Some Thoughts on Zingales’s “Preventing Economists’ Capture”

4 09 2014

Luigi Zingales, an economist who works at the Booth School of Business in Chicago, has published an interesting paper that suggests that economists in business schools have a strong pro-business or rather pro-management bias. The ungated version of the paper is available here.

Abstract: The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.


The publication of this paper is very timely, given that “regulatory capture” is on the lips of most Americans this week in the wake of news that Eric Cantor’s move to investment bank Moelis & Co. (See TYT video above).  The thesis of Zingales’s paper is broadly similar to that of the provocative movie _Inside Job_, which argued that corrupt economists contributed to the 2008 financial crisis by legitimating bad behaviour.

I’ve read Zingales’s paper with tremendous interest. It’s a good paper, although I’ve discovered several problems with his claims and several oversights that create possibilities for additional research.


1) The author’s distinction between “pro-business and antibusiness biases” in journal articles is a bit crude, given the sheer diversity of interests that go under the label “the private sector”. For instance, is an economist who teaches the efficient market hypothesis a friend or foe of “business”? One could argue that he is a foe, since if all investors accepted the EMH, they would pull their money out of mutual funds with expensive management costs and invest instead in simple index funds like Vanguard. One of the problems with the much hyped book by Thomas Piketty is that its author regards “capital” as a sort of monolithic entity when it is actually far from homogeneous.

2) The academic journal articles coded and counted by Zingales for ideological bias may have less of an impact on students than the ideas presented in the classroom or in textbooks. Attempting to measure the net ideological bias of lectures delivered in hundreds of business schools around the world would be very complex. Studying textbooks is easier and has actually been done.

3) Academics are themselves unionised workers and, in many cases, work in the public sector, which partially insulates them from corporate pressure and may cause them to sympapthise with fellow public-sector workers.

Research Opportunities:

1) The majority of academics in business schools are not economists. It would be interesting to try to compare the degree of pro-management bias among business-school economist with other groups of academics in business schools.
2) Is the extent of economists’ capture greater in the United States than in other countries?



One response

25 10 2014

Reblogged this on The Past Speaks and commented:

In early September, I blogged about a new paper by Luigi Zingales, an economist who works at the Booth School of Business in Chicago. The paper suggests that economists in business schools have a strong pro-business or rather pro-management bias.

Zingales was the guest on this week’s episode of Econtalk. I usually enjoying listening to Econtalk but this week’s episode was unusually good–educational and entertaining.

Obviously I’m not an economist, but I do work in a management school and I think that much of what Zingales says about the possibility of capture and pro-business bias applies to all management researchers, including business historians. At one point in the interview, Zingales says that scholars who use archival sources are less prone to capture than those who do research involving interviews with executives. Hmmm— I don’t know about that. I would suggest that Zingales read Stephanie Decker’s piece on research in business archives.

I thought that this particular exchange was particularly important to business historians who rely on company archives.

Zingales: So, first of all, let’s start with data. Nowadays it’s very sexy and trendy to either use propriety data for certain analysis, or to do a field study about a certain topic. Now, the best researchers guarantee themselves against being prevented from publishing their results, the research they do. Still there is a very subtle quid pro quo about what I’m doing. So, if I partner with some payday loan, with one payday loan firm to do some field experiment, I probably don’t want to come up with a result that says that payday loans
Russ Roberts: Exploit poor people.
Guest: Exactly. And so, it’s not that I am sort of prevented from doing that. Like, the regulator is not prevented from really going after the industry. But the incentives are such that I probably will sort of fine tune and try not to look at the worst things, and look at the things I can look at. So, inevitably the research is going to be a bit biased. Now, we know every research is a bit biased. I don’t think that anybody holds[?] the truth. But in general, we come to the conclusion that if we come across research, those individual biases cancel out, and as a result, the average is pretty accurate. What I’m saying is, because the data in this case are controlled by people with a particular interest, even if you take the integral of all this research, the overall picture cannot be unbiased.

I’ve been very lucky to work with company archivists who have given me no-strings attached access to internal documents. However, I know that not all firms are like that.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: