[APPLAUSE]
MARIANNE BERTRAND: Thank you.
President Zimmer, provosts, deans, colleagues,
families in front of our students,
and other distinguished guests, good morning.
And of course, dear graduating students, congratulations.
Preparing for the speech has been stressful.
My eczema even flared up this quarter.
All this extra stress, I soon realized
had much to do with low expectations I had
as to how well an economist--
no, scratch that-- an economist working in a business school
was going to be received.
All the picketing that has been taking
place outside of my building over the last few months
sure did not help raise my low expectations.
The broader public does not trust economists.
A recent poll reveals that only 25% of people trust us.
That is in contrast with an 82% trust level in doctors
and 71% in historians.
It is only thanks--
[LAUGHTER]
It is only thanks to politicians that we
escape the bottom of the list.
Some of this distrust and sometimes
outright dislike for economists comes, I believe,
from a misunderstanding of what economists study and teach.
For too many, economics is equated
to a toolbox of tricks masquerading as a science that
teaches people in firms how to make as much money as possible
at whatever cost to society.
If you are graduating today with an economics degree,
and if this is what you think economics is about,
it's not too late to ask for your money back.
[LAUGHTER]
If you are graduating with an economics degree or business
degree or really any degree, I sure
hope that you understand that misleading and cheating
should never be part of your job description.
Nothing good happens either to our economy or our society
when businesses flourish because they
cheat while other businesses struggle
because they remain honest.
And yes, you have a choice.
You can exert voice, be an active agent
for cultural change when you see this culture lacking
at your place of employment.
You can also vote with your feet and exit if the culture is
not right and not fixable.
I understand this is easy for me to say,
as I am not staring at years of student debt.
But trust me, there are many good jobs out there
that will not conflict with your moral compass,
and a little pay cut will be well worth
sleeping better at night.
Whatever you choose, voice or exit, always
remember that you have a choice.
But of course, that is not what economics is.
Economics studies help people and firms make choices
under constraints.
These constraints derive from the fact
that the resources we have as a society are limited.
There are only that much natural resources, physical capital,
human capital, and time to spread around.
Given this, economists tend to focus most of their attention
on efficiency considerations.
Given the limited resources that we
have, how do we best allocate them to maximize
people's well-being?
We love markets because markets with appropriate safeguards
can be truly transformative in this quest for efficiency.
More sophisticated critics of economics
dislike how discipline dehumanizes people.
We treat people, the argument goes,
as hyperrational, utility-maximizing robots,
and base our [INAUDIBLE] of what is
and what is not efficient, relying on models that
are fundamentally flawed given the unrealistic assumptions
they make about how people make choices.
This hyperrational view of human decision making
does not reflect the field of economics today.
Put more humbly, economists have realized their mistakes
and now embrace rather than dismiss
the other social sciences.
After multiple Nobel Prizes celebrating
behavioral economics, it is now apparent even to outsiders
that economics has converged towards a more realistic view
of how our people make decisions.
They are lazy, they have self control problems,
and they are really not that good at statistics.
[LAUGHTER]
Beyond the transformational imports
from cognitive psychology via the work of Richard Thaler
and others, sociology and social psychology
have also reshaped economics.
Indeed, our understanding of human behavior becomes more
complete when we are willing to accept that people care about
what others think of them, that the well-being might be
a reflection of not just how much money and leisure they
have, but also how they fare compared to others,
and how the choice and circumstances map
into their social identity--
as fourth generation coal miners that
have been raised to view themselves
as the main providers for their family,
as African-American boys trying to fit
in in the most violent neighborhoods of Chicago.
It is true that the economics that we practice today,
with all these imports from psychology and sociology,
is less disciplined than it was in the past.
It is messier, less model-centric,
and less theory-driven.
But there's no doubt in my mind that this diminished rigor
has come with the benefit of greater
realism and an increased likelihood
that we are getting some of it right.
It is definitely in this messier type of economics
that I feel comfortable.
I know the criticisms of economics,
and the one I want to focus on for the remaining
of this speech is related to economists' supposed
lack of concern for distributional issues.
While economists care about efficiency and value creation
society, they do not care about who benefits
from the value that is created.
And indeed, what is the most efficient may sometimes--
but not always-- create greater inequalities.
Globalization and trade are certainly
today's leading example of the tradeoffs between efficiency
and distribution.
It is true that some economists have strongly
argued against economists studying
distributional effects.
One of my Nobel Prize-winning colleagues famously
said that nothing is as poisonous to sound economics
as to focus on questions of distribution,
questions that might be better left
to other disciplines or political institutions.
However, many economists are in fact
very much concerned with distribution and inequality.
I'm only one of a large contingent of scholars
in economics departments, public policy schools,
and business schools who have been devoting
much of their careers to measuring
inequalities, understanding the causes, and studying solutions.
In a nutshell, many economists are minding the gaps.
To be clear, I do not think it requires
extending beyond other economists' preferred focus
on efficiency to make the case that inequality should
be of concern to economics.
This is because inequalities hurt efficiency.
Let me explain.
In some of my research, I've been
measuring gender and racial inequalities in the labor
market.
Some facts are startling enough to be worth repeating.
Only 25% of college-educated women working full-time in 2010
had earnings above the median of similarly-educated men working
full-time.
Only 6% had earnings that put them
in the top 20% of the men's distribution.
In some of the work I did on racial inequality,
I used a field experiment to show
that job applicants with African American-sounding names
received 50% fewer callbacks for interviews than the job
applicants with identical resumes
but white-sounding names.
Since I completed this work, it has
been replicated in many countries around the world,
with each of these new studies documenting
similar patterns of adverse labor market outcomes
for the minority group in that country.
North Africans in France, indigenous
people of Australia, Mongolians and Tibetans in China,
the list goes on.
A recent study that mined hundreds of millions of US tax
records show that large income disparities
exist between white and black men
even when they are raised in homes with the same income
and the same family structure.
There are many ways to argue as to why all these findings are
troubling.
Most outside of economics which say,
this is just simply unfair--
a violation of equal rights.
But is not just a matter of fairness and justice
and rights, it is also a matter of efficiency.
Starting from the assumption that talent is equally
distributed at birth between men and women,
and ruling out that as the assumption that women
are born with a comparative advantage
in loading the dishwasher, changing diapers,
or driving kids to soccer games, premises I firmly stand by,
it has to be that as a society, we
are leaving money on the table by having only to use one
of the most extreme examples--
5% of CEOs of Fortune 500 companies that are women.
The same logic about the efficiency cost of inequality
obviously also extends to racial inequality.
My colleagues, Erik Hurst and Chang-Tai Hsieh,
have made this point forcefully in some of their recent work.
Where they show that a quarter of the growth
that the US has experienced between 1960 and 2010
can be explained by the lowering over time of the barriers
to entry for women and African Americans
into occupations in which they had been
previously under-represented.
Furthermore, and maybe more disturbing
to the aforementioned argument that economics should
focus solely on matters of efficiency
and leave distribution questions to others,
some of the higher income inequality
that may be created by the more efficient policies
may also ultimately hurt efficiency
if this income inequality is accompanied
by lower social mobility, as the data seems to suggest.
Unequal societies might be losing out
by precluding themselves from tapping
into the talent of those who were
born into the lower hand of the income distribution.
What economics has given me in my quest
to measure gender and racial inequalities
is a healthy dose of skepticism against easy explanations
for these inequalities.
In particular, economists like to start from the prayer
that there is no free lunch out there.
It's a useful prayer.
Why would firms that are trying to do
the best they can with limited resources not hire
the talented women and minorities
whose talent is apparently undervalued by the market?
For sure, employers should be jumping on this opportunity,
and this could naturally reduce the gender and racial gaps
in earnings.
Maybe there are sexist and racist employers out there,
but these employers would not survive
in a competitive marketplace as they
are paying more for the same talent
by favoring white men in their hiring decisions.
Taking the skepticism to the data has led me to question
a one-size-fits-all explanation for women
and minorities' underperformance in the labor market.
When it comes to racial inequalities,
I believe it is difficult to look at the body of research
that is accumulated without acknowledging
the central role of prejudice.
But probably more common than explicit racism
are the unconscious implicit biases
that induce even the best-intentioned employer
to discriminate.
In contrast, I do not believe that sexism in the workplace is
the leading explanation as to why your moms' careers have
on average not matched that of your dads'.
Instead, I believe that the main explanation is you, graduates.
Evidence that has now accumulated across countries
show that college-educated woman's careers essentially
track that of their husband until the birth of the couple's
first child.
Mothers take a massive earnings hit right
after that first birth, and their earnings never recover.
Old school economics help me make sense of this finding.
The thinking is that optimizing couples face time constraints
and benefits from having each spouse specialize--
one in the labor market and the other one
in childcare and home production.
The messier economics that I feel comfortable in
helped me understand why it is the woman that more often take
the labor market hit.
Even among couples where the allocation of labor market
talent would ask for the woman to work and the man
to stay home.
The root is in slow-moving gender identity
norms transmitted from one generation to the next.
Norms that are lagging today's distribution of human capital.
These are norms about where men belong,
primarily in the workplace, about which spouse can best
provide for the children, or about whether a man can truly
be a real man if he's out-earned by his wife.
I understand this view have converged towards--
flies in the face of the current focus on sexual discrimination,
and worse, sexual harassment in the workplace.
So let me be very clear--
I'm in no way saying that sexual discrimination workplace does
not exist.
I'm convinced that there are women in this audience today
that have experienced it.
Through my service work over the last year
of my own professional association,
I've heard too many stories of women
whose career got derailed because of sexist colleagues.
This said, I doubt that fully eradicating gender
discrimination in the workplace will erase the gender
gap in earnings.
It would be a mistake to direct all policy or efforts,
be it corporate or public policy, to fixing the work
environment when, I would argue, a key driver of the gender gap
is rooted in the home, or more precisely,
the intersection of the home and the work environment.
Whatever you make of this, I have one small request
to all of you--
give your mom a big hug.
[CHEERS AND APPLAUSE]
And to you, the young woman in the audience
today, you should mind the gap as you take that crucial step
from the platform to the train.
You should mind the gap as you transition out
of school and into building successful, professional,
and personal lives.
You should realize that these tradeoffs between career
and family still exist for you, even though they
will undoubtedly be less pronounced in your generation
than they were in mine.
It would be presumptuous, I think,
to simply assume that you can have it all, career and family,
without being thoughtful about the choices
you make, in particular, in a large market.
If you want to have it all, make sure to check
your date's appetite for diaper duty and willingness
to let you shine the brightest star at work
that you want if this is what you want for yourself.
This holds true even if your date looks like Ryan Gosling.
[LAUGHTER]
In conclusion, I'm afraid that this speech did not
deliver on the forever truths that are
staples of commencement speech.
I certainly did not share any secret formula
on how to design a good life.
I'm still looking for that formula for myself.
But I will squeeze in some final, very cliched words
of wisdom.
It feels like yesterday that I was
sitting in your chair, wide-eyed, and ready
to build my own professional and family life.
So please believe me when I say, time really does fly.
You all have an exciting future in front of you.
Make the most of every moment.
Congratulations, Class of 2018.
[APPLAUSE]