Editor's introduction - Brief Article

American Journal of Economics and Sociology, The,  July, 2002  

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In this July issue of the AJES we offer as our Remembrance and Appreciation feature a stimulating collection of personal remembrances and analytic essays about the important 20th-century Nobel laureate George J. Stigler.

Stigler's variant of Chicago School economics called for an empirical investigation of how people actually behave and not how they "proclaimed" that they behave. The economist who concludes that some democracy made a "mistake" because the means chosen by that political system were inconsistent with the intended outcome is really admitting to his or her own ignorance. As Levy states in his contribution below, Stigler's view was "to say that [certain] policies are mistaken is to say that one cannot explain them." According to Stigler, to explain economic policy is to propose a mechanism that takes us from the individual, self-interested calculations of the society's members to the final legislative outcome. But if the populace supports the political mechanisms by which individual preferences are morphed into public programs, then by what independent standard can any public policy be declared "mistaken"? Who anointed the academic economist the chief critic of democratic processes?

Issues such as this one were only part of Stigler's larger contribution to the social sciences. Our collection of personal remembrances covers his contributions as a teacher, parent, prominent advisor to the editor of the leading history of economic thought journal, coauthor and promoter of economic theory via one of the post-War's most important microeconomic texts, the Theory of Competitive Price. That Stigler text went to battle against the view that American capitalism had lost its competitive nature and yielded to large corporations that mostly administered prices. Stigler expressed the "Chicago view" when he insisted on the inherently competitive nature of modern capitalism in his text and other places as well.

We next feature three papers that together pursue the theme of the labor market but this time viewed through the lens of the economic sociologist. Karen Buerkle and Alya Guseva remind us that both human capital and social capital are by-products of the formal educational process. Personal networks established in a person's early years and especially while studying or learning a profession also tend to elevate future lifetime earnings. Buerkle and Guseva provide some empirical evidence to support their claim and also issue a clarion call for economic sociologists to emphasize the distinction between social networks and human capital formation. They also ask that efforts be made to separately measure the two effects on labor market earnings.

Professor L. Susan Williams argues that geography in the form of the local labor market environment has an impact on the aspiration levels of young women. In this age of the Internet and expanded global reach, the empirical evidence suggests that all markets remain in a profound sense local markets, and that this is especially the case with labor markets.

Next, Professor James G. Scoville indicts the economist for homogenizing labor markets when such a simplification might lead to misleading results. This concern is especially acute when it comes to modeling child labor in the third world. Scoville's essay shocks us when he asks how really substitutable adult labor is in a Southeast Asian city's red-light district for, say, child labor. The world outside the privileged wealthy urban centers is more varied and often more tragic than orthodox theorists care to admit.

Finally, and last but not least, Professor Daniel Sutter provides a lively and richly analytic critique of the advertising and political bias in the media argument. It is often alleged that international news reporting will be censored once the owners of, say, the radio stations have to rely on corporate advertising revenues to pay their wages. The popular allegation is that business patronage will produce a reporting climate in which no news commentator can feel secure in reporting on business corruption and scandal. If, say, the television show "60 Minutes" reports about a defect in a car manufacturer's product, then that same car manufacturer will most surely cancel its advertisements and therefore stifle free speech and free discussion. (1)

In short, a market economy based on profit and loss calculation will produce a collection of sanitized and (therefore) pseudo-news reporting programs. According to Sutter, the incentives in the media do not on balance pull in the direction of censorship. While it might be in the collective business interests of all large corporations not to have any bad news about business corruption reported to the world's audiences, it is not in the interest of any particular business corporation to do much about what is reported. In short, the incentives within the existing industry just do not line up in such a way as to produce the conspiratorial result that the foes of commerce expect. Sutter's essay suggests that the recent press coverage of the Enron scandal is not an exception to the rule, but an application of the rule itself. The rule is that the listeners-customers get what they are willing and able to pay for. Furthermore, if the listeners want more coverage of corruption and misdeeds, then that is exactly what t he news sources will produce and present.