Summers, Gender Discrimination, and Bad Economics

Okay, so being sick means I missed the bulk of the Summers fiasco over the last couple of days. However, in catching up on the blogosphere’s reaction I came across this post. According to Fred Vincy the problem with Summer’s economic argument is as follows,

Let’s see if I follow that reasoning. Widespread discrimination against women in the sciences cannot exist, because economic theory says it would be inefficient, and someone would exploit those inefficiencies, making it go away. That’s a familiar theory that you’ll hear from someone who’s finished Econ. 101 and now understands everything, but it’s not what you’d expect from the President of Harvard. The problem with that theory is that, if you believe it, it would prove that there’s never been discrimination against anyone, anywhere, which is clearly not the case, and as I understand economics you have to change your theory when it doesn’t explain the data. [emphasis in the original]

Normally I’d side with Mr. Vincy here. Yes, when your theory cannot explain the data you need to re-think your theory, and maybe even chuck the whole thing and start over again. But there is one thing that Mr. Vincy is missing here. Economic systems do not operate in a vaccuum. Economic systems almost always operate inside a legal framework (as well as cutural frameworks). Sure there was discrimination such as in the Jim Crow south. But there were also laws the prevented people from not engaging in segregation. Is this significant? I think so and for precisely the reason Mr. Vincy notes, without the laws there are profitable transactions that are not being taken advantage of, and a smart individual more interested in making a buck than in segregation would engage in those transactions.

Currently, as far as I know there are no laws anywhere that make gender discrimination permissable. So to conclude today the economic pressure would not reduce discrimination may not be the right answer. Ignoring the institutional situation can lead one to erroneously rejectg a theory. Granted not all instances of discrimination may be attributable to legal institutions, but you don’t reject a hypothesis simply because it offends your political world view.

For more on the biology check out this post at Gene Expression. This one in particular with images of the differences in the male and femal brain is particularly good. Also there is this post by Moebius Stripper at Tall Dark and Mysterious, and her reply to a commenter.

FILED UNDER: Economics and Business, Gender Issues
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.


  1. Stone Court says:

    Assume A Can Opener, Part II
    Steven Verdon of Outside the Beltway responds to my initial post about Lawrence Summers…. The first point of all of this is that the economic theory relied upon by Summers is a very poor fit to many real world markets — and that markets like that …