Capitalism and the currency of convictions

Dr. Marianne Schulze, LL.M. is an independent legal consultant and human rights expert based in Vienna, Austria.* Many years ago, Marianne was a student in one of my classes, Economics for Non-Economists, at the University of Notre Dame. Last year, she wrote a response to my blog, which for a variety of reasons could not be included in the symposium that appeared in Rethinking Marxism. However, I am pleased to publish it here as a guest post.

The “Journal of Unsung Social Theories Irreconcilable with Contemporary Economics” (JUSTICE) was going to be the follow-up to a course on “Economics for Non-Economists,” which Professor Ruccio taught at the University of Notre Dame to a rather eclectic group of students. The course itself and the ensuing discussion over a journal and its title serve as an apt prelude as well as yet another variation on the theme of David’s blog of “occasional links and commentary on economics, culture, and society.”

“Economics for Non-Economists” is by its very title a testament to David’s teaching ethos as well as his continuous efforts to relate what economics is —and what it could be—and how enmeshed the field is with other approaches to and descriptions of being part of a larger system. The blog then is a logical —if not to say natural—continuation of David’s ethos and poise. To discuss the blog is to praise his ability to stay firm, yet open-minded, to embrace a good challenge and yet never waiver from certain tenets. There is that unique mix of quietude and calm derived from deep knowledge, and there is also the fierce passion fed by a distinct level of certainty as well as urgency in avoiding calamities designed by the dominating understanding of economics.

And then there is of course a sprinkle of Italian passion (the only fault with that being that it adds anchovies to the mix). That passion is deeply informed, incredibly caring about others—both in the sense of people as well as professional fields. It is that kind of passion that demands engagement, that excites and as such is contagious. That appears to be in stark contrast to the seeming sense of insulation in which a growing number of undergraduates appear to approach studying. It speaks volumes about David’s perseverance that he maintained his style of teaching and never wavered from loving it, against all odds. “Still, he persisted!”

Given the challenges posed by the changes in the student body’s attitudes there was a growing need for an outlet, for kindling that informed passion about situating economics within lived lives and experience. And thus the blog has a certain logic to it: to re-direct the insight(s), to relay the sense of urgency and the need for multiple perspectives through alternative means. 

To appraise David’s blog—also as a form of online teaching—in human rights terms is to talk about accessibility. Not in terms of the standard technical issues such as universal design but more in the sense of imparting knowledge in a way that invites in those who are not (yet) literate in the terminology and theories and make them feel comfortable (in spite of knowing nothing—and I mean nothing—about economics). To be aware and be comfortable with showing that awareness, that students come to learning and to insights in very different ways. To be keenly aware of how the diversity of biographies and “walks of life” affect perceptions and expectations. To try and maximize that social aspect of accessibility through deep awareness of barriers built on exploitation, discrimination, othering, and exclusion.

Writing about David’s blog from a human rights perspective also warrants mentioning that soccer is not only one of the fundamentals of society but that being invested in Manchester United is part and parcel of a human right. Yes, there is a right to sport. And, yes, it has some origins in the labour movement and its insistence on leisure time (Article 24 Universal Declaration of Human Rights). While reciting human rights provisions, it may also be important to note that driving cars of a certain brand designed in the South of Germany renown for being useless in snow (the author’s driving license is Austrian) in the hills of Vermont is that part of legal capacity that Pat Deegan has aptly termed “dignity of risk.” The fact that David likes to refer to those hills as “mountains” could be as much a lack of utilizing the right to health and having an eye-check as a use of freedom of speech that leans heavily on alternate realities as an art-form.  

One of the art-forms that David has perfected is that of dusting a good old black-board into a white landscape. Well before Vermont skiing was added to his equilibrium and therewith a source of sustenance for “occasional links and commentary on economics, culture, and society,” David’s hands dusted away any speck of black within the hour. It seemed like pure magic. The sheer passion of delivery turned those boards into. . .well, whiteboards.

That passion appears to also feed the immense resilience that David has shown teaching in an academic landscape increasingly hostile to his academic and pedagogical outlook. And it has fed and continues to sustain David’s dedication to the blog rightly celebrated in the symposium. There is another aspect that stands out and warrants mention as well as deep admiration: David’s ability to walk the tightrope between showing personal introspection and a critical habit as a professional. The willingness of making himself ever so slightly vulnerable as a professor is only one of the aspects that sets David’s teaching apart from others but I believe the one that has— indirectly—caused the most ire. The cliché that vulnerability is strength is particularly true in teaching. And while I have certainly picked up some incredibly important insights into the makings and sustainability of the machinations of neoliberal economic thought, it is that delivery of convictions with a personal edge that has left an indelible impression.

In a capitalist world it is the currency of convictions that will endure and, thus, “occasional links and commentary on economics, culture, and society” sets a benchmark that will find both more readers and also like-minded bloggers.  

*She also passionately dislikes anchovies and is working to meet DFR’s blueberry-harvesting expectations.

Econ 101

It’s time to get back to blog writing—after a 6-month hiatus during which I taught my final two courses at the University of Notre Dame (A Tale of Two Depressions and Marxian Economic Theory) and prepared for my retirement (which involved, among other things, sorting through, packing up, and moving decades of “stuff”). Now, after 38 years of teaching, I am officially Professor of Economics Emeritus. But, rest assured, I plan to continue this blog and other writing projects. 

For the first time in almost four decades (aside from a few research sabbaticals), I don’t face the prospect of returning to campus and teaching economics. But, I can’t help it, I still worry about what millions of students in the United States and around the world will learn—or at least be subjected to—when they enroll in their economics classes this fall.

One of the major issues for any economics class, especially an introductory or principles course, is how to make it useful for students. My own approach has always been to teach the basics of mainstream economics—the key assumptions, the standard models, the relevant conclusions—and then to teach the critique of mainstream economics (including alternative theories within the discipline of economics). Two for one, I used to tell the students. In my view, they would be better students and citizens of the world when they understood both how mainstream economics affected their lives and how they could criticize and explore alternatives to the hegemonic theories within economics.* And I updated the content, and made it more useful to students, as mainstream economic theories changed and as particular issues were taken up in the media and political discourse.

That’s certainly not how mainstream economists approach teaching. For example, Justin Wolfers, a liberal mainstream economist at the University of Michigan, recently announced that he wants to make introductory economics useful to students by teaching them “a set of tools that can empower them, providing insight that will guide them toward better decisions.” And those “better decisions”? Exactly the presumptions and pronouncements that mainstream economists have celebrated since their approach was invented by Adam Smith and then reinvented in the late nineteenth century as neoclassical economics. It’s the entire arsenal of comparative advantage, rational choice, opportunity cost, given scarcity, and so on.

The approach introduced by Wolfers with such fanfare is no different from the miserable and misleading analogy invoked by Harvard’s Greg Mankiw between international trade and hiring someone to shovel snow. And it accomplishes nothing more than demonstrating that current economic arrangements are exactly as they should be because, in the view of mainstream economists, free trade is always mutually beneficial:

Start thinking this way and you’ll quickly see that the ideas that guide your everyday decisions also propel international trade, which is why American engineers design iPhones, while foreign workers — who have fewer alternative opportunities — do the laborious work of putting them together. By assigning tasks this way, Americans have gotten cheaper iPhones, and Chinese and Indian consumers have gotten greater access to advanced technology.

Fortunately, there are many other economists who are devising courses that are much more useful to today’s students. Last year, Aditya Chakrabortty wrote about one such course, in which students learned that the rules of the economy “aren’t laws of nature.” And just last week, Andrew Simms and David Boyle published a new beginners’ guide to economics for non-experts:

In it we ask some heretical questions that that could get us expelled from most university economics departments, such as: is the price mechanism so clever, or rising productivity always a good thing? We talk about the trouble with growth, and why working less might be better. Our common starting point is that the economy should serve rather than dominate people, and that it must work within planetary ecological boundaries.

As against what Wolfers, Mankiw, and so many other mainstream economists teach their students, these approaches are useful to students because they serve to denaturalize both existing economic thought and economic arrangements, thereby creating space for alternative ways of thinking about how the economy is organized and creating other possibilities.

I’ll only be able to rest easy in my retirement when the teaching of economics is taken out of the hands of mainstream economists and the millions of students who enroll in economics classes are taught to think critically and creatively about the economic dimensions of their lives and the world around them.

 

*So, I was heartened and gratified when, on the occasion of my retirement, some of my former students shared their thoughts about what they’d learned along the way:

“They aren’t laws of nature”

Nicola Headlam is, I think, right with respect to “how the rules of the economy are set”:

“Somehow, someone, somewhere made these rules up. They aren’t laws of nature.” And they determine “who’s got what and where and why”.

The question is, how do we teach economics so that that message gets through?

Aditya Chakrabortty [ht: ja] reports on one way of doing it—a makeshift classroom in a converted church, with nine “lay people” and two facilitators (Headlam and Anne Hines, who are donating their time), in the Levenshulme area of Manchester, England.

Part of what makes the course interesting, at least to me, are the participants:

Those doing the Levenshulme crash course don’t look like your typical seminar room attendees. Not only are they decades older; all but one is a women. The average undergraduate economics course, according to the Royal Economic Society, is about 67% male and 25% privately educated (compared with 7% of the population). After the class, a charity van pulls up outside, offering three bags of short-dated food for £6. Several “students” collect their groceries for the week.

Everyone here brings their own lived experience of economics. In her motorised wheelchair, Joanne Wilcock notes how “everything is much more expensive when you’re disabled”. Bang on, yet you hardly ever read that in an article on the latest inflation figures. Bhatt knows that Levenshulme is supposed to be gentrifying – “fancy cars, flash weddings” – but notices his neighbours can’t afford to do up their own houses. “All fur coat and no knickers!” he concludes, and the room cracks up.

Another is the pedagogy:

That impulse may now be dressed up in polite euphemism – but it lives on. “So many thinktanks and MPs come up with good ideas to change our economy, but they’re all stuck in their political bubble,” says the head of Economy, Joe Earle. “Ordinary people barely get a say in the thing that rules their lives.”

Contrast that with this class and its polite horizontalism, where no one is presumed to be a total expert and everyone is treated as if they have something valuable to say. . .

At the end of the class, each participant tells the rest the best thing they have learned. There’s a pause when it gets to Aklima Akhter, who only came to this country in 2013 and has been sitting so benignly quiet in her white headscarf. She starts haltingly: “It is difficult for me, you know … the subject, the language.”

All around her are faces pursed in little moues of encouragement, but then Akhter speeds up with fluency. “But my favourite word was ‘nationalisation’. Because when things are privatised it is the rich who get all the benefit.” And for once in this room, no one is laughing.

The contrast to the usual economics classroom couldn’t be more stark—in terms of both the diverse backgrounds and experiences of the students and the commitment on the part of the facilitators to recognizing the “everyday” questions and viewpoints the students bring to learning about economics.

The usual method, at least these days (and outside of for-profit colleges and universities, which tend to attract older students), is to teach mostly young male undergraduates (according to Claudia Goldin [pdf]) in a vertical manner.* What I mean by the latter is the presumption that the ideas students bring to the classroom are probably wrong, and need to be replaced by the “correct” methods and models. And, for the most part, that means pushing students through the chapters of a traditional textbook of economics, and therefore teaching them a narrow version of economics, consisting almost entirely of neoclassical and Keynesian theories, approaches, and policies.

That way of teaching economics has the effect of naturalizing a capitalist economy. First, it reduces the universe of relevant economic thought to contemporary mainstream economics. No other economic theories, now or in the past, need apply. (Nor, for that matter, should knowledges about the economy beyond mainstream economics, from either disciplines or from outside the academy.) Second, the methods and models are taught in a “common sense” manner. As I discussed back in May, markets have a magical, quasi-mystical status within mainstream economics. They are the original starting-point of neoclassical theory—presented as being “just there,” with the requisite price and quantity axes and supply and demand schedules, as the origin and focus of economic analysis. As for macroeconomics, which I discussed this past April, the premise and promise of both Keynesian and neoclassical macroeconomics is that, with the appropriate institutions and policies, capitalism can be characterized by and should be celebrated for achieving full employment and price stability. In both cases, at the micro and macro levels, the rules governing the economy are considered to be natural laws, which are correctly captured within the models of mainstream economics—and then, of course, meant to be respected and obeyed.

As I explained in 2011, after 70 students walked out of Gregory Mankiw’s Principles of Economics class, my approach couldn’t be more different (all of my course syllabi are publicly available here):

For almost 30 years, I have focused on teaching neoclassical economic theory, which I present both as one story about the economy among many and as the hegemonic story among economists inside and outside the academy. I start with economic history and then present neoclassical theory from its basic assumptions (such as the assumptions about human nature) through its most important theoretical conclusions and policy recommendations (such as general equilibrium and Pareto efficiency). Then, after I present some of the extensions of neoclassical theory (such as imperfect competition, game theory, and international trade), I discuss some of the basic criticisms of neoclassical theory (from the endogeneity of preferences through the concept of capital to the distribution of income), a couple of lectures on Marxian economic theory, and the consequences for theory and policy of the differences among economic theories.

Now, I understand, my approach to teaching economics is specific to its context (in an American research university, with full-time undergraduate students, during the past three-plus decades). It might not work in a Levenshulme community center or a labor college or elsewhere. But, even in those circumstances, I would insist on history (and thus highlight the radical changes in both economic thought and economic institutions over time) and a discussion of the differences among economic theories today (neoclassical, Keynesian, and Marxian, based on different entry points and methods), as well as the different theoretical and social consequences of those theories.

My hope is that students would learn, if nothing else, that the rules of the economy aren’t—and never have been—”laws of nature.”

 

*Chakrabortty refers to the fact that “Not so long ago, a Levenshulme resident could learn economics – or any number of other subjects – through the adult evening classes offered by the University of Manchester. The extramural programme stretched as far afield as Wigan and Burnley, and by the 1970s employed more than 30 academic staff. Then followed decades of cuts, until the entire department was shut down in 2006.” In the United States, students haven been able to study economics in a variety of settings, such as labor colleges (including the Work People’s College [1904-41] in Duluth, Minnesota, Brookwood Labor College [1921-37] in Katonah, New York, and Commonwealth College [1923-41] near Mena, Arkansas, as well as the National Labor College, sponsored by the AFL-CIO, which closed in 2014) and centers of popular education (including, still, the Center for Popular Economics and the Highlander Center).

Crash and learn?

Mark Tansey, “EC 101” (2009)

The case for changing the way we teach economics is—or should be—obvious.

It certainly is apparent to the students of Manchester University’s  Post-Crash Economics Society and to the other 44 student groups, members of Rethinking Economics, pressing for pedagogical changes on campuses from Canada to Italy and from Brazil to Uganda.

But as anyone who teaches or studies economics these days knows full well, the mainstream that has long dominated economics (especially at research universities, in the United States and elsewhere) is not even beginning to let go of their almost-total control over the curriculum of undergraduate and graduate programs.

That’s clear from a recent article in the Financial Times, in which David Pilling asks the question, “should we change the way we teach economics?”

Me, I’ve heard the excuses not to change economics for decades now. But it still jars to see them in print, especially after the spectacular failure of mainstream economics before, during, and after the worst economic crisis since the first Great Depression.

Here’s one—the idea that heterodox economics is like creationism, in disputing the “immutable laws” captured by mainstream theory:

Pontus Rendahl teaches macroeconomic theory at Cambridge. He doesn’t disagree that students should be exposed to economic history and to ideas that challenge neoclassical thinking. (He prefers the word “mainstream”, since neoclassical, like neoliberal, has become a term of near-abuse.) He is wary, however, of moving to a pluralist curriculum in which different schools of thought are given similar weight.

“Pluralism is a nicely chosen word,” he says. “But it’s the same argument as the creationists in the US who say that natural selection is just a theory.” Since mainstream economics has “immutable laws”, he argues, it would be wrong to teach heterodox theories as though they had equal validity. “In the same way, I don’t think heterodox engineering or alternative medicine should be taught.”

Rendahl also argues that students are too critical of the models they encounter as undergraduates:

When we start teaching economics, we have to teach the nuts and bolts.” He introduces first-year students to the Robinson Crusoe model, in which there is only one “representative agent”. Later on, Friday is brought on the scene so the two can start trading, although no money changes hands since transactions are solely by barter. (Money and credit are strangely absent from most economic curricula.)

Somehow, the “simplification” involved in presenting a theory of capitalism without money and credit—and therefore without the mechanisms that, from the start, invalidate Say’s Law—is presumed to be innocent.

Then, of course, there’s the ever-present worry about banishing mathematical modeling, which is taken to be the necessary condition for intellectual rigor:

Angus Deaton, who won the Nobel Prize in economics and teaches at Princeton, says economics is a broad church, but one that needs to be kept rigorous.

He gives the example of Daron Acemoğlu, a “young superstar” at the Massachusetts Institute of Technology, whose research includes the study of how institutions foster or inhibit growth. “He’s a very good example of the way things ought to be going, which is you do history but you know enough mathematics to be able to model it too. Banishing mathematics is not the solution,” he says. “The model is the cross-check on whether you actually know what you’re talking about.”

For economists like Deaton, rigor is identified with mathematics, not with knowing the assumptions of a theory or being acquainted with various theories.

And, finally, there’s the idea that part of economics is broken but the rest is just fine:

In Manchester, Diane Coyle also defends the basic methodology of economics. She says there is confusion among critics between microeconomics, the study of the behaviour of individuals and firms, and macroeconomics, the study of whole economies. Macroeconomics, she admits, “is broken”. But microeconomics is both robust and often verifiable with real-world data. What, she asks, can heterodox economists contribute to typical concerns of microeconomics, such as discovering the right mix of policy incentives to discourage obesity?

In Coyle’s case, the assumption is that there’s a set of theory-independent, “real-world data,” against which neoclassical microeconomics has been compared and ultimately verified. That, of course, is news to other economists, who use different theoretical lenses, and see very different data.

The assumptions built into each and every one of these defenses of mainstream economics and attacks on heterodox economic theories as well as any hint of pluralism in the teaching of economics are, at best, outdated—the leftovers from positivism and other forms of post-Enlightenment scientism. They comprise the “spontaneous philosophy” of mainstream economists who have exercised hegemony in the practice and teaching of economics throughout the postwar period.

And, yes, Pilling is right, when that hegemony is challenged, as it has been by economics students and many economists in recent years, “the clash of ideas gets nasty.”

Learning and unlearning economics

Noah Smith argues that something he refers to as the recent “empirical revolution” in economics is challenging “a ton of standard, common theories.” These include:

1. If you slap some quick supply-and-demand graphs on the board, it looks like minimum wages should harm employment in the short term. But the data shows that they probably don’t.

2. If there’s any sort of limits to mobility, then simple labor demand theory says that a big influx of immigrants should depress the wages of native-born workers of comparable skill. But the data shows that in many cases, especially in the U.S., the effect is very small.

3. A simple theory of labor-leisure choice predicts that welfare should make recipients work less. But a raft of new studies shows that in countries around the world, welfare programs barely reduce observable work effort.

4. Most standard econ theory doesn’t assume the existence of social norms. But experiments consistently show that social norms (or morals, broadly conceived) matter to people.

I agree.

I’d only add that some of us have been teaching these and many other challenges to mainstream economics for a very long time. That’s because we were fortunate to learn theories other than those of mainstream economics, which we have then used in our own teaching of economics.

We teach our students that mainstream, neoclassical economics is one story about the economy. And, we also teach them, there are many other stories—based on different entry points and logics, and which arrive at conclusions very different from those of mainstream economics.

Fear the economics textbook

My long-time friend Stephen T. Ziliak is doing great things with students at Roosevelt University, including teaching an introduction to economics based on the Grapes of Wrath and Theories of Justice, whence the video above.

Here is an excerpt from the lyrics:

Readin’ Greg Mankiw,
Queue the conservative man’s view
Supply, demand, invisible hand too
Following these Ten Commandments he hands to you
Hey kids, you understand what Econ really can do?
These ain’t the pearly gates, Mr. Mankiw
Just preachin’ on profit and Max U
But where’s the vertical mobility?
Masses are enslaved in poverty
Millions for your fat pockets see
This poverty of nations ain’t so efficient
Mainstream economists are mentally deficient
Monotonous lectures despite student resistance
What works on the Blackboard but not with existence
Your crackpot theories plot all the wrong axes
If you are the state we-Uber-killin’ all your taxis

Occupy the teaching of economics

Back in 2009, in the midst of the Great Crash (and therefore at the start of the Second Great Depression), a colleague and friend asked me whether I expected the teaching of economics to change. His view was that, since mainstream economics had so miserably failed in both predicting the crash and providing a guide as to what to do once the crash occurred, it was obvious the economics being taught to students had to fundamentally change. My answer was that, while the need for a change was obvious, I didn’t see it happening—and it probably wouldn’t happen (thinking back to the emergence of the Union of Radical Political Economics in the late-1960s) unless and until students of economics demanded a different approach.

Well, in various places (starting almost a decade before the current crises, with the eruption of the Post-Autistic Economics movement in June 2000), students have been demanding a fundamental change in the way economics is being taught. The latest effort to move that project along is a report from the University of Manchester Post-Crash Economics Society. Here are some of their key findings, which refer to how economics is taught at Manchester but clearly have much wider relevance, in and beyond the United Kingdom:

• Economics education at Manchester has elevated one economic paradigm, often called neoclassical economics, to the sole object of study. Other schools of thought such as institutional, evolutionary, Austrian, post-Keynesian, Marxist, feminist and ecological economics are almost completely absent.
• The consequence of the above is to preclude the development of meaningful critical thinking and evaluation. In the absence of fundamental disagreement over methodology, assumptions, objectives and definitions, the practice of being critical is reduced to technical and predictive disagreements. A discipline with a broader knowledge of alternative perspectives will be more internally self-critical and aware of the limits of its knowledge. Universities cannot justify this monopoly of one economic paradigm.
• The ethics of being an economist and the ethical consequences of economic policies are almost completely absent from the syllabus.
• History of economic thought is an optional third year module which students are put off taking due to it requiring essay writing skills that have not been extensively developed elsewhere in the degree. Very little economic history is taught. Students finish an economics degree without any knowledge of momentous economic events from the Great Depression to the break-up of the Bretton Woods Monetary System.
• When taken together, these points mean that economics students are taught the economic theory of one perspective as if it represented universally established truth or law.

Stephen Resnick—teacher

Back in January, I noted that I expected to be writing more about Stephen Resnick’s gifts and his great legacy to the world. Well, it’s taken me a while to begin to confront the loss and to finally return to that task.

Here, I want to focus on two things: his teaching (in this post) and his writing (in another post).

Resnick was, by all accounts, a great teacher. And I was fortunate to witness that first hand: as one of his teaching assistants (for Introduction to Microeconomics) and as a graduate student (in his course on European Economic History)—not to mention many conversations, seminars, and conferences over the years. (For readers who did not have the opportunity to sit in one of Resnick’s courses or to hear him present at conferences, you can get a sense of his commitment to teaching in his on-line Marx course).

The first thing that struck me was that, at least on certain levels, Resnick didn’t distinguish between undergraduate and graduate students. He treated them equally. I remember as if it were yesterday that, in both undergraduate Microeconomics and graduate European Economic History (and I was in both during my first semester at UMass), he started in the same way: with history and epistemology. He taught both groups of students (1) that capitalism had a history (and therefore a beginning and an end) and (2) that different economic theories produced different conceptions of capitalism (and, of course, had different consequences for that system). So, I literally went from his undergraduate lectures to 250 students to his graduate course with 25 students and heard the same thing. Yes, the language was somewhat different but the lesson was the same: history and theories mattered.

And that’s one of the reasons Resnick took teaching so seriously. History and theories matter. And if undergraduate students were only going to take one course in economics, and if they took it from Resnick, they learned that capitalism had a history (and thus was not the only way of organizing economic and social life) and that economic theories were important (since they affected everything, from individual decisions about whether or not to go to college to economic policies enacted in national and international institutions). Graduate students learned the same lessons, which meant that we were taught from the very beginning that history was important (studying the transition to capitalism implied the possibility of a transition beyond capitalism) and so were different theories (which gave us a reason to study both neoclassical economics and the Marxian critique of political economy).

The other major reason Resnick was so successful as a teacher was because he took the students seriously—again, both undergraduate and graduate. He treated them/us as subjects, capable of both thinking and acting. And therefore of changing the world. In other words, he didn’t teach economics as a dismal science, and therefore as a set of laws that needed to be mastered and obeyed. Instead, economics was alive, both useful and problematic, and therefore important for students to know well and critically. He taught the students to understand how and why different groups of economists told the stories they did and arrived at particular conclusions, because that was the only way they were going to be able to understand the role that economics plays in the world—and then to do something about it.

Back in 1998, I was asked to provide a letter of reference when Resnick was nominated for a Distinguished Teaching Award (which he then won). Here’s what I wrote:

Steve is fond of saying that the only thing he has learned during thirty-five years of teaching is that he hasn’t learned anything. Such statements are, I think, a testament to his humility: he neither accepts all the credit for the many successes he has achieved as a teacher nor is he willing to assume the position of the many merchants of educational “snake oil” who are quick to sell to frustrated teachers the elixir for solving any and all problems they encounter in the classroom.

That was a position that Resnick maintained right to the end. He was proud to be a teacher, and humble about how and why he was so successful. “Sometimes it works, and sometimes it doesn’t,” he often said. “And I have no idea why.” But that never stopped him from walking into the classroom, each and every time, with the idea that history and theories matter and with a fundamental respect for the students sitting before him.

How NOT to teach the theory of comparative advantage

The neoclassical theory of comparative advantage is both a prediction of how international trade will take place and a story about the gains from trade if countries specialize and trade according to their relative cost advantages.

Contra Greg Mankiw, Emily Oster’s essay is the worst possible way to teach the theory of comparative advantage.

Why? First, because international trade is not at all similar to dividing up chores in a household. Even worse is this example:

When I teach my students at the University of Chicago this principle, I explain it in the context of managing their employees. Imagine you have a good employee and a not-so-good one. Should you make the good employee do literally everything?

Managing their employees?!

Using such “common sense” examples absolves teachers of the responsibility of explaining to students the history and institutions of international trade (such as colonialism and multinational corporations) and the assumptions of the Ricardian/neoclassical story (such as starting with full employment, the absence of externalities, no economies of scale, and so on).

I really can’t think of a worse way of teaching the theory of comparative advantage than following the lead of Mankiw and Oster.

And one last thought: there’s the wonderful irony that most textbook examples of comparative advantage are based on a labor theory of value—without, at least these days, a single mention of Marx.

Occupy market failure

source

With all due respect to Mark Thoma, the introduction of market failures does not mean the teaching of principles of economics is not a problem.* It’s the least mainstream economists can due. But it’s not enough.

The way principles of economics gets taught, at Harvard and at many other schools, is that markets represent the best solution to the problem of scarcity (based on limited means and unlimited desires). But then, after the entire apparatus has been explained, it can be shown that—for a variety of reasons (from negative externalities, such as pollution, to asymmetric information, as one might find in credit markets)—free, unregulated markets might not produce an efficient allocation of resources. A market failure might occur. Therefore, some kind of intervention might be necessary.

That’s it. In the best of circumstances, that’s the end of the story. And so the limits of the mainstream debate are defined: free markets versus regulated markets, the invisible hand and the visible hand. All with the same goal: the efficient allocation of scarce resources.

But that’s not enough for our students. What the market/market failure way of teaching the principles of economics doesn’t allow is that there are other ways of making sense of markets—other economic theories, historically and today—and other ways of allocating goods and services and resources—other economic systems, which may or may not include different kinds of markets.

The principles of economics needs to introduce students to those debates, among and between different theories and different economic systems. That’s why we need to occupy market failure.

* But I do agree wholeheartedly with Thoma on his earlier observation:

The fact that one introductory class at Harvard has this much power to affect the national narrative is part of the problem not the solution. It is yet another reminder of just how concentrated power is in this society, and where it lies. Would a protest at a typical state university have gotten as much publicity? Nope. But when it’s the institution that educates the rich and powerful, suddenly we are supposed to take note. And we do.