Planet Money - To all the econ papers I've loved before

Episode Date: January 27, 2023

A great economics paper does two things. It takes on a big question, and it finds a smart way to answer that question.But some papers go even further. The very best papers have the power to change lives.That was the case for three economists we spoke to: Nancy Qian, Belinda Archibong, and Kyle Greenberg.They all stumbled on important economics papers at crucial moments in their careers, and those papers gave them a new way to see the world. On today's show - how economics papers on the Pentecostal church in Ghana, the Vietnam war draft, and the price of butter in Sweden shaped the courses of three lives.This episode was produced by Sam Yellowhorse Kesler. It was edited by Keith Romer. Sierra Juarez checked the facts, and it was mastered by Natasha Branch with help from Gilly Moon. Jess Jiang is our acting executive producer.Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoneyLearn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. I want to tell you about the moment that I fell in love with economics. It was around 2008, 2009. I was in college. I didn't know what I was going to major in. But it was the middle of the financial crisis, so I thought, I'll take some econ classes. In one of these classes, the professor started talking about something kind of unexpected. She said that economists have been trying to understand why, in some parts of the world, men outnumber women.

They called this the missing women problem. The most famous example is China with its one-child policy. But the missing women problem shows up in India and Pakistan and Taiwan. And our professor had us read this really interesting paper that had just come out. It was by this young economist, Nancy Chan, who had this theory. She thought that the missing women problem was somehow connected to women's incomes. She realized that in China, picking tea leaves is mostly women's work. So to test her theory, she came up with this ingenious idea. She compared regions that grew tea with regions that didn't grow tea.

And she found that in tea-growing regions, when the price of tea goes up, all of a sudden girls were more likely to survive childhood, probably because their mothers were earning more money and had more say in what family resources were going to their daughters. This paper blew my mind. All of a sudden, I realized that economics is about way more than just supply and demand and the stock market. I was born in China during the one-child era. My sister was born here in the U.S. after we moved here.

This paper showed me that economists can take on really important questions. Questions about gender, about inequality, about justice, about me and my family. That's why I love economics and why I love reading economics papers. A great economics paper is like magic. It can completely change how you see the world and how we all fit into it. Hello and welcome to Planet Money. I'm Jeff Guo. And I'm Amanda Aronchik. Today on the show, a celebration of the economics paper. A great economics paper, according to me, does two things.

One, it answers a big question, a question that matters. And two, it finds a really smart, clever way to answer that question. And two, it finds a really smart, clever way to answer that question. So we are going to go deep with three economists about the great papers that they love. Papers that blew their minds. We're going to talk about the economics of church donations, the consequences of serving in the Vietnam War, and butter prices in Sweden. That's a big question too. America loves its eureka moments. Take one canonical invention, Thomas Edison, lightbulb, 1879.

But the world did not change the day that Edison's light bulb went on. What mattered for the rest of the world is not the invention of the light bulb, but the implementation. That slightly less heroic story of how an invention goes from one to one billion. An argument that the U.S. has lost sight of that story. That's in our most recent bonus episode, if you're a Planet Money Plus listener. And if you're not, you can sign up and support NPR in the process via Apple Podcasts or at plus.npr.org. The first economist we talked to was Belinda Archibong. She is a professor at Barnard College in New York. And one of Belinda's favorite papers, a paper that she is obsessed with,

speaks to something that she noticed as a kid growing up in Nigeria, a place where the church plays a huge role in many people's lives. I don't know if I could convey to like a U.S. audience how big the church is, even bigger than in America, in places like Ghana, places like Nigeria.

Belinda says, think about how evangelical churches are really influential in America, right? Take that and multiply it by like 10 in Africa, and you understand the scale I'm talking about. Belinda was raised in the Pentecostal church, and like a lot of Christian churches in Nigeria, they would preach something called the prosperity gospel, the idea that God will reward your faith with material wealth. And the more you give to the church, the more God will give back to you. Belinda remembers every week, like the whole congregation would all literally sing a song about church donations. We have this huge crowd of people. There is a raised platform. The pastor and the choir are on the platform. So the choir is singing. They have beautiful voices and they're all singing.

And so they lead the whole congregation in song. And so when it's time to give the offering, they would come on and they would sing, you know, if you give, it will come back to you. Like a hype song for like church donations. Exactly. Exactly. Oh, Pentecostal churches are very good at hype songs. So yes, indeed. And the hype songs bring in money. Of course, some people are critical of the churches for asking people to donate substantial percentages of their income. Belinda, she has heard all of these concerns. People who have very little money, why do they spend a lot of that little money that they

have in the church? She's wondered that herself. Her family went to church all the time. They gave money. They shelled out for prayer camps. If you just looked at the situation without thinking about any details in the context, you would say this is irrational behavior, to use the economic term, right? And maybe it looks that way from the outside. Even though people all over the world spend a lot of money on religion, there's not that much economic research on it. And that is why Belinda was so surprised a few years ago when she came across this economics paper with a kind of unusual title.

It's a paper called God Insures Those Who Pay. God Insures Those Who Pay. God Insures Those Who Pay. So Belinda first hears about this paper at a conference where she goes to a talk by one of the authors, Ama Panin. Now I remember her presenting this paper and my eyes just going wider and wider like, this is amazing. Like, oh my God, somebody is doing work on this. Like, this is brilliant. This paper oh, my God, somebody is doing work on this. Like, this is brilliant. This paper set out to figure out what motivated people, specifically in Ghana, to give all that money to the church. And the authors had a really interesting hypothesis, which is that the church serves as a kind of insurance policy.

I think as Americans, we sometimes take insurance for granted. But like insurance is a modern marvel. It's a way to control risk, to share that risk with a bunch of other people. So you getting sick or having your house burned down doesn't ruin your whole life. But in a lot of places like Ghana and Nigeria, there isn't that much formal insurance that you can buy or that the government will provide for you. So the idea is maybe the church is filling that gap in some way. If the state won't protect me, maybe God will protect me against, you know, illness, against sickness, against what we call in economics negative shocks in my life. That's a really interesting theory.

God as an insurance policy. But how do you test that theory, right? You can't just ask people, do you think of your church donations as like insurance premiums? Well, these economists came up with a really clever idea. They ran an experiment. Right.

So this is what they did. They got 800 churchgoers and randomly divided them into groups. And in one of those groups, they were given real insurance. The insurance was for funeral costs, which are quite expensive in Ghana. And the authors found that the people

who got free funeral insurance, they would spend less money, less money on God, on things like church donations and charities than the people who weren't given the insurance. So the paper says insurance premiums and church donations, they're maybe both ways of trying

to buy protection from risk. The fancy way to say this is that they are economic substitutes. It's a substitution away from giving to the church and towards formal insurance when you have this market available. So anyway, I love this paper. It's a brilliant paper. I think brilliantly done from beginning to end. Belinda loves this paper not just because it's clever and interesting, but because it shows how important context is to the way that we make choices. She says if you look at the world through the lens of economics, people will start to look really similar.

We're all just economic actors trying to make the best decisions we can. It's not that people are necessarily strange or weird or somehow culturally, you know, unknowable. People are acting in ways that are actually very rational, given their constraints and given their environment and given their context. And if you change that context, the kinds of choices we might make are going to change too. Belinda has experienced this personally. When she was 12, her family moved from Nigeria to the U.S. And in Nigeria, they had been middle class. Her mom was a lawyer. But when they moved here, her mom couldn't use her law degree anymore.

We were quite low income in the U.S., struggling financially. And 12-year-old me just was like, this makes no sense. Belinda and her family were still the same people. They hadn't changed. But all of a sudden, they were in a different place with totally different lives. It really drove home to me just the, you know, the strangeness of the way in which just arbitrary things about you, you know, that you don't control. Like you don't control where you're born, you know, what parents you're born to, your ethnicity or race, like these kind of things that you did not choose about you can affect significantly your outcome.

Belinda says her experiences have defined the way she thinks about economics. Now, as a professor, she studies how things outside of our control, like pollution, epidemics, the police, how those can channel our lives in one direction or another. Belinda says by understanding the context in which people are making choices, it gets easier and easier to tease out the economic logic behind those choices. People are people, and we're all very, very similar at a fundamental level, you know? And that's true whether you're a kid going to a prayer camp in Nigeria or a grown-up professor teaching economics at Barnard. While Belinda's favorite paper is about the way economics can show how fundamentally alike we all are,

our next great econ paper is about how our lives can diverge depending on things like chance, luck, fate. Lieutenant Colonel Kyle Greenberg is a professor at West Point, the U.S. Military Academy, and we should say his views do not represent those of West Point or the Department of Defense. Kyle's favorite economics paper is by economist Josh Angrist. He has this paper titled Lifetime Earnings and the Vietnam Era Draft Lottery. And what he's trying to do is he's trying to estimate the causal effects of conscription on U.S. veterans' earnings. Basically, the paper was trying to understand how does serving in the military

change how much money you make later in life? The paper came out in 1990, and it was one of the first papers to use this ingenious idea that has basically changed how people have done economics ever since. Kyle loves this paper because of what it shows

about how economists find answers in the world. So let's talk about that. You might think that if you want to understand the economic effect of military service, just compare veterans to non-veterans. But there's a problem with doing it that way. You know, someone who joins the army is different from someone who doesn't join the army for many different reasons. Maybe soldiers come from different economic backgrounds than non-soldiers, or maybe they're more patriotic or more athletic or whatever. To really make a fair comparison, you have to run an experiment on two similar groups of people. But imagine saying to a thousand people, hey, for an economics experiment, you have to join the army for three years. No, thank you.

But what Josh Angrist realized is that this experiment kind of already happened. During the Vietnam War, there was a draft. Every young man got a random draft number. And depending on that number, you were either in the group that got to stay home, or you were in the group that probably had to enlist. By creating those two randomly selected groups that you could compare against each other, the draft created what economists call a natural experiment. And in his paper, Josh Angrist showed that for white men, at least, serving during the Vietnam era caused them to earn less money later in life. It's one of these first papers to show that, you know, as economists, we can

use these natural experiments like the draft lottery to answer questions that have important policy implications. Natural experiments were this big new idea in economics at the time. This paper is one of the key papers that showed just how powerful they could be. Josh Angrist went on to win a Nobel Prize for this. In part, thanks to him, natural experiments are everywhere in economics these days. Learning about this stuff was just this light bulb moment for Kyle. Because another way to think about natural experiments is that they help us understand what could have been. There is a name for this, the counterfactual. The counterfactual is the what-if version of ourselves.

What if we had grown up in a different neighborhood? What if we'd gone to a different school? What if we hadn't taken that job? Do you ever think about, like, what your counterfactual life would have been if you hadn't done the whole West Point military thing? I don't know. It's a great question. Like basically all of us, Kyle's life had these huge turning points where things could have gone in a totally different direction. Turning point number one, he almost didn't go to West Point. He went there because his parents said we are only going to pay for in-state tuition. If you want to leave our home state of Michigan, then you are going to have to figure out how to pay for it,

which is how he ends up applying to West Point, because it's free. And I was like, yeah, I could see myself doing Army stuff. And his parents were like, yeah, they could see themselves not having to pay for his college. They did buy a hot tub, like, soon after I attended West Point. They claim it was not with my college money. But I don't know. But now being an economist, I'm sort of like, I'm sure there was some substitution of funds somewhere. The deal with West Point is that you have to serve in the army for eight years afterward.

But when Kyle decided to enroll, he never actually thought he was going to see combat. I remember my brother once being like, there's no wars anymore. This doesn't happen. This is like in 2000 or 1999. Which leads us to counterfactual turning point number two in Kyle's life. The year that Kyle arrived at West Point was 2001. Just a few weeks after his first semester started, 9-11 happened. And all of a sudden, the U.S. was fighting in wars again. 9-11 happened. And all of a sudden, the U.S. was fighting in wars again. So after graduation, Kyle ended up deploying to Iraq. He spent 15 months there as an intelligence officer leading a platoon.

Toward the end of his eight-year stint in the Army, Kyle's looking for a way to go to grad school. And this brings us to counterfactual turning point number three. One day, he just happens to talk to one of his mentors, who mentions that the Army could pay for grad school. There's a program he can apply to. And he's like, and I think the deadline is coming up real soon. And he was correct. It was like two days away. He takes the GREs and pulls together his application in a single weekend. And he gets in.

It's really sort of a random chance encounter that I had that sort of put me down this path. random chance encounter that I had that sort of put me down this path. Kyle goes to MIT and eventually finds himself in a classroom face-to-face with the Josh Angrist, the economist who wrote the Vietnam draft paper. And this is the moment when Kyle reads that paper for the first time. Josh Angrist ends up becoming one of Kyle's mentors, encourages him to study the economics of the military. These days, Kyle is a professor himself. He's back at West Point teaching his students about the importance of the counterfactual. Because Kyle

says all these random things that happen in our lives, they can feel so arbitrary. But economists can add up everybody's experiences to see the patterns, to understand the counterfactual, so they can try to answer the question, what if, with real data? After the break, we talked to one more economist, and it's actually Nancy Chien, who wrote Jeff's favorite paper ever. I'm so excited. So excited. So, Amanda, when I first thought about reporting the story, I thought this is going to be great. I'm going to nerd out with some economists about some really cool papers.

But I quickly realized that these economists, they had these deep personal connections to their favorite papers. deep personal connections to their favorite papers. These papers help them understand not just what it means to be an economist, but also like maybe a fundamental truth about themselves. And that was especially true for Nancy Chan. Right. The woman who wrote your favorite economics paper. The one about tea and missing women in China. She's a professor at Northwestern. And a few weeks ago, I called her up to ask, do you have a favorite paper? And Nancy says, absolutely. You know, sometimes you read I called her up to ask, do you have a favorite paper? And Nancy says, absolutely. You know, sometimes you read a paper and it can change the way you think. Like there are questions that you come across and you're like, oh my gosh, I hadn't even thought about asking this question. Nancy's favorite paper is called Changing World Prices, Women's Wages,

and the Fertility Transition, colon, Sweden, 1860 to 1910. I feel like they need a better headline writer for economic papers. Nancy says there's a reason why this is her favorite paper. And the story starts in Boston in the early 2000s. Nancy's a brand new econ grad student at MIT, but she simultaneously has these very not-econ ambitions. My plan was to be really a competitive ballroom dancer and break into the top, like top six. Well, where were you in the rankings at the time? I don't want to say this is accurate, but our self-perception that we had a chance that we were in striking range of top 12. Like top 12 in the U.S.

Nancy says some of the dancers she was up against, they are now coaches on Dancing with the Stars. So she was trying to juggle that and doing a PhD at MIT at the same time. At some point, I started to fund classes because I just couldn't hold it together. Like, you know, I was, because this was a program where, you know, people who are much smarter and better than me, who've been studying all their lives, were studying, hours a week. And I, who was not prepared, was not doing that. Eventually, her advisors at her grad program call her in to have a talk. I knew that they were going to give me bad news, but I knew so little about how these programs worked. I didn't have concrete expectations. Knowing what I know now, the expectation would be like, they're going to kick me out. Her advisors tell her, you have to buckle

down. A life in economics, that is a serious commitment. And Nancy is devastated. She realizes that she has to give up dancing and study harder than she has ever studied in her life. And she's still not sure that's enough to catch up. Right before her big second year tests, Nancy calls her parents in a panic. I was like, look, you know, it's very likely that I'm not going to pass these exams. And I realized that I don't really have any other skills. And at some point, in a point of melodrama, I was like, you know, if this doesn't work out, I think I'll just, maybe I'll just farm. She'll just farm. But her parents were not the kind of parents who tolerated melodrama. In fact, they had lived through the Cultural Revolution in China,

and they had been farmers themselves. My mom said, I remember this really well, my mom said, it is wrong to be so condescending, to think that if you don't have any skills, you can just farm. You know, the thing that requires the least skill is picking up dung to make fertilizer. I remember cheering up on the phone. I was like, oh my god, if I fail these classes, if I fail, and I get kicked out of the program, I'm going to end up picking dung. This becomes her mantra. I do not want to pick up dung.

I want to be an economist. You know, I just threw my entire, like, body and soul into it. And that works. Nancy does not get kicked out of her program. Fast forward a few years to when she's writing her dissertation. That thesis? That becomes her Missing Women and Tea Prices paper. That is the paper that will determine her place in economics, whether or not she'll get her dream job of being a professor.

At the time, one of the economists who reads her paper emails her a bunch of comments. And one of the things he said was, I don't know if you've heard new about this paper, but your job market paper reminds me of one of my favorite all-time papers by T.P. Schultz about Swedish fertility. That's the paper, Changing World Prices, Women's Wages, and the Fertility Transition, colon, Sweden, 1860 to 1910. That was the first time Nancy had heard of this paper. It was about the butter industry in Sweden, which was dominated by women, and how when the price of butter went up, women in Sweden chose to have fewer children. Nancy's paper, remember, was about the woman-dominated

tea industry in China, and how when the price of tea went up, so did the proportion of women in the population. So these papers had a lot in common. You might think discovering a paper like this would be bad news for someone in Nancy's shoes. Like your thesis, somebody has kind of done it before. But that is not how Nancy took it. For her, it was a sign from the universe. It was really reaffirming for me because I felt like it was a confirmation that intellectually I really belonged in this place,

that there would be other people who would be interested in the things that I would find interesting. And that just felt, I was just so excited. Nancy's gone on to have a really important career. Her tea paper is one of the most widely cited papers in her field. She's done important research on racial discrimination, democracy in developing countries, and the economic causes of famines. And she's worked to bring along the next generation of economists to make them feel like they too can belong. So Amanda, you know we were talking about what makes a great

economics paper, right? It has to have a really important question. There's got to be a smart way to answer that question. After talking to Nancy, I want to add a third thing to that list. A really great paper makes you fall in love with economics. That's what happened when I first read Nancy's tea paper way back in college. And I've been waiting all this time to tell her. That paper was your paper. It was the Missing Women paper that you wrote about tea prices in China. Oh my gosh. Thank you.

That's a lot of pressure, but thank you. You look a little flustered. Yeah. So as a child of Chinese immigrant parents who are very loving and supportive, I'm neither used to or very comfortable with direct praise. And after this conversation, I'm going to block this out. But thanks. conversation. I'm going to block this out. But thanks. I guess having a favorite econ paper is one thing, but being the author of someone else's favorite econ paper, that is something else altogether. This episode was produced by Sam Yellow Horse Kessler. It was edited by Keith Romer, Sierra Juarez, check the facts, and it was mastered by Natasha Branch with help from Gilly Moon. Jess Jang is our acting executive producer. I'm Jeff Guo. And I'm Amanda Aronchik. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation,

for helping to support this podcast.