Rod Hill and Tony Myatt, in an interview conducted by Philip Pilkington, explain what students learn—and don’t learn—in mainstream introductory economics courses.
PP: The issue of power is an interesting one. I think what many students who feel instinctively critical of economics courses note from the outset is that the theories taught imply some sort of level playing field. Yet, you would have to be blind not to notice divisions of class and race in even the most prosperous societies. Could you talk about this a bit?
Rod Hill: I think power is central to understanding the reality of economic life. For that reason, it’s important that it be effectively obscured in the principles texts as students are taught how to ‘think like an economist’. The texts typically manage this very well, although I’m sure their authors have no conscious intention to set out to do this. (This remarkable aspect of our propaganda system helps to make it so effective.)
The texts do indeed imply a sort of ‘level playing field’ between buyers and sellers in both markets for goods and services as well as in the labour market. This follows from the central place that’s given to the supply and demand model (which is “short-hand” for the perfectly competitive market).
There, everyone is a ‘price taker’. There is no room for businesses to use their bargaining power to squeeze workers’ wages, to prevent workers from unionizing, to force down their suppliers’ prices, or to raise their selling prices once they’ve eliminated their competition. (Think Walmart.) . . .
PP: You say that no alternative models are taught in the classroom. I’ve heard this criticism raised many times before and it has always struck me as rather strange. In just about every other social sciences class it is a prerequisite that the lecturer teach the major different approaches, to do otherwise would be considered biased. In your opinions, how do economists get away with this where others cannot?
Tony Myatt: Well, we need to be careful here. Other models of market structure besides perfect competition are taught. Monopoly, monopsony, imperfect competition, and oligopoly are all taught. But they are placed towards the end of the book. Later, when we need to explain the distribution of income, or the benefits of trade, the texts return to assuming perfect competition, to the demand and supply framework, as if that intervening stuff never happened. The argument is that perfect competition is simpler, and is good enough as a first approximation to all markets. But perfect competition is actually a lot more complicated than monopoly. Why not apply monopoly as a first approximation? But that would have a huge ideological impact. It would mean that power, cronyism, and exploitation are potentially important. It would mean that the economy doesn’t necessarily operate efficiently (as a first approximation), and that unions don’t necessarily cause inefficiencies. It would mean that there is a potentially much bigger role for government regulation. And the point is, when discussing a particular topic – international trade say – the texts don’t say “if we assume perfect competition we get these predictions; if we assume imperfect competition we get these predictions; now let’s compare the predictions to the facts”. This is thought to be too complicated, too advanced. But this is a cop out, a dereliction of duty, and is inconsistent with the methodology which the textbooks purport to endorse.