60 years ago an undergraduate at an "Ivy League" US university didn't like the economics and politics that were being taught there. He didn't boycott classes. Instead he wrote a book about it.
The full title of William F. Buckley's book is "God and Man at Yale: the Superstitions of 'Academic Feedom'". (I haven't read it, though I skimmed it 30 years ago.)
Buckley complained that the economics taught at Yale was too collectivist. Too much Keynes, and not enough Hayek and von Mises. He addressed his book in part to those who donated money to Yale. He wanted them to use their influence.
Sure, there are differences, but there's also an obvious parallel to the walkout by some students from Greg Mankiw's Intro Economics class at Harvard. But I Googled, and can't find anyone making that (to me) obvious connection. We need to make that connection. We need to ask ourselves whether our reactions to those two protests are consistent. Austin Bramwell (pdf) quotes some of the very extreme reactions to Buckley's critique. Was there anything that extreme said about the Harvard students?
Here's another recent example of students boycotting classes because they don't like what is being taught.
I also want to draw attention to that second bit of the book's title. William F. Buckley saw that underlying the question "what should we teach?" was the question "who decides what we should teach?".
I don't have any especially insightful answers to those questions that you probably haven't already heard. So I'm just going to give a few personal reflections.
I teach Intro Economics, and have done for many years. I use the Canadian edition of Greg Mankiw's book. (I was a co-author of the Canadian edition, but quit after the third edition for personal reasons.) I sometimes get questions or comments in class from students who, I guess, disagree profoundly with what I teach or the textbook says. Those questions usually make me happy, even though it's sometimes a challenge to come up with a good answer on the spot. "That's not how the world works" and "That's not what we should do" show that the student recognises that economics is supposed to be about the world and is supposed to be giving good advice. What depresses me is "Will this be on the exam?", because it suggests that nothing I say really matters at all. The critics, who think we are wrong, at least flatter our vanity by thinking that economics matters.
My sympathies, unsurprisingly, side with Greg Mankiw. I hope that sort of thing doesn't happen to me. If it does, I hope I would have the strength to deal with it as well as Greg Mankiw. It's hard enough teaching Intro Economics (few faculty volunteer) even without everybody on the internet joining in to criticise the politics of your course content. My immediate reaction might not be printable. Then I might start thinking about words like "Chilly Climate", "Hostile Environment", and "Silencing".
I haven't heard of any recent stories of conservative students walking out of classes taught by left-of-centre sociologists, but I hope my response would be consistent. Ultimately, I see this as a sort of social contract. "If you try to stop me teaching what I think is right, why the hell shouldn't I try to stop you teaching what you think is right?" Does this social contract extend to Nazis? Hmmm. Does this social contract extend to Marxists? Hmmm. Would they offer me the same deal? Hmmm.
Worthwhile Canadian Initiative 
The dominance and prestige of economics in our day-to-day political discourse, particularly received wisdom about, as Gregor puts it, the world as primarily composed of “property rights, contract law, and freedom of exchange”, suggests that economics as a discipline has far more political import than Marxist anthropology, so it’s much harder to make a case for a walkout of an anthropology course as a political statement.
I mean, Gregor put his finger on the whole underlying issue here. There is a basic, simple conceptual framework that clearly provides the infrastructure of what mainstream economists do and teach. It’s not hard to spell it out. If you accept it, than you can define a right and left wing there and then. The left wing is now interested in enumerating and compensating for exceptions (“market failures”). The right wing is interested in explaining why apparent exceptions, aren’t. In this conceptual framework, the left wing is always going to be at a disadvantage, because enumerating exceptions to the underlying foundation of “property rights, contract law, and freedom of exchange” is always going to be weak political sauce. The basic right-wing belief that our economic and social relations are the way they are because they approximate the optimal outcome of the free exchange of property can only be challenged at the fringes.
(The fact that there can be a right and a left wing is interesting in itself! But no matter…)
But a simple glance at a newspaper tells me trivially that it is not a sound basis we can assume for the way the world works. That’s why the David Graeber argument was so important, pace Gregor and Nick. If it was never the case, then what we see in the world is not a deviation from that state. Then there’s no real reason to accept it as a basis for discussion when planning a renewed society.
And if that’s the case, then it’s like wrestling with the prospect of a winged purple elephant. If powerful people believe in it, or some approximation of it based on the underlying argument about outcomes subtending from the free exchange of goods, then one is forced to that extent to engage with it. But not because of its intrinsic merit.
So no, I don’t believe that the protesting students were under any obligation to come up with a cogent counterargument within the same intellectual framework, even the well-intentioned kind that admits market failures. Having to do so is the intellectual equivalent of having one arm tied behind one’s back.
Frances, I can only speak to macro.
My argument is not about the political element of economic ideas and the political biases of economists, though. It’s about the economic fundamentals that are taught – are they accurate and representative of how the real world works, independent of policy implications? The politics I lament is the politics within the econ profession, which leads to entrenched ideologies that preclude the exposure of other ideas.
In other words, the politics within the econ profession is not the balance of left vs right economists, but the process by which ideas become entrenched and the struggle for academic power, influence, and prestige, at the expense of an open-minded approach and exposure to other ideas.
wh10: “It’s about the economic fundamentals that are taught – are they accurate and representative of how the real world works, independent of policy implications?”
Generally speaking demand curves slope downwards and supply curves slope upwards. A movement along the demand curve is different from a shift in the demand curve. A change in prices produces a substitution effect and an income effect. The actual effect of policy is frequently different from the intended effect of policy.
Just getting people to think through problems analytically with a simple supply and demand framework is immensely valuable. And, as a first order approximation, it’s frequently reasonably accurate and representative (see, e.g., my recent post on dental hygienists).
Or at least as accurate and representative of the real world as what’s taught in intro survey courses across the academy.
If you’d spent as much time as I have trying to force people to think analytically, to pay attention to market forces, you’d be grateful to just about anyone, regardless of their political views, who was able to convey these ideas in a way that stuck.
Frances, that’s fine, and I think that stuff is great. However, there’s more to intro econ than that. For example, Post-Keynesians would take much issue with how intro texts describe and approach banking and fiscal/monetary operations, not on the basis of what it implies about policy, but simply on the basis of what actually happens.
Mandos you said:
“We also live in a world with regulations, electorates, cultures, politicians, vested interests, malicious people, etc, etc, etc, most of which are massively underweighted in a conception of the universe that contains only “a monetary exchange economy with private property, contract law, and freedom of exchange [Oxford comma!!!1!!!1],.”
Who said we didn’t? Of course there are politicians and vested interests. So what? There are also market forces at work. And they matter a great deal. And most people are fairly ignorant of market forces. If you never study economics, you’re much more likely to think that the world is ENTIRELY driven by regulations, electorates, cultures, politicians, vested interests, malicious people, etc, etc. If you never studied any economics, you’re much more likely to think that instituting a 20/hr minimum wage is a good idea. You’re much more likely to see think that the government setting a price ceiling of 80 cents/lite on gasoline is a good idea. And you’re much less likely to think that that requiring companies to provide workers with certain benefits will result in corresponding downward pressure on wages. If you think all there is to the world is politicians, social movements and culture, you’re going to make a lot of incorrect predictions about the effects of different economic policies. Ignore market forces at your peril.
When you learn econ 100, you learn about market forces and how those market forces and how those market forces interact with the political and cultural forces you described. Take your example regulation. Some market activities are regulated by the government and some are not. How can we assess the impact of a government regulation of a market activity if we are completely ignorant of the forces that drive the quantities and prices exchanged absent the regulation? You need to compare the case where there is regulation to the case where there is no regulation. And for that you need to learn econ 100.
Hmm, my comment seems to have got dropped down the memory hole. That’s a shame, because I thought it was a sound argument for universities to employ more people who can teach the history of economics…
In a democracy people should come together to construct the society that they want to live in… They may not all understand economics, but that does not mean they don’t have values. When the values are constantly ignored on the basis of political ideologies based on the language technocratic management … they feel left out of the political process and react (not always appropriately). These manifestations have to be looked at as symptoms. In that sense asking whether protesters are right or not is not really the right way to look at it. In a system that shuts out progressive voices that want change through protocols of speech – a protest is one that finds no other voice. Here is an example of this :
http://www.cbc.ca/news/world/story/2011/12/07/un-climate-kent.html
“The six members of the Canadian Youth Delegation stood as Kent began his speech and turned their backs, revealing the message “Turn Your back on Canada” on their T-shirts. The youth delegates said they received an ovation from the crowd but were escorted out by security and had their accreditation revoked.”
Gregor Bush : Of course you have to understand the implications of your actions on market forces otherwise you may do more harm than not: that is realism. But I would not say “so what” to the vested interests of big players and the ideologies that dominate politics. The problem is that many people who want to see change are being played the tune of realism to justify a status quo that has nothing to do with realism… (Republican party anyone?)
Gregor,
Let me give you at least this. If economics confined itself to coming up with “interpolative” explanations—of the way things were in the past with severe caveats about its predictive power, then it might eventually, after some time, gain a status similar to evolutionary biology. Evolutionary biology has also a conceptual substructure that has been refined and empirically validated by looking at past and present (and even then there ambiguous issues like the role of neutral selection), but no evolutionary biologist would claim that s/he could make any reasonable sort of prediction as to what might happen in the future.
But to claim that “market forces” are a dominant overlay that restricts the effect of all other relations and conditions all possible futures is, once again, to assume the conclusion. I don’t admit the existence of “a case where there is no regulation”—that is a claim that is simply assumed. There is always regulation; it is only the regulator and their intent that differs.
This is all, heh, “academic” in the case of Gregory Mankiw. He’s in a different league entirely.
W. Peden: I just found it in the spam filter. It’s now published, at 11.05pm yesterday. Sorry about that.
(Stephen Gordon) “What is so special about the US that when their policy-makers screw up, the world must re-invent principles courses?”
(Nick Rowe) “I teach Intro Economics, and have done for many years. I use the Canadian edition of Greg Mankiw’s book.”
It strikes me that the second paragraph might go some way to explaining the first?
Mandos: “But a simple glance at a newspaper tells me trivially that it is not a sound basis we can assume for the way the world works. That’s why the David Graeber argument was so important, pace Gregor and Nick. If it was never the case, then what we see in the world is not a deviation from that state. Then there’s no real reason to accept it as a basis for discussion when planning a renewed society.”
I want to understand your position, not (yet) argue against it. Massively oversimplifying, is this it:
‘Markets were (historically) created by the state. Therefore we should have an economics which is based on the allocation of scarce resources by the state, and teach about markets as a special case of how the state allocates resources, rather than vice versa.’ ?
W. Peden,
You’ve essentially just made up your mind that modifying intro courses, along certain lines which are unclear to me, is out of the question.
Oddly enough, the lines I am talking about, such as the money multiplier, seem to be lines you might agree with.
I also agree history of econ would be helpful.
But I disagree that ‘time’ is an issue and that simply making it a prereq for only econ majors is sufficient. Most people are not econ majors, and so they won’t be exposed to this, and they’ll carry their poorly formed understanding and prejudices into the real world. And your implication that current debates in physics are of similar nature to those in economics is tenuous and misses the point. See Determinant’s comments at 8:55am
Hmm, that is indeed a very oversimplified view of what I mean, though it is in the right direction. For one thing, I would quibble with the word “historically”. I would say that markets are currently created by the state, because the current state itself is designed, at a very deep level, to discourage or penalize the emergence of even attempts at producing alternatives. (Witness the crackdown on some of the occupy encampments.)
If economics confined itself to coming up with “interpolative” explanations—of the way things were in the past with severe caveats about its predictive power…
“If”? That pretty much describes the entirety of applied work in economics. Unconditional forecasting is a niche field, and most of that is done outside academia.
Nick Rowe,
Thanks!
wh10,
“You’ve essentially just made up your mind that modifying intro courses, along certain lines which are unclear to me, is out of the question.”
No I have not. It would be absolutely insane to think that intro courses should never be modified.
“But I disagree that ‘time’ is an issue and that simply making it a prereq for only econ majors is sufficient. Most people are not econ majors, and so they won’t be exposed to this, and they’ll carry their poorly formed understanding and prejudices into the real world.”
This seems to be a hazard in any introductory course to any subject. Time is precisely the reason why.
“And your implication that current debates in physics are of similar nature to those in economics is tenuous and misses the point. See Determinant’s comments at 8:55am”
They are similar in this respect that is sufficient for my point to be correct: you cannot properly understand them without a considerable understanding of one set of theories, which takes longer than one intro course to know and understand.
The requirement of a basic grounding is true of any subject, including literary criticism and sociology, so the relative fundamental consensus in physics is quite irrelevant to my claim. Whether or not learning the basic popular theories in economics requires more than an intro course is a contingent question and I’m open to any argument to the contrary.
Any form of policy advice (such as critiques of party platforms) is also an exception.
Mandos, you said:
“That’s why the David Graeber argument was so important, pace Gregor and Nick. If it was never the case, then what we see in the world is not a deviation from that state. Then there’s no real reason to accept it as a basis for discussion when planning a renewed society.”
Ahh…so you’re effectively conceding that if you were not “planning a renewed society” that what you learn ECON 100 can be quite useful for understanding the world in which we live today. So if a proposed policy change were marginal, say, a price cap on gasoline, then the Econ 100 prediction of a gasoline shortage will be valid. Do you agree? And if so, why is that not useful for people to know?
You sound alot like the utopian socialists of the late 19th century here: we don’t need to worry about the laws of supply and demand because once we overturn the existing social order there will be a “spiritual transformation of man” and individual incentives will become meaningless. Well, as it turns out, individual incentives still mattered. When China (and in other countries) collectivized farming, output plummeted. Then when they allowed private farming again output shot back up. Who could have predicted that? Well, anyone who took and truly understood Econ 100, that’s who.
The moral of the story is that if your socialist revolution does not come, Econ 100, as it is currently taught, will be a very useful tool for understanding market forces in the world in which we currently live. And if the socialist revolution does come, Econ 100 will offer important insights into why the whole thing isn’t working out nearly as well as the socialist revolutionaries had hoped.
“The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” –Hayek
Let’s stick for a while with Determinant’s analogy to logic. One sense in which this analogy is certainly correct is that both subjects require a considerable amount of technical training before the main issues can be understood.
A modern formal logic course will begin* with a basic propositional calculus (without going into the more esoteric issues of NAND, NOR and functional completeness) then proceed onto a fairly luxurious predicate logic system. That will take up at least a semester and even then most students will get very little out of the course in the long-run if it is covered too quickly. A two semester course might go into one or two simple modal logic systems. The issues in mathematical logic, philosophical logic and the philosophy of logic that are the debates within formal logic as a subject will not be taught. Fuzzy logics, interrogative logics, imperative logics, funky modal logics like temporal logic, intuitionist logics and Aristotelian logics have no place in an introductory logic course, unless they’re mentioned for about 30 seconds.
The same is true for an informal logic course. An introductory informal logic course (or, more typically, a short informal section within a wider logic course) will go through a basic fallacy classification system. If Douglas Walton or one of his followers is teaching, a dialogue approach will be taken. If a rhetorician is teaching, a rhetoric approach will be taught. Trying to teach all three in one intro course would be very unwise and horrifically confusing for students.
That’s not to mention idealist logics, Boolean logic and pragmatist logics. Learning what John Dewey or F. S. Schiller had to say about logic is interesting and perhaps they were right, but should it be taught in an introductory course?
* Some might still waste their students time with Aristotelian logic.
Peden,
You.are.disagreeing.with.me.about.modifying.intro.econ.courses. Thus, you are disagreeing about modifying them in certain ways (“certain lines”), which is exactly what I said. I never said that you think they should ‘never be modified’ in any way.
Furthermore, I am talking about fundamental things like the money multiplier, which you seem to be potentially on my side about! So don’t tell me you think there isn’t room for modification here, when you already have.
Your point/claim with regards to physics may be correct, but it’s irrelevant to the grounds on which I am suggesting change. I’m not talking about matters as complex as contemporary debates in physics, about grand theories, which of course I would agree first requires base-level understanding. I’m talking about basic fundamental concepts such as the money multiplier.
Capiche?
The money multiplier is ‘fundamental’?
I can understand why you misunderstood me, reading my response again. However, if I meant what you thought, I would have more properly placed “along certain lines…” as clause after “made up your mind.”
Secondly, I should rephrase to say not that I don’t think time is an issue, but that it is not an insurmountable issue. At least to the same degree you view it.
Although, as I point out, we may not be disagreeing all that much, on at least certain potential modifications.
Stephen, call it what you want. There’s serious disagreement about it across the profession, yet it’s introduced as a basic concept in intro econ across the US without any caveat. I see no reason why intro econ can’t also explain why this concept might be flawed.
wh10,
“You’ve essentially just made up your mind that modifying intro courses, along certain lines which are unclear to me, is out of the question.”
I suspect that the commas in this sentence have mislead me. I was under the impression that the “certain lines” were MINE i.e. my reasons for rejecting even the question that intro courses should be modified. This is because the phrase “along certain lines” is part of the appositive subordinate clause rather than the subject of the sentence (my making up my mind that etc.). So I’m glad to hear that I don’t come across as insane!
“Furthermore, I am talking about fundamental things like the money multiplier, which you seem to be potentially on my side about! So don’t tell me you think there isn’t room for modification here, when you already have.”
There is definitely room for modification there: the money multiplier concept should not be taught. However, the modification should not be to present different perspectives, but rather because professional opinion has (surely?) moved away from the concept and learning it is no longer a prerequisite for understanding basic macroeconomic debates. I only found out about it quite recently, for instance, despite years of discussing macroeconomics.
I think the complex case is where an economics lecturer disagrees strongly with the basic views in the subject. In such a situation, the lecturer has to exercise his/her judgement: can their objection be stated quickly and clearly? Can the controversy just be referred to generally? Is the issue one without much of a consensus or importance such that teaching the lecturer’s view would not disadvantage students when they go on to discuss economics?
Well, Peden, I would personally agree with you on banning the money multiplier, but I expect many professors around the US might disagree, since it seems to be a near universal concept in intro econ, in the US. It most certainly is presented in Mankiw’s text, for example. So I am trying to compromise by suggesting both sides of it can be presented without making the intro econ curriculum unworkable.
Your last paragraph sort of gets at my issue with the entrenchment of certain ideas and tribal nature within the economics profession. What if valid disagreements with basic views exist, but most teachers simply just don’t know about them, rather than choose to disagree with them? In the US, I’d say the money multiplier is a perfect example of this.
“Noah Smith is more likely to side with you guys, than me, but he puts it well here, and this is my main gripe:”
Noah’s point is that empirical work in economics makes a misleadingly inadequate showing in Econ 101. Students are introduced to lots of abstract theoretical concepts but are not presented with the “the part that links theory to reality.” They walk out wrongly thinking that economic research is based on what “sort of seemed plausible” rather than systematic analysis of evidence. I agree with Noah’s complaint about the 101 curriculum, although I think he massively underestimates how difficult it is to discuss statistical concepts in a 101 class.
That is not your complaint at all. Your complaint appears to be that your favorite fringe schools of macroeconomic theory are not represented at the 101 level.
Does Nick teach the money multiplier?
If not, did he make the decision for ” university administrators, for funding agencies, for foundations, and for students and perhaps their parents” ?
If so, what would ‘make’ him change?
Chris,
You’re right. My point was only tangentially, if that, related to Noah’s article and the specific quote I selected. I used the quote because I thought the importance of challenging assumptions using empirical data was related to the idea that most students simply walk out of econ accepting that the ideas they were taught were essentially right, with no exposure to or idea that other perspectives may exist.
In recent comments, I’ve made one of my complaints regarding econ 101 plainly clear- the money multiplier. Feel free to engage me on that level, instead of making assumptions about how I would ultimately like to see the econ 101 curriculum. I don’t know. I came here to discuss.
Winslow:
Yes, I teach the money multiplier. In a very small part, because some of my students come from China and China uses required reserves as an instrument of monetary policy.
What would lead me to change? Maybe: a good intellectual argument for change, from someone who actually understood the difference between: supply; quantity supplied; demand; quantity demanded; actual stock; and also the difference between the determination of the stock of medium of exchange and all other assets.
Mandos: “For one thing, I would quibble with the word “historically”.”
I would quibble (or more) with that word too. I only stuck it in there because I thought that was Graeber’s argument.
Nick, interesting. Are all those requirements necessary since you think they’re absolutely crucial to understanding whether or not a bank receiving reserves will set off a cycle in which the money supply expands, through loan creation, in accordance with the reserve ratio, or rather that you are so suspicious of anyone who hasn’t proven to you that they understand those things that you feel it is safest to not seriously consider their take on this very specific idea, just in case some of those issues actually matter?
I can understand either reason, I suppose, though I find it frustrating that whole schools of economic thought and empirical research, from mainstream authorities, can challenge the money multiplier, receive no legitimate rebuttal, and the idea continues to live on as if nothing happened.
*to be clear – “just in case some of those issues actually matter” to a meaningful degree in the specific context of the money multiplier.
In your graduate training as an academic economist, were you taught or did you ever read any research exploring the specific matter of the money multiplier and the details behind how it might operate in the real world, or is it something, by and large, treated as self-evident and not given much further attention, partly because there’s so much to learn? What about in your years as an academic economist?
I am not trying to be curt here. I am honestly just curious. It’s something I never really questioned meaningfully in undergrad, where I had intro and intermediate econ, and I could imagine higher level econ not wasting too much time on this.
Sorry for the string of comments. I don’t mean papers trying to forecast or model the money multiplier as it might exist in the real world, but papers exploring why the logic taught in econ texts regarding the money multiplier makes any sense.
wh10: some background:
The money supply multiplier is a small unimportant part of economics. Most microeconomists will be very hazy on the concept. Even in macro it’s not a big deal. When (say) MMTers make a big deal of it, mainstream macroeconomists raise their eyebrows.
Many mainstream macroeconomists don’t like the money supply multiplier approach. It does not “live on as if nothing had happened”, though there is a lot of inertia in intro textbooks. I am one of a minority who have actually thought about it and thinks it is telling us something important.
“or rather that you are so suspicious of anyone who hasn’t proven to you that they understand those things that you feel it is safest to not seriously consider their take on this very specific idea, just in case some of those issues actually matter?”
That’s probably closer to it. I don’t want to spend a lot of my energy going over the basics of that stuff, just so we can get to what matters.
Funny thing is, if you had asked me (say) 4 years ago what I thought of the money multiplier, I would have shrugged my shoulders. A quick and dirty way to get from H to M, nothing more. It was only after reading critiques of it that I began to see the good in it.
Updated (after the Economics Department wine and cheese, I see a couple more comments).
“In your graduate training as an academic economist, were you taught or did you ever read any research exploring the specific matter of the money multiplier and the details behind how it might operate in the real world, or is it something, by and large, treated as self-evident and not given much further attention, partly because there’s so much to learn?”
I vaguely remember being taught it, with some discussion of why it might change or be unstable. I think Tom Courchene wrote about it in the Canadian context, and I may have read him. James Tobin critiqued it from a theoretical standpoint. We really never paid it much attention. It was seen as a rather boring and unimportant topic, to be gotten out the way as quickly as possible so we could get on to the interesting controversial stuff. It didn’t really matter much if it was right or wrong.
“Maybe: a good intellectual argument for change, from someone who actually understood the difference between: supply; quantity supplied; demand; quantity demanded; actual stock; and also the difference between the determination of the stock of medium of exchange and all other assets.”
You’ve been explaining these topics through allegory on your blog for years? I’ ve followed loosely as various commentators, more informed than I, have engaged with you in a discussion of theses issues. Sometimes it ‘feels’ as though the narrative is being complicated unnecessarily into a form where obsification is more important than understanding.
Despite what many would like us to believe, money creation just isn’t that hard to understand, neither the mechanics nor drive. Given that I like your curiosity, sense of humor, willingness to engage, it bothers me when I sense what could be feigned humility. I would never accuse you of megalomania.
Personally I have many faults, mostly saying offensive things without realizing it, hence my moniker 🙂
wh10,
“Well, Peden, I would personally agree with you on banning the money multiplier, but I expect many professors around the US might disagree, since it seems to be a near universal concept in intro econ, in the US. It most certainly is presented in Mankiw’s text, for example. So I am trying to compromise by suggesting both sides of it can be presented without making the intro econ curriculum unworkable.”
I would hope that it isn’t the consensus in monetary opinion in the US (it certainly isn’t here in the UK; people very rarely even use the phrase “monetary base” when discussing monetary issues here and we focus more on interest rates, deposits, credit and equity) and if it’s not the consensus then there is no reason to teach it.
“Your last paragraph sort of gets at my issue with the entrenchment of certain ideas and tribal nature within the economics profession. What if valid disagreements with basic views exist, but most teachers simply just don’t know about them, rather than choose to disagree with them? In the US, I’d say the money multiplier is a perfect example of this.”
That does raise a really big problem. I don’t really want to say that it’s the job of intro lecturers to know about each and every heterodox theory and to judge the soundness or validity of these alternatives.
This is what is weird about intro textbooks: they are very slow to change. But, sometimes, that is a good thing. Consider this example:
Ever since around 1950, the main macro model in the intro textbook was the Keyensian Cross. At first, most macroeconomists believed the KC was a good model, even if oversimplified. But the KC model lived on in the intro textbook for decades after most macroeconomists had abandoned it as hopelessly misleading. In other words, relative to what macroeconomists believed, the typical Intro text showed a massive Old Keynesian bias. But really, it was just slow to change.
Ironically, only in the last 3 years has it been possible to argue that the KC model is useful.
For the last 20 years, the mainstream New Keynesian approach has also believed that the stock of money is an irrelevant variable. (And so the money multiplier is doubly irrelevant). The only thing that matters is the rate of interest. But they still lived on in the Intro textbook.
Ironically again, only in the last 3 years has it been possible to argue we should pay attention to this old stuff again.
There are two reasons why Intro textbooks are slow to change:
1. Innate conservatism (small c, not righty) of us old guys teaching it.
2. There’s a coordination problem. Nobody wants to change first. Everyone wants to do the same as everyone else is doing.
Winslow: “Despite what many would like us to believe, money creation just isn’t that hard to understand, neither the mechanics nor drive. Given that I like your curiosity, sense of humor, willingness to engage, it bothers me when I sense what could be feigned humility.”
Thanks. This isn’t feigned humility. I think I understand one important thing about money creation that only very few economists understand. I’m more arrogant than humble on that point. But I still don’t understand that thing very well. And I barely understood it at all a couple of years ago. That’s where I feel humble. Money is weird. The usual demand and supply stuff doesn’t work for money. Everybody else, from New Keynesians to MMTers, thinks it does. They just draw the money supply curve as horizontal, with the stock of money being determined by quantity demanded at the rate of interest set by the central bank. That’s what I used to think too, though I never thought about it much. Now I think that’s wrong. Hardly anyone agrees with me.
There are sometimes pedagogical reasons. For example, the KC is a good way to work out the distinction between a national accounting identities and an equilibrium condition. And IS-LM is a good way to introduce the idea of having more 2 (or more) markets clearing simultaneously. If you got rid of them, you’d have to come up with another set of models that does the job.
Stephen: true. Even if you think the KC model is wrong, it is at least a model, and it’s simple enough for first year students to play with, so they can learn how economic models work.
But nearly all macroeconomists agree that, understood literally, with no qualifications, the KC model is horribly wrong (except in very special cases). It says: monetary policy is irrelevant and fiscal policy is the only way to control AD (even though all civilised countries were using monetary policy rather than fiscal policy until 3 years ago); it says if you want to increase real income, all you need to do is increase G or cut T.
That is a terribly wrong lesson for students to learn, if that’s the only economics course they ever take (which is about half of them). A little learning is a dangerous thing. The KC model was that little learning for millions of people. That model has done more damage than any other (Marx aside).
30 years ago Mike Parkin tried to delete the KC model from his intro text. The market would let him. He had to hold his nose and put it back in. Finally, Greg Mankiw managed to get rid of it as a formal model, and just relegate it to a side-show.
But, for all its flaws, the KC model contains some important grains of truth. I both love it and hate it.
Nick, thanks for the perspectives and anecdotes.
Putting aside what you think is important about the money multiplier concept, I think it hangs around in bad ways, precisely due to the nature that it is taught universally in intro econ, at least in the US. Take for example many economists’s, commentators’s, and market participants’s reactions to QE2. Everyone thought this would be wildly inflationary due to money multiplier mechanism taught in intro econ.
Putting aside the possibility that the Fed wanted to create inflation expectations specifically through this channel of poor misunderstanding, what good is this misunderstanding? It seems this is, if anything, destabilizing in the markets and causes unnecessary lost trust in the Fed. I mean, as a proponent of NGDP targeting, wouldn’t you like greater support and understanding of the Fed on the part of society?
I guess this might be getting too far off topic, but thoughts I had. And you might disagree with me anyways, since you find value in the money multiplier.
Sorry- wanted to write ‘precisely due to the way it is taught in intro econ.’
Well, it is; I assumed you stuck it in there because you were trying to imply that it had stopped at some point being true, which I don’t think is a necessary part of Graeber’s argument. If it hasn’t stopped being true, then yes, the point at which econ101 starts should be very different.
wh10: “Take for example many economists’s, commentators’s, and market participants’s reactions to QE2. Everyone thought this would be wildly inflationary due to money multiplier mechanism taught in intro econ.”
Fair point. Good example of the “taking models too literally and uncritically” and/or “a little learning is a dangerous thing”.
Actually, I think the money multiplier sucks if it’s used for comparative statics equilibrium exercises, like M=(1/rr)H. But I like the disequilibrium process story that goes along with it. Sort of the same with the Keynesian Cross model, which has a really useful positive feedback disequilibrium process story built into a bad model for comparative statics equilibrium exercises.
Gregor,
“I’ll take ‘praxeology’ for 10 billion drachmas, Alex!”
I don’t see where I conceded anything. See Nick’s previous reply to me and my reply to Nick and his reply to me and mine to him. Because “the world in which we live today” is as much an imposition as any other, with capitalism indeed having its own sordid little set of catastrophes, what you’re calling ECON 100 can be thought of as a characterization of the selfsame imposition. Obviously, just as we don’t discard everything the Greek philosophers said because we might not now agree with everything they wrote… you can fill in the rest.
The remainder of your comment is simply a rehash of the belief that because USSR, markets are some sort of natural baseline for human interaction. Petitio principii.
KC cross didn’t show the monetary policy that “civilized countries” used. But it showed that “barbarians” could do something other than relying on the tender ministrations of independant central banks, so independant that like the BoC in the ’90’s or the ECB now, they are willing to destroy their countries for the fun of respecting some absurd shiboleth about inflation.
KC cross has lots of defects and faults. But it included the Injections-Withdrawals model ( full of faults etc). And the IW could show to the dumbest least interested undergrad that “expansionnary austerity” can’t work. And that’s a powerful result.( Or should have been).
Mandos: thanks. I haven’t read Graeber at all fully and carefully, so I’m not at all sure I can critique him properly. But I suspect he may be making a profound conceptual mistake. Similar to the mistake made by a political scientist (if there are any) who thinks that Hobbes’ Leviathan was about the historical origin of the state. Similar to an economist who interprets Menger as writing a history of the origin of money. (Maybe you can interpret Menger and Hobbes that way, but I think both make a lot more sense if you don’t.)
Aha! I’ve found my old post on this subject:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/02/creation-myths-and-economic-history.html
I wonder if I dare re-post it, with the title: “A critique of Graeber”? Better not!
Thanks for the thoughts Nick.
In that regard, I think it’s a shame books can’t be updated, or at least teachers address old but dangerous material. Isn’t it a good excuse for a new addition and a new price ;)?