Tuesday, September 13, 2005

Steven N. S. Cheung and the New Empirical Economics

I have mentioned Steven N.S. Cheung as deserving a Nobel prize in my previous post. I would argue the case for Cheung not only because of his contribution to the economics of contract and property rights, but for his instillation of a new sense to the term "empirical economics"that has long been treated as equivalent to econometrics to most economists.

What is this new empirical economics that Cheung creates?

Starting out with the simple premise of constrained maximization, and the simplest economics tools available (doward sloping demand curve), Cheung urges fellow economists to go out to the real world to examine exactly what the real world contraints are in affecting peoples' choices.

Indeed, he has written an extremely important piece on how economists should go about conducting research on real world constraints. The paper is entitled "A Theory of Price Control," Journal of Law and Economics, 1974. If you have access to JSTOR, you can read it here. If not, you can wait for Steve's forthcoming collection of essays that is due out in October.

3 comments:

Sea Bottom Coconut said...

Starting with the simple premise of constrained maximization, and the most elemental of theoretical tools, (nothing fancier than the downward sloping demand curve), Cheung demonstrates to fellow economists that economic behaviors can be predicted -- so long as the constraints that people are faced with are fully known.

This heroic claim puts economics on an equal footing with chemistry, physics and other natural sciences. Difficult as it is, Cheung has shown us time and time again that constraints indeed can be nailed down and clearly defined. His studies on sharecropping, rent control, and contracts are shinning examples of this remarkable scientific achievement.

His emphasis on knowing the constraints makes him a true empiricist. The object lesson one gathers from Cheung's work is this:You don't need fancy tools to explains real world phenomenon, what is needed is hard work and an imaginative mind. In this sense, Cheung is as much a scientist as he is an artist.

Sea Bottom Coconut said...

Judging by his contributions, (e.g. Theory of Price Control, Contractural Nature of the Firm, let alone Fable of the Bees) to the field, Professor Steven N S Cheung should have won the prize long ago. The fact that he has not is an affront to all those who take economics as an empirical science seriously. The Nobel Committee is not doing the science of economics any service by habitually handing out prizes to rocket scientists who have scarcely any clue what the real world is all about. As those who are familiar with his works will know, his insistence on appealling to empirical facts -- and facts alone -- puts Professor Cheung in a class all by himself in the profession. The time to award him the prize is now. It will make a wonderful present for a loyal and faithful servant of the science who has labored hard to make economics interesting -- and fun -- again on his 70th birthday this coming Dec 1st.

貓爸爸/catpapa said...

The problem is mathematics has become the language of our science. If Cheung does not speak in this language, he just cannot communicate with the "mainstream" economists. I do agree that his works are more meaningful than some other "important" works in the field, say, solving for equilibria for some strange games. But again, if he does not prove his results in terms of mathematical theorems (like the two propositions in "A Theory of Price Control"....by the way I like this paper a lot, no doubt as he said it is his best), people in the field will be skeptical about it on the ground of rigor. When it comes to "empirical" economics, I think another Steve who got the Clark strikes a very good balance between techniques and real-world.