 years ago. So, economics is not doing, I would say, as well as engineering. I think you’re right on that, Kate.

Kate: So, far we’ve focused on the lack of ethnic diversity in economics. Professors at top universities in economics aren’t really representative of the US population. But what about the international population of students and professors? What about international research? We took these questions back to Andres Liberman.

Andres Liberman: Foreign students from Latin America, the big issues typically are the language, the funding, and a general lack of knowledge of the process. And these are big issues. Typically, the way they have been solved in the past is through a very idiosyncratic process, which is, you find a local professor, say, in Chile, who is motivated enough and who has connections, who identifies promising students and helps them get funding via the government, via grants, helps you with the applications, has connections for letters, etc. It very much depends on where you are, who you work with, whether you’re going to do it or not.

In Chile, for example, Chile has this long tradition of academic economists, and so, they go back to Chile, and they’re forming a new generation of economists, and they have connections, so they’ve been able to send a steady stream of Chilean economists to get formed. Some of them go back to Chile and continue this process. So, maybe that’s one way to break this cycle of underrepresentation.

Luigi: And this is something that López experienced firsthand as a first-generation immigrant.

Luis López: One obstacle was just a general understanding of how the US education system really works. My parents went to school in Mexico, so when they came here to the United States, they of course did not go to school here, and they weren’t able to provide me with a lot of the soft information to help guide me through high school or through college. And I always felt that I didn’t discover the right path or I didn’t know about the right path until after the fact.

So, for example, I did not know what the value of honors classes was until I was in my senior year. I didn’t know that the SAT exams were something that you needed to study for. I thought it was just something that everybody took at some stage and was placed. For my first couple of years, I was following the path that my sister took. I saw that she went to college. I saw that she went to graduate school. So, I said, well, if she’s doing that, I think I need to do that, too. I need to go to college. I need to go to graduate school. Of course, we chose different fields, but the whole idea of just going to college really relied on just looking at what my older sister was doing.

For the most part, that strategy did work out. Other times it did not. If it wasn’t for me taking AP tests and AP calculus, I would have placed in remedial math, and that would have set me back a few semesters in college and been detrimental to my career. So, in some sense, I sometimes lucked out.

Kate: For you personally, Luigi, you raised your kids here in the US. Did you know what classes to tell them to take? Did you know how to tutor them on the SATs and how they should act in college and stuff like that?

Luigi: Actually, not really, in a sense. For example, I did not know how to play the game early on. I learned later that to maximize your kids’ chances of getting into a good college, you need to have them play fancy sports like lacrosse. Honestly, I didn’t even know lacrosse existed as a sport, let alone have my kids play in order to maximize their chances to get into school. So, yes, there is this institutional knowledge. But, in the grand scheme of things, I was lucky, because being an academic, I could at least go and ask other people. Clearly, if you come from an underrepresented minority, I think the lack of institutional knowledge is a huge barrier to entry.

Kate: So, what can we do to fix these issues?

Andres Liberman: What a difficult question. This is a difficult question, Kate. I do believe in temporary affirmative action, at least for a period of time. I do think we need to accept more women and more minority students in our PhD programs. I think this is important. I’m also in favor of extending evaluation periods during maternity, extending your tenure clock. I also think editors, and, in general, people who are influential, have a role to be more inclusive to different ideas, different types of existing theories, different data sets. And I think, naturally, this is going to lead to more voices and more diverse voices showing up.

Luigi: And what does Anna Gifty think?

Anna Gifty Opoku-Agyeman: It’s a good question. First and foremost, I don’t claim to be an expert on this. I think a lot of times, people are like, “Oh, you founded the Sadie Collective, so you must know everything.” No, there’s people that have been doing this for a long time. The National Economic Association, for example, has existed for 50 years. And there is a committee on the status of minorities in economics, specifically within the AEA, that has also focused on this for quite some time. So, what I would say is—

Kate: But if it’s been around for so long, then why haven’t they fixed it yet?

Anna Gifty Opoku-Agyeman: That’s not, I’m not going to say nothing about that. But what I’ll say is they’ve done their best, and I think that they pushed the envelope to a certain degree, and I think now my generation is taking on that mantle and moving it to the next level. And so, what I will say is, one thing I did recently, a couple of months ago, pretty much when the protests were picking up, was I mentioned in a Twitter thread that a lot of economists don’t have Black colleagues. Your papers are focusing on race and discrimination and bias, yet you have never coauthored with a Black economist or a Black scholar in the economics or related field spectrum. That’s a problem.

You cannot be talking about these issues, talking about how much you care about diversity and inclusion, and not actually have Black colleagues that you work with. The first thing is you need to look for some Black colleagues to work with on any forthcoming paper that’s talking about topics that are in their realm. And it doesn’t have to be about race and discrimination. You have Black macroeconomists who are looking at economic trends in different countries. You have those who are focusing on development economics. We’re talking about just having folks that can give you a much richer perspective because they are closer to the data. They’re closer to the experience that you are evaluating.

So, I think that’s the first sort of tangible thing that people can do. The next thing in the same realm is citing more Black economists. There’s an entire journal dedicated to the work of Black economists, The Review of Black Political Economy, that is produced by the National Economic Association. That journal is rich with perspectives from Black economists and analyses that I would say rival many of the top five journals. These people are trained in the same way. Even if it’s not in the same exact way, they’re trained in the same methodology or trained to think about the same methodology in different ways. That’s invaluable if we’re talking about bringing out the best ideas for some of the crushing problems that we are addressing today.

I think on the other hand of that is thinking about the pipeline in the faculty. If every econ faculty committed to mentoring one Black woman, that would dramatically increase the number of Black women who will probably enter the profession. What this all boils down to is commitment. Are people committed to seeing a more diverse and inclusive economics profession? That’s going to require some work on your part. It’s not enough to “mentor” and push up people who are already on their way to that place. It’s about getting those who are on the verge, or people who haven’t even considered it, to actually consider economics as a profession.

Kate: Another person trying to tackle this issue from the ground up is Dean Henry.

Peter Henry: I started something called the PhD Excellence Initiative in 2013 to try to increase . . . It’s funded by the Sloan Foundation. The goal of the PhD Excellence Initiative is to increase representation in economics of African Americans and underrepresented minorities. So, the assumption on which I work when I run the PhD Excellence Initiative is that race and talent are not correlated. But opportunity and talent are. OK?

Now, what difference does that assumption make? Well, it makes a big difference if a kid walks into your office who is from a Pell Grant family and has been an undergraduate at NYU and has a good but not great grade point average, because we’re very hierarchical in economics. Do you assume that the kid just isn’t quite good enough to cut it in economics? You know, actually, what’s true about the kid sitting in front of me, if he’s able to get an almost 3.5 at NYU, coming from a Pell Grant family, he must have a huge unobserved fixed effect. Use one of our terms, right?

So, if you make the assumption that race and talent are not correlated, but race and opportunity are, then your mind is just open to seeing those unobserved fixed effects. Think about the admissions process of PhD programs. There’s false negatives and false positives. So, think about your typical application pool. Let’s say 3,000 people will apply to the University of Chicago PhD program in economics. There are going to be a lot of white guys in that application pool. A bunch of guys who could have done the program are going to get rejected. So, there’s a bunch of, call them false negatives. Or maybe even cases where you know they could do the program but you’ve just got to make a choice.

But the cost to society, to the profession, of those false negatives is really small. But if we apply that same filter to all students, let’s say you have five applicants who are Black and they get thrown out with the false negatives, it’s a huge cost. Because if you look at it, I think in 2017 there were, I think, 3 percent of the PhDs awarded in 2017 were to Black [people]. So, in a pool in which every year there’s only 15 Black people getting a PhD in economics, if you’re throwing out one or two false negatives at every admission pool, there’s a huge delta on the field.

When we make PhD admission decisions, we also make a bunch of, there are a bunch of false positives as well. We admit students we shouldn’t admit. And that’s not particularly costly to programs as long as you don’t get too many of those.

Luigi: Actually—

Peter Henry: If you advise those students, yes, it could be very costly. Fair enough. But we know that we admit false positives all the time, but it’s not such a big deal if we admit false positives for white students. But we make a huge deal, we’re living in fear we’re going to admit one Black student that maybe shouldn’t have gotten admitted. Well, we know we’ve had scores and scores of white students that shouldn’t have gotten admitted, so what’s the . . . We have a cost-benefit analysis-off because I think we’re not thinking about the data in the way we should.

Luigi: And, finally, Lisa Cook runs the AEA Summer Program, which tries to actually mentor people in order to give the opportunities that other people naturally receive through their background, family connections, but offer this opportunity to minority students.

Lisa Cook: In every single year of the AEA Summer Program, I learn about some obscure university, some obscure community college I’ve never heard of, and these kids are extraordinary. They take these exams, these coding exams, say, that are offered by J-PAL and other predoc programs, and they perform just like everybody else. But that’s because they have had the exposure. That’s not . . . and it doesn’t take much extra work. This may seem like I am on the defensive. I’m not. I’m quite hopeful, because I think people learn, they confront and they change. I’m hoping that the economics profession will also be that way.

Kate: So, Luigi, do you think that we have covered all the ways that we can fix this problem?

Luigi: Yeah, let me try to summarize, because I think that there are basically three possible causes, and I’m not saying they’re mutually exclusive. Number one is lack of information of training early on due to economic disadvantage. The second could be that the profession puts some criteria on admissions that are not gender-neutral or not ethnicity- or race-neutral. And the third one, which is actually the one that worries me the most, because it’s the one that’s probably most responsible, if that’s true, and also the one that is harder to fix, is that the profession somehow is hostile in its nature to diversity and to people that don’t conform. That there is a very strong consensus on what is the right way to do economics and implicitly, also, who are the right people doing economics. Of course, all three play some role, but Kate, what do you think is the most important? If you were to address one first, where would you start?

Kate: My answer is always education, especially early-stage education. I think this is particularly true for this issue. I don’t know for sure what this looks like, but this is kind of like the question you raised earlier, Luigi. How many children of farmers are out there? How many children from poorer backgrounds are out there? If we remove all international students and professors, and if we remove people who don’t have any academics in their family, I think that the pool of American professors is also, maybe not underrepresented, but it’s people who got lucky at some point in their careers. I think that generally we just need to bulk up earlier-stage education.

Luigi: But no, let’s keep going on the different . . . I think on the education, I completely agree. But you are probably better positioned than I am in saying that. Do you think that we have kind of an intolerance problem toward diversity in economics?

Kate: Yes. If anyone feels seriously offended or discriminated against, it’s problematic, and especially when you start hearing the same story over and over, it becomes a systemic problem. Now, some of the guests that we spoke to didn’t think it was a huge problem, and other people have had worse experiences. But it seems like there’s enough evidence that there is hostility and harassment toward people in the profession. I certainly have experienced enough to the point that it would make your skin crawl if I relayed all my stories to you about the creepiness that I’ve been on the receiving end of.

But I don’t want to dwell on the negative. I just want to make the point that there is a harassment problem, and there seems to be not a whole lot of attention to fixing it. We’ve talked about it at various points in the profession. There have been some high-profile cases, some of which we’ve discussed here on this podcast. But I don’t think any of my advisors, when I was in grad school, had to take sexual-harassment training. I don’t think any of them took sensitivity training. It’s surprising, because if you worked anywhere else, if you work in the industry, if you work in big tech, you have to do these things every year.

And so, why is it that professors, people who are constantly interacting with students who are in a weaker position to them, who are beholden to them, they don’t have to take that kind of training? It’s crazy to me.

Luigi: I think that economists feel more justified of their privileges. Our theories tend to say and derive that the people emerging, they emerge because they deserve it. Yes, we have some friction, but by and large, our models tend to, if you are a higher beta or theta, whatever Greek letter represents talent, ability, etc., you prevail and you make more money, and that premium is compensating for that talent, and is, in a sense, deserved, and so on and so forth.

There is not a lot of discussion in economics about people that get a rent not deserving it and stuff like that. Our entire sort of structure of economics tends to justify the rent of the people who are at the top of the economic ladder, and in particular, the people at the top of the economics profession. So, that makes, I think, the field less open to listen to challenges or to listen to questions about the entire structure.

In its purest form or in its best version, the capitalist system is not only competitive but also allows and favors diversity, because as Gary Becker said, when there is competition, it’s more costly to have biased preferences for one group versus another. So, competition is one force that can solve these problems. But, I’m sorry to say, in many other fields, including academia, competition takes so long to work that I think we need to find some other mechanism. This is where the profession has been, in my view, a bit slow, because we rely on saying competition will work its magic and we’re not realizing that maybe that will be after we’re dead, and we want to have some change in our lifetime.

Kate: Well, it seems to me that’s what this episode has been about, is having more competition. Because if you have different types of ideas and people approaching questions from different perspectives, then you’ll have more competition. And you’ll have more people pushing back against what’s considered established knowledge. And so that’s . . . It’s one and the same. The diversity is a form of competition.

Luigi: But two aspects. One is that diversity leads to more competition and better outcomes. But also, if you don’t have enough competition, you don’t have enough diversity. So, it’s both cause and effect. Fortunately, we don’t have to identify the two apart. Otherwise, we cannot publish the paper.

Kate: That’s a finance joke.

Luigi: But, of course, the two are intrinsically connected. To me, if I see a lack of diversity, it is an indication of some form of bias to entry, some form of lack of competition. As Lisa Cook said, the talent is equally distributed. And so, if you see a gigantic difference and a persistent difference, there must be some issue, and the question is, which one and how to fix it.

Before we let Kate go, I would like to first of all thank her for these fantastic two and a half years. Saying that I could not have done it without you is not just an expression, I think it’s the truth. You actually knew so much more about how to even think about podcasting than I could have possibly imagined. You pushed me to analyze a lot of topics that I naturally would not have analyzed. And I’m glad I did.

I learned a lot from you. When you talk about diversity, I think that if you have not experienced it on the job, you don’t see the value. I was very fortunate, because I did experience it in my academic life, and I did experience it with Kate in my podcasting life, and I think, may I say, I am a better man as a result.

Kate: That’s probably one of the best compliments I’ve ever been paid, so, thank you, Luigi. I’m sad. Now I’m crying. Not crying. Not crying. I want to thank our listeners who have been awesome. Probably half of the downloads we’ve gotten have been my dad, so thanks, dad. But I think at a certain point other people started listening to the show, and I’ve gotten a lot of emails. I even sat next to a listener on a Southwest plane ride once, so thanks for listening and for the feedback and for reaching out to me and for talking to me.

Thanks to our awesome producer, Matt, who takes this gobbledygook that we produce over the course of hours and somehow distills it into something that sounds reasonable in half an hour. I don’t think that anyone can do that better than he can.

And thanks, Luigi. It’s been a good two and a half years. I would say that I’ve learned a ton from you, but that was already true before I even met you, because I had already read all your papers in college. Already read your book and stuff.

But I think what has surprised me the most over these past couple of years is that, number one, you put your money where your mouth is, I think more than most economists. Maybe any economist I know. And by that, I mean that you’re always talking about how we need competition. We need open markets. And I don’t think anyone likes to argue and to think about different ideas and different perspectives and new topics more than you. So, that has been really cool to be able to experience.

And then, finally, I have given you crap on the show for being older than me, and occasionally I make fun of your TV and movie preferences or lack thereof. But, I swear to God, you have 10 times more energy than I have and are probably one of the youngest-seeming people I know. And that’s been an inspiration. So, I hope that you continue to bring that energy to this podcast and to the rest of your research, and that’s because it’s benefited the world so much. And there’s still a lot that we’re going to get from Luigi Zingales.

Luigi: I’m crying, too.

As to the future of the podcast, Capitalisn’t will do a very European thing. We’ll take a break during the month of August, but don’t be afraid. We’re going to be with you by releasing a special couple of episodes and some re-releases of our key features. And then, in September, we’re going to come back with a new cohost.