explain or summarize the points from 2 resources

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explain the points from cochrane guide file and textbook file in your own words and give examples for every point.

Cannot just copy the original text; label the each point. mark which points from which resources. Highlight the important points from Cochrane guide.

need a A or above.

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Writing Tips for Ph. D. Students John H. Cochrane1,2 Graduate School of Business University of Chicago 5807 S. Woodlawn Chicago IL 60637. 773 702 3059. john.cochrane@gsb.uchicago.edu http://gsbwww.uchicago.edu/fac/john.cochrane/research/Papers/ June 8, 2005 1 Always put your contact info on the front page so that people can find your paper and send you comments! It’s the 21st century — get a web page. If your paper is ready for a faculty member to read it, it should be on your webpage. Put the date on the paper so people know if they are reading a new version. 2 I thank Toby Moskowitz for helpful comments. 1 Organization Figure out the one central and novel contribution of your paper. Write this down in one paragraph. As with all your writing, this must be concrete. Don’t write “I analyzed data on executive compensation and found many interesting results.” Explain what the central results are. For example, Fama and French 1992 start their abstract with: “Two easily measured variables, size and book-to-market equity, combine to capture the cross-sectional variation in average stock returns associated with market β, size, leverage, book-to-market equity, and earnings-price ratios.” Distilling your one central contribution will take some thought. It will cause some pain, because you will start to realize how much you’re going to have to throw out. Once you do it, though, you’re in a much better position to focus the paper on that one contribution, and help readers to get it quickly. Your readers are busy and impatient. No reader will ever read the whole thing from start to finish. Readers skim. You have to make it easy for them to skim. Most readers want to know your basic result. Only a few care how it is different from others. Only a few care if it holds up with different variable definitions, different instrument sets, etc. Organize the paper in “triangular” or “newspaper” style, not in “joke” or “novel” style. Notice how newspapers start with the most important part, then fill in background later for the readers who kept going and want more details. A good joke or a mystery novel has a long windup to the final punchline. Don’t write papers like that — put the punchline right up front and then slowly explain the joke. Readers don’t stick around to find the punchline in Table 12. The vast majority of Ph.D. student papers and workshop presentations (not all by students!) get this exactly wrong, and we never really find out what the contribution of the paper is until the last page, the last table, and the last 5 minutes of the seminar. A good paper is not a travelogue of your search process. We don’t care how you came to figure out the right answer. We don’t care about the hundreds of things you tried that did not work. Save it for your memoirs. Abstract Most journals allow 100-150 words. Obey this limit now. The main function of the abstract is to communicate the one central and novel contribution, which you just figured out. You should not mention other literature in the abstract. Like everything else, the abstract must be concrete. Say what you find, not what you look for. Here too, don’t write “data are analyzed, theorems are proved, discussion is made..” 1 Introduction The introduction should start with what you do in this paper, the major contribution. You must explain that contribution so that people can understand it. Don’t just state your conclusion: “My results show that the pecking-order theory is rejected.” Give the fact behind that result. “In a regression of x on y, controlling for z, the coefficient is q.” The first sentence is the hardest. Do not start with philosophy, “Financial economists have long wondered if markets are efficient.” Do not start with “The finance literature has long been interested in x.” Your paper must be interesting on its own, and not just because lots of other people wasted space on the subject. Do not start with a long motivation of how important the issue is to public policy. All of this is known to writers as “clearing your throat.” It’s a waste of space. Start with your central contribution. Three pages is a good upper limit for the introduction. I don’t write a “roadmap” paragraph: “Section 2 sets out the model, section 3 discusses identification, section 4 gives the main results, section 5 checks for robustness, section 6 concludes.” It seems a waste of space; readers will figure it out when they get there and I save a paragraph against the editor’s page count. Make your own mind up about this question; but realize it’s not mandatory. Literature review Do not start your introduction with a page and a half of other literature. First, your readers are most interested in just figuring out what you do. They can’t start wondering if it’s better than what others have done until they understand what you do. Second, most readers do not know the literature. It’s going to be hard enough to explain your paper in simple terms; good luck explaining everyone else’s too. After you’ve explained your contribution, then you can write a brief literature review. Make it a separate section of otherwise set it off so people can skip it who aren’t interested. Remember, it will be very hard for people to understand how your paper is different from others’ given that they don’t understand your paper yet, and most of them have not read the other papers. Be generous in your citations. You do not have to say that everyone else did it all wrong for your approach and improvements to be interesting. Literature reviews have gotten way out of hand. It is not necessary to cite every single paper in the literature or to write a Journal of Economic Literature style review. The main point of the literature review should be to set your paper off against the 2 or 3 closest current papers, and to give proper credit to people who deserve priority for things that might otherwise seem new in your paper. Some people worry a lot about strategic citations; choosing citations to hint to editors who they should assign as referees and adding loads of citations to make sure referees see themselves. Whatever one thinks of these practices, we can agree you should get rid of all the fluff in the final version. 2 Body of the paper Your task now is to get to the central result as fast as possible. Most papers do precisely the opposite: They have a long motivation, a long literature review, a big complex model that then gets ignored, descriptive statistics, preliminary results, a side discussion or two and then finally Table 12 of “main estimates.” By then we’re all asleep. Here’s the rule: There should be nothing before the main result that a reader does not need to know in order to understand the main result. Theory In most papers, the “main result” is empirical. There may be some theory or a model, but if you (or the editor!) ask “does this paper expand our knowledge of economic theory?,” the answer is “no.” The theory is there to help understand the empirical work. Following the rule, then, the theory must be the minimum required for the reader to understand the empirical results. Do not write a “general” model and then “for the empirical work, we now specialize the general shock process to an AR(1), we use only 2 firms rather than a continuum, we assume agents have quadratic utility,” etc. Work out only the specialized model that you actually take to data. Empirical work Start with the main result. Do not do warmup exercises, extensive data description (especially of well-known datasets), preliminary estimates, replication of others’ work. Do not motivate the specification that worked with all your failures. If any of this is really important, it can come afterwards or in an appendix. You will mightily resist this advice. If you can’t follow it, at least do not put anything before the main result that a reader does not need to know in order to understand the main result. Follow the main result with graphs and tables that give intuition, showing how the main result is a robust feature of compelling stylized facts in the data. Follow that with limited responses to potential criticisms and robustness checks. Most of those should end up in your web appendix. Conclusions Really, a conclusions section should not be necessary. If you did a good job of explaining your contribution in understandable prose in the introduction, and then documenting those claims in the body of the paper, (writing in good triangular style), then saying it all over again is pointless. I tried omitting the conclusions section a few times, though, and this was too radical for editors and referees. It is true that some people skip to the conclusion to 3 look for the main result, but that’s because they are used to authors who don’t explain it well enough in the introduction. Thus, conclusions should be short and sweet. Do not restate all of your findings. One statement in the abstract, one in the introduction and once more in the body of the text should be enough! You can include a short paragraph or two acknowledging limitations, suggesting implications beyond those in the paper. Keep it short though — don’t write your grant application here outlining all of your plans for future research. And don’t speculate; the reader wants to know your facts not your opinions. Appendices Appendices are a great tool. Take that delicious section that has so many insightful comments on the literature, the general version of the model, the 57 robustness exercises that you did, and dump them in to an appendix. This is a good way to get them out of the paper. Eventually you’ll dump them out of the appendix too. Seriously, careful authors, referees and critics often want to document that the main result is robust to various other ways of doing things. You have to do that, but once you’ve verified that it does not make that much difference and you’ve found the one best way of doing things in your main result, it isn’t worth space in the paper to present all the checks and variations. Appendices are a great way to solve this problem, and you can just summarize all the things you did in the paper. You can put the appendix on your and the journal’s website. (“Bond risk premia” with Monika Piazzesi is an example of a web-appendix gone wild.) 2 Writing Keep it short Keep the paper as short as possible. Every word must count. As you edit the paper ask yourself constantly, “can I make the same point in less space?” and “Do I really have to say this?” Final papers should be no more than 40 pages. Drafts should be shorter. (Do as I say, not as I do!) Shorter is better. Don’t repeat things. In other words, if you’ve said it once, you don’t have to say it again. Most of all, it uses up extra space and reader’s patience to have to see the same point made over and over again. So, once again, repetition is really a bad idea. (Get the picture?!) “In other words” is a sign of trouble. Go back and say it once, right. General points Follow the rule “first describe what you do, then explain it, compare it to alternatives, 4 and compare it to others’ procedures” at the micro level as well as the macro level. For example, in describing a data transformation, just start with, say, “I adjust income by the square root of household size”. Then tell us why adjusting is important, and then talk about different adjustment functions. Most writers do all this in the reverse order. Previews and recalls are a good sign of poor organization. “As we will see in Table 6” “Recall from section 2” “this result previews the extra analysis of section 4” all often mean you didn’t put things in the right order. Strive for precision. Read each sentence carefully. Does each sentence say something, and does it mean what it says? Document your work. A fellow graduate student must be able to sit down with your paper and all alone reproduce every number in it from instructions given in the paper, and any print or web appendices. The usual student paper falls short here. There is a sea of verbiage, but I can’t figure out how the central table of results was computed, how standard errors were computed, how a simulation was conducted, etc. Simple is better. Most students think they have to dress up a paper to look impressive. The exact opposite is true: The less math used, the better. The simpler the estimation technique, the better. Footnotes Don’t use footnotes for parenthetical comments. If it’s important, put it in the text. If it’s not important, delete it. Parenthetical comments in footnotes usually mean you haven’t organized your ideas; you haven’t figured out where to put this thought in a proper linear sequence. Do you really want the reader to stop and read this? Then it should be in the text. Do you think the average reader should not stop? Then delete the footnote. Obviously, lots of parentheses are just as bad as lots of footnotes. Use footnotes only for things that the typical reader genuinely can skip, but a few readers might want to have attached to the current point. Long lists of references, simple bits of algebra, or other documentation are good candidates for footnotes. Tables Each table should have a self-contained caption so that a skimming reader can understand the fact presented without having to go searching through the text for things like the definitions of Greek letters. Don’t go nuts here; some captions are longer than the paper. In my opinion, you can leave out details of variable construction and similar items. “Book/market ratio” is fine; you don’t have to tell me that you got book values in June from Compustat. The goal is to allow a skimming reader to understand the table, not to substitute for the detailed documentation that must be in the paper somewhere. The caption of a regression table should have the regression equation and the name of 5 the variables, especially the left hand variable. No number should appear in a table that is not discussed in the text. You don’t have to mention each number separately; “Row 1 of Table 3 shows a u-shaped pattern” is ok. “Table 5 shows summary statistics” (period) is not ok. If it’s not worth writing about in the text, it’s not worth putting in the table. Use the correct number of significant digits, not whatever the program spits out. 4.56783 with a standard error of 0.6789 should be 4.6 with a standard error of 0.7. Two to three significant digits are plenty for almost all economics and finance applications. Use sensible units. Percentages are good. If you can report a number as 2.3 rather than 0.0000023, that’s usually easier to understand. Figures Good figures really make a paper come alive, and they communicate patterns in the data much better than big tables of numbers. Bad or poorly chosen figures waste a lot of space. Again, give a self-contained caption, including a verbal definition of each symbol on the graphs. Label the axes. Use sensible units. Don’t use dotted line types that are invisible when reproduced. Don’t use dashes for very volatile series. Writing tips The most important thing in writing is to keep track of what your reader knows and doesn’t know. Most Ph.D. students assume far too much. No, we do not have the details of every paper ever written in our heads. Keep in mind what you have explained and what you have not. The reader usually wants most of all to understand your basic point, and won’t start criticizing it before he or she understands it. That’s behind my advice to first state and explain what you do, and save defending it and comparing it to other approaches until much later. Use active tense. Not: “it is assumed that τ = 3”, “data were constructed as follows..” Gee, I wonder who did that assuming and constructing? Search for “is” and “are” in the document to root out every single passive sentence. “I” is fine. Don’t use the royal “we” on a sole-authored paper. “I assume that τ = 3.” “I construct the data as follows.” If it seems like too much “I,” you can often avoid the article altogether. For example, I think it’s ok to write “Table 5 presents estimates” rather than “I present estimates in Table 5”, though a purist might object to making a Table the subject of a sentence. I use “we” to mean “you (the reader) and I,” and “you” for the reader. “We can see the u-shaped coefficients in Table 5” or “You can see the u-shaped coefficients” is much better than “The u-shaped coefficients can be seen” (passive) or “one can see the u-shaped coefficients” (who, exactly?) 6 Much bad writing comes down to trying to avoid responsibility for what you’re saying. That’s why people resort to passive sentences, “it should be noted that”, poor organization with literature first and your idea last, and so on. Take a deep breath, and take responsibility for what you’re writing. Present tense is usually best. You can say “Fama and French 1993 find that” even though 1993 was a while ago. The same goes for your own paper; describe what you find in Table 5 not what you will find in Table 5. Most importantly, though, keep the tense consistent. Don’t start a paragraph in past tense and finish it in the future. Use the normal sentence structure: subject, verb, object. Not: “The insurance mechanisms that agents utilize to smooth consumption in the face of transitory earnings fluctuations are diverse” Instead: “People use a variety of insurance mechanisms to smooth consumption..” (I also changed the starchy “agents” to the concrete “people,” and the simple “variety” rather than the fancy “diverse.” Actually, this whole sentence probably should be dumped; it was introducing a paragraph that described the mechanisms. It’s a throatclearing sentence that violates the rule that every sentence should mean something. The fact that people use a variety of mechanisms is not big news, the news is what the mechanisms are.) Avoid technical jargon wherever possible. Writing should be concrete, not abstract. (Insert concrete examples.) Little writing tips Don’t use adjectives to describe your work: “striking results” “very significant” coefficients, etc. If the work merits adjectives, the world will give them to you. If you must use adjectives, don’t use double adjectives. Results are certainly not “very novel.” Use simple short words not big fancy words. “Use” not “utilize.” “several” not “diverse”. It is usually the case that most good writers find that everything before the “that” should be deleted from a sentence. Read that sentence again starting at “Everything”: it’s true, isn’t it? “It should be noted that” is particularly obnoxious. Just say what you want to say. “It is easy to show that” means that it isn’t. Search for “that” in the document to get rid of these. Similarly, strike “A comment is in order at this point.” Just make the comment. These phrases also violate the rule that each sentence should mean what it says. Is the point of the sentence really that “it should be noted?” Or is this just a wimpy way to bring up the topic? Clothe the naked “this.” “This shows that markets really are irrational...” This what? “This” should always have something following it. “This regression shows that....” is fine. More generally, this helps (no, that should be “this rule helps,” right?) you to avoid an unclear antecedent to the “this.” Often there are three or more things in recent memory 7 that “this” could point to. Hyphens are widely misused. Here’s the rule from the JFE style sheet: “Hyphens are used for true compound modifiers before the noun (e.g., after-tax income, risk-free rate, two-day return, three-digit SIC code, value-weighted index) unless part of the compound modifier is an adverb ending in ‘ly’ (e.g., previously acquired subsidiary, equally weighted index, publicly traded stock). When there is no risk of misinterpretation, the hyphen can be omitted, but the treatment must be consistent throughout the paper.” Note the hyphen is optional, so you don’t have to construct monstrosities like “continually-rebalanced-equallyweighted portfolio.” Don’t use hyphens in other circumstances, e.g. “The paper focuses on small-stocks.” People forget Greek letter definitions. If you define them once in an obscure part of the text and then use naked references (“θ = 3 gives the best fit”) no one will know what you’re talking about. Define them clearly in an easy-to-find place. It’s best to give them a name too, and then remind people of the name and the number (“I find the best fit when the elasticity of substitution θ equals 3.”) This is the one place where a little repetition isn’t bad. If you’ve reminded them of the name in the last paragraph or two, however, you can use the naked letter. Strike “I leave x for future research.” We’re less interested in your plans and excuses than we are in your memoirs. Never use the words “illustrative test” or “illustrative empirical work.” Never do illustrative work. Do real empirical work or don’t do any at all. Illustrating technique with empirical work you don’t believe in is a waste of space. Even if you do it, there is no faster way to get readers to fall asleep than to tell them that what you’re doing doesn’t really matter. You don’t need to “assume” things about a model. Don’t write “I assume that consumers have power utility” (And, of course, don’t write “it is assumed that utility is power,” right?) You are describing a model, not reality, so you can just state the model structure. “Consumers have power utility.” (“In this model” is understood.) Save “assumptions” for things that really do modify the real world, “I assume there are no shifts in the demand curve so that the regression of price on quantity identifies the supply curve.” Keep down the number of clauses in your sentences, and the number of things kept hanging. “Where” refers to a place. “In which” refers to a model. Don’t write “models where consumers have uninsured shocks,” write “models in which consumers have uninsured shocks.” Don’t abbreviate authors’ names, “FF show that size really does matter.” There is always enough space to spell out people’s names. You’d want them to write out yours, no? It is appropriate to thank people who have helped you in the author footnote. I don’t add the qualifier about not blaming people I thank for comments for mistakes. It goes 8 without saying. I don’t list every single place I’ve given the workshop in the thanks. I’m not ungrateful, but the long list can get out of hand. Don’t start your paper with a cute quotation. Don’t overuse italics. (I use them far too much.) It’s best to use them only when the emphasis in a sentence would otherwise not be clear — but maybe then you should rewrite the sentence so that the emphasis really is clear. (Who is that shouting in here?) When describing the sign of a casual link, one direction is enough. “When Jane goes up (down) on the teeter-totter, Billy goes down (up) on the other side,” the stuff in the parentheses is distracting. Add “and vice versa” if you must. Every sentence should have a subject, verb and object. No sentences like “No sentences like this.” 3 Tips for empirical work These tips verge on “how to do empirical work” rather than just “how to write empirical work,” but in the larger picture “doing” and “writing” are not that different. What are the three most important things for empirical work? Identification, Identification, Identification. Describe your identification strategy clearly. (Understand what it is, first!) Much empirical work boils down to a claim that “A causes B,” usually documented by some sort of regression. Explain how the causal effect you think you see in the data is identified. 1. Describe what economic mechanism caused the dispersion in your right hand variables. No, God does not hand us true natural experiments very often. 2. Describe what economic mechanism constitutes the error term. What things other than your right hand variable cause variation in the left hand variable? 3. Hence, explain why you think the error term is uncorrelated with the right hand variables in economic terms. There is no way to talk about this crucial assumption unless you have done items 1 and 2! 4. Explain the economics of why your instruments are correlated with the right hand variable and not with the error term. 5. Do you understand the difference between an instrument and a control? In regressing y on x, when should z be used as an additional variable on the right hand side and when should it be an instrument for x? 6. Describe the source of variation in the data that drives your estimates, for every single number you present. For example, the underlying facts will be quite different as you 9 add fixed effects. With firm fixed effects, the regression coefficient is driven by how the variation over time within each firm. Without firm fixed effects, the coefficient is (mostly) driven by variation across firms at a moment in time. 7. Are you sure you’re looking at a demand curve, not a supply curve? As one way to clarify this question, ask “whose behavior are you modeling?” Example: Suppose you are interested in how interest rates affect housing demand, so you run the number of new loans on interest rates. But maybe when housing demand is large for other reasons, demand for mortgages (and other borrowing demand correlated with demand for mortgages) drives interest rates up. You implicitly assumed stable demand, so that an increase in price would lower quantity. But maybe the data are generated by a stable supply, so that increased demand raises the price, or some of both. Are you modeling the behavior of house purchasers or the behavior of savers (how savings responds to interest rates)? 8. Are you sure causality doesn’t run from y to x, or from z to y and x simultaneously? Think of the obvious reverse-causality stories. Example: You can also think about the last example as causality: Do interest rates cause changes in housing demand or vice versa (or does the overall state of the economy cause both to change)? 9. Consider carefully what controls should and should not be in the regression. Most papers have far too many right hand variables. You do not want to include all the “determinants” of y on the right hand side. (a) High R2 is usually bad — it means you ran left shoes = α + β right shoes +γprice + error. Right shoes should not be a control! (b) Don’t run a regression like wage = a + b education + c industry + error. Of course, adding industry helps raise the R2 , and industry is an important other determinant of wage (it was in the error term if you did #2). But the whole point of getting an education is to help people move to better industries, not to move from assistant burger-flipper to chief burger-flipper. Give the stylized facts in the data that drive your result, not just estimates and p values. For a good example, look at Fama and French’s 1996 “Multifactor explanations.” In the old style we would need one number: the GRS test. Fama and French show us the expected returns of each portfolio, they show us the beta of each portfolio, and they convince us that the pattern of expected returns matches the pattern of betas. This is the most successful factor model of the last 15 years ...even though the GRS test is a disaster! They were successful because they showed us the stylized facts in the data. Explain the economic significance of your results. Explain the economic magnitude of the central numbers, not just their statistical significance. Especially in large panel data sets even the tiniest of effects is “statistically significant.” (And when people show up with the usual 2.10 t statistic in large panel data sets, the effect is truly tiny!) 10 Of course, every important number should include a standard error. 4 Seminar presentations You will not believe how fast the time will go by. Since time is limited, it’s especially important to get to the point. We can’t skim to the important stuff in a seminar! You don’t need any literature review or motivation in a seminar. Just get to the point. Gene Fama usually starts his seminars with “Look at table 1.” That’s a good model to emulate. Don’t “preview” results. It wastes time; why say it twice rather than say it once, right? Don’t make slides with a bullet point for every word you intend to say. This forces you into a preplanned order, and then you can’t change on the fly when you figure out how fast time is going by. Slides are fine that only contain equations, tables and graphs — things we really need to see. At most use words for the one or two really important things you want people to know, e.g. “Identification: interest rates do not respond to fiscal shocks in the Ricardian model.” Also, you want people to remember the structure of the model, definitions of variables, etc. If you have too much junk on the slides, people can’t see the utility function while you’re talking about the production function, so they get lost. People don’t remember equations from one slide to the next. You have to leave slides up for a decent amount of time in order for people to digest them. That means you will not be able to put up 1 slide per minute! As in writing the paper, your main objective is to get to the #1 important contribution as fast as possible. Most seminars are a disaster. They start with pointless motivation and policy implications, which the audience can’t follow since we don’t know the result. Then we get a long literature review, which is even more boring since we don’t know the point of this paper much less what everyone else did. Then we get a results preview. Usually, the presenter says “I’ll preview the results now because I may not have time to get to them all,” a strangely self-fulfilling prophecy. Since showing the main results is the only reason you came, why not just start right now! Worse, the reason we run out of time is because we wasted half an hour on the stupid preview! The seminar then bogs down as people start asking questions about the previewed results; most of the questions are dumb (“I measure the demand elasticity at 0.3.” “But how did you identify supply shifts?”) since they will be explained in a proper presentation of the results. But the questions are totally reasonable since the claim with no documentation is meaningless. Next, we get (in empirical papers) some “theory” that is really beside the point and only serves to provoke more needless argument (no, there really is no way to distinguish the “behavioral” and “rational” explanation. Clever audience 11 members will come up with stories that reverse all the signs.) Then we get some distracting preliminary results and tables and graphs of unrelated observations. More pointless discussion erupts; people don’t know what point the speaker is trying to make and the discussion goes off in to tangents. Finally the speaker sees there is only 10 minutes to go, tells people to be quiet, and the main results go by in a big rush. Everyone is tired and confused and doesn’t follow anything. I timed the finance workshop last winter quarter and not one paper got to the main results in under an hour! Listen to the questions, all the way to the end, then count to three before answering. Yes, you’re in a rush, and yes, you think you can guess what the question will be and you know the answer. This isn’t a game show, and much of the time you actually don’t know what the question will be. Keep a sheet of paper handy. You may not have a quick answer to every question, and some questions may point to good things to change in the paper. You cannot make it too simple. Most presenters, especially Ph. D. students overestimate dramatically how much theory people can digest in one sitting, and how quickly they can memorize and digest models and results. Speak loudly, slowly and clearly. There’s nothing wrong with ending early! 5 Conclusion May economists falsely think of themselves as scientists who just “write up” research. We are not; we are primarily writers. Economics and finance papers are essays. Most good economists spend at least 50% of the time they put into any project on writing. For me, it’s more like 80%. Pay attention to the writing in papers you read, and notice the style adopted by authors you admire. I got a lot out of reading William Zinsser’s On Writing Well, and D. McCloskey’s Rhetoric of Economics. I also found Glenn Ellison’s “The slowdown of the economics publishing process” in the JPE useful for thinking about how papers should be structured (and refereed and edited, but that’s another story). 12 The Student’s Guide to Writing Economics Economists bring clear thinking and a host of analytical techniques to a wide range of topics. The Student’s Guide to Writing Economics will equip students with the tools and skills required to write accomplished essays. Robert Neugeboren provides a concise and accessible guide to the writing process taking the student through the stages of planning, revising, and editing pieces of work. This book presents the core principles of the “economics approach” and covers essential topics such as: ■ ■ ■ ■ ■ the key to successful writing in economics basic methods economists use to analyze data and communicate ideas suggestions for finding and focusing your chosen topic vital techniques for researching topics how to approach the citing of sources and creating a bibliography The Student’s Guide to Writing Economics also includes up-to-date appendices covering fields in economics, standard statistical sources, online search engines, and electronic indices to periodical literature. This guide will prove an invaluable resource for students seeking to understand how to write successfully in economics. Robert Neugeboren is Lecturer in Economics and Assistant Director of Undergraduate Studies at Harvard University, USA. The Student’s Guide to Writing Economics Robert Neugeboren First published 2005 by Routledge 270 Madison Ave, New York, NY 10016 Simultaneously published in the UK by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2005 Robert Neugeboren, and the President and Fellows of Harvard College All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Neugeboren, Robert The student’s guide to writing economics/Robert Neugeboren. p. cm. Includes bibliographical references and index. 1. English language–Rhetoric–Problems, exercises, etc. 2. Economics–Authorship–Problems, exercises, etc. 3. Academic writing–Problems, exercises, etc. I. Title. PE1479.E35.N48 2005 808⬘.06633–dc22 2005005272 ISBN 0-203-79954-2 Master e-book ISBN ISBN10: 0–415–70122–8 (hbk) ISBN10: 0–415–70123–6 (pbk) ISBN13: 9–78–0–415–70122–8 (hbk) ISBN13: 9–78–0–415–70123–5 (pbk) Contents Notes on contributors Acknowledgments vii ix Introduction: the economic approach Economics and the problem of scarcity The assumption of rationality The theory of incentives Types of writing assignments Plan of this guide 1 2 3 4 4 6 1 Writing economically with Mireille Jacobson Overview of the writing process Getting started The keys to good economics writing Achieving clarity Managing your time 8 8 8 12 15 2 The language of economic analysis Economic models Hypothesis testing Improving the fit Applying the tools 17 18 20 21 22 7 v CONTENTS 3 Finding and researching your topic Finding a topic for a term paper Finding and using sources Doing a periodical search Taking and organizing notes 25 26 28 29 30 4 The term paper Outlining your paper Writing your literature review Presenting your hypothesis Presenting your results by Christopher Foote Discussing your results 33 34 35 37 39 5 Formatting and documentation by Kerry Walk Placing citations in your paper Listing your references Three types of sources Basic guidelines Sample entries 49 Appendices A Fields in economics B Economics on the Internet B1: Economics links B2: Statistical sources C Electronic indices to periodical literature 63 63 69 70 72 76 References Index vi 46 50 52 53 54 56 79 81 Contributors CHRISTOPHER FOOTE is Senior Economist in the Research Department at the Federal Reserve Bank of Boston. From 1996 to 2002, he taught at Harvard University’s Department of Economics, where he also served as Director of Undergraduate Studies. In July 2002, he accepted a position as senior staff economist with the Council of Economic Advisers, becoming chief economist at CEA in February 2003. He joined the Boston Fed in October 2003. MIREILLE JACOBSON is Assistant Professor of Planning, Policy, and Design at the School of Social Ecology at the University of California. In 2001, she earned a doctorate in economics from Harvard University, where she was a National Science Foundation Graduate Fellow. She is currently a Robert Wood Johnson Foundation Scholar in Health Policy Research at the University of Michigan. KERRY WALK is Director of the Princeton Writing Program. Before leaving Harvard University in 2001, she was Assistant Director of the Harvard Writing Project, which seeks to enhance the role of writing in courses and departments campus-wide. Walk has given faculty workshops on assigning and responding to student writing at institutions across the country. She received her Ph.D. in English from the University of California, Berkeley. vii Acknowledgments This guide was developed in conjunction with the Economics Tutorial Program at Harvard University, with support and assistance from The Harvard Writing Project. Nancy Sommers, Sosland Director of Expository Writing, proposed the idea in 1999, and I was asked to write the guide, which has since been distributed to the sophomores in the department each year. Kerry Walk, then Assistant Director of the Writing Project, saw the project through from inception to completion, commented on drafts, gave advice at every stage, and ultimately added the section on “Formatting and documentation” (Chapter 5). Christopher Foote, then Assistant Professor of Economics and Director of Undergraduate Studies, wrote part of Chapter 4, and Mireille Jacobson made substantial contributions to the section on “Writing economically” (Chapter 1), and she compiled the original appendices. Oliver Hart, Michael Murray, Lorenzo Isla, Tuan Min Li, Allison Morantz, and Stephen Weinberg also gave very helpful comments. Rajiv Shankar updated the appendices and prepared the manuscript for printing. Special thanks to Anita Mortimer, with regrets for her recent passing. ix Introduction: The economic approach LIST OF SUB-TOPICS ■ ■ ■ ■ ■ Economics and the problem of scarcity The assumption of rationality The theory of incentives Types of writing assignments Plan of this guide Economists study everything from money and prices to child rearing and the environment. They analyze small-scale decision-making and large-scale international policy-making. They compile data about the past and make predictions about the future. Many economic ideas have currency in everyday life, cropping up in newspapers, magazines, and policy debates. The amount you pay every month to finance a car or new home purchase will depend on interest rates. Business people make investment plans based on expectations of future demand, and policy-makers devise budgets to achieve a desired macroeconomic equilibrium. While the range of topics that interest economists is vast, there is a unique approach to knowledge, something common to the way all economists see the world. Economists share certain assumptions 1 INTRODUCTION: THE ECONOMIC APPROACH about how the economy works, and they use standard methods for analyzing data and communicating their ideas. The purpose of this guide is to help you to think and write like an economist. ECONOMICS AND THE PROBLEM OF SCARCITY Since its beginnings as “the dismal science,” economics has been preoccupied with the problem of scarcity. The hours in a day, the money in one’s pocket, the food the earth can supply are all limited; spending resources on one activity necessarily comes at the expense of some other, foregone opportunity. Scarcity provides economics with its central problem: how to make choices in the context of constraint. Accordingly, economists ask questions such as: How does a consumer choose a bundle of commodities, given her income and prices? How does a country choose to meet its objectives, given its national budget? How do decision-makers allocate scarce resources among alternative activities with different uses? While this central economic problem may be rather narrow, the range of topics that interest economists is vast. Indeed, insofar as it can be characterized as choice under constraint, any kind of behavior falls within the scope of economic analysis. As Lord Lionel Robbins (1984), one of the great economists of the twentieth century, put it: We do not say that the production of potatoes is economic activity and the production of philosophy is not. We say rather that, in so far as either kind of activity involves the relinquishment of other desired alternatives, it has its economic aspect. There are no limitations on the subject matter of Economic Science save this. It should come as no surprise that economists are sometimes called “imperialists” by other social scientists for their encroachment 2 INTRODUCTION: THE ECONOMIC APPROACH on fields that traditionally belong to other disciplines. For instance, historians studying the migration patterns of eighteenth-century European peasants have explained the movement out of the countryside and into the cities in terms of broad social and cultural factors: the peasants were subjects of changing times, swept along by the force of history. By contrast, economists, such as Samuel L. Popkin (1979), have attributed urban migration patterns to the trade-offs faced and choices made by individual agents; from this perspective, the peasants’ behavior was rational. THE ASSUMPTION OF RATIONALITY Economists approach a wide range of topics with the assumption that the behavior under investigation is best understood as if it were rational (though we know that not all behavior is, in fact, rational) and that the best explanations, models, and theories we construct take rationality as the norm. Rationality, in the words of Frank Hahn, is the “weak causal proposition” that sets all economic analyses in motion. “Economics can be distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that agents have stable, well-defined preferences and make rational choices consistent with those preferences” (Colin Camerer and Richard Thaler, 1995). Rationality, in the standard sense of the economist, means that agents prefer more of what they want to less. This may seem like a rather strong proposition, insofar as it seems to imply that human behavior is necessarily calculated and self-interested. But the assumption of rationality does not imply anything about the content of agents’ wants, or preferences; hence to be rational is not necessarily to be selfish. One can want others to be better off and rationally pursue this objective as well. Economists assume that whatever their preferences, agents will attempt to maximize their satisfaction subject to the constraints they face. And good economics 3 INTRODUCTION: THE ECONOMIC APPROACH writing will take the assumption of rational behavior as its starting point. THE THEORY OF INCENTIVES The theory of incentives posits that individual agents, firms, or people, make decisions by comparing costs and benefits. When costs or benefits – the constraints on choices – change, behavior may also change. In other words, agents respond to incentives. Many recent developments in economics and public policy are based on the theory of incentives. For example, recent welfare reforms recognize that traditional welfare, which guarantees a basic level of income but is taken away once that level is surpassed, provides incentives for those below the earnings threshold to stay out of the formal workforce. This and other criticisms have led to the adoption and expansion of programs such as the Earned Income Tax Credit (EITC). The EITC seeks to rectify this particular incentive problem by making transfers only to working individuals. Such policy changes suggest that incentives matter for behavior. Thus, a thorough analysis of any behavior, and a well-written account of it, must account for incentive effects. TYPES OF WRITING ASSIGNMENTS Depending on the course, the instructor, and the degree to which writing has been integrated into the curriculum, there are several types of writing assignments you might see. Some courses will sequence their assignments, working on basic skills in short assignments and building to a longer term paper. No matter what the format, length, etc., it is important to understand the assignment’s goal or purpose. 4 INTRODUCTION: THE ECONOMIC APPROACH Response paper (1–2pp) Response papers might involve summarizing an assigned reading or answering a specific set of questions about the text. Instructors use these to focus your attention on important topics and to stimulate class discussion. Response papers can also help develop the themes and vocabulary needed for writing successful longer papers. Short essay (3–4pp) Short essays may require you to analyze two articles and compare their policy implications, explain a model, criticize an argument, present a case study, evaluate an intellectual debate, and so on. A short essay differs from a response paper in that it will usually ask you to have a thesis, or central argument, and then present some kind of analysis to make your case. Empirical exercise (5–6pp) Often courses will assign an empirical exercise in which you are asked to analyze economic data using a standard statistical software package (e.g., Stata, Minitab, SAS, SPSS, etc.). An empirical exercise will give you experience in answering an economic question with data and drawing conclusions from evidence. Term paper (10–15pp) The term paper addresses a topic in depth and combines skills developed throughout the semester. It typically includes a literature review, an empirical component, a discussion of results, and perhaps a discussion of policy implications. It may build on earlier short assignments, including a prospectus, in which you will propose a thesis or question and detail how the issue will be addressed. The term paper may require research beyond what has been assigned to the class. 5 INTRODUCTION: THE ECONOMIC APPROACH Make sure you clear up any confusion about the assignment by asking your instructor specific questions about what he or she is looking for. The earlier you get clarification, the better able you will be to complete the assignment (and get a good grade). For longer papers, you may want to hand in rough drafts. Getting feedback may improve your writing considerably and generally makes for more interesting papers. PLAN OF THIS GUIDE Understanding the way economists see the world is a necessary step on the way to good economics writing. Chapter 1 describes the keys you need to succeed as a writer of economics and offers an overview of the writing process from beginning to end. Chapter 2 describes the basic methods economists use to analyze data and communicate their ideas. Chapter 3 offers suggestions for finding and focusing your topic, including standard economic sources and techniques for doing economic research. Chapter 4 tells you how to write a term paper. Finally, Chapter 5 provides a guide to citing sources and creating a bibliography. Three appendices provide useful information for developing your term papers. Appendix A provides a roadmap of fields in economics and can help define very broad areas of interest. Appendix B presents an overview of economics resources on the Internet, with a brief directory of useful websites and links to statistical sources that you may wish to use for your own research. Appendix C lists the relevant electronic indices to periodical literature, invaluable resources for the initial stages of any paper. 6 Chapter 1 Writing economically LIST OF SUB-TOPICS ■ ■ ■ ■ ■ Overview of the writing process Getting started The keys to good economics writing Achieving clarity Managing your time Pick up any publication of the American Economics Association and you will discover a few things about writing economics. First, the discourse is often mathematical, with lots of formulas, lemmas, and proofs. Second, writing styles vary widely. Some authors are very dry and technical; a few are rather eloquent. You do not have to be a great “writer” to produce good economics writing. This is because economics writing is different from many other types of writing. It is essentially technical writing, where the goal is not to turn a clever phrase, hold the reader in suspense, or create multi-layered nuance, but rather to achieve clarity. Elegant prose is nice, but clarity is the only style that is relevant for our purposes. A clear presentation will allow the strength of your underlying analysis and the quality of your research to shine through. 7 WRITING ECONOMICALLY OVERVIEW OF THE WRITING PROCESS If you have ever pulled an all-nighter and done reasonably well on the assignment, you may be tempted to rely on your ability to churn out pages of prose late at night. This is not a sensible strategy. Good economics papers just do not “happen” without time spent on preparation; you cannot hide a lack of research, planning, and revising behind cleverly constructed prose. More time will produce better results, though returns to effort will be diminishing at some point. Here, too, the principles of economy apply. GETTING STARTED Getting started is often the hardest part of writing. The blank page or screen can bring on writer’s block, and sustaining an argument through many pages can seem daunting, particularly when you know your work will be graded. Do not let these concerns paralyze you; break the paper down into smaller parts, and get started on the simpler tasks. Economics writing usually requires a review of the relevant literature (more on this later). Especially if you are stuck, this can be a great way to begin. THE KEYS TO GOOD ECONOMICS WRITING Writing in economics, as in any academic discipline, is never simply a matter of asserting your opinions. While your ideas are important, your job includes establishing your credentials as a writer of economics, by demonstrating your knowledge of economic facts and theories, identifying and interpreting the underlying economic models, understanding what others have said about the relevant issues, evaluating the available evidence, and presenting a persuasive 8 WRITING ECONOMICALLY argument. Even if you do not write particularly well, you can produce good economics papers by attending to three basic tasks: Research Economic research generally entails three stages. First, you may need to gain a broad overview of your topic: start from a text book on the subject, or discover what resources are available in that field over the internet (see Appendix B1). Second, you may need to review the literature on the topic: simple or exhaustive searches can be made through online academic search portals which will find perhaps hundreds of articles based on your narrow search criteria (see Appendix C). Sometimes the entire article is available online; usually at least an abstract is given, and you have to manually locate the article in your library, or get it via inter-library loan. Third, even if you are referring to only a single paper, you may need to update some of the relevant statistics, or collect and analyze substantial data on your own, which you can get from any of a number of standard statistical sources (see Appendix B2). In general, your writing will reflect the quality of your research, and good writing will demonstrate that you understand the findings that are relevant to your topic. Organization Once you have found your sources, you will need to organize your ideas and outline your paper. Economists usually organize their writing by using simplified models (such as supply and demand, cost/benefit analysis, and comparative advantage). Therefore, a literature review is often followed by the presentation of a model, usually one of the standard models or, for the theoretically inclined, one of your own devising. Models are used to organize data and generate hypotheses about how some aspect of the economy works. 9 WRITING ECONOMICALLY Analysis Reducing something complex into simpler parts is an integral part of economic rigor. Statistical analysis (or econometrics) takes vast piles of data and returns useful numerical summaries that can be used to test various economic models and make predictions about the future. Mathematics is very helpful here because it is a precise language that can articulate the way basic economic relations are conceptualized, measured, and defined. Nonetheless, even before you have mastered sophisticated statistical and mathematical techniques, your goals should be writing clearly, following a line of deductive reasoning to its conclusion, and applying the rules of inference correctly. These are the marks of good economics writing. AN EXAMPLE FROM THE LITERATURE Generally, in the first few paragraphs of a paper, economists set up their research question as well as the model and data they use to think about it. This style can be useful to both writer and reader as it establishes the structure of the work that follows. Unfortunately, it sometimes means a stilted or dry presentation. An excerpt from a piece by two of the field’s most eloquent authors, Claudia Goldin and Lawrence F. Katz (1996), illustrates a skilful approach to setting up a research question, placing it in the literature, and outlining how the work to follow extends existing research. Notice, in particular, that these steps need not be completely independent. The piece, taken from the authors’ work on the historical relationship among technology, human capital, and the wage structure, starts by presenting the facts motivating the question: 10 WRITING ECONOMICALLY Recent technological advances and a widening of the wage structure have led many to conclude that technology and human capital are relative complements. The possibility that such a relationship exists today has prompted a widely held conjecture that technology and skill have always been relative complements. Next they explain the existing theories behind this relationship: According to this view, technological advance always serves to widen the wage structure, and only large injections of education slow its relentless course. A related literature demonstrates that capital and skill are relative complements today and in the recent past (Zvi Griliches, 1969). Thus capital deepening appears also to have increased the relative demand for the educated, serving further to stretch the wage structure. Then they clearly and simply state their question: Physical capital and technology are now regarded as the relative complements of human capital, but have they been so for the past two centuries? Next they cite more of the related literature: Some answers have already been provided. A literature has emerged on the bias to technological change across history that challenges the view that physical capital and human capital have always been relative complements. Finally they propose how they seek to answer this question: We argue that capital–skill complementarity was manifested in the aggregate economy as particular 11 WRITING ECONOMICALLY technologies spread, specifically batch and continuous process methods of production. Their paper goes on to establish the empirical evidence that backs up this assertion. As evidenced by the example above, the clarity of your prose, the quality of your research, the organization of your argument, and the rigor of your analysis are the keys to your success as an economics writer. ACHIEVING CLARITY Clear writing is easy to read but hard to write. It rarely occurs without considerable effort and a willingness to revise and rework. As McCloskey (1985), the dean of economics writing, tells us: “it is good to be brief in the whole essay and in the single word, during the midnight fever of composition and during the morning chill of revision.” The rules of clear writing apply to the organization of the entire paper, to the order of paragraphs, to sentences, and to words. Clarity can be achieved in stages: Organize your ideas into an argument with the help of an outline. ↓ Define the important terms you will use. ↓ State your hypothesis and proceed deductively to reach your conclusions. ↓ 12 WRITING ECONOMICALLY ↓ Avoid excess verbiage. ↓ Edit yourself, remove what is not needed, and keep revising until you get down to a simple, efficient way of communicating. This last stage is crucial. Take, for example, the following excerpt from a student’s short response paper: In the beginning of the 1980s, the problem of homelessness in the United States became apparent (Richard B. Freeman and Brian Hall, 1989). Since then, the number of homeless in this country has continued to grow. While the problem of homelessness, in itself, is obviously a problem that is quite relevant to other fields of economic study, it has also given rise to a phenomenon that is an interesting topic for the study of behavioral economics: the donation of money to help the homeless population. With a little revision, the author could have achieved a more clear and concise introduction: Early in the 1980s, increasing homelessness in the United States became apparent (Freeman and Hall, 1989). Since then, the number of homeless has continued to grow. While homelessness is studied in many fields of economics, it has given rise to a particular phenomenon – the donation of money directly to the homeless – that interests behavioral economists in particular. 13 WRITING ECONOMICALLY Below are some additional tips to achieving clarity and some examples that apply them. These and many other useful tips can be found in Strunk and White (1979), Turabian (1996), and Gibaldi (2003). Use the active voice It turns a weak statement (first one) into a more direct assertion (second statement): In this paper, the effect of centralized wage-setting institutions on the industry distribution of employment is studied. This paper studies the effect of centralized wage-setting institutions on the industry distribution of employment. Put statements in positive form Many day-traders did not pay attention to the warnings of experts. This statement is more concisely conveyed as follows: Many day-traders ignored the warnings of experts. Omit needless words In spite of the fact that the stock market is down, many experts feel that financial markets may perform reasonably well this quarter. 14 WRITING ECONOMICALLY A better way to express the same thing is: Although the stock market is down, financial markets may still perform reasonably well this quarter. In summaries, generally stick to one tense This study showed that dividend payouts increase when dividend income was less tax-disadvantaged relative to capital gains. An improvement uses the present tense throughout: This study shows that dividend payouts increase when dividend income is less tax-disadvantaged relative to capital gains. Few writers achieve clarity without continual editing. Once you have your basic ideas down, be sure to reread and revise your work. MANAGING YOUR TIME The best laid plans for writing a good paper can be wrecked by poor time management. Make sure you clear up any confusion about the assignment right away. Set deadlines for completing each phase of the project: 15 WRITING ECONOMICALLY Start the project by finding your topic. ↓ Begin your research. ↓ Start an outline. ↓ Write a draft. ↓ Revise and polish. Divide your time, from the moment you receive your assignment to the moment it is due, into segments allotted to each task. Hold yourself to the deadlines you set, and allow yourself time to revise and polish the paper. The payoff will be a better product, a better grade, and less anxiety throughout. 16 Chapter 2 The language of economic analysis LIST OF SUB-TOPICS ■ ■ ■ ■ Economic models Hypothesis testing Improving the fit Applying the tools The economy is a complex web of interdependent elements, and understanding any part is a significant accomplishment. The price of tea in the USA is determined by many factors, including individual preferences (or tastes), labor costs, weather conditions, and the price of tea in China, among others. Preferences, labor costs, weather, etc., are in turn connected to other factors, including the price of coffee, which in turn can affect the price of tea. All the parts can be moving simultaneously, making it hard to see what is causing what. To write effectively about economics, you have to understand how economists think about such complicated phenomena. In general, to make their task easier, economists focus on and try to isolate simple causal connections, often between two variables ceteris paribus, or “other things being equal.” “Other things being equal,” what is the 17 THE LANGUAGE OF ECONOMIC ANALYSIS effect of a change in labor costs on the price of tea? “Other things being equal,” how does a change in the price of coffee affect the price of tea? This kind of analysis allows economists to say something very precise about well-defined relationships and to run rigorous tests to measure the strength and direction of their connections. Of course, focusing on just one relationship at a time means other relationships are artificially held constant, so that our analyses necessarily diverge from reality. They are hypothetical. But simplification and abstraction are necessary ingredients of any theoretical enterprise, and a good economist knows the real world is more complex. ECONOMIC MODELS Economic analysis is characterized by the use of models, simplified representations of how economic phenomena work. Supply and demand, cost/benefit analysis, and comparative advantage are examples of basic economic models. A model is a theory rendered in precise, usually mathematical, terms. Economists build models the way curious scientists do: Reduce the phenomenon to its basic elements and recombine these elements so as to produce a model that resembles the original in relevant respects. Take it apart, figure out how it works, then put it back together and see if it goes. Economic models specify relationships between two kinds of variables: exogenous variables and endogenous variables (Gregory N. Mankiw, 1997). Exogenous variables are inputs to the model, factors that influence what happens but are themselves determined “outside” the model. They are givens, fixed values that are assumed not to change over the period of analysis. Endogenous variables are outputs of the model, determined “within.” Usually, a mathematical function is used to represent the relationship between exogenous and endogenous variables. Systems of relationships, in which changes 18 THE LANGUAGE OF ECONOMIC ANALYSIS in one part of the economy have different consequences in others, are often conveniently represented by systems of functions. For example, we can model the market for ice cream in terms of three functions: The quantity of ice cream demanded depends (negatively) on the price of ice cream and (positively) on income (Y): Qd = D(PI, Y) The quantity of ice cream supplied depends (negatively) on the price of milk (because ice cream is made from milk) and on the price of ice cream: Qs = S(PI, PM) In equilibrium, the quantity of ice cream supplied equals the quantity demanded: Qd = Qs In this model, the price of milk and the level of income are exogenous variables; the price of ice cream and the quantity of ice cream exchanged are endogenous variables. By plugging data (exogenous variables) into the model, it is possible to predict the behavior of the endogenous variables, thus generating hypotheses about phenomena that have not yet been observed. Applying basic models allows one to make predictions about the real world economy, both forward-looking predictions about, say, future interest rates and backward-looking predictions about, say, the savings rate during the Depression. Models also provide guidance about where to look for and how to look at data, and they provide a structure on which the rest of the paper can hang. 19 THE LANGUAGE OF ECONOMIC ANALYSIS HYPOTHESIS TESTING A model’s predictions about the future or the past are essentially empirical hypotheses: claims, supported by facts, about how some economic phenomenon works. Most economists, aspiring to be good social scientists, would like to test their hypotheses under laboratory conditions. But this is not ordinarily possible. Instead, we take sample data from the real world, by looking at census reports, balance sheets and the like, and we use statistical methods to test the predictive power of our models and the hypotheses they generate. Most economic data come in, or can be easily transformed into, numerical terms. Prices and quantities are numbers, and economists also attach numerical measurements to factors such as standards of living that do not usually come in quantified form. But a long list of numbers is just that until a relationship among them can be specified that imparts some order. By building and using models, economists are able to focus on simple, sometimes subtle, relationships in the data and explain the causal links involved. Finding the pattern in the data allows one to say something about how the economy works. A set of well-known models can greatly simplify the task of organizing and communicating your ideas. But the real test of a model is how well it helps us understand the workings of the economy. AN EXAMPLE: REGRESSION Say, for instance, you are interested in explaining the causes of inflation. You study the literature and learn about a connection between the level of economic activity and the level of inflation. You formulate a simple hypothesis: Hypothesis: High levels of employment lead to high levels of inflation. 20 THE LANGUAGE OF ECONOMIC ANALYSIS Observations: Monthly employment (X) and inflation rates (Y) in the US from 1980–1995. (Two lists of 12 × 16 = 192 observations.) Regression: Y = a + bX + c. b measures the correlation between X and Y. If b is positive and statistically significant, the hypothesis cannot be rejected. (a is a constant; c is an error term.) In order to run such a regression you will need a fairly large number of observations. Without enough data you may not be able to decide between this and the alternative, or null, hypothesis (i.e., high levels of employment have no relationship to high levels of inflation) by statistical measures alone. In such cases, there may be better ways to do an empirical exercise (e.g., case study; experimental methods). Even with enough data, statistical analyses show correlation, not causation. A model is needed to explain how things work – for instance, how high levels of employment lead to high levels of inflation. IMPROVING THE FIT The fit between a model and reality is never perfect. When the fit is good, we can make better predictions about the future and better understand the past. In the former case, the passage of time will fail to disconfirm the prediction; in the latter case, historical research will match our expectations. As in any science, our theories can really only be disproved. However, when our predictions are correct, the weight we place on our models increases. When our predictions are wrong, we are left either looking for more data or 21 THE LANGUAGE OF ECONOMIC ANALYSIS perhaps a new or revised model. That model may be used to generate new predictions, which can then be confronted with new data, which may again bring disconfirmation of the prediction and suggest a revision of the current model. APPLYING THE TOOLS Most of the writing done in economics involves the application of old models to new data, with the goal of better understanding some real world economic phenomenon. This may or may not involve analyzing a large dataset. This example applies economic tools – namely, game theoretic analysis – to one particular issue, the role of international institutions in the post-Cold War era: The purpose of this paper is to discuss the continuing role of NATO and the likelihood of lasting cooperation among the organization’s member states in a post-Cold War world. Game theory and the study of strategic interactions, although initially devised as a tool for understanding Cold War motives and actions, nevertheless are extremely applicable to a post-Cold War environment. I therefore plan to incorporate several relevant international relations issues into a game theoretical perspective – first to discuss the cooperation that actually occurred in NATO since the 1940s, and then to explain why similar cooperation may be unlikely among security-based regimes after the collapse of the Soviet Union. Another kind of writing, the theory paper, involves criticizing the models we use and proposing better ones. The goal of the theory paper is to improve the conceptual underpinnings of the particular 22 THE LANGUAGE OF ECONOMIC ANALYSIS analytical tools we use to understand the actual economy. This may be a better model of how firms behave in uncertain market conditions, or a new way to measure the level of national economic activity, or a synthesis of existing theories to produce a new, more general theory. Because all economic models are crude approximations of a complex world, it is necessary to assess just how crude the approximations are before we can say which model better fits the data. Interpreting statistics and determining what can and cannot be reliably inferred given the observations available requires knowledge of economic theory as well as a healthy dose of mathematics. Mathematical logic is also used to build new models, both to formalize the logical structure of the model and to test for its coherence and internal consistency. The mathematics of model building does not involve numbers, but it does specify quantities (quantifiers) and uses well-defined operators to combine (sets of ) propositions. Economic theory was not always so mathematical. And the mathematization of economic theory has had costs as well as benefits. The benefits are that, in many cases, more can be said quickly and precisely, because mathematics is a powerful language and convenient shorthand. The cost is that not all relevant phenomena are easily cast in mathematical terms or can be only crudely captured mathematically. Another cost is that economic theory becomes somewhat less accessible to students and to the world at large, in which public policy debates are conducted. 23 Chapter 3 Finding and researching your topic LIST OF SUB-TOPICS ■ ■ ■ ■ Finding a topic for a term paper Finding and using sources Doing a periodical search Taking and organizing notes Economists view the world through the lens of efficiency, starting from the assumption that individuals behave rationally and focusing on the problem of allocating scarce resources. From this common analytical perspective, economists study a wide range of topics, involving the behavior of individuals, organizations, and nations. The economic approach can be applied so broadly that choosing a topic to write on can be difficult. Indeed, once you start looking at the world through the eyes of an economist, almost anything can be analyzed in terms of choice under constraint. Your own research has to meet the terms of the assignment as well as the time and other constraints you face. You may need to read books and journal articles in the library or pore over data sets on a computer. In either case, you will need a topic before you can begin. If your instructor gives you a list of topics, a review of related 25 FINDING AND RESEARCHING YOUR TOPIC research may help you choose among them. If the research question is entirely up to you, a literature search is often not the best way to begin. Immersing yourself in the literature before you have found a topic may convince you that all the interesting questions have already been tackled. At the very least, literature searches should be guided by very general topic ideas. FINDING A TOPIC FOR A TERM PAPER Though there is no one way to find a topic, thinking of the issues that interest you is a great place to begin. While the range of possible topics is large, there are some well-defined fields in economics, and your own interests are likely to fit into one of these (see Appendix A for an annotated list of fields). Course materials, textbooks, handouts, and so on are obvious and convenient places to look, especially since your topic will most likely have to pertain to the course subject. But reading the newspaper and keeping an eye on current events can be even more helpful. Once you have a general idea, you should go to the literature and see how economists have tried thinking about it. For example, say your interest is piqued by recent shootings in both schools and workplaces. What role has the availability of guns played in these events? What are the effects of banning guns? Implementing tougher gun control laws? Though this might initially strike you as a government or law project, many of the underlying issues are fundamentally economic – gun control measures explicitly place limits on supply and attempt to put guns in disfavor or reduce demand. Once you have identified guns and gun control as an area of interest, do your literature search (more on this later). Pick out the relevant articles and scour them for content as well as for additional sources. Try to narrow down your topic. Have the authors pointed out any future research areas? Are there any issues that you think have not been fully addressed? 26 FINDING AND RESEARCHING YOUR TOPIC In addition to finding something that interests you, you will also need a project that can be done within the parameters of the assignment (for example, length, due date, access to research materials). If the topic does not interest you, you probably will not put in the effort needed to do a good job or ask the right questions along the way. On the other hand, a profoundly interesting topic may not be manageable given the time and other constraints that you face. As another example, say you are interested in the stock market and want to know what determines stock prices. From basic economic theory, you know that prices are determined by supply and demand, but what specific relationships do you need to study and what data do you need to gather? You think about it for a while and realize there are many parts to your question. What determines the price of a particular company’s stock is a different question from what determines the level of stock prices in general (as measured by Dow Jones or another index), though the two may be related. And what determined stock prices yesterday might be different from what explains changes in stock prices in the future. Each of these questions could be the subject of an interesting paper. Your original topic was overly broad; you should focus on a single, manageable question. Get started on your research even if you do not have a precise topic; it will evolve along the way. The question you begin with may become less interesting, and something new may draw your attention. You may be persuaded by an argument you encounter or find data that pose a problem you had not considered. You may find no data on one topic and a goldmine on another. Shaping your topic in this way is perfectly fine, but do not get trapped in an endless maze of new, or just slightly revised, topics. You want your search to converge on a manageable topic in a reasonable amount of time. Find a question you can answer and begin your work. 27 FINDING AND RESEARCHING YOUR TOPIC FINDING AND USING SOURCES All academic writing involves the use of source materials. Archaeologists look in the ground for artifacts, about which volumes of research may subsequently appear. Biologists look through microscopes and write up the laboratory experiments they perform. Historians study documents; sociologists interview subjects . . . Economic research typically begins with a (large) set of numerical data – say, a list of per capita incomes for every country in the United Nations or the history of daily closing prices for shares of XYZ Corporation over the last year. In these long lists of numbers, economists look for patterns, or regularities, that reveal some underlying relationship between economic variables and help explain how some part of the economy works. A data set could include hundreds or thousands of entries; thus, statistical tools are used to summarize this information and ease your job of communicating with your audience. The mean of a large set of numbers conveys important information in a compact form. Knowing the standard deviation and other statistical measures can also be helpful when describing the population under investigation and presenting the results of your research. Economic sources come in two types. The first is empirical data: facts about the real world that come in, or can be easily converted into, numerical form (for example, prices, quantities, income levels). The second is academic literature: books or articles that you read in the library that can help you organize your ideas and make sense of the heaps of data you have accumulated. In general you will not have the time or resources to go into the field and compile your own data – administer questionnaires, study individual balance sheets, budgets, etc. Instead, you will rely on others to collect your data, including other economists as well as demographers, auditors, and “official” statisticians. These data are compiled in a number of standard secondary sources, such as the Economic Report of the President and the Statistical Abstract of the United 28 FINDING AND RESEARCHING YOUR TOPIC States. These volumes and others (see Appendix B2) contain detailed information on public and private spending, wage and tax rates, and work force size and education levels, as well as other information grouped by states, industries, and nations. Economists frequently begin their research with these sources; they will either point you to the proper primary source or contain the precise data you need for your paper. You will also want to look at academic journals and other scholarly literature on your topic. Using scholarly sources will allow you to invoke the authority of experts in the field to sanction your analysis or to establish the point of departure for your own original contribution. You need to become familiar with what others have thought and written so that you can communicate your findings in terms your audience will recognize. Perhaps you will apply a standard model found in the literature to new evidence or compare two models and see which does a better job explaining the data you have found. These works will also point you to additional sources. Bibliographies, citations, and footnotes may reveal a single, seminal forerunner. Read it. If you come across a “review” or “survey” article, you have hit the jackpot. It will contain an authoritatively complete summary of the literature in the field. DOING A PERIODICAL SEARCH Periodical literature was once indexed in cumbersome hardbound volumes. Nowadays, there are a number of very useful electronic indices available on-line and updated frequently. Most are publicly available on the Internet, although some reside on your institution’s proprietary system. Appendix C describes those sources that are used most frequently by economists. Depending on the service you are using, your search can be very deep, including title, author, and subject as well as abstracts, tables 29 FINDING AND RESEARCHING YOUR TOPIC of contents, and related topic fields. This makes electronic searching far more powerful than anything that could be done just a few years ago. Once you find a relevant article, look at the abstract. Check a few more items and retrieve from the shelves whatever looks interesting and useful. TAKING AND ORGANIZING NOTES The books, articles, charts, and tables strewn before you are the objects of your research, the evidence you will marshal to support your argument. Your first encounter with your sources should be carefully recorded: you should document your findings and give proper credit to the sources you use. First, take down the complete bibliographic record: Author(s) (or Editor(s)). Title. Journal. Volume. Date. Pages. Number. For the Goldin and Katz (1996) example used in Chapter 1, your notes would look as follows: Goldin, Claudia and Katz, Lawrence F. “Technology, Skill and the Wage Structure: Insights from the Past.” American Economic Review, 86 (2). May 1996. Pp. 252–257. 30 FINDING AND RESEARCHING YOUR TOPIC Keep a file of notes on each article you read. This should include the main points of the article and any important results. Make sure to clearly set off direct quotations by using quotation marks. Avoid paraphrasing, because it will be difficult to separate the original wording from your own later on. You can add your own comments afterwards, but it is important to keep an accurate record of your first encounter with the source. Taking good notes will accomplish several things. First, you will have all your references at hand when you are writing the paper, so you will not have to go searching for a quote or chart when you are in your dorm room and the article you need is in the library. Second, you will leave a clear record for your readers to follow, so that they can go to the originals for more information or to see the facts for themselves. Finally, you will leave signposts for yourself so that you can know where you have been and separate your own ideas and results from those you found in your sources. This will help you avoid plagiarizing, which can happen inadvertently as your own ideas blur into what you have “learned” from others. The unacknowledged use of another writer’s words or ideas is plagiarism, whether intended or not. Poor note taking and sloppy documentation mechanics can lead to plagiarism, but such mistakes are easy to correct and avoid. Start taking notes right away. A word processor can make things easier, but even if you use pen and paper, try to develop good notetaking habits from the outset. Create a note file for each source you find. Group your notes by topic, alphabetically, chronologically, or otherwise. As you organize them, add comments and summaries, pick out important themes, and focus on issues for further research. These notes should help motivate your project by shaping the analytical model used and, through your summaries, form the beginnings of a good literature review. 31 Chapter 4 The term paper LIST OF SUB-TOPICS ■ ■ ■ ■ ■ Outlining your paper Writing your literature review Presenting your hypothesis Presenting your results Discussing your results You have chosen your topic, done your research, and settled on your ideas, and now you have to write the paper. If you have done your job properly up to now, you should have a topic, some data, and plenty of notes on things you have read. Now your task is to decide how to focus your question and ideas, assemble the pieces into a structure that hangs together, and present an argument others will find persuasive. Remember: writing is a process. Start with a few lines, perhaps just section headings, and then build up detail and flesh out your analysis. The key to the process is not to become too rigid too soon. While you want enough structure to get started, you also want to allow the overall shape of your paper to evolve somewhat along the way. 33 THE TERM PAPER OUTLINING YOUR PAPER The outline for your term paper is the agenda you set for the things you want to accomplish. A good term paper will ask an interesting question and offer a plausible answer. It should be plausible in that it is (probably) true, but also not obviously or patently true; and it should be supportable in that it is subject to factual observation or logical demonstration (Gordon Harvey, Harvard Writing Program). No matter what your field or topic, there is a fairly standard set of things you want to accomplish in the paper: INTRODUCTION pose an interesting question or problem LITERATURE REVIEW survey the literature on your topic METHODS/DATA formulate your hypothesis and describe your data RESULTS present your results with the help of graphs and charts DISCUSSION critique your method and/or discuss any policy implications CONCLUSIONS summarize what you have done; pose questions for further research Not every assignment will require all of these parts, but your term paper will impress your reader if you have done a good job on most of them. You might want to write the introduction and conclusions after you have completed the body of the paper. Few 34 THE TERM PAPER points are given for subtlety or surprise. You should prepare your audience for what you are going to do, then do it, then summarize what you have done. WRITING YOUR LITERATURE REVIEW Depending on your assignment, preparing a literature review might entail an exhaustive library search or referencing the single paper your instructor has assigned. You should have notes, either on index cards or in files on your computer, on the books and articles you have read. Read over your summaries and comments and begin to look for common themes that can organize your review. What is the main point of the article, and how does it relate to your topic? Do other authors offer a similar position? An opposing one? As you think through these questions, keep in mind that the literature review has two functions. The first is simply to demonstrate your familiarity with scholarly work on your topic – to provide a survey of what you have read, trace the development of important themes, and draw out any tensions in prior research. The second function is to lay the foundations for your paper, to provide motivation. The particular issues you intend to raise, the terms you will employ, and the approach you will take should be defined with reference to previous scholarly works. By drawing on such sources, you can find sanction for your own approach and invoke the authority of those who have written on the topic before you. In some instances, these two functions will pull in opposite directions: the first toward including as many sources as possible, the second toward selecting only those that are useful for your argument. In any case, more research is better than less, and a summary is always selective, insofar as only some things can be included and others left out. The selections you make will necessarily reflect your own interests and, hopefully, lead the reader to take an interest in the argument you will present. 35 WRITING ECONOMICALLY FOR EXAMPLE Martin Feldstein begins his article, “Social Security, Induced Retirement, and Aggregate Capital Accumulation” (1974), with a discussion of the development of economists’ thinking on lifetime savings patterns. He starts with a famous early work in the field: Ever since Harrod’s (1948) discussion of “hump savings,” economists have recognized the importance of saving during working years for consumption during retirement (p. 906). “Hump-savings” refers to the shape of an individual’s savings curve over time: low at the beginning, higher in the middle, lower at the end. This basic model is used throughout the paper and holds together all that follows. Feldstein cites a number of authors who have observed this regularity in empirical data on personal savings patterns as confirmation of the model. He goes on to argue that while the “hump-savings” model works well to explain most of the observed data, the effect of certain government policies on individual savings has never been measured empirically. In particular, he poses the question: What is the effect of social security on individuals’ lifetime savings? He then cites the work of three other authors as well as his own earlier work as examples of this neglect. In this way, Feldstein presents his current research as a necessary development out of well established research program, the next question to ask on a line stemming from important ancestors to contemporary scholarly research. The reader is thus prepared for the empirical analysis that follows, 36 WRITING ECONOMICALLY which shows that “social security depresses personal savings by 30–50 percent” (Martin Feldstein, 1974). PRESENTING YOUR HYPOTHESIS The literature review sets out the issues that motivate your paper and demonstrates your familiarity with what others have written on the topic. The next step is to formulate a specific questions, problem, or conjecture, and to describe the approach you will take to answer, solve, or test it. Often, this will take the form of an empirical hypothesis: “social security depresses personal savings”; “high levels of employment are related to high levels of inflation,” etc. An empirical hypothesis makes a claim about how some part of the economy works and can be assessed by analyzing the relevant data. In presenting your hypothesis, you need to discuss the data set you are using and, in most cases, the type of regression you will run. You should say where you found the data, and use a table, graph, or simple statistics to summarize them. You should explain how the data relate to your hypothesis and note any problems they pose. If you have only a small set of observations, or have to use proxies for data you cannot directly observe, you should explicitly acknowledge this. FOR EXAMPLE In “Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?,” Brigitte Madrian (1994) writes: 37 THE TERM PAPER To study the phenomenon of job-lock, one would like information on individual and family health status, worker mobility, and the health insurance plans of both the firm for which and individual works and to which one could move. Unfortunately, information on health status and health insurance is not widely available in labor force surveys, information on worker mobility is not typically available in health surveys, and information on insurance plans of companies for which an individual could have worked is nonexistent. Madrian goes on to offer an alternative method to study joblock by looking at two groups of workers who are similar in all respects but one: one group has employer provided health insurance and the other does not. She then measures the number of times the workers change jobs and observes a significant negative relationship between employment-based health insurance and job turnover. Madrian is careful not to jump to a hasty conclusion, noting that this correlation is not itself conclusive evidence of job-lock. Employers that provide health insurance often provide other benefits that will affect mobility. In addition, unobserved characteristics of workers’ health status may independently affect job sorting and mobility because workers with preexisting conditions may have a harder time getting new health insurance. Still, Madrian’s careful analysis controls for as many factors as possible and allows her to conclude: “that there is substantial health insurance-related job-lock.” In a term paper, it may not be possible to reach conclusive empirical results. You may have incomplete data, or your regression coefficients may not be significant, or you may not have controlled 38 THE TERM PAPER for significantly all the factors involved. It is better to acknowledge these shortcomings than to make overly broad and unsupported statements. PRESENTING YOUR RESULTS by Christopher Foote One of the more common mistakes made by authors of economic papers is to forget that their results need to be written up as carefully and clearly as any other part of the paper. There are essentially two decisions to make. First, how many empirical results should be presented? Second, how should these results be described in the text? How many results should I report? Less is usually more. A common mistake made by virtually all novice researchers (including graduate students) is to include every parameter estimate from every regression specification that was run. Such a “kitchen sink” approach is usually taken to show the world that the researcher has been careful and done a lot of work and that the main results of the paper are not sensitive to the choice of sample period, minor changes in the list of regressors, etc. However, pages of parameter estimates usually muddy the message of the paper. The reader will get either lost or bored. A good general rule is to present only those parameter estimates that speak directly to your topic. FOR EXAMPLE Suppose you are writing about the effect of education on wages. Your main regression places an individual’s wage on the 39 THE TERM PAPER left-hand side and regressors such as education, race, gender, seniority at the individual’s job, labor market experience, and state of residence on the right hand side. You believe that the regressor of interest (education) is correlated with the error term of the wage equation – more “able” people earn more at their jobs, i.e. have a high residual in the wage equation, and also obtain more education. Because of this correlation between the error term and education, the measured effect of education in the regression will reflect not only the true causal effect of education on wages but also some of the effect of ability on wages. To circumvent this “ability bias” you use a separate measure as a proxy for ability. Though such a proxy is probably not available, assume for the sake of exposition that a special dataset contains an individual’s evaluation by his or her second grade teacher. When presenting your results you want to focus only on the estimates of the education effect and the ability effect. Your table might look something like this: Table I OLS estimates of the effect of education on wagesdependent variable: log of yearly earnings 1985–1995 (1) Years of education (2) (3) (4) (0.091 (0.031 (0.086 (0.027 (0.001) (0.003) (0.002) (0.005) Ability dummy (0.251 (0.010) State dummies included? No No. of obs. 35,001 35,001 19,505 19,505 No. of persons Adj. R 40 2 No (0.301 (0.010) Yes Yes 5,505 5,505 4,590 4,590 0.50 0.55 0.76 0.79 THE TERM PAPER Notes: Standard errors are in parentheses. Data are from the Tennessee Second Grade Ability Survey and Wage Follow-up, and include individuals evaluated between 1962 and 1971. The “ability dummy” equals one if the individual’s second grade teacher classified the individual as “able,” zero otherwise. Each regression also includes yearly dummies, 10 one-digit industry and 20 Census-defined occupation dummies, labor market experience (defined as age –6), experience squared, seniority on the current job, seniority squared, Census region of current residence, marital status, race, gender, and a dummy variable denoting whether the individual lives in a city of more than 100,000 persons. Columns (3) and (4) have fewer observations because state of residence is not available for some individuals. Note that Table I does not present the parameter estimates of your control variables, regressors such as marital status and seniority, but presents any detail that helps interpret the parameters of interest (including the identification of the dependent variable, which is annoyingly left off of many tables). For example, explain how you define labor market experience as well as why the third and fourth regressions have fewer observations than the first and second regressions. The notes to your table should be extensive enough so that the reader does not have to look back at the text to understand what is being presented. The cardinal sin, to be avoided at all costs, is to report your estimates in terms of “α” or “β” (the actual Greek letters from your equations) without stating what these coefficients mean. Using eight-letter abbreviations from your Stata or SAS program (YEDUCT1 or ABIL25A) is not much better. Do not worry about repeating yourself in the text and the notes – this will often be necessary so the reader can understand your table without looking back at the text. You should present enough information in total so that a researcher could replicate your results. For very detailed projects, this may require a data appendix. Finally, the notes to the table should indicate whether you are reporting standard errors or t-statistics in the 41 THE TERM PAPER parentheses underneath the coefficients. Both are seen in the literature, so you must be clear which you are using. As a general rule, it is better to report standard errors. That way, your readers can more easily choose the statistical method they would like to use in evaluating your numbers. After presenting these results you may want to discuss any additional robustness checks that you performed. The third and fourth columns of Table I are robustness checks of sorts; they show that the effect of including ability in the regression is the same whether or not we include state level dummy variables. We may also have checked whether the estimate of the education effect is lower when ability is included, if we subset only on male household heads or if we restrict the sample to the 1990s. Sometimes all that is necessary is to let the reader know in the text that you performed these tests and that the main results were unaffected. For a single robustness check, this information can even appear in a footnote keyed to the relevant po...
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Running head: ECONOMICS WRITING

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Writing and Presenting an Economics Paper
Student Name:
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ECONOMICS WRITING

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Getting started is often the hardest part of writing. As such, writers are encouraged to spend
a sufficient amount of time in research (Neugeboren, 2005). The three main stages of research
involve; gaining a broad overview of the study topic, reviewing the literature of the topic, and
updating the relevant statistics required in building the paper. For example, is a writer is interested
in the subject of economic growth, ample time should be spent on research to ensure that the right
topic is selected.
Upon completion of research and identifying the research topic, a writer is required to
engage in a proper organization to create an efficient outline of the paper (Cochrane, 2005;
Neugeboren, 2005). Economists often organize thei...


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