From the hub of the universe comes an initiative to identify `the world‟s hardest unsolved problems in economics, psychology, government, sociology, and other social sciences.’ A starting list was generated by the usual roster of `big thinkers’. It is a sign of how late in the day it is that pygmies cast giant shadows.
It brought to mind the moon-ghetto metaphor from the late sixties: if we can put a man on the moon, why can’t we solve the problems of the ghetto (sounds better with elvis playing in the background). Putting a man on the moon is a well defined problem in that we all agree on what constitutes a solution. Admittedly there are some details to be filled in. For example, does the man have to be alive and does he need to be returned as such to Earth? The `problem of the ghetto’ is a different kettle of fish. What exactly is the problem? Are there many or one? What constitutes a solution? As I sometimes say to students and colleagues interested in economics: there are no open problems in economics only issues.
Nevertheless, one can’t resist idle speculation. Designing the financial system to resist crashes? Nah. Voltaire’s observations on the occassion of Admiral Byng’s execution applies:
Dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres.
A little blood-letting now and then is a good thing. Perhaps rather than resist crashes, limit the damage or make them more resilient.
Alvaro Sandroni suggested the following:
How can genocide be prevented? What are the best ways to minimize the odds of ecological disasters? How can chronic malnutrition be eradicated?
Worthy goals. Condign measures and letting nature take its course?
I like the suggestion of my colleague Tim Feddersen best, since it gets, I think, to the heart of the matter.
How should values conflicts be resolved? Economics can suggest good mechanisms when a value is specified and some mechanisms work well for a wide variety of values but when values conflict economics is silent. Now, perhaps, one can argue that the problem is unsolvable. But then we must confront the fact that all of us as individuals and collectively “solve” such problems regularly.
The Leisure of the Theory Class 
10 comments
April 24, 2010 at 12:22 pm
the really hard problems « orgtheory.net
[…] Facebook page lets readers offer their own problems. Some of my colleagues at Kellogg suggested a few additions to the list. Does organizational theory have any hard problems of its own? Even if the problems are […]
April 24, 2010 at 1:38 pm
Paul Goldberg
I took a look at the poll page (where, fortunately, the social questions are summarized in text, so you don’t have to watch the videos). I recall a related question which does not seem to appear on their list:
Why do we tolerate unfairness? Specifically, with regard to very uneven distribution of money. In England, when we address this issue, the commentator focuses on the impact of family wealth on a child’s educational attainment. Why do we not also worry about the fact the good-looking people earn more than ugly people?
April 24, 2010 at 2:18 pm
Tweets that mention Great Unsolved Problems « The Leisure of the Theory Class -- Topsy.com
[…] This post was mentioned on Twitter by Midas Oracle, Lance Fortnow. Lance Fortnow said: Rakesh Vohra: There are no open problems in economics only issues. http://bit.ly/a6MGyj […]
April 24, 2010 at 11:04 pm
Confused economist
1. Bankrupcy may be good for incentives if poor performance is a signal of agent’s low effort. A financial crash is an aggregate event not a signal of individual being lazy. Insuring risk averse agents against acts of god improves incentives. So, preventing crashes is a good idea.
2. Your colleague Feddersen appears to be a political scientist. What is he talking about? Economics having nothing to say beyond Pareto efficiency? If that is the case, there is no puzzle: there is no consensus normative solution but this does not contradict the positive fact that decisions get made – players with power makes them and imposes them on others.
Incidentally, “values conflict” sounds like waffle for MBA students. And your writing style signals you want to belong to the “hub” – but perhaps the hub also has research standards you can’t meet?
May 3, 2010 at 11:53 am
T Feddersen
To confused economist. If one gives an economist an objective and asks for advice she may provide it. However, if one gives the economist two conflicting objectives (i.e., a values conflict) and asks for advice she may respond by talking about “trade-offs” or, in the best case, reveals that there isn’t any real conflict at all. But, if the conflict is real and I still require advice the economist is silent or sends me to a psychiatrist. At any rate, after my options for consultations with social scientists are exhausted I end up making a choice. At that point the economist typically exclaims: “oh, if you had only told me that was your objective I would have told you to do that in the first place!”
May 3, 2010 at 8:10 pm
tfeddersen
Ricky,
An interesting distinction between problems and issues. Care to elaborate?
TF
May 4, 2010 at 10:59 am
Rakesh Vohra
Confused Economist (CE) makes three points. The first is that:
“A financial crash is an aggregate event not a signal of individual being lazy.”
I’m interpret this to mean that crashes are exogenous shocks to the system. I’m sure this is not what CE intended. So, will wait for clarification.
The second, about values, I think makes the point that resolving values conflicts are interesting. If one interprets values as being preferences (as CE suggests), then deviations from the status quo that are not pareto improving cannot be achieved except by force. If so, there are no hardest unsolved problems. All problems are resolved in favor of the side with the big battalions. This is certainly a logically consistent view, but it relies on the assumption that values means preferences. I am doubtful that others see it this way. When autarks east of Aden claim that Western values are ill suited for their climates, I don’t think they use values in the sense of preferences. Indeed, Sen (I know, I invoke reverent authority, Bacon would turn in his grave) has a discussion of just this issue in chapter 2 of his `On Ethics and Economics’.
Third point, the gap between my aspirations and abilities. Sigh! I know growing up is all about coming to terms with ones mediocrity, but I’m not there yet. I have some more growing to do.
May 4, 2010 at 11:12 am
Rakesh Vohra
TF asks for some clarification on the `distinction between problems and issues.’ Perhaps an example will do the trick. Bounded rationality. It is not a problem in the sense that I could state it precisely and identify what would constitute a solution. However, trying to understand it and its implications is an important goal of economic theory (but not exclusively).
What are the challenges? We believe there are limits to rationality, but these limits seem to take different forms depending on the context. For example, does bounded rationality mean limited recall? Does it mean systematic errors in inference? Does it mean limited look ahead ability? Is bounded rationality the same as unawareness?
Take even one of the more well known notions, satisficing. What does this mean? Looking for things that are `good enough’. Does this mean there is a higher level tradeoff taking place that we the modeler are unaware of? If so, perhaps what we perceive as being suboptimal is optimal in a larger context. Does it mean optimization with constraints? However, adding constraints can frequently make a problem harder. In what sense then is the agent boundedly rational?
In short, with bounded rationality we are at the stage of just trying to frame the problem in a way that sufficiently many will find compelling. The really interesting and challenging questions in Economics, I think are of this variety. I think the word `issues’ better describes what is going on then `problems’.
May 4, 2010 at 8:53 pm
tfeddersen
Ricky’s comment about the example of bounded rationality makes me wonder if a there is a more general way to formulate my candidate hardest “problem”. Let me try again.
What advice should be given to the unfortunate soul who finds him or herself having to make an important decision in the face of true uncertainty? I.e., the soul who knows that there are known knowns, known unknowns and unknown unknowns.
I think this reformulation captures both my original problem of handling values conflicts and Ricky’s issue of bounded rationality.
In the case of a values conflict the individual faces uncertainty about what ends should be desired. In the case of bounded rationality the individual faces uncertainty about the means that will produce the desired ends.
In reality we often face both kinds of uncertainty and yet we somehow manage to not only muddle through but some even prosper.
November 23, 2010 at 4:05 pm
Big, Unsolved Problems in Economics « Kvams
[…] Unsolved Problems in Economics By kvams Earlier this year, experts gathered at the hub of the universe (which is Harvard, it seems) to suggest and debate the big, unsolved problems in the social […]