Thursday, November 16, 2006

Teaching Economics

Christoper Hayes has an interesting article on the way first year economics classes are taught. It focuses on the University of Chicago, but much of it reflects my own experience.

Some good bits:

Neoclassical economics smuggles a great many normative wares underneath its positive trenchcoat, both in its assumptions about how humans operate—as individuals rationally
maximizing their utility—and its implied preference for “markets in everything.” Because neoclassical economics always presents itself as a value-neutral description of the world, its ideological commitments can be adopted by those who learn it without any recognition that
they are ideological. This is the source of some very spirited debate within the field itself. A growing global movement of “heterodox” economists has criticized the ideological confines and blindspots of the neoclassical approach. As Nobel Laureate Joseph Stiglitz put it, the dominance of the neoclassical model is a “triumph of ideology over science.”

Sanderson’s politics aren’t one-dimensional, and he certainly isn’t a propagandist. But the fact remains that he has the predispositions of someone who “learned economics from Milton Friedman.” First, there’s a tendency to see trade-offs between equity and efficiency even where
they might not exist. Dean Baker, an economist at the Center for Economic and Policy Research and author of the book The Conservative Nanny State, points out that policies can be both fairer
and more efficient. For instance, Baker told me, “it is not clear that a flat tax is more efficient than a progressive income tax. This is entirely an empirical question. It is entirely possible that taxing middleincome workers and Bill Gates at a 25 percent rate will create more distortions
than taxing middle-income workers at a 15 percent rate and Bill Gates at a 40 percent rate. … They want liberals to say that we care about fairness and they care about efficiency. This is crap. They find ways to justify redistributing income upward and proclaim it to be efficient. The
reality is it is not fair and generally not efficient either.”
But when equity and efficiency tradeoffs do arise, economists like Sanderson are systematically biased in favor of efficiency because that’s what they are experts on. Efficiency they can measure and analyze. Fairness? That’s the turf of philosophers and politicians. This tendency
is most pronounced in discussions of economic growth, and how the benefits of that growth should be distributed. Sanderson paraphrases his Nobel Laureate colleague Bob Lucas, who
says that “once you start to think about the benefits of high growth, it’s hard to think about anything else.” In other words, first worry about how best to grow the pie, then how to slice it up. Let efficiency trump equity, create wealth, and then you can use the extra wealth
you’ve created to alleviate inequality. This makes a certain amount of sense. But when this rhetoric comes to dominate our politics, the problem of inequality is never addressed. Now is always the time for growing, later is always the time to address concerns about equity. The result is predictable: In countries that have adopted the neoclassical policy prescriptions
(including the United States), there has been an ever-widening gap between rich and poor.


Jordan said...

I'll never forget the difficulty I had at Auckland doing economics in the late 90s. The best moment was when our (U Chicago) lecturer, a neoclassisist, was away for a week and we had a Keynesian instead.

Eyes were opened. The questions which flowed after that enraged our lecturer, who had been found out as something he'd pretended not to be - posessed of a point of view.

The Post Autistic Economics Review is an interesting journal in this debate on economics.

Terence said...

Hi Jordan,

Thanks for your comment. My other beef with the way some econ. papers are taught is that they tend to provide the illusion that there are cast iron laws, like those of physics, which underlie the 'science' whereas, in reality, what you have are value judgements and assumptions about the way people will act. This isn't to say that all the assumptions are nonesense or that the value judgements are entirely obscene. Yet some are pretty questionable and it would be nice if more econ teachers were up front about this.