Dictionary of Enigmatic-Economic Jargon

Preface

"Jargon" is "The specialized or technical language of a trade, profession, or similar group."(1) It can have one or more of three effects:
  1. facilitate communication among the group's insiders,
  2. confuse and mislead, and
  3. create barriers to group entry.
When it comes to economics jargon, this dictionary is devoted to mitigating the 3rd effect, while helping outsiders determine when the 2nd effect dominates the 1st. Please email if you have some insider information to contribute.

Creating confusion may be worthy of satire, but it is often an unfortunate byproduct of important and interesting research. I therefore focus the satire on the use and users of enigmatic-economic jargon, and not the creators, by omitting etymologies from the dictionary.

Terms associated with a risk of confusion are organized alphabetically, and multiple definitions are provided when applicable.
A   B   C   D   E   F   G   H   I   J   K   L   M  N   O   P   Q   R   S   T   U   V   W   X   Y   Z


A

adverse selection,   noun.
  1. Any kind of selection.

C

contribution,   noun.
  1. A voluntary payment of time, money or goods from one party to another.
  2. public finance. A payment of tax, typically made because the taxpayer fears punishment by the government. Eg., Social Security contributions.
convergence,   noun.
  1. The decline of inequality over time.
  2. modern macroeconomics. regression to mediocrity
  3. convergence in probability
There is a long history of scholars' confusing regression to mediocrity with declining inequality.(2) It has not become any easier to avoid this fallacy, since modern macroeconomists now use the term "convergence" to describe either admittedly different phenomenon.(3)

E

enigmatic economics,   noun

extensive margin,   noun. see also intensive margin

  1. The margin of action or inaction, without regard for the intensity of that action. It is said that first order equations do not necessarily characterize choices on the extensive margin.
  2. labor economics. to work or not work.
  3. labor economics. The distinction between answering "yes" or "no" to a survey question, such as "Did you work last week?"
A high risk of confusion occurs when the third definition is used interchangeably with the other two. Mincer(4) has explained how the distinction between working or not last week might be understood in terms of choice on the "intensive" margin (namely, a choice about the fraction of one's life to work), and Mulligan(5) generalizes Mincer's explanation. Mulligan also explains how the distinction between any numerically positive response to the question "How many hours did you work last week?" might be understood in terms of choice on the "extensive" margin (namely, a time-integral of higher-frequency choices on the extensive margin).

F

fund Social Security,   verb.
  1. public finance. to change Social Security tax and benefit formulas so that everyone (dead, alive, and yet to be born) receives benefits net of taxes that are nonnegative in lifetime present value, without changing any other goverment policies.
  2. public finance. to change non-Social-Security policies so that they deliver more government revenue (in present value), and use the proceeds to change Social Security tax and benefit formulas so that everyone receives benefits net of taxes that are nonnegative in lifetime present value. Non-Social-Security revenue sources that have been proposed for this purpose include: reducing any tax rate that is on the wrong side of the Laffer curve, Federal open market operations in stock markets where prices are too low, or substituting a good tax for a bad one.
  3. public finance. to increase Social Security taxes, and promise to return those additional taxes (with interest) to taxpayers, enough that transfers within and/or across cohorts are hard to notice when compared with the size of the Social Security budget. Also known as "Social Security's dillution solution."(6)
Social Security can never be funded according to definition 1, so proposals are made to fund Social Security according to definitions 2-3 and, whenever possible, disguising the proposal as funding according to definition 1. As a result, public finance economists can legitimately brag that they have created confusion on a worldwide scale.

H

hyperbolic discounting,   noun.
  1. the preferences or value system associated with a willingness to trade money, consumption, or physic feeling between time t and time t' > t that changes between time s < t and time t.
  2. the behavior associated with a willingness to trade money, consumption, or physic feeling between time t and time t' > t that changes between time s < t and time t.
  3. excessive impatience.
Several loads of confusion have been manufactured as the result of interchangeable use of quite different definitions.

I

identification,   noun. verb form: identify.
  1. The act or process of distinguishing a null hypothesis from an alternative. The alternative hypothesis may or may not have been articulated.
  2. econometrics, applied microeconomics. The test of a null hypothesis that distinguishes it from all others (including those hypotheses yet to be articulated by a human being), based on the available or conceivably available data. Exclamations of "Your model is not identified!" can be found at almost any economics seminar, workshop, or conference at which the audience is allowed to speak.(7)
  3. econometrics. Specification of the various equations of a simultaneous equations model so that "distinct points in the model's parameter space imply observationally distinct patterns of behavior for the model's variables."(8)
  4. applied microeconomics. Specification of a single equation which, when placed in any conceivable system of equations, results in a system that is identified in the econometric sense.
  5. applied microeconomics. The name of the index of summation used in the calculation of a covariance. eg., "Is your identification across states, or over time?"
Of course, there does not exist a test that can distinguish any hypothesis from all others based on any conceivably available data. Nor does there exist a single equation which can be placed in any conceivable system of equations, resulting in a system that is identified according to definition 3. Hence, a high risk of confusion occurs when particular alternative hypotheses to be identified from the null hypothesis, or a particular system of simultaneous equations, has not been articulated and is known only to the insiders. All I can say about definition 5 is "sic!"

intensive margin,   noun. See also extensive margin

  1. The margin between any two numerically positive amounts of action. It is said that first order equations necessarily characterize choices on the intensive margin.
  2. labor economics. how much to work, conditional on working
  3. labor economics. The distinction between any numerically positive response to the question "How many hours did you work last week?"
A high risk of confusion occurs when the third definition is used interchangeably with the other two. Mulligan(5) has explained how the distinction between any numerically positive response to the question "How many hours did you work last week?" might be understood in terms of choice on the "extensive" margin. Mincer(4) has explained how the distinction between working or not last week might be understood in terms of choice on the "intensive" margin.

M

micro-political foundations,   noun.
  1. public finance. the building-blocks of a structural model of public policies
  2. public finance. the building-blocks of a well-specified model of public policies


N

nonparametric,   adjective.


P

privatize Social Security,   verb.
  1. public finance. to change Social Security benefit formulas to that a taxpayer's claims on future tax revenues are explicit.
  2. public finance. to increase Social Security taxes, and immediately return those additional taxes to taxpayers to engage in mandatory retirement savings, enough that Social Security transfers within and/or across cohorts are hard to notice when compared with cash flows withdrawn by retirees from Social Security and their mandatory savings accounts. Also known as "Social Security's dillution solution."(6)
Confusion production becomes exceptionally efficient when this enigmatic-Economic jargon is combined with "funding Social Security"!

R

reduced-form model,   noun. See also structural model, well-specified model
  1. 1970's macroeconomics. A model having compiled an empirical record of parameter instability particularly in the face of breaks in the stochastic behavior of the exogenous variables and disturbances.(9)
  2. modern macroeconomics, public finance. Any model built up from something other than tastes (ie, mapping from allocations to utility) and technologies (ie, mappings from inputs to outputs for each sector or firm), regardless of whether the model has an empirical record of parameter stability.
  3. modern macroeconomics, public finance, econometrics. Any model not explicitly built from tastes and technologies, regardless of whether the model has an empirical record of parameter stability.
  4. modern macroeconomics, public finance. Any model that fails to explore economic or political activity in sufficient detail to entertain qualified economic theorists, regardless of whether those details have any relevance for the question at hand. Eg., "Becker's influence function mapping inputs to outputs for the political sector is a reduced form model, not a structural model, merely because it abstracts from political details."
  5. modern macroeconomics, public finance. Any model which isn't written down the way the conference discussant, journal editor, or referee would write it down.
  6. reduced form equation. econometrics. An algebraic solution of two or more of the equations of a simultaneous equations model.
The profession has enjoyed a great expansion in confusion production ever since definitions 2-5 substituted for Lucas and Sargent's empirically-based definition 1.(10)

S

structural model,   noun. See also reduced-form model, well-specified model
  1. 1970's macroeconomics. A model having "compiled [an empirical] record of parameter stability particularly in the face of breaks in the stochastic behavior of the exogenous variables and disturbances."(11)
  2. modern macroeconomics, public finance, econometrics. Any model explicitly built from tastes (ie, mapping from allocations to utility) and technologies (ie, mappings from inputs to outputs for each sector or firm), regardless of whether the model has an empirical record of parameter stability.
  3. modern macroeconomics, public finance. Any model that explores economic or political activity in sufficient detail to entertain qualified economic theorists, regardless of whether those details have any relevance for the question at hand. Eg., "Becker's influence function mapping inputs to outputs for the political sector is a reduced form model, not a structural model, merely because it abstracts from political details."
  4. structural equation. econometrics. Any of one of the equations of a simultaneous equations model.
The profession has enjoyed a great expansion in confusion production ever since definitions 2 and 3 substituted for Lucas and Sargent's empirically-based definition 1.(10)

S

well-specified model,   noun. See also reduced-form model, structural model
  1. Any model explicitly built from tastes and technologies, or from an extensive-form game, regardless of its empirical relevance.
  2. A model with intrinsic value, and lots of attention to minutiae.

footnotes

1. Excerpted from The American Heritage Dictionary of the English Language, Third Edition Copyright 1992 by Houghton Mifflin Company. See also their alternative definition, "Nonsensical, incoherent, or meaningless talk."

2. See a brief article by Milton Friedman citing some examples of "the regression fallacy."

3. This dictionary doesn't have etymologies, but two macroeconomists have suggested using the terms "sigma convergence" and "beta convergence" to replace the terms "declining inequality" and "regression to mediocrity", respectively.

4. Mincer, Jacob. "Labor Force Participation of Married Women: A Study of Labor Supply." in H.G. Lewis, ed. Aspects of Labor Economics. Princeton: Princeton University Press, 1962.

5. Mulligan, Casey B. "Microfoundations and Macro Implications of Indivisible Labor." NBER Working paper #7116, May 1999.

6. Mulligan, Casey B. "Review of Laurence S. Seidman's 'Funding Social Security'." Journal of Economic Literature. 38(3), September 2000, p. 660.

7. For a list of related phenomena, see George Stigler's "Conference Handbook." For an example of the use of the word "identification," click here.

8. Sims, Christopher A. "Macroeconomics and Reality." Econometrica. 48(1), January 1980, p. 2.

9. paraphrased from Lucas, Robert E., Jr. and Thomas J. Sargent "After Keynesian Macroeconomics" 1978, p. 56. There they also explain how, at the time of their writing, "the question of whether a particular model is structural is an empirical, not a theoretical one." [emphasis added]

10. Apparently this substitution occured sometime between 1978 and 1990, when Lucas ("Supply-Side Economics: An Analytically Review." Oxford Economic Papers. 42, 1990, p. 314) referred to "structural modeling of aggregate behavior" as "accounting for observed behavior in terms of preferences and technology," without regards to whether such accounting was based on empirically stable relationships.

11. Lucas, Robert E., Jr. and Thomas J. Sargent "After Keynesian Macroeconomics" 1978, p. 56. There they also explain how, at the time of their writing, "the question of whether a particular model is structural is an empirical, not a theoretical one." [emphasis added]


© copyright 2001-3 by Casey B. Mulligan.