My eyes were drawn to Timothy Taylor’s gloss on Greg Mankiw’s ruminations on the life of an econ textbook author. As such an animal myself (Microeconomics and Macroeconomics: A Fresh Start), I’ve thought about many of the same questions. Differently.
Issue #1: How do you teach the introductory economics courses if you have a dissenting perspective? Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. He says the second option is “pedagogical malpractice”, and Taylor agrees. I opted for an approach neither of them consider, to present mainstream economics in the third person: this is what that particular group thinks. Allow for a critical distancing, which is not the same as critique. I didn’t write “this stuff is garbage”, but “here are the assumptions that conventional economists make that distinguish their approach from others.” Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly.
Issue #2: What should be the role of supply and demand theory and, in particular, the welfare interpretation of it? Mankiw feels welfare economics gets short shrift in the typical intro econ course and text, while Taylor demurs. I am mostly on Mankiw’s side here, but from a critical perspective. I agree entirely that welfarism underlies virtually all applied econ work outside macroeconomics, and it’s important for students to understand what it means. We just saw a “Nobel” prize awarded to an economist, Bill Nordhaus, whose primary claim to fame is an application of the welfare framework to climate change. Nearly every economist working on climate issues adopts the same approach. It would not be an exaggeration, however, to say that the vast majority of climate scientists regard their work as nuts. Clearly there is a pressing need to present the underpinnings of welfare economics to as wide an audience as possible, so they can understand these disputes.
In my micro text I devoted half of one chapter and all of another to these foundations, which I called the Market Welfare Model. As I defined it, the model has three conditions, that the supply curve represents the marginal cost to society of the good in question, the demand curve the marginal benefit to society, and that there is a single, stable market-clearing equilibrium. The half chapter spells out precisely what “social cost” and “social benefit” mean in economics (which is not what they mean in other frameworks), and the full chapter is devoted to working out the logic that goes from these framing concepts to the welfarist conclusion. A further chapter on market failure takes up the first two conditions, and the final chapter on general equilibrium theory considers the third. In one sense, this is Mankiw on steroids, but I think he would recoil at the critical distancing with which all this is presented.
Issue #3: Do current economics textbooks cover too many detailed topics? The argument that one hears not only from Mankiw but also many other authors is that the incentives of the textbook biz bias toward over-inclusion. Each reviewer has a favored topic and lobbies the publisher to have it included. The argument is made that it is easier for an instructor to skip the stuff they don’t care about than conjure up what’s missing that they consider indispensable. The result is a massive tome bristling with highly specialized material of limited interest at the expense of deep treatment of the key ideas. Taylor mostly agrees.
I do too, but again with a somewhat different take. First, I’ve come to think that a good introduction to a discipline would present a set of exemplars that would be relatively standard for new learners. For instance, climate change should be given detailed treatment in every introductory text, micro and macro alike, where the concepts and tools being developed could be given a bit of a workout to see what they mean in real life. This should not take the form of a just-so story where climate change just happens to validate everything we always thought, but a test of the strengths, weaknesses and limits of a given approach. I can imagine a number of other potentially canonical examples: the pay-productivity relationship, health care, financial stability—topics of longstanding interest that are complex enough to illuminate multiple questions in economics. I confess to not having understood that very well when I wrote my micro text, but I had it mostly figured out when I came to macro.
Second, what makes a “specialized” topic germane to introductory treatment in my book (literally) is its relationship to the core assumptions economists make. Information asymmetry and the strategic perspective of game theory, for example, are often treated as specialized, but for me they are foundational. I made a point of presenting a prisoner’s dilemma payoff matrix before a supply and demand diagram in the micro text, since to me the distinction between individual and collective rationality is prior to any other treatment of what economists regard as rational behavior. (So is a discussion of the psychological assumptions economists make about the nature of rationality, as well as their reduction of all social behavior to choice and exchange.) General equilibrium theory for me is not a special topic at all, a throwaway add-on, but a primary investigation of whether or to what extent the supply-and-demand metaphor works. On the other hand, I’ve reluctantly come to think that much of what is covered in the treatment of risk actually is specialized. It’s certainly important—absolutely indispensable in some contexts—but a student can get the gist of what economics is about without wading into the arcana of certainty equivalence. Just about all of the so-called microfoundations of macro falls into this category as well.
Issue #4: Should textbooks be free? Mankiw says no, and he bases his argument on the presumption of market efficiency: if existing textbook publishers, who are disciplined by competition, can’t put a book on the market for less that $200 a pop, where could the cost savings come from? Wouldn’t “price controls”, like a zero price, require a corresponding reduction in quality? Taylor, who has actually worked on a reduced-cost e-text project, thinks textbook quality is fairly standardized, but not so the ancillary materials like tutorial software, prefab presentations and text banks. Here is where we would find the downside of cheap.
My perspective is rather distant from theirs. First, I think economics is definitely not a settled field, nor is economic pedagogy a done deal. There is plenty of experimentation that needs to be done, and this requires a multiplicity of texts instructors can choose from. (Austrians should understand this point in their bones.) The issue is not quality per se, but innovation and rivalry, or at least the opportunity to try out alternative approaches and assess the results. This is why I am concerned about the movement to standardize textbooks in order to achieve zero cost. The price is right, but the standardization is not.
Second, the arms race in ancillaries is a reflection of poor pedagogy in economics. Of all the social sciences, economics gives the least disciplinary attention to teaching strategies. I haven’t done the quantitative work (has anyone?), but based on my experience, there are fewer sessions at the ASSA meetings devoted to pedagogy than you would find in most other fields. Economists have been notoriously slow to transition to active learning methods, much less a true critical thinking framework. This is visible in most of the baroque supplementary material purveyed by textbook publishers, a deadly, mind-numbing hammering of procedures (diagram manipulation) to be inscribed in short-term memory. Not that it’s all bad, of course. I transitioned this term to a flipped classroom: I recorded my lectures and posted them online (with short self-graded quizzes to encourage and document attention) in order to maximize class time for workshops and other activities. In general, however, active learning is less given to prefabricated, standardized aids; it is tailored to the students in front of you, the issues of the moment, and the flow logic of how well various ideas are gelling from week to week. The best ancillary would be a guidebook for instructors explaining the techniques for crafting small research projects and engaging workshops, along with examples of what has worked in the past.
All that said, zero is still the best price. I think it’s appropriate for foundations or other funding sources to support a multiplicity of free textbook options. (I’m not looking at you, Bill Gates.) INET has done this with its CORE project, but no one else. I don’t think funding is the whole story, however. Economics needs to regard pedagogy as one of its central missions. This is not only a matter of having more panels about it at the national meetings; there needs to be more disciplinary reward for putting one’s time and energy into the development of strategies and materials for the classroom. This means promotion, prizes and esteem, and it would require a substantial cultural shift. Where to begin? I suspect we have a vicious circle that could well become virtuous. Today we have a bleak landscape of minimal innovation in pedagogy and little institutional recognition for those who do this work. In a world well-populated with innovative experiments in teaching and learning, it would be natural to reward the most successful or even just provocative projects. So again the next step seems to belong to the funders.
I can imagine that other disciplines have other methods for looking at the cost and benefits of policies but that they consider cost benefit analysis nuts? That would be worth a post.
The INET CORE project is definitely a worthy endeavor.
There's a huge critical literature on cost benefit analysis which economists mostly shrug off: "some" sort of decision is necessary, and this is the most rigorous, objective way to do it, based on the "preferences" of those involved. As you can tell, I don't agree. Here and here are a couple of posts that reflect the evolution of my thinking. One of my goals over the next few years is to put this argument into long form.
To this day, economists have produced NOT ONE textbook that satisfies scientific standards
Comment on Peter Dorman on ‘Introductory Econ Textbooks: A Different Take on the Issues’
Peter Dorman summarizes: “Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. … Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly.”
No, this is NOT critical thinking. This is post-modern anything-goes, i.e. the pluralism of provably false theories. Economics is scientifically indefensible: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
And this is the crux of the matter: economists do not have the true theory. This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 140+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.
Economics is what Feynman called a cargo cult science and the textbooks reflect this. Economics is in need of a Paradigm Shift.#1 Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards.#2 Since generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks.#3
Needless to emphasize that there have been multiple attempts to improve the situation. The latest initiative comes from MMT. MMT claims to be the new approach that beats failed Orthodoxy. This is accurate with regard to the long overdue shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/Menger.#4 The problem is that economists messed up the shift from microfoundations to macrofoundations.
MMT is NO exception. And the proof is in the new MMT Textbook, more specifically in the premises of MMT.#5 The premises are laid out on pp. 13-16 and pp. 83-86.
“One of the most basic propositions in macroeconomics that MMT emphasizes is is the notion that at the aggregate level, total spending equals total income and total output.” (p. 14)
Unfortunately, the most basic proposition in macroeconomics is false since Keynes, and MMTers have not realized it to this day. Here is the short proof that economists in general and MMTers, in particular, get the elementary mathematics that underlies macroeconomics wrong.
See part 2
(i) The elementary production-consumption economy is given by three macroeconomic axioms: (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.
(iii) The monetary profit of the business sector is defined as Q≡C−Yw,
(iv) The monetary saving of the household sector is defined as S≡Yw−C.
(v) Ergo Q+S=0 or Q=−S.
The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving (-S) is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.
For the elementary investment economy holds Q=I−S. For the elementary investment economy plus government holds Q=(I−S)+(G−T). And so on with growing complexity.
In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows,#6 (2) distributed profit Yd is income and adds up with wage income Yw to total income, (3) total income is NEVER equal to total spending, (4) in the most elementary case, the difference between total spending of the household sector C and total wage income Yw is saving/dissaving, (5) profit/loss of the business sector is the mirror image of dissaving/saving of the household sector, i.e Q=−S, (6) saving and investment are causally INDEPENDENT and NEVER equal, (7) all I=S/IS-LM models are false since Keynes/Hicks, (8) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (9) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is false because it lacks the balance of the business sector Q, (10) because profit is false, the whole of MMT is false, (11) because the theory is false, MMT policy guidance has no sound scientific foundations.
What holds for the new MMT Textbook holds mutatis mutandis for all predecessors including Peter Dorman’s Microeconomics and Macroeconomics: A Fresh Start.
#1 New Economic Thinking: The 10 crucial points
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”
#4 The problem with macro in two words
#5 William Mitchell, L. Randall Wray and Martin Watts, Macroeconomics
#6 The Profit Theory is False Since Adam Smith
It surprises me that economist seldom note key features of the textbook market. The ones who pick the books don't pay for 'em; and the guys that write the books benefit hugely from their high prices. That sure seems like a recipe for abusive pricing to me.
An important aspect of the textbook market was enunciated by successful textbook author, David Colander, some years ago: the 15% rule. He claims that a new textbook will not be successful if it deviates from the leading previous textbook(s) by more than 15%. That is because profs indeed decide whivh books to use and do not like to change their class notes all that much. This may be unreasonable, unfair, unwise, and so on, but is probably true.
Above, Peter Dorman recounts: “We just saw a ‘Nobel’ prize awarded to an economist, Bill Nordhaus, whose primary claim to fame is an application of the welfare framework to climate change. Nearly every economist working on climate issues adopts the same approach. It would not be an exaggeration, however, to say that the vast majority of climate scientists regard their work as nuts.”
It is a plain fact that economics textbooks are the main medium for the faithful reproduction of nutters.#1
Everybody who ever accepts microfoundations#2 and supply-demand-equilibrium proves conclusively his scientific incompetence.
As Hahn put it in 1980: “I often wonder whether other subjects suffer as much from textbook writers.” Certainly not, because in the genuine sciences nutty textbook writers like Samuelson are not awarded fake Nobels.
#1 Fact of life: your econ prof is scientifically incompetent
#2 Microfoundations are given with this or a similar behavioral axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
Actually Principles level textbooks sometimes are more realistic about certain issues than textbooks at higher levels. in recent years this has been notoriously true for macro, where intermediate level textbooks largely adopted teaching students about microfoundations and a more or less new classical approach tending to DSGE. Principples textbooks have tended not to emphasize the micreofoundations approach to macro.
You're not going to see any pedagogical innovation, content innovation, or flipped classrooms in intro econ when it's exclusively taught by underpaid sessionals teaching 4 sessions of 100 per semester.
PS so obviously I'm one of the guys who would like to see practical political economy in intro econ.
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