What Auteur Theory and Freshwater Economics have in common

Mark Palko writes:

We’ll define freshwater economics as the theory that economic behavior (and perhaps most non-economic behavior) can be explained using the concepts of rational actors and efficient markets and auteur theory as the idea that most films (particularly great films) represent the artistic vision of a single author (almost always the director) and the best way to approach one of those films is through the body of work of its author. Both of these definitions are oversimplified and a bit unfair but they will get the discussion started. . . .

Compared to their nearest neighbors, film criticism and economics (particularly macroeconomics) are both difficult, messy fields. Films are collaborative efforts where individual contributions defy attribution and creative decisions often can’t be distinguished from accidents of filming. Worse yet, most films are the product of large corporations which means that dozens of VPs and executives might have played a role (sometimes an appallingly large one) in determining what got to the screen.

Economists face a comparably daunting task. Unlike researchers in the hard sciences, they have to deal with messiness of human behavior. Unlike psychologists, microeconomists have few opportunities to perform randomized trials and macroeconomists have none whatsoever. Finally, unlike any other researchers in any other field, economists face a massive problem with deliberate feedback. . . .

Faced with all this confusion, film scholars and economists (at least, macroeconomists) both reached the same inevitable conclusion: they would have to rely on broader, stronger assumptions than those colleagues in adjacent fields were using. This does not apply simply to auteurists and freshwater economists. Anyone who does any work in these fields will have to start with some sweeping and unprovable statements about how the world works. Auteurists and freshwater economists just took this idea to its logical conclusion and built their work on the simplest and most elegant assumptions possible . . .

Given that we have two similar responses to two similar situations, it is not all that surprising to see that both schools of thought have followed similar paths and have come to dominate their respective fields. I don’t think that anyone would argue that any institution has had more impact on economics than the Chicago school over the past fifty years and I doubt you could find a theory of film that comes close to the impact of auteurism over the same period. . . .

The dominance of auteurism and the Chicago School is, if anything, greater when you venture outside of academia. Most financial journalists, pundits and politicians take the power of market forces as a given and the vast majority of movie reviewers routinely assume that the director is the author of the film they just saw, but in both these cases with very few exceptions, the lay people using these theories have no idea that the conditions of the previous paragraphs even exist.

The problem with auteurism is compounded by the fact that most reviewers have no idea what a director actually does. This was certainly not true of the original French critics who popularized the theory (who were, themselves, directors) or of its primary American proponent, Andrew Sarris, (who went to great pains to discuss exactly and also set out the definitive list of the conditions I referred to).

Today most reviews will use the possessive form of the director’s name then proceed to discuss everything about the film but the direction. The strange result of all this is that directors are both the most overrated and under-appreciated of movie makers. They are given credit for the work of everyone else while their own contribution is generally ignored.

I don’t really have anything to add here, just thought it was an interesting idea.

7 thoughts on “What Auteur Theory and Freshwater Economics have in common

  1. I don't understand why (freshwater) macro was singled out as having a particular connection to auteurism, except that both are paradigms that had a large influence on their field. You could say the same about the germ theory of disease and medicine, computer models and meteorology, etc. As far as I can tell, pretty much every field had schools of thought that had a lot of influence on it.

  2. Tomas: Yes, I read Palko's blog as being more about film studies than about economics. That said, his point about this particular economic theory was not merely that it was a paradigm or a method, but that the inherent difficulty of the field (economics or film studies) naturally led to the adoption of extremely strong models. Agree or disagree, it's an interesting thought.

  3. It's a very interesting point now that I have seen Andrew's spin. Even physics began with strong assumptions (the lack of friction in many mechanics problems). But fields like film are complicated to model and information is often missing.

    You see the same pattern in many areas — how often do we evaluate the staff of a famous general as a part of military success. Instead we use specific leaders as proxies for a staff structure. This assumption may or may not be reasonable.

    So needing to make strong assumptions is not evidence that a field isn't useful but it is key to understand them. Mechanics is useful to engineers but they may or may not be able to make the "no friction" assumption in real problems. Knowing the assumptions is key — I suspect Mark's concern was that popularized versions of a theory may not have the same depth of understanding of what underlies the conceptual models as the original theorists had.

  4. Tamas,

    I don't know much about economics (a point I made in the disclaimer for the post), but when I suggested that the elegance of theories based on strong assumptions about rationality and efficiency had made those theories more popular, I was simply repeating a point made by many economists, notably Paul Krugman (see below).

    Of course, the appeal of the elegant explanation in science goes back at least to Newton, but when you're working in a field as inherently messy as economics, that appeal may lead you to dismiss prematurely some discrepancies and counter-examples (again, see below).

    Thanks for the comments,
    Mark

    Krugman:
    http://www.nytimes.com/2009/09/06/magazine/06Econ
    These events, however, which Keynes would have considered evidence of the unreliability of markets, did little to blunt the force of a beautiful idea. The theoretical model that finance economists developed by assuming that every investor rationally balances risk against reward — the so-called Capital Asset Pricing Model, or CAPM (pronounced cap-em) — is wonderfully elegant. And if you accept its premises it’s also extremely useful. CAPM not only tells you how to choose your portfolio — even more important from the financial industry’s point of view, it tells you how to put a price on financial derivatives, claims on claims. The elegance and apparent usefulness of the new theory led to a string of Nobel prizes for its creators, and many of the theory’s adepts also received more mundane rewards: Armed with their new models and formidable math skills — the more arcane uses of CAPM require physicist-level computations — mild-mannered business-school professors could and did become Wall Street rocket scientists, earning Wall Street paychecks.

    To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form. Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient.

  5. Andrew,

    In retrospect I should have quoted at length from Krugman's New York Times Magazine piece to make the post more balanced. (Until I went back and reread Krugman this morning, I didn't realize how much I was reiterating points he had already made.)

    That being said, you're right that the main point here was that difficult questions often require strong modeling assumptions, but also that these assumptions bring with them certain risks particularly when combined with the appeal of an elegant theory and filtered through the popular press.

    Thanks for the link.

    Mark

  6. Freshwater economics does not, in fact, dominate economics. It has been influential in the sense that it caused saltwater economics to reinvent itself in response to freshwater criticism. Greg Mankiw (a saltwater economists) uses the term "brackish" to refer to the synthesis of freshwater ideas into saltwater economics in his paper on the macroeconomist as scientist vs engineer. One of the things he points out is that freshwater economists are not invited to Washington to make policy, they have relegated themselves to merely discussing ideas with other academics (and as noted in John Wood's History of Macroeconomic Policy in the United States, the flow of ideas is from Washington to academia rather than the other way around). Since macroeconomists generally would like for their ideas to actually matter, it's not surprising that they also form a minority within academia.

    Pretty much every mainstream economist takes "the power of market forces" very seriously. The inventors of CAPM were predominately from saltwater universities (Harvard, more specifically), though Jan Mossin taught at Carnegie. It is distinct from the EMH: Fama famously noted that they are always testing two hypotheses at once ("joint hypothesis problem"). Empirical work (including by Fama, but also Black & Scholes) shows the two cannot both be right.

    It might also be noted that the well known "Chicago School" ideas of Milton Friedman are distinct from many later ideas stemming from Bob Lucas often associated with "freshwater" economics. This paper argues that the distinction is that the previous generation were inspired by Marshall's vision of economics while the later ones were Walrasians:
    http://dukespace.lib.duke.edu:8080/dspace/bitstre

    The question of whether market participants are rational is also quite distinct from whether markets by themselves will give rise to good outcomes. As Herb Gintis pointed out in his review of "Animal Spirits", agent-based models even with homo economicus assumptions can still give rise to high volatility such as the sort we have seen recently.

  7. Thanks.

    A helpful insight.

    One caveat:

    "This was certainly not true of the original French critics who popularized the theory (who were, themselves, directors) …"

    Well, they were critics before they were directors. Inventing the auteur theory was one way they raised their public profiles enough so that eventually De Gaulle gave them some money to direct films themselves.

    The funny thing is that the world has evolved more or less in the direction of the auteur theory. I think there are more writer-directors today than before. On the other hand, writer-directors tend to start out as writers, then, after achieving success that way, move up to writer-director.

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