The Institute Blog

Robin Wells: We Are Greg Mankiw… or Not?

In response to the walkout staged by students in the intro economics class at Harvard, INET launched the syllabus project 30 Ways to Teach Economics. We invited professors and students to send us syllabi, and to share their experience with teaching and learning intro economics. Here are three responses, from Bruce Caldwell, Duncan Foley, and Stephen Ziliak.

Another response comes from Robin Wells. In this essay, she warns teachers of letting the classroom become disconnected from the real world. Amid mass unemployment and economic turmoil, “instructors who lecture on the superiority of free markets without acknowledging the dysfunction in the wider economy are at risk of appearing out of touch and exacerbating antipathy towards economics.”

Wells has taught economics at Princeton University and Stanford Business School. With Paul Krugman she co-authored Economics, published by Worth Publishers and soon forthcoming in the 3rd edition.

We Are Greg Mankiw… or Not?

by ROBIN WELLS

On Nov. 2nd, a group of students in Harvard University Ec10, the introductory economics class taught by Greg Mankiw, staged a walk-out. In an open letter, the students lambasted Greg’s course and his textbook for “espous[ing] a specific – and limited – view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today…..There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.” 

I am sure that many of us who have taught introductory economics or who have written an intro economics textbook (a much smaller subset, and I fall into both) felt a pang of sympathy for Greg when we heard about the walk-out.  If you have ever faced a large lecture hall of restive intro econ students, or coped with a voluble student with an ax to grind, you can feel some solidarity: we are Greg Mankiw too. 

But just how far should that sympathy extend?  Is Mankiw simply the target of fuzzy-minded youth who are more intent on making a statement than engaging in reasoned inquiry? Or, is Mankiw – and much of the profession, for that matter – getting a needed reality check about the need to re-orient the way we teach economics? 

First, let me say what this essay is not.  It is not an attempt to promote my textbook over Mankiw’s nor an exercise in partisan jousting.  I don’t find a walk-out a useful way to communicate displeasure with an instructor – better to invite him or her to a friendly debate with opposing views. This essay is not a critique of Mankiw’s teaching approach: I was not there to witness it, and every instructor will differ in political preferences and emphasis.  And neither will this essay advocate a root-and-branch re-think of how to teach introductory economics for both pedagogical and practical reasons.  I consider standard microeconomics to be an invaluable introduction to how to reason about the allocation of scarce resources.  Moreover, most intro econ instructors are stretched far too thin to contemplate a wholesale revision of their courses.   

But what I will say is this: something is shifting out there, and we ignore it at our peril. It would be very easy to dismiss the student walk-out as an exercise in intellectual laziness and grandstanding.  (After all, as many have pointed out, Keynesian models can’t be taught until second semester of Harvard Ec10.)  But perceptive instructors know that sometimes a stupid question is more than a stupid question.  And a really perceptive instructor will take a seemingly stupid question and turn it into the insightful question that the student should have asked. 

Right now the general public views the economics profession with a large measure of distrust and in some cases outright contempt. Students are entering the worst job market in well over a generation, without much prospect of improvement.  Many of them have seen their parents’ lives turned upside down by financial troubles.  They face being members of the first generation in American history with a lower standard of living than their parents.  Income inequality has reached levels not seen since the Gilded Age.  There are over 4 million long-term unemployed.

In this environment, instructors who lecture on the superiority of free markets without acknowledging the dysfunction in the wider economy are at risk of appearing out of touch and exacerbating antipathy towards economics.

But how does an instructor do this in an introductory economics?  I think it’s largely a matter of shifting our perspective to let go of the certainties that were part of our economic training and admit to the painful economic uncertainties that many Americans now inhabit.  Here are four ways to help bring that shift to the classroom:

Provide Context.   Compared to past years, instructors need to acknowledge the limits of free markets earlier in their courses. Students should understand the difference between the conceptual importance of free markets and their real world limitations. Explain that much of the current economic distress arises from markets that don’t behave competitively -- the labor and financial markets.

Build Trust.  Trust is built when the instructor compensates for the one-sided nature of the relationship by treating students’ viewpoints with respect.  And this is where the art of the perceptive instructor is most likely to be needed.  For example, to the microeconomics student who protests that Keynes and Adam Smith should be given equal time, respond that the issue boils down to why some economists believe that the labor market doesn’t always clear while others believe that its does.  Then take a few minutes to discuss each side of the debate.   Yet, also make clear that valuable class time won’t be wasted on debating viewpoints that are contradicted by the data.

Address Distributional Issues.  The dramatic rise in U.S. income inequality compels us as instructors to address it.  While international trade and educational differences have clearly contributed to some of the rise, it’s clear that they are only partial explanations: they can’t explain the explosion of income gain at the top 1% of the income distribution, and particularly at the top 0.1%.  We shouldn’t extol the benefits of markets while ignoring today’s highly skewed distribution of the benefits.  While there is no single definitive explanation, there are many factors that are feasible topics in class: moral hazard and the setting of CEO compensation, the decline of countervailing forces such as unions and higher marginal tax rates at the top end, deregulation, asset bubbles and the financialization of the U.S. economy.  And then discuss: to what extent is the level of income inequality a legitimate policy target?

Finally, Adopt Some Humility.  It’s true that those of us who weren’t in the business of teaching Gaussian pricing formulas for CDO’s or touting the benefits of homeownership via sub-prime mortgages aren’t directly responsible for the economic mess we’re in.  But in the eyes of many students we are culpable to the extent that we dismiss the need for some re-think of the deference accorded to free markets in how we teach economics as applied to the real world.  Again, I want to emphasize that we make the distinction between communicating the importance of free markets as an intellectual building block and the frequent mis-use of free market concepts when it comes to making real world policy choices.  Lastly, in a world of liquidity-trap macroeconomics, soaring income inequality and an exploding Eurozone, we are going to have to admit that there are areas in which the profession just doesn’t know what the right answer is.  

And remember, there is such a thing as a first-mover advantage.  So schedule a teach-in before your classroom is occupied.

Comments

0

Thanks for a considered and measured response to a complex topic. Most of what I've read about this up to now was dismissive of the student's point of view (although she did not help her case by making an emotional response to a question of economic principle).
I was intrigued by the point you made supporting the student's suspicion of the field:
"Right now the general public views the economics profession with a large measure of distrust and in some cases outright contempt. Students are entering the worst job market in well over a generation, without much prospect of improvement. Many of them have seen their parents’ lives turned upside down by financial troubles. They face being members of the first generation in American history with a lower standard of living than their parents. Income inequality has reached levels not seen since the Gilded Age. There are over 4 million long-term unemployed."
To me this point actually reinforces a misperception about economics and perhaps begins to explain why economists have been unable to more accurately predict looming trouble in the financial markets.
For one, to rely on the famous Niels Bohr quote, "prediction is very difficult, especially about the future." Study after study has shown that very few people have the ability to predict the future more accurately than chance. Why should we expect economists to be exempt from this finding?
If students are upset about the inability of economists to predict the current financial crisis (let alone do something about it) perhaps it is just that they fundamentally misunderstand what economics is really about.
Economics tries to understand human behavior in the face of scarcity and the allocation of scarce resources. Often times these lesons and models are applied to financial markets (because there is a strong correlation between utility to money) but it is not necessarily the case that the models apply robustly enough to accurately predict the behavior of the market. (Perhaps that should be the biggest lesson of the profession's miss of the collapse of 2008 - that the macro models aren't robust).
I think you start to address this by having the profession approach the current situation with humility - but humility connotes responsibility and I think that's an over-reach.
The real opportunity for the profession in light of recent events is to be honest about the scope of its ability, what Hayek called "the Pretense of Knowledge" in his 1974 Nobel acceptance speech.
Economists can study human behavior in the face of scarce resources and start to build some rules and models that might predict likely individual behavior but the idea that economics could accurately predict, let alone be responsible for, the kinds of behaviors and policies that got us to the current state of income equality is nothing short of absurd.
The real opportunity for the field is to put a narrower scope on the sorts of questions that can be realistically adressed by economists.

0

Thank you for posting this. I had the same reaction to my Mankiw textbook (as required by my University of Baltimore course) as these students. On the plus side, it inspired me to follow both Mankiw's and Krugman's blogs. Although, one can barely call Mankiw's blog a blog. He rarely expresses his own opinion and hides behind linking to other articles and papers. Morever, he doesn't allow comments and will not engage with the blogosphere. That's always frustrated me. As a result, I have a tendency to comment on others' blog posts concerning Mankiw. :)

0

While I entirely sympathize with most of what you are saying Dr. Wells, there was one aspect of your commentary that I found somewhat inaccurate:
"Lastly, in a world of liquidity-trap macroeconomics, soaring income inequality and an exploding Eurozone, we are going to have to admit that there are areas in which the profession just doesn’t know what the right answer is. "

There is a pretty strong set of economics literature that suggests that at least some in the profession have a pretty good idea what the right answer is to these issues. Brad Delong has been writing till his fingers are numb explaining what a likely path out of the weeds should look like for the Eurozone. Similarly both Delong and Paul Krugman have been writing significantly about likely ways to deal with liquidity-trap macroeconomics, ways which match Ben Bernanke's scholarship on Japan in the 90s as well as Milton Friedman's. Generally I think if Friedman and Krugman agree on something, its fair to say that the economics profession has a pretty good idea what the right answer is. Especially when that something happens to comport quite well with all available data.

Anyway, just a minor issue that you seemed to be being a bit over-conditional on.

0

"we are going to have to admit that there are areas in which the profession just doesn’t know what the right answer is."

A very important point. Greg has made it strongly: http://www.nytimes.com/2011/05/08/business/economy/08view.html

Not all econ textbook writers have followed this principle, though. Something to think about.

Also worth nothing the massive government intervention in all sectors of the economy that contributed to the current mess.

0

If the students are complaining about Adam Smith then in all likely hood, as was the case in my intro econ class, Prof Mankiw is taking Adam Smith totally out of context. In reality Adam Smith and Keynes are very compatible, and in reality Smith is practically a Marxist.

Whenever neo-classical economists refer to Adam Smith they selectively quote him and focus on very narrow context. Modern day capitalism, not modern market theory, bears no resemblance to anything described by Adam Smith, who was a far better economist than 99.9% of the economists out there today.

On top of that, all economics today, especially intro is far too reliant on math and deals very little or not at all with any understanding of the actual underlying principles and fundamentals. But there is a reason for this, and the reason of course is that such an examination would immediately expose neo-classical economists for the sham that it is.

IMO intro to economics should start with the discussion of an economy on a desert island with 5 inhabitants. All theories of exchange, value, labor, capital, demand, supply, etc should be worked out using that simple model before moving on to anything else.

But they are afraid to teach economics that way because they know if they did we'd end up with a world full of Marxists...

0

We can start by disabusing ourselves of the premise of this blog post - that the free market run amok is the underlying source of our troubles.

0

A lay perspective.

What's missing from most economics courses, and that students readily grasp, is non linearity and a network view. Maybe it's an advanced topic, yet students see networks at work every day and they wonder why can't economists see them (yet).

An economy is a network. Information and network theory will help us explain much more about the state of economics than the more or less linear relationships of supply-demand and other intro topics. For instance, how might the lack of transparency (a lack of information) to the derivatives market create bubbles? How might some people profit from a lack of transparency? What rules might we put in place (what is a market but a set of established rules on trading) to ensure free flow of information in the network? How might we ensure ways that will safely allow abstraction of that information without incurring additional risk? In other words, how can we manage complexity without incurring additional risk?

How can a rational investor make rational decisions without perfect information access?

Like any platform, success begins with access to information.

In an age when networks are so apparent everywhere, it sure seems odd to discuss the economy as anything but a network. These are things that students wonder, and I suspect they wonder why economics is so lost in nodes, unable to see the network.

0

The failure of the economics profession to connect theory with reality goes back a long way, it was an important issue back in 1975 when I took first year economics at Yale. Then, free markets were well and good but what about the oil crisis and its impact on the economy. One reason this situation persists is that introductory course get short shrift by professors, who fail to see that better prepared intro students are better prepared for more advanced courses down the road. The popularity of economics as a major has made the profession lazy in its teaching of economics. Perhaps now the lure of the economics major will be less. Continue to offer a substandard product and reap what you sow.

0

This is excellent!

Might I add, and perhaps Econ101 isn't the appropriate place for this, but I think the hegemony of the neoclassical synthesis needs to make room for a more rigorous look at the accounting underlying banking as well as heterodox economic theories.

Look, I am young, and I don't have a PhD in economics, but I am no dummy, and my education gave me a good understanding of economic fundamentals, finance, accounting, and the capital markets to continuing pursuing truth and understanding post-graduation. And what I've found is much of what I was taught in undergrad econ was not just oversimplified, but patently false or misrepresenting what is actually happening in the real world, and this has profound implications on our society and policy decision making.

Recent Fed and BIS research as well as volumes of orthodox and heterodox research shows a lot of fundamental concepts taught in Econ101 are simply not how it works in the real world. This includes, inter alia, the money multiplier, how central banks establish and defend the FFR, loanable funds, and the mechanics behind Central Bank and Treasury spending.

I'd say in these regards, beyond the heterodox economists, some expert financial practitioners at very high places within the industry, including Wall Street, as well as research and operational folk at the Fed/Treasury, have understood this stuff for a while and more are beginning to catch on. If the economics profession remains intransigent and isn't properly training their students as potential hires for industry, then perhaps there may come a day when it is forced upon them through the force of their funding. I guess INET is a manifestation of this. Or, as you suggest, perhaps it will be forced from the bottom-up.

0

It is my own personal belief that a great disservice to economics was done whenever the split was made between macro-economics and micro-economics. As this article (http://pragcap.com/resources/understanding-modern-monetary-system) describes it succinctly - "When Nixon closed the gold window in 1971, everything changed"

When that happened, the U. S. could run budget deficits without reprisal.

At that point economics should have been broken down into
public finance (federal government) and private finance (corporate, individual). What would have occurred then would be a major rethinking of the role of government in the financial world (taxes, money, banking, debt).

Instead, it maintained a Marxist bent towards the government serving as an allocation of fixed resources between entrepeneurs and workers. During the gold standard days, the federal government was limited in the size of the budget deficits that it could run - meaning there was always a give and take that occurred primarily between Democrats (pro labor) and Republicans (pro business). After the gold standard was broken, those lines should have dissappeared.

The question that was never asked after the gold standard was broken was, does the federal government need to sell debt at all? The federal reserve does not need federal debt to set interest rates, they could just as easily adjust the discount window rate by decree.

Federal government debt is a claim on future tax revenue. More than that it is a guaranteed claim. Why should the federal government sell any type of guaranteed claim?

0

Debating with the instructor is great if you feel that the problems with the course are restricted to that course only. If you believe that teachers and administrators across the field are failing students in important ways due to a reluctance to rethink the status quo, then staging a walk out on someone with the status of a Greg Mankiw might light up some blog discussion. Somebody has to address the system, and the students who pay for that system seem to have little opportunity to take part in that. How many changes have come about in our society that were helped along by a grandstander or two? If the youth of our country have been underwhelmed by the reality of an Obama presidency, then I'm thrilled if the answer is walk-outs and occupations rather than giving up on the hope of change altogether.

0

Mankiw's textbook (and I bet many others) extol the efficiency of free markets in obtaining optimal outcomes to a degree that is nothing sort of absurd. Wherever he lacks arguments he argues from authority, and his authority is The God named Market.

http://rwer.wordpress.com/2011/11/07/toxic-textbooks-part-i-%e2%80%93-ma...

http://rwer.wordpress.com/2011/11/08/toxic-textbooks-part-ii-%e2%80%93-m...

0

One way economists earn mistrust is by hiring themselves out to Wall St financial houses and other Big Money interests. You may as well ask physicians hired by Big Pharma to write policy on drug development and pricing, or geologists hired by Big Oil to write energy & environmental policy.

0

I am not surprised the students walked out. In their minds, the instructor has all the power, and this student generation doesn't care about that. It makes sense for them to say, you have the power, but not over me.

So yes, it's about lack of trust, lack of engagement, lack of relevance. Maybe the instructor has to invite the students in to the economists world, give them tasks suited to a real purpose? I think this generation is really asking for a piece of the pie, they're not interested in being nobodies. Does that mean having them invent their own curriculum? Not sure you can go that far, but certainly make it more of an apprenticeship than being a consumer of wisdom coming down from on high. An apprenticeship means getting your hands dirty as a social scientists- to- be, and engaging in a whole different way than treating them as know-nothings. Even though that's kind of where they happen to be. It's not something most instructors know how to do, and have the time to do. But have fun with the walk-outs in that case.

0

I am not surprised the students walked out. In their minds, the instructor has all the power, and this student generation doesn't care about that. It makes sense for them to say, you have the power, but not over me.

So yes, it's about lack of trust, lack of engagement, lack of relevance. Maybe the instructor has to invite the students in to the economists world, give them tasks suited to a real purpose? I think this generation is really asking for a piece of the pie, they're not interested in being nobodies. Does that mean having them invent their own curriculum? Not sure you can go that far, but certainly make it more of an apprenticeship than being a consumer of wisdom coming down from on high. An apprenticeship means getting your hands dirty as a social scientists- to- be, and engaging in a whole different way than treating them as know-nothings. Even though that's kind of where they happen to be. It's not something most instructors know how to do, and have the time to do. But have fun with the walk-outs in that case.

0

A better, more complete, statement of the students concerns can be found here http://www.thecrimson.com/article/2011/11/8/pay-mankiw-walk-out/ --absent the smith keynes cringe inducing comment.

0

An excellent essay! I'm retired from a career in university teaching and research in computer science, so there was no wiggle room for opinion about most subjects. But even there, we felt a responsibility to offer discussions about privacy issues magnified by our technologies, ethics surrounding intellectual property, etc. I hope our students were better professionals as a result.

0

I found EC 10 mentioned in a book I have, which is odd. Make of it what you will:

"Perhaps the single most important intellectual influence pushing policy to the right came from Martin S. Feldstein, a rightist economist who has long taught ‘Ec10,’ a ‘decidedly anti-tax, free market-leaning introduction to economics’ to thousands of students at Harvard University, many of whom have gone on to prestigious positions in the US Treasury Department (Leonhardt 2002), and who, as president of the National Bureau of Economic Research, provided a more serious rationale than Laffer for cutting taxes."

UNHOLY TRINITY the IMF, World Bank and WTO
Richard Peet
p 13

0

The walk out and ensuing debate betray a very one dimensional view of Adam Smith. Maybe the students should read the Theory of Moral Sentiment first?

Is the problem not merely reflective of the very circumscribed way in which Freshmen and Sofmore undergraduates are taught economics in the US? As Paul Krugman has said in the past, a small snippet of economics teaching can be a bad thing, and can lead to the impression that the profession is highly partisan when really there is broad consensus among elite economists on matters such as fiscal borrowing in a liquidity trap.

At Oxford, the economics I learned encouraged me to question Pareto from day one, let alone 'the invisible hand'. We specialised, in one sense, since we studied economics from the start; but got a broader context, in the other, as courses combine complementary subject (e.g. Politics, Philosophy & Economics; or History and Economics).

We also were not taught solely from textbooks. I'm sure my peers can all remember some of the seminal references in the past 40 years of macro (Barro, Gordon, Kydland, Prescott) because we read them! Even the textbooks were more nuanced (e.g. Parkin and Bade). Mr. Mankiw's textbook is particularly guilty of lacking analytical detail, fully rounded theoretical treatments and self doubt. It is certainly one o the prettiest though.

0

I think part of Greg Mankiw's problem is the political hacking he has done for the GOP. Maybe if he was more honest with his popular writing, he would not have had the walk out. I use his textbook and I come away with different conclusions than Greg Mankiw does now that a Democrat is in the White House as oppose when he was working for GWB (WPE)

0

Nicely said!

+1

I'd like to point out that every freshman physics prof (except for those who adopt the Feynmann lectures) is consciously lying to their students. And their students--or at least the goods ones--know it. And they don't care. They know that Physics 101 is a needed pedagogical warmup to the real stuff. Nobody pretends that Newtonian mechanics is The Truth. And nobody, 20 years later, uses their fuzzy memories of Newtonian mechanics to assert intellectual dominance over others.

I'm not an economist. But it seems to me that the economists should ape the physicists correctly for once. There has been enough stupid aping of physics--Herb Simon was correct when he said that the economics he read was more mathematical than the physics he read, to the discredit of the economists.

So repeat after me: Micro tools are a mere intellectual warmup for the real stuff. Economics profs should not over-sell their micro tools, just because they contain most of the mathematical machismo. Real economics is a social study, not mathematical modelling.

0

The problem is that Adam Smith was to modern economics as Freud was to modern psycho-therapy. An early pioneer and, as it turns out, mostly wrong.

Further, when we get Adam Smith shoved down our throats, this Adam Smith insight to why we need government regulation never seems to make the cut:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Regulated capitalism is a wonderful thing. The laissez faire capitalism taught by Mankiw, and others, is not.

What they preach is the capitalism of the rentiers and cronies who, by virtue of their wealth, do far more harm than good to the economy. Or as Thomas Jefferson observed in his 1789 trip to France:

As soon as I had got clear of the town I fell in with a poor woman walking at the same rate with myself and going the same course. Wishing to know the condition of the laboring poor I entered into conversation with her, which I began by enquiries for the path which would lead me into the mountain: and thence proceeded to enquiries into her vocation, condition and circumstances. She told me she was a day laborer at 8 sous or 4d. sterling the day: that she had two children to maintain, and to pay a rent of 30 livres for her house (which would consume the hire of 75 days), that often she could get no employment and of course was without bread. As we had walked together near a mile and she had so far served me as a guide, I gave her, on parting, 24 sous. She burst into tears of gratitude which I could perceive was unfeigned because she was unable to utter a word. She had probably never before received so great an aid. This little attendrissement, with the solitude of my walk, led me into a train of reflections on that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe.

This is the world Mankiw's economic theories creates -- peasants and paupers and a few ultra-rich who live off rents they grind out of the working poor while innovating nothing and leading all to an impoverished, stagnated economy.

So, I say good for those students. They should not be going to one of the finest schools in the world to hear a phony mixture of Cold War/Rich Man propaganda. They should learn from models and theories that accuratelythat predict what happens and why rather than mere religious apologetics.

0

Thank you, Dr. Wells. I think this is very well written -thoughtful and with respect for all parties.

+1

These students need an attitude check (but it's Harvard so what can you expect). It's like saying it's not worth learning about monopoly pricing or Bertrand competition because Cournot makes more sense. How can they understand why free markets don't work if they don't know how free markets are supposed to work and see where to flaws are? Strikes me as the stupidity and arrogance of our current Facebook generation. No wonder the Chinese are literally eating their lunch.

0

Though Ms. Wells notes that she wasn't present at the Mankiw lecture in questions, she implicitly assumes that he generally lectures "on the superiority of free markets without acknowledging the dysfunction in the wider economy." Why make this assumption?

0

>> Lastly, in a world of liquidity-trap macroeconomics, soaring income inequality and an exploding Eurozone, we are going to have to admit that there are areas in which the profession just doesn’t know what the right answer is.

On the other hand, in a world where liquidity-trap macroeconomics has been studied for two decades and where those who were paying attention then have made consistently solid predictions about the trajectory of the world economy... in such a world, perhaps we should admit that we DO know what the right answer is, we just don't "like" it for political reasons and so spend time closing our eyes and plugging our ears, instead of doing what relatively simple macroecon tells us what we need to do: stimulate demand.

0

Maybe the students would've been interested in the Sonnenschein–Mantel–Debreu theorem, that says that market demand curves don't obey the law of demand? Or the Theory of the second best; possibly a practical argument in favor of unions and minimum wages? Or that the Phillips curve and IS/LM model are oversimplifications of what Phillips and Keynes originally had to say?

The basic supply/demand model of neoclassical economics is so weak that open minded students have every right to question it, and demand alternative models. Instead of fully acknowledging its weaknesses, lecturers go on to pose such bold exam questions as "show the effect that a minimum wage will have on the labor market".

Not to mention that the only economists who saw the 2007 financial crisis coming were heterodox economists (In my opinion, the post-Keynesians were right), yet this is not communicated to students.

Quite frankly, I'm glad I switched from econ to engineering after my first semester.

0

The second to last line in your article, that the economics profession needs to admit it just does not always know the right answer, struck a chord with me. I tried to sum up why this is the case in my own article about the disputability of macroeconomic knowledge. http://bit.ly/uUUS0o

0

The walkout students were not terribly convincing in their letter.

They should have read Steve Keen's Debunking Economics before writing it.

As should every econ professor.

0

Whatever happened to the mixed economy? When I was taught introductory economics in the late 1990s, Western countries were described as having mixed economies. I vividly remember the professor drawing a line on the board, with free markets to one side and controlled markets on the other, then proceeding to plot all developed economies within the middle two quartiles. students see that the US is not, in fact, a free market.
Today, this needs to be explained at the beginning of the course. Because students enter the class exposed to a media that constantly refers to the US economy as a "free market economy," they will incorrectly associate the introductory econ treatment of the hypothetical pure free market as synonymous with the US economy.

0

Since the facts are that the content of Mankiw's (and your) text book is not only misleading, but false!, you stand as a poor defender of academic virtues.

The theories presented in the books mentioned have been falsified not only in practice but more stringently in a wealth of papers over the last century. Yet you continue to present these absurdities as descriptions of the society we live in.

The walkout is very much justified, and should be continued and expanded.

0

"I don’t find a walk-out a useful way to communicate displeasure with an instructor – better to invite him or her to a friendly debate with opposing views."

I majored in Econ in the early 1990's and aced every course I took - including a few graduate level courses. I walked away from economics 20 years ago because the entire field in unwilling and unable to reconcile what they wish to believe from the obvious way the world really works. It is a field corrupted by power, arrogance and, duh, money.

Kids walking out of the real economy into an econ classroom is probably as jarring for them as if they walked into an Anthropolgy class teaching Aryan supremacy. What amazes me...is that they don't all walk out.

Finally, find me a econ professor willing to have a friendly debate about opposing views and I will show you a junior college professor.

0

I hope that all teachers read this.
And congrats on Krugman's linking.

0

I'll certainly vote for the last prescription! Have some humility!

There is nothing that turns people against supposed technocrats more than arrogant denial that there's something they don't know. Greenspan and Summers both do it.

So a question remains for the third player in the deregulation of our financial markets: Geithner. Does Geithner do this when he talks to the President?

"We don't yet know..."

0

The question isn't whether labor markets clear, it's how to determine the time scale. Recessions used to be called panics because they came and went rapidly. Today they are called liquidity traps and can last for a decade. What's going on? Neither Smith nor Keynes seemed to worry about dynamics, let alone time scales.

0

"we are going to have to admit that there are areas in which the profession just doesn’t know what the right answer is"

This is what's so frustrating. We do know what the right answer is, in just about every important area. Nothing in this crisis has stumped standard theory except the refusal of much of the top of the profession to know standard theory.

We're going to come out of this recession learning absolutely nothing. The fix was obvious ten years ago.

0

"instructors need to acknowledge the limits of free markets earlier in their courses"

No. Instructors need to acknowledge from the first moment the logical impossibility of the existence of a "free market." We all know what we mean by the word free in this context: unrestrained, not-interfered-with, unregulated.

But what do we mean by "market"? A market is essentially a set of rules governing a type of commerce. It is a defined system of economic transactions. It is, by definition, restrained, interfered-with, and regulated. A market is made of regulations. Saying "free market" is like saying "married bachelor" or "brickless brick house."

I suppose the comeback is that we know there have o be rules, but we just don't want the government picking winners and losers. Except that the government must pick winners and losers. No set of economic rules can benefit Warren Buffet and a minimum wage 7-11 clerk equally. It is the government's right and responsibility to make rules and pick winners.

Sadly, it generally picks the already-wealthy as winners, but that is a political point, not a logical one.

If you were to pick apart "free trade" and "free enterprise" you'd find the same logical contradictions.

I'd advise economics students to walk out on any professor who uses any of the aforementioned expressions without a huge set of air quotes, because the professor is talking rot.

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In a Sunday Review article at the New York Times over the weekend, Professor Edward Glaeser of Harvard invoked the "lump of labor" fallacy in support of the "counterintuitive" notion that "the forever work life of older Americans may turn out to be a good thing for young workers."

The idea is not only "counterintuitive." It's a fossil of magical thinking from the 18th century. Glaeser's bogus fallacy claim has been shown to be itself a fallacy by no less than A.C. Pigou, Maurice Dobb and (more generally) by J.M. Keynes's father, John Neville Keynes. Yet it gets taught by the likes of Glaeser, Mankiw (who sneered at Albert Einstein for committing the bogus fallacy) and... even Professor Paul Krugman of Princeton:

Economists call it the "lump of labor fallacy." It's the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950's that automation would lead to mass unemployment.) As the derisive name suggests, it's an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.

Last May I wrote an open letter to Professor Krugman advising him of the documented falsity of the fallacy claim. I received no reply. The letter, posted at my blog, has received over 2,000 views.

PROVIDE CONTEXT: the "fallacy" claim is based on unrealistic assumptions of no transaction costs, reversible time and total indifference to working conditions. Moreover, it's origin is in pre-industrial economic thought influenced by the conceptual framework of alchemy (which in itself is not necessarily a bad thing -- see Isaac Newton, for example -- but it needs to be tempered with a good dose of skepticism).

BUILD TRUST: I have written to Professor Glaeser on two occasions regarding the fraudulence of the fallacy claim but have received no reply. I have also received no reply from Paul Krugman. I have written two published articles debunking the fallacy claim, one a chapter in an anthology textbook and another in a peer reviewed journal and no one has responded to my critique -- they just keep repeating the bogus claim.

ADDRESS DISTRIBUTIONAL ISSUES: The lump-of-labor fallacy claim is, in effect, an argument from authority that distributional issues don't count.

ADOPT SOME HUMILITY: When is that going to happen? In my lifetime?

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As I recall some 30 years ago when I was majoring in Economics, one of the most important lessons was about the assumptions of the so-called Theory of Perfect Competition. As I and my fellow students thought through the implications of those assumptions, it became quite clear that free market capitalism has some very signficant limitations. Some of those issues (e.g. perfect imforation) were instrumental in causing the economic calamity that came to a head in 2008.

When my son took a Micro Intro. course recently, I noticed that there was no clear discussion of thesee assumptions and there implications the text. Perhaps it is that lack of balance (and I would argue, accuracy) that has the students at Harvard upset. After all, as the world economy becomes more complex, it is more ulikely that those assumptions remain true enough.

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Teaching modern physics has no problem with introducing Newton mechanics first, and Theory of relativity later because the area of application and historic precedence are clearly spelled out at the very beginning.

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Good work.

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Thanks Robin; this is great advice. By the way, my students previewed your text and they like it!

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I think it's important to point out early that almost no real world markets are competitive. I think the grain markets probably are; I can't think of any others that are, mostly because you don't have large numbers of suppliers, entry of new suppliers is restricted, one or more suppliers can affect the price, etc. Perhaps it would be good to spend some time discussing the concept of "markets" as a Platonic ideal, like lines or points in geometry, which is simplified to make it possible to analyze otherwise intractable problems. My feeling is that the students are reacting not so much to Mankiw (although he makes himself a target by being such a visible player for Team Republican) as they are to the propagandistic overselling of "the magic of free markets" by those who really want to remove restrictions on their "right" to loot.

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I merely have an undergraduate degree & little formal economics education, but for my money I've learned a great deal from reading criticism of US policy in the context of its departure from Keynesian prescriptions. My understanding isn't perfect, but it's sufficient to put together how attacking federal policy as failed Keynesianism is fallacious.

As for microeconomics, again displaying my lack of depth, I'd say one of the better books I've ever read was Peter Schiff's "How an Economy Grows and Why It Crashes". The first half seems to be a highly simplified primer on microeconomics whereas the second half is a highly loaded, scathing commentary on US economic policy since the housing bust. Point being, it seems there's little light between Keynesian and Austrian schools on microeconomics but the sliver becomes a chasm when crossing to macro. Highlighting this relationship could be an interesting way to promote productive discussions in the classroom.

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There is gracious humility here, and an attempt to be objective about ones profession, without being condescending to those who cannot profess inside knowlege of the temple of reason like superstar professors...

That being said, you have to remember that many of us were brought up by parents who were free market fundamentalists--
I had to come up with a marketing plan to even get the tooth fairies attention and had to explain why free gifts at Christmas, wouldnt automatically serve as a disincentive to achieve in school.

We dont mean to be disrespectful to Keynes and his theories,
but the idea that economic science can advance beyond theories hundreds of years old, that it can learn new things
about how to maximize employment or deal with Capitalisms extensive noise,is intensely painful to us. If science wont yield to helping the priviledged maintain the status quo, who will? Certainly wont be that Jesus character-I reread the whole damn thing...

Yes, we are very emotional people when our invisible hand
is mocked by professors, who though they get Phd's and Nobel prizes, still dont have the money to spread around like we do, so why should we listen to them? Money is might and might makes right.

Jesus Keynes Krugman make Che Guevara look like member of a rural Kansas School board...

(yes I am joking and keep up the good work Robin

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There's a pretty simple solution: before moving into micro start with Economic History and History of Economics. Look at the relationship of the discipline to the world with which it engages. Be resolute in highlighting the gap between models and observable facts, not to downplay the former to but realism into the discussion of what models can and cannot do. And, yes, humility above all.

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Thought this was going to be one big rip piece against Mankiw... enjoyable, however.

I think most of the stuff you mentioned has already been adopted by good economics teachers as soon as they saw in 2007 that the rules of the past 40 years had come to an end. Every economics teacher I've had has given us the scoop of limitations to free markets. I'm sure Mankiw teaches this in his course as well, which is what I find silly about this whole situation.

Overall I agree with your post, however I really am of the mind that the "walk-out" really was nothing more than students ignorant of the subject matter getting angry at the nearest economics authority figure. Like you said in the article, Keynes was in fact going to be covered by their instructors-- the semester after Microeconomics. These students don't even know what separates Keynes and Smith to know why their statement that one is being preferred over the other by their teacher to be such a...ludicrous one!

Anyway, your post is right about the adjustments that economics the profession needs to make. time to weed out the idealists and political lion-hearts, make room for the scientists and pragmatists.

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I wonder: how many economics classrooms are being targeted at community colleges and small state Universities? Is this an example of elite university exceptional-ism? Or just the childishness of spoiled rich kids.

Clearly my mind is already made up.

I don't think the working classes who are suffering most care for these actions; nor can I believe they want pity from these "elect".

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I hope you and Dr. Krugman will open a communication site for discussion when people have read the new text. The only hope we have to escape a dismal and possibly apocalyptic outcome is for the maximum number of people to understand economics. Ayn Rand is making a comeback, and so is Karl Marx. If people like you and Dr. Krugman fail to turn on enough lights, I fear passion will overcome reason, and while that can be fun for an evening, it generally makes for nasty history down the road.

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