Unsolved Questions In Economics

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Marianna

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Aug 4, 2024, 3:47:38 PM8/4/24

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Thisis a list of some of the major unsolved problems, puzzles, or questions in economics. Some of these are theoretical in origin and some of them concern the inability of orthodox economic theory to explain an empirical observation.

But anyway, I have been thinking about focusing my studies on mechanism design (MD) but it would be a lot better if I had some tangible theoretical topic/question towards which I could move. Something like: "prove this and you'll make yourself useful".

I guess I have a nave attitude but really, how does one go about finding a good topic? Are there any in MD? And is it like that in every science or is economics "unique" (much like in allowing several competing theories to exist at the same time)?

(I don't count macro in, mostly because I am not very confident in that area. Finance does have some unsolved problems but then again: -Why do companies pay dividends if they are tax disadvantaged? -Signalling! Ou yeah...)

Very serious answer: I do not think you are material for an economist. There are lists of unsolved problems in mathematics and mathematicians excel in solving problems that somebody else posed for them; that's their job description.

In economics, you have to figure out what an interesting question is. It is a skill which is separate from IQ or mathematical ability. There are many examples of good mathematicians who failed as economists (just think of every student out there who sailed through first year and fizzled doing research).

So you are saying it is too much do demand unsolved problems in a serious science? And who decides what is an interesting question? I don't deny the fact that for a truly great ideas you need imagination but I personally like to keep my aspirations low...

I don't know anything about mechanism design but there are problems that everyone recognizes need to be addressed, such as

Equity premium puzzle

Micro-Macro labor elasticity disagreements

What are/causes/sustains/repairs recessions

Curse of dimensionality in Dyn.Prg. (probably not fixable)

and so on....

But really, economics hasn't been around long enough to map out what *all* the essential questions are, so this takes some intuition. I think it ought to be clear to you whether you are looking at an interesting question or not. Nobody decides it, it's a matter of the opinion of the community when they see it.

There are 100s.

Hint: Look at literatures that were huge in the past and reasons why they stopped. People still care about the same core issues in theory, the usual reason is that we were unable to reach satisfactory answers.

.Characterization of equilibria in repeated auctions

.Sufficient and necessary conditions ON PRIMITIVES for existence of market equilibria with indivisible goods

.Optimal mechanisms with multiple objects and realistic assumptions

.Universal recursive axiomatization of Nash equilibrium/rationalizability (SARP for games)

.Decision theoretic foundations for adaptive heuristics

.Existence of equilibria in Blotto games, multi-unit auctions, ...

.The role of ex-ante communication in collusion (repeated games)

This this this. As well as being a difficult theory problem, it has ENORMOUS practical application in the antitrust world. Whoever really nails this will win a Nobel (maybe) AND go ka-ching! as an antitrust consultant at $20k for a quick chat on the phone (very definitely)

Women are underrepresented at all levels within the discipline, a fact that has persisted for decades. Studies documenting the gender gap in introductory courses consistently place the female enrolment at less than 50%, with many documenting percentages between 40% and 45%, across all institution types in the United States (see, e.g., Rask and Tiefenthaler 2008; Main and Ost 2014; Emerson and McGoldrick 2019). The gender disparity grows by graduation, with the percentage of bachelor degrees awarded in the United States to females peaking at 35% in 2003 and then falling below 30% for most institutional categories thereafter (Bayer and Wilcox 2019; Siegfried 2021).

Female enrolment in degree-granting post-secondary institutions climbed above 50% in 1979 and has been steadily increasing since. Most recently available figures place female enrolment in 2020 at 58.6%.3 Despite their growing presence in colleges and universities, female students neither enrol in introductory economics courses at the same rate nor has the growth pattern of their enrolment mirrored that of institutional enrolment figures. Reported enrolment percentages of female students in introductory economics courses are below 50%, consistent over time and by institution type. For example, several studies suggest that the percentage of females ranges from 44% to 49% at research institutions (Elzinga and Melaugh 2009; Main and Ost 2014; Owen 2010), 40% at large schools with engineering programs (Emerson and McGoldrick 2019), 43% at mid-sized state schools (Hadsell 2020), 46% at liberal arts colleges (Rask and Tiefenthaler 2008), and 47% at Canadian institutions (Anderson, Benjamin and Fuss 1994).

In one of the few multi-institution studies, Emerson, McGoldrick and Mumford (2012) identify patterns based on 587,991 students at 11 engineering schools.4 Similar to other studies, 49% of male students took an introductory economics course versus 38% of female students. Of those who took introductory economics, 2.7% of males and 1.9% of females took an intermediate course. However, the gender differential reverses at graduation. About 20% of males and 23.3% of females that took the introductory course ultimately graduated with an economics major.5

In this section we outline primary reasons given for the gender gap based on the current research. As will become clear, no single reason dominates and any approach to closing the gap will have to take this into account.

It would be nave to think that broader gender issues within the profession are not related to why we fail to see more women in our classrooms. Some issues are obvious: a dearth of female faculty means few female role models. Other issues may be less obvious. For example, it may be that the aggressive or competitive environment that economists bring to seminars and other settings translate to how they conduct their classrooms.

Graduate school is a trying time for most students, but research suggests it is even more so for female students. Colander and Holmes (2007), using data from 231 graduate students at seven elite PhD programs, report that over half of female graduate students, compared to a quarter of male students, find the coursework to be very stressful, and female graduate students are 23 percentage points less likely to choose to attend graduate school if they were currently making that decision.6

The principles class is the gateway class to economics, which explains why it attracts attention when discussing issues of diversity within the profession. Yet, there is evidence that female students arrive on college campus less interested in economics. Tonin and Wahba (2015) use data from the UK to analyze a 50% random sample of all college applications in 2008. They find that female applicants are less likely to apply for a degree in economics. This result holds even for females satisfying the math requirements to apply to economics. This suggests that, to close the gap in economics, work must be done to enhance interest prior to their arrival on campus. This matters because initial major matters. Owen and Hagstrom (2021) find that students at a liberal arts school expressing an interest in majoring in economics at the time of admission are 36 percentage points more likely to express interest after a second economics course. Similarly, Ahlstrom and Asarta (2019) find that male and female students with a declared economics major at the time they entered the institution were more likely to persist to the second introductory course (macroeconomics) and those having a declared economics major at introductory macroeconomics were more likely to take intermediate microeconomics.

Economics seminars and graduate education, as previously noted, can be viewed as competitive and aggressive. If this culture permeates the undergraduate classroom, then students on the margin may feel even more marginalized. In our discussion of belonging below, we will see that it is not uncommon for female students to feel less like they belong. One way to counter this is to purposefully create a cooperative classroom environment by employing team-based and other cooperative learning approaches. Espey (2018) analyzes 114 teams with almost 700 students in 17 introductory microeconomics classes. She introduces team-based learning and finds that the level of cooperation within teams improves the performance of female students and has no measurable effect on the performance of male students.

What do these differences mean for the economics major? Goldin (2015) finds that math aptitude does not appear to explain differences in major choice. As previously noted, Tonin and Wahba (2015) find that female students with a needed math requirement were still less likely to choose an economics major, suggesting it is not math that is keeping them out. Emerson, McGoldrick and Siegfried (2018) find that a one-semester calculus requirement for economics majors increases the number of female students, but a two-semester requirement has the opposite effect at PhD-granting universities while still attracting more female majors at liberal arts colleges. However, Ahlstrom and Asarta (2019) report that, conditional on having completed intermediate microeconomics, male students with higher SAT math scores have a greater likelihood of securing a Bachelor of Science (BS) in economics and a lower probability of minoring in economics. Higher SAT math scores for females decrease their likelihood of graduating with a Bachelor of Arts (BA) in economics.