Fed’s “Racism and the Economy” series examines racism’s impact on the economics profession Fed’s “Racism and the Economy” series examines racism’s impact on the economics profession

Identifies shortcomings, proposes solutions to increase diversity and equity in economics Identifies shortcomings, proposes solutions to increase diversity and equity in economics

April 16, 2021

Last June, William Spriggs, advisor to the Minneapolis Fed’s Opportunity & Inclusive Growth Institute, chief economist for the AFL-CIO, and a professor at Howard University, penned a letter to fellow economists imploring the discipline to undertake an accounting of how deeply racism has affected the people and practice of economics. 

Spriggs’ letter was a response to George Floyd’s killing by Minneapolis police, an event that spurred worldwide concern about racial disparities. On Tuesday, just days after another Black man, Daunte Wright, was killed by a police officer, Spriggs joined economists from across the country and the Federal Reserve System to discuss racism, the economics profession, and the work that needs to be done to achieve greater diversity, expand avenues of inquiry, and better inform public policy. The event is part of the “Racism and the Economy” series, launched by the 12 Federal Reserve Banks to examine structural racism, its impacts, and ways to dismantle it.

“There is a tendency to think that these problems are somebody else’s problems, that policing in predominantly Black communities is somebody else’s problem, that hate crimes against Asian Americans are somebody else’s problems, that if there is a failure of representation in the field of economics, that’s somebody else’s problem,” David Wilcox, a senior fellow at the Peterson Institute for International Economics, said at the April 13 event. “That’s the wrong view. It is our problem.” 

As one of the largest employers of Ph.D. economists, the Federal Reserve is committed to addressing the problem. “Inclusivity must be part of our identity,” Esther George, president of the Kansas City Fed, stated in her opening remarks. “Addressing today’s economic dynamics is a complex task. It will serve us well to invite new perspectives and new questions about old issues, to challenge dominant paradigms, group think, and even blind spots.”

Racism and the pipeline into economics

The first panel, moderated by New York Times reporter Jeanna Smialek, explored the causes and consequences of the underrepresentation of people of color in economics. The profession is “unwelcoming,” panelists stated, a view borne out by data presented by Ebonya Washington, the Samuel C. Park Jr. professor of economics at Yale University, that showed the extent to which people of color are underrepresented among academic faculty, government staff, Ph.D. recipients, and B.A. graduates. 

“Right from the beginning, we see shortfalls in representation,” Washington observed, as she and other panelists pointed out that many young people are unfamiliar with economics beyond a vague association with “banking” and “finance,” and therefore don’t see economics as a useful tool for understanding and confronting the social issues they see in their communities. 

But the problem of underrepresentation goes beyond recruitment. It’s a problem of retention too. That means valuing work that looks at new questions and embraces new perspectives, said Judith Chevalier, the William S. Beinecke professor of finance and economics at Yale University’s School of Management, and Randall Akee, chair of the American Indian Studies Interdepartmental Program and associate professor of public policy at the University of California, Los Angeles.

A cultural change, all speakers emphasized, is essential. “We must recognize that we will lose our comparative advantage as researchers if we do not change the culture. This is an existential crisis for the profession,” Trevon Logan, the Hazel C. Youngberg trustees distinguished professor of economics at the Ohio State University, stated.

Racism and the practice of economics

The ways in which economics is unwelcoming to people of color extends to how the discipline studies race—when it studies it—by treating race as an exogenous variable rather than a social construct. Opening the second panel conversation, moderator Mary Daly, president of the San Francisco Fed, stated, “We’re going to talk about how the practice of economics, the very way we conduct our research, may in fact contribute to, perpetuate, some of the things we’ve seen that horrify us.” 

The conversation identified a number of reasons why economics has trouble studying race well. One of them is that human behavior isn’t as neat and orderly as the discipline’s foundational assumptions suggest. “Economics tends to focus on rationality and efficiency. So topics of race, of human behavior that may not be particularly rational or efficient, don’t fit into the paradigm very well,” Boston Fed President Eric Rosengren said in the closing panel.

Another explanation, highlighted by both Spriggs and Atlanta Fed President Raphael Bostic, is that many people simply aren’t very familiar with U.S. history and the legacy of the laws and systems that denied access to people of color. “If we don’t know that history, then it’s much easier for an economic modelist to assume, oh, it must be something about the minorities or the women who they have in their data set, and not something where they are a byproduct and really a victim of those earlier decisions,” Bostic said.

The result of these paradigmatic blinders is that it can be difficult to convince economists that discrimination is real. “There appears to be no evidence to get economists to admit that yes, there’s discrimination, and yes, it matters,” Spriggs said.

A remedy, suggested Sendhil Mullainathan, Roman Family University professor of computation and behavioral science at the University of Chicago Booth School of Business, may be to set aside economics’ traditional technical tools for a moment and spend time just talking with people. “I would love if everyone in the profession could have a heartfelt one-hour, two-hour conversation with someone who’s been disadvantaged by the system that we see today. The barriers just aren’t salient enough and the problems salient enough for most people,” Mullainathan said. In its desire to be an empirical science, economics has lost touch with its fundamental human nature.

Promoting inclusivity and effecting change

The third panel, moderated by Marketplace host and correspondent Kimberly Adams, considered changes that would lead the way to creating a more diverse, inclusive, and informed discipline. No single step is enough, but panelists throughout the event identified specific actions they encouraged economists to take. 

A first step, Wilcox suggested, may be quite simple: Advertise to high school students and undergraduates that economics is relevant to “the broadest spectrum of individual lives and experiences.” Actively bringing that message to young people has the potential to broaden the backgrounds of those who enter the profession and thus who will shape it five or 10 years down the road.

Changing the profession also requires speaking up. “Everyone has to be an active bystander who says, ‘That’s not OK’ when they see a person of color being dismissed or being berated or talked about poorly in a faculty meeting or a tenure decision meeting,” Lisa D. Cook, professor of economics and international relations at Michigan State University, urged.

Speaking up extends to offering support and encouragement to people of color as they move through the profession. Catalina Amuedo-Dorantes, professor of economics at the University of California, Merced, described how she personally has at times felt like an outsider because she is not a White man. “I felt that I wasn’t as informed as some of my other colleagues, that I didn’t know a lot of the options, a lot of the possibilities that were out there,” Amuedo-Dorantes said. Mentoring can start to close those information gaps.

While there is much that economics can and should learn from other disciplines about increasing diversity and studying race, some of the solutions will come from within, advised Arthur Lupia, assistant director at the National Science Foundation and Gerald R. Ford distinguished university professor of political science at the University of Michigan. “Economists study how people actually behave, what their incentives are. That’s an amazing tool.”

Why diversity, equity, and inclusion in economics matter to the Fed

Ultimately, achieving diversity may itself be part of a solution to some of the problems that economics is now experiencing, by bringing into focus a broader set of issues and by empowering people who will be agents of change. Bostic, Rosengren, and Cleveland Fed President Loretta Mester emphasized greater intentionality in efforts to achieve diversity across the Federal Reserve System, from recruitment of research assistants to the constituencies consulted for the Beige Book to leadership on the Banks’ boards of directors.

“Different people will have different experiences, they’ll have different viewpoints and perspectives, and we want to be able to harness all that difference in viewpoints for the good of our policymaking in the Fed and also for the good of our organizations,” Mester said.

The appetite for change is here. Nearly a quarter of the event’s registrants—more than 1,000 people—pledged to promote awareness and discussion of the event in their workplaces. This pledge aims to create momentum for candid dialogue and meaningful change around racism in economics. To help facilitate these discussions and learn more about how racism affects the people and practice of economics, visit the Discussion Guide and the list of Additional Resources. A link to the video of the full event and biographies of all speakers is available on the event’s webpage