Field’s Top Young Scholar Asks, Why Don’t More Women Study Economics?

Economics runs in Emi Nakamura’s family. Her mother, father, and aunt are economists, and her grandfather was an econometrician. A macroeconomist at the University of California at Berkeley, Nakamura won this year’s John Bates Clark Medal for the best American economist under age 40, for her studies of price “stickiness” — whether and how prices of goods and service change — and how government spending affects the economy. She was cited for bringing a data-oriented, empirical approach to macroeconomic study, which is usually more about models and theories. She is only the fourth woman to win the prize since its inception in 1947. The Chronicle talked to her about her research, the importance of the Federal Reserve, and attending, as a child, a Japanese public school in Tokyo in the summer.

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Given all the economists you grew up with, did you ever think of being anything other than an academic?

I certainly thought I was interested in some kind of a research job from when I was fairly young. I could see that you got to ask your own questions and think about the things you thought were the most interesting. The reason economics appealed to me was that it is a combination of many different disciplines. I’d always liked math, but I also liked politics and history and literature. And economics, perhaps partly because it’s a newer field than science or math, is less specialized, so you get to keep doing more of those fields.

Your work is often with your husband, Jón Steinsson, also an economist at Berkeley. Could you please explain your research, in layman’s terms?

I work on the topics that macroeconomists have been thinking about for a long time. What causes recessions and booms? What kinds of economic policies could we use to address those situations? One big question is, if you have a sudden, big reduction in demand for things in the economy, how would that affect production and employment? This question goes back to Keynes: Why was there such a high rate of unemployment during the Great Depression?

So where does price stickiness fit in?

If you have a big reduction in overall spending, like in the last recession, when people’s house values fell, they start feeling poorer. Then usually, all else equal, they would spend less. And there would be less production in the economy, and thus less employment. But if prices adjusted in an efficient way, what might happen instead is there could be a big reduction in the prices of things, and that could stabilize the amount of production. So even though people don’t feel as rich, if the prices fall, then they would be inclined to spend more, and production and employment would stay the same.

But in reality, it does seem that “demand shocks” like this do have an impact on how much is produced. So the question is, why? One interpretation is that the prices don’t adjust so rapidly. There are a lot of reasons why prices don’t instantly decline, even when there starts to be less demand. One is that firms don’t set prices every day, they set them over long periods of time. As a consequence, when there’s a big drop in demand during a recession, it doesn’t mean that instantly the prices fall. That’s how “sticky” prices fit in general in what causes recessions.

Another question is how they fit into the effects of monetary policy, which is fundamentally the amount of money in the economy. If you double the amount of money, and again if all prices instantly double, then really, nothing has changed. But we know that there is a huge amount of focus on what the Fed does, and the economy reacts to it. And one can try to scientifically study the effect of Fed announcements and policies on the economy. The same type of interpretation applies: If prices don’t react instantly to these changes in the amount of money in the economy, then this doubling of money doesn’t lead to an instantaneous doubling in the prices. So that’s why sticky prices matter.

Is there anything you’ve learned that could apply to colleges?

Well, another branch of my research is on government spending, not on colleges, but it’s tangential. I’ve studied the effects of military expenditures. When the U.S. goes into a war, some states receive much bigger increases in government spending than others. For example, California, which builds airplanes, is one of the states that gets a big increase, whereas Illinois sees very little impact. This is again an example of a demand shock, and one can ask: What effect does this have on economic activity in those states?

There are similar questions that arise in the context of educational spending, about how it relates to spending during a recession. I haven’t been at Berkeley very long, but I know that during the last recession there were huge cuts in terms of spending on universities.

In July the Fed cut its key interest rate by a quarter point. What do you think of that policy move, and could it affect higher education?

Clearly, public universities are very much affected by recessions and booms. Everyone is affected by recessions and booms, but private universities with huge endowments are somewhat more insulated. So what is the Fed trying to do? It’s kind of an unusual move in the sense that we have very low unemployment right now. Often the Fed would not be lowering interest rates in this situation. But there are some worrisome signs right now that maybe there could be a recession on the horizon. I think that’s why the Fed decided to lower interest rates. Higher education is so much affected by the state of the overall economy, and that is what the Fed is focused on right now.

I read that your parents took you and your brother to Japan every summer.

My dad’s parents were tofu makers. They had a small tofu shop in downtown Tokyo. My dad is from Japan — my mom is American — they would take us there in the summer. But my grandparents were also living in downtown Tokyo, so it wasn’t a place where it was easy to have little kids playing. So what they did, amazingly, they were able to enroll us just for the summer in the local public school that my dad had attended. Japanese schools go for longer than schools in Canada, where I was growing up. So I would finish school in Canada and then they would bring me and my brother to Japan, and we would go to school for a little over a month. That was a pretty amazing experience. It was, of course, sort of stressful because we were very different from the other kids, we weren’t completely fluent in Japanese, and so on. But looking back on it, that experience of not fitting in was one of the most valuable things about it: seeing a different culture, being in a situation where I was really different from people but nevertheless making it work.

There was talk at this year’s American Economic Association meeting about gender imbalance in economics, and some colleges have programs to try to promote the field to women. Have you ever felt any bias personally?

Clearly economics is male-dominated, in the sense that the fraction of women in economics is still small. But my own experience has been very positive. There’s been an enormous positive change in the field of economics if one goes back in time. I look back to my mom’s experience: In her graduate class at Johns Hopkins, there was a quota of only two women in the class. They were supposed to take notes for the men! It was completely discriminatory. If I go back to my grandfather’s generation, my mom remembers going to pick up my grandfather when he worked at Harvard, and they couldn’t even go into the library because women were not allowed.

So there has been a huge change over time, and the discussion now about gender issues is an illustration of further change. These initiatives at various universities are important, because it’s clear that women are not going into economics at a very high rate. I don’t think there’s any reason why that should be the case, and hopefully it’s something that will change.

What percentage of women are there in Berkeley’s graduate program?

It varies a lot, but it’s not 50 percent; it may be something like a third. All economics programs would like it to be 50 percent. What I’ve heard is that it drops off a lot sometime in undergrad. It’s something I’d like to know more about because girls and women do better in school from elementary to high school. My understanding is that if it were completely blind, universities would have substantially higher than 50 percent women. So women are better students at every level. What happens to make women not want to go into economics? It may matter whether you have female professors. I think those are important questions because it certainly seems to me like the field could benefit from having more women.

If you were able to advise a president of the United States, how would he or she govern differently?

One crucial thing to remember right now is how important the institution of the Federal Reserve is. People forget what a remarkable victory we’ve had when it comes to inflation. Back in 1980, inflation was over 10 percent, and there was a general sense that it was very hard to lower inflation. There are still many countries in the world where this is the case. But in the United States, inflation over the last 30 or 40 years fell dramatically, and now it been very stable, around 2 percent for many years. This is an enormous victory. My sense is that it has a lot to do with the fact that the Federal Reserve is such a strong institution, and quite an apolitical institution, supported by both Democrats and Republicans. This institution took a really long time to build up. This is something we have to really be careful about not destroying, because it takes a long time to get it back.

This interview has been edited for length and clarity.

Heidi Landecker is deputy managing editor for copy and production at The Chronicle. Follow her on Twitter @heidilande, or email her at heidi.landecker@chronicle.com