Occupy Greg Mankiw!

Of course, enterprising students could buy his book, in an edition as recent as 2008, on ABE for about $4.00 including shipping. I’m not an economist but I’m sure resale value says something about something or other… societal values?

I know that the Harvard Crimson article is by some undergrad. But really, the same article includes both:

“The truth is that Ec 10, a requirement for economics concentrators, provides a necessary academic grounding for the study of economics as a social science.”

and

“Indeed, it seems ironic that students in an introductory economics course at Harvard feel that by walking out of their completely optional lecture taught by a famous economist on the theme of income inequality feel that their actions ought to be considered a sign of solidarity with the Occupy movement. ”

Their completely optional lecture? I skipped classes in college, but I think that an editorial stance that the lectures in a required course for your major are completely optional goes a good deal further.

Can’t trust anyone whose first name is just the letter N.

$175 for a textbook is daylight robbery at the best of times. $175 for a textbook the professor wrote, without the professor forfeiting the royalties, is just self-dealing. The very first lesson these students learn about economics is that their professor the economist is gouging them, personally. Useful lesson, perhaps.

I think the Austrian popularizer Mark Skousen praised Mankiw’s textbook for taking Keynes off the throne that Samuelson had put him. I think Skousen pointed out that the paradox of thrift of thrift had virtually disappeared. Will have to check.

Hear it from the horses mouth on NPR
http://www.npr.org/2011/11/03/141969009/economics-class-protests-perceived-bias

It’s sad: the Harvard Crimson has a distinguished tradition; many of the nation’s leading journalists got started there. They were fiery youth who later mellowed, which is, I suppose, the law of life. It was a great read. But today’s Crimson is an intellectual wasteland, edited by young philistines who seem already old.

@Meredith (10) – apparently the first semester is Micro – hence no Keynes. I found the whole complaint about the lack of Keynesianism a bit odd (also, of course, Mankiw is rather famous as a New-Keynesian).
I think, unfortunately, in this whole affair, Mankiw is the only one not looking stupid. He’s relaxed about the whole thing and makes some good natured jibes against the kids walking out of his lecture.
The open letter doesn’t really make a case why they should walk out. The HC response is ridiculous – obviously a couple of students walking out of lecture to attend a rally doesn’t threaten academic freedom in the least. Both letter and editorial are written in terrible, pompous and convoluted prose.
So yeah – Henry’s suggestion would have been _much_ better – and given how testy Mankiw has been on that subject in the past, he’d likely not look as cool as he does now.

Just an interesting factoid of questionable relevance….

‘Frederick Lee, professor of economics at the University of Missouri, has crunched some numbers from the 2008 research assessment exercise in the UK and found that “of the 2,676 journal articles submitted for the 2008 RAE in economics” only 3 per cent were from what Lee calls “heterodox” journals and “none was from Marxist/radical journals”.

Lee’s analysis also suggests that papers in the 26 “mainstream” economics journals tend not to cite work published in the 62 “heterodox” ones. He concludes by lamenting that “heterodox economics is no longer a visible part of the academic community of British economists”. ‘

http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=417988

@12. Quite. It was the part I found most amusing about the open letter.

“There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.”

As the course guide goes on to say micro is first semester, macro second. So Keynes will make his appearance in the second semester, not a few weeks into the first semester which is where we are now.

“Introduction to economic issues and basic principles and methods of economics. Fall term focuses on microeconomics: how markets work, market efficiency and market failure, firm and consumer behavior, and policy issues such as taxation, international trade, the environment, and the distribution of income. Spring term focuses on macroeconomics: economic growth, inflation, unemployment, the business cycle, the financial system, international capital flows and trade imbalances, and the impact of monetary and fiscal policy. ”

(Err, does Harvard use “term” as some archaic Englishism? Rather than semester?)

I do like Henry’s idea. Would be most fun to watch…..

1. Many of the clientele of Harvard University studying economics would be paying their course fees from money gained by screwing over the proles.

2. Experiential learning is effective teaching.

Is there a problem?

Tim: “(Err, does Harvard use “term” as some archaic Englishism? Rather than semester?)”

Some places in the US do. A term, of course, is a baker’s dozen furlongs divided by seven fortnights plus a ha’ hour :)

Usually ‘term’ means that the place is one a three-term academic year, instead of two semesters.

This action could spark a useful conversation about the role of orthodox economics in the US both at Harvard and more broadly. That conversation is desperately needed. This is true even if their criticisms are not perfectly directed. If we focus on the tactic and their intended target it will be a distraction from those larger issues. I do think that some of the objections voiced here take for granted some of the very things that are being questioned. For example, is Mankiw really usefully categorized as a Keynesian / what does that category mean? Is the micro / macro split a useful way of organizing the field? Given the developments of the past few years, asking those sort of fundamental questions is necessary.

Henry’s suggestion is interesting, but I wonder if they might also connect the textbook issue to the sorts of theories they feel are missing from the course.

Rich @10: if Ec 10 is still organized the way it was back in the Cretaceous when I took it, then the lectures really are not only optional but essentially ornamental; all the actual teaching was done by the TAs in the discussion sections. (Luckily I had a very good TA!)

Mankiw is transparently an intellectually dishonest political hack; the fact that he is an “esteemed” professor at my dear old alma mater, and even entrusted with the intro course, is a devastating indictment of the integrity and scholarly standing of the economics profession, not that there aren’t myriad others.

A classful of one-percenters (either descended from, aspiring, or both) that crank out $50k annually for a prestige degree don’t like the cost of a textbook they can buy used for a few percent of the new price (or torrent for much less)? They could add more to their paper: price discrimination, secondary markets, income mobility, human capital, signaling, asymmetric information, intellectual property, …

As a playfully written post, I enjoyed it. And I think Mankiw would enjoy that type of exercise, although you may be stretching (just a bit) the regulatory implications of allowing a professor to choose his texts for the course.

The point about Keynes is well taken — so what ought the dissenters read in microeconomics?

I suggest Bowles’ textbook:

http://press.princeton.edu/titles/7610.html

Any other suggestions?

Like S. LaBonne @27, I took Ec 10 a long while ago. As he says, the lectures (Feldstein and guest lecturers when I took it) were superfluous and forgettable. The course’s ‘ideological content,’ although definitely present, was probably less overt than it is under Mankiw. (And of course the textbk was not Mankiw but Samuelson.)

@ hartal above: A quick glance at the current catalog shows S. Marglin is teaching a new (undergrad) course “Keynes’s General Theory”.

There are many remarkable aspects of the editorialists’ prose style

Yes, quite badly written, as someone remarked above.

The protesting students’ open letter to Mankiw is also not a model of prose style. (They say, among other things, that Ec 10 “symbolizes” economic inequality. Huh? I don’t think the course, bad as it is or may be, “symbolizes” much of anything.)

$175 for a textbook? This will date me: I once worked at a San Francisco publishing house which was bringing out a textbook written by a then well known psychologist. Meeting to finalise some details regarding the book, the publisher suggested it be priced at $10.50. No, said the professor/author; you can’t ask students to pay more than $10 for a textbook. OK, said the publisher, let’s make it $9.50. No, said the professor, let’s make it $9.99

“which he himself has authored, and requires students to buy at $175 a pop”

Somewhat OT , but if Henry is talking about the introductory text, then I’m genuinely curious about what accounts for the very, very high price ? I read it (well … browsed it) fairly recently & found its contents mostly indistinguishable from the contents of dozens of other similarly themed textbooks. Now this is not unique to Mankiw or Economics – Combinatorics by DR A is going to cover much the same ground as “Theory of Combinatorics” by Dr. B etc. But still, $175 for a thing that is pretty much commodity ?! Why can’t the kids just get Schaum series or something ?

How do you occupy a person if you’re not a spirit or demon?

I guess they could pitch tents in his office.

Students love to protest. They are young, won’t be at school long, and are little invested. IMHO, they’re right to protext Mankiw’s Ec 10, but it doesn’t surprise me that they do not fully understand why, or cannot articulate it. Do we really expect them — students in an introductory econ course — to be masterful critics of the text and its prominent author?

Appropriate words and frames are not familiar, and the words and frames that are ready to hand just put us into the same, wrong ruts.

Is the problem, “bias”? Is Mankiw, a tireless partisan, “biased” in his course content presentation? I’ll bet he’s not, on his own terms. I’ll bet that he makes an elaborate point of the distinction between “normative” and “positive” economics, in the best tradition of Milton Friedman. I’ll bet he even-handedly presents homogenized, pasteurized even-handed persistent “controversies” among economists (if only to legitimate an occasional claim of the form, “economists don’t agree on much, but 80% of them would agree [fill in some utter right-wing nonsense]”

Is the problem, “orthodoxy”? Is the problem, the absence of a legitimate diversity of views? I imagine he makes the same gentle, but firm defense of the goal of helping students master a conventional, and conventionally defined, body of reasoning skills, that my teachers did in the early 1970s. Economics teaches a method of thinking, less than a body of doctrine, and, besides, you cannot accomplish anything, by crowding non-Euclidean geometry into a course on Euclidean geometry. Or something to that effect.

I don’t think we, who are sitting on our duffs, should be instructing young protestors on the most effective ways to protest. Nevertheless, I like Henry’s suggested “critiques” for their pointed defiance of the smug, mind-numbing, self-serving hackery, which is Mankiw.

The actual students asked Mankiw to respect their protest. What’s needed, here, is a lack of respect, but that lack of respect is not on offer. Calling what Mankiw teaches “orthodoxy” is a very gentle way of criticizing its doctrinaire quality, and one that reserves for it, even under challenge, a pride of place. Complaining about the absence of a critical diversity of views legitimates the conventional view, and suggests the out Harvard has taken, let Margolin teach an “alternative” course.

Krugman likes to say, “economics is not a morality play”. But, Mankiw’s economics kind of is a morality play. That’s the core of it. That’s the shadowy center, students are likely to dimly recall, five years or ten years later: an uncritical receptivity to a certain definition of what is practical, sober, serious, right.

Mankiw’s infamous Ten Principles of Economics, demonstrate the uncritical nature of what he teaches, and how he hopes that will translate into a worldview. That they are written, as if to instruct kidnergartners, should be a clue, as to what’s wrong.
http://www.swlearning.com/economics/mankiw/principles2e/principles.html
and
https://crookedtimber.org/2008/02/28/mankiws-10-principles-of-economics/

Unfortunately their letttr isn’t great, but what amuses (or distresses) me most is the way that defenders of the orthodoxy still insist that economics is somehow value free (Marx is outside economics??).

Being taught neoclassical economics drills a number of fallacious mental framings into your head:

(1) The economy is in equilibrium, or at least, long run equilibrium.

(2) Keynesian economics = IS/LM and the multplier.

(3) There exists a thing called ‘the market’ (or it’s even uglier cousin, the ‘free market’) that is governed by well behaved demand-supply functions.

(4) The economy is effectively a battle between governments and the market.

The absolute worst thing about mainstream econ, though, is that the teaching goes something like this:

(a) “OK, here’s the thing that we are modelling, here are the assumptions we have made.”

(b) ?????

(c) Diagram! It looks like this, this is the economy, doing its thing. No we will not tell you the steps required to get from (a) to (c).

I had a relatively benign economics education where they readily acknowledged the limitations and paid some attention to heterodox schools, but I still had many of these drilled into my head, and it really does take a while to unlearn them. If you’ve been working within this framework for decades, then there is probably no hope for you (Stiglitz is the only one I can think of who is escaping, maybe Akerlof too).

You really need a circular cartel where professor X insists on professor Y’s textbook, who insists on professor Z’s textbook, who insists on professor X’s textbook being bought.

Everyone still makes money, but morally. And it’s a good collective-action problem for the final.

175$ for one textbook? That’s just silly, borderline disgusting. Good thing that that commons have provided a solution: it took me 30 seconds to find a pdf copy of the book for free online.

Could all the people pointing to Harvard’s sky-high tuition please get a clue? Harvard doesn’t charge any tuition to children from families earning considerably more than the median household income ($60,000 a couple of years ago, according to a random website I found – though I thought I recalled they were proposing a $100,000 cutoff), and there’s a graduated tuition scale for families earning tens of thousands more. Harvard doesn’t accept nearly enough students from less advantaged backgrounds, but it absolutely accepts students for whom a $200 textbook is a major consideration, and those students can’t dismiss the textbook as being 1% of the semester’s debt.

More generally, there’s just something dramatically wrong with a pricing structure where a textbook loses 98% of its value in four years. When I went to school about two decades ago, prices were already quite steep ($60 was a standard pricepoint for a textbook), but the campus bookstore bought back any clean copy for 1/3, and resold it for 2/3.

Harvard’s tuition rates are 10% of parents’ income whose income is between $120K and $180K. Below $120K, the percentage starts to decline, which is very progressive, isn’t it?

I love Harvard. I’m even pushing my senior in high school son to apply. He did great on his standardized tests and has some great extra-curricular activities, but he wonders if he’s good enough….

I just hope that if he is lucky enough to be accepted by Harvard, and goes, that he’ll call home before he does something silly like walk out of a first level course because the prof is supposedly “biased.” I think he would not walk out under that circumstance because he already deals with biased teachers in high school–and has enjoyed his disagreements with them. In fact, one of his “conservative” teachers, in literature class, told me she enjoyed having him in her class, and is writing him a recommendation.

Our family supports OWS and are Popular Front-New Dealers in our politics. My son and even younger daughter know the lyrics to Joe Hill, etc….But the Econ class walkout is trivial and the students owe Mankiw an apology.

I’m sure that Professor Mankiw believes his text is the best one for his students, so has a good reason to assign it. But I’m equally sure he doesn’t want to profit from assigning it. I have a solution.

I think he won’t mind me saying this: my colleague Erik Wright solves the problem of “royalties when assigning one’s own book as assigned text” by working out what his royalty is per book, getting the friendly local bookstore to sell it at regular price minus royalty, and paying the bookstore the difference. So he still gets the royalty check and pays tax on it, but the students get it at a lower price and he doesn’t make any money from requiring them to purchase it.

I don’t know any textbook that presents the fundamentals of macroeconomics from a more genuinely Keynesian or radical perspective.

Just a question from someone who knows nothing, but I had heard that the Dornbusch-Fisher Macroeconomics was good enough, and slightly to the left of Mankiw. It’s a little old, but revised in 2003.

Dornbusch’s 1981 open-economy macro textbook is very good, IMO. But you couldn’t (or at least I wouldn’t) use that as the primary textbook for an undergraduate macro class today.

And yes, there are good-enough alternatives that are slightly to the left of Mankiw. I guess I think we could aim higher than that.

@ragweed: “The high cost of textbooks is a big issue in the US – if I recall there were congressional hearings on it a while back.” It’s now federal law (thanks to the unlikely political bedfellows, Charles Grassley of Iowa and Chuck Schumer of NY): book orders must be placed by pre-registration, so that students can decide whether or not to take a course, if its costs are too high (love that reason) and/or so that they have time (before final registration/start of term, to cover every calendar variation) to find the least expensive copies. (I am at the moment in violation of federal law because I haven’t gotten my book orders in for next semester because the bookstore’s damned website isn’t working properly.)
Re text book costs: do econ textbooks have to cost a fortune in order to assert econ’s status as a science? Bio and Chem textbooks cost a fortune (though maybe because those fields, Bio especially, really are constantly changing).
At least these books are all in print. Try to find a commentary+text of Sophocles’ Ajax.

Does anyone know how much Mankiw makes from his textbook?

Best selling textbooks are very profitable for the authors. Its not a Springer-Verlag deal.

C’mon, Meredith, there’s a brand new edition with commentary on the Ajax by remarkably prolific young Mr. Finglass, a useful Aris and Phillips text by A F Garvie, a Loeb (not quite a commentary) by Lloyd Jones, plus reprints of Stanford’s old MacMillan red from Bristol and the still very valuable Jebb (from Exeter, I think). Hard to think of a classical text that is better served with commentaries. There was a rumor of Cambridge green and yellow, but I don’t expect in my lifetime.

Does that explain why Serge Lang kept writing so many books? With all the editions coming out Mankiw must have the same proofreading skills.

Honestly, is there any chance that the editors of the Harvard Crimson are NOT gigantic wanktastic tools? No, there is not.

Should have added about Finglass’ Ajax: $180.00. (I was lamenting the absence of affordable commentaries — and this one has a translation, which I don’t want.)

Stanford’s Ajax is in print from Bristol Classical Press or whatever they’re calling themselves these days. Finglass is hardly suitable for undergraduates (I didn’t realize that was what you were looking for), but I don’t think it has a translation.

My own experience from a long time ago is that having a translation along with a quality commentary (like Garvie’s) that deals with real problems in the play impacted my students negatively a lot less than I expected, and in terms of evaluating student progress it’s really easy to see if they are following the Greek or Latin text. (I think I found this out with Barsby’s Amores I — which gives some idea of my age.) It actually seems to turn out better when the translation is in the book and keyed to the commentary and other apparatus than when students use a separate volume with a perhaps dubious translation. By the way, I think that Jebb’s Sophocles was the first major scholarly edition to employ a facing translation (ca. 1890) and the translation, which is not suitable for reading on its own, was essentially part of the commentary.

On the other hand, the Loeb doesn’t have notes or information on meter.

You probably aren’t old enough to know how much worse things were in the good old days — when I was an undergraduate we used an edition of Suetonius’ Life of Augustus that advocated reading the book to understand Mussolini’s new Roman Empire. (There had once been a better Victorian edition.) We also read from Pindar from the OCT, which is not only a bad text but hopelessly inadequate to the needs of an undergraduate.

@76:

Dis-intentional hermeneutics are strictly not allowed @ CT.

Feldstein was probably more balanced than Mankiw when I took Ec 10 in the 90’s. Our textbook was Baumol and Blinder then.

The problem sets and the study guides were all part of the course packet. That was the bit you really needed to know. I think that there were questions on the exam that were only there to make sure that you had done the reading, but you would be fine even if you hadn’t.

I have a solution. Mankiw should donate his royalties to publishers for subsidizing Greek and Latin texts + commentaries. (Or not a solution. The health of classics publishing would then become dependent on the prevalence of his mode of thinking economics — cf. state-sponsored gambling/lotteries and education.)
Point really is: this morality-free economics. As some above have indicated, doesn’t econ need to re-think its whole conception of itself (as most fields have had to do in the last few decades)? It’s interesting to watch Krugman, whom I admire and rely on for day-by-day evaluations, come to the realization that economics entails values, complex weighing of many intersecting factors, whether econ likes to think of itself that way or not. Yet even Krugman is obsessed: econ is not about morality, he insists (the austerity moralists he inveighs against, rightly). What is the difference between values and morality — that’s the question I wait for him to ponder. Where is this world where values can be put over here and numbers-crunching over there? I recognize no such world (and don’t think I’d want to live in such a place, anyway).
Sorry for the Krugman digression, but I don’t think Mankiw can be analyzed properly in isolation from a larger fabric….

I was going to recommend _Understanding Capitalism: Competition, Command, and Change_ , by Sam Bowles, Richard Edwards and Frank Roosevelt. But I see cian has beaten me to it. Make that 2 votes then.

‘It’s always possible that these contentions are a reflection of reality as well.’

Er………………..no.

Hidari, business rents are not rent controlled, so new construction is not residential. Banning high prices produces gaps between what people want to have and what people want to make. This should be eminently noncontroversial. The critique of political economy is not at the level of morality.

Andrew the issue is that Mankiw profits from picking the book he does. He’s also insulated from the costs of picking the textbook that he does. Both of these imply, by standard economic thinking, that his decision would be different if those factors were not true. I can easily see a professor picking an expensive book rather then a cheap one, even if his students disagree, because he already has the expensive one and thinks its a better book.

“were it not that a number of these things (eg. minimum wage and employment) have actually been studied, and reality in fact has been found not to comport with simple-minded Ec 10 models at all.”

That’s interesting. I was aware of the point that imposing a low minimum wage didn’t have much effect on any thing. For the obvious reason that not much effect will happen from changing the wages of not many people.

I wasn’t aware that the claim had moved on from that, to a claim that a minimum wage, at whatever level, does not reduce employment.

A few years ago, Harvard explicitly rejected the idea of having Marglin’s intro class count for the same educational requirements as Ec 10. Furthermore, William Lazonick comments on some Crimson article as follows:

“About 30 years ago, when I was an associate professor of economics at Harvard, my colleague Steve Marglin managed to have a series of three lectures on alternative approaches to economics integrated into the Ec 10 curriculum….in 1984, Professor Martin Feldstein returned from his stint as chair of the Council of Economic Advisers under Ronald Reagan, and, as the new head of Ec 10, got the job done [of eliminating the three lectures]. One point of view would prevail…”

The students expressed themselves badly, but they are correct.

Watson Ladd @ 87: “The critique of political economy is not at the level of morality.”

Sure it is, because the defense of mainstream economics doctrine is a conservative advocacy of moral propositions. Milton Friedman, Free to Choose. Or, a shorter version: Ed Glaeser’s NYT op-ed, The Moral Heart of Economics

A large part of what passes for mainstream macroeconomics, today, is pre-occupied with elaborate mathematical apparatus, dedicated to “proving” qualitative properties of policy, i.e. pareto-efficiency.

Tim Worstall @ 89: “I wasn’t aware that the claim had moved on from that, to a claim that a minimum wage, at whatever level, does not reduce employment.”

a priori and with no specification of the level of the (relative) minimum, economic theory doesn’t support drawing any conclusion, whatsoever.

It is traditional in the pedagogy of “Econ 101” (which includes Ec 10), to introduce certain auxiliary “plausibility” hypotheses to sort things out a bit, into digestible narratives, for example, to make the Supply curves slope up, and the Demand curves slope down, so that an increase in the price of a normal good, say, reduces the quantity demanded.

If the minimum wage is low enough, and it is raised by a small amount, it might be reasonable, on the basis of the usual plausibility hypotheses, to suppose that it might benefit people working at very low wages, by raising incomes. That’s just an application of simple notions of elasticity, and leads to the unobjectionable insight that it matters, as an empirical matter, how low is “low”.

Teachers cross a line, from the pedagogical use of “plausibility” hypotheses, into propounding an ideological doctrine, when they insist that very low wage workers are disadvantaged by the very existence of a minimum wage, and that any increase in the minimum must, necessarily, reduce employment. Not only is such a claim, properly, empirical and factual, but it serves to elevate the elementary propositions of Econ 101 from the fumblings of the still-ignorant into the high principles of authoritarian dogma. It is the false claim that all you need to know, you learn in kidnergarten — or, in this case, Econ 101, and it serves to hide the far more sophisticated ideas of more advanced economics.

There’s no justification for economists reasoning as if the “market” for low-wage work is perfectly competitive, or as if unemployment rates are not, in large part, macroeconomic variables, or as if the capital stock of the low-wage worker is a property of the worker, or as if management and organization of the firm doesn’t matter. Economics has sophisticated insights into the gamesmanship of the labor “market”. There are sophisticated ideas, such as “efficiency wages”, which turn topsy-turvy the simplistic notions of the elementary textbook.

Mankiw comes down on the doctrinaire side. His infamous Ten Principles, before which he poses as an Economics Moses, are ridiculous, and promote ignorance. And, controversy over the minimum wage, is a good example of how pernicious Mankiw’s favored doctrine is. A student schooled by Mankiw can scarcely manage to figure out the reasons why a minimum wage is a good idea, or how it benefits low-wage workers, let alone why an appreciable effect on the unemployment rate is highly implausible.

“It is traditional in the pedagogy of “Econ 101” (which includes Ec 10), to introduce certain auxiliary “plausibility” hypotheses to sort things out a bit, into digestible narratives, for example, to make the Supply curves slope up, and the Demand curves slope down, so that an increase in the price of a normal good, say, reduces the quantity demanded.”

Well, yes, obviously, for a normal good is one which is defined as one for which the curves slope that way. As most curves and most goods do behave that way (wheat noodles in North China being one of the exceptions) “normal” seems a suitable enough name.

“If the minimum wage is low enough, and it is raised by a small amount, it might be reasonable, on the basis of the usual plausibility hypotheses, to suppose that it might benefit people working at very low wages, by raising incomes. That’s just an application of simple notions of elasticity, and leads to the unobjectionable insight that it matters, as an empirical matter, how low is “low”.”

Sure, another example of the correct answer in economics almost always being “it depends”. No one at all argues that speculation increases price volatility. Some argue that “excessive” does so. No one at all argues that all demand curves slope downward, there’s even a name for when they don’t. No one (an economist that is) I can think of says that an increase4 in a very low minimum wage will have any observable impact on unemployment: similarly, no economist I can think of (possibly my fault) would argue that a minimum wage of 200% of average wages would not have an effect on unemployment.

“It depends” see?

What happened to positions in the history of economics, within Economics departments? I have the impression that, in the 70’s and into the 80’s, many Econ departments not only had such positions but often filled them with their “resident Marxist” or at least someone who would challenge some of the assumptions built into most of the other courses in the department.

Mankiw used the opportunity of the walkout to tell lies to the press.

He says (see CNN) that, “Adam Smith is pretty non-controversial among economists.” This is a lie.

He says (see NPR) that increased income inequality is due to changes in pay among college-educated and non-college educated. Much of the controversy is about the distinction between trends among the 99% and the 1%, and even within the 1%. Premiums to college education cannot explain these trends.

The econ 101 story of the labor market is nonsense on stilts (and Tim Worstall is uncivil to constantly write falsehoods, nonsense, and irrelevancies). I highly doubt Mankiw cites me or the leading lights I draw on in a journal paper I wrote on the labor market.

Andrew F @ 98

I’ve read Mankiw’s textbook treatment of the minimum wage; it is simplistic in its theoretical analysis and polemical to the point of being tendential in its use of facts. It is, imho, completely inappropriate for a textbook.

An interesting aspect of Rutgers is the experience of Paul Davidson, Al Eichner, and other Post Keynesians. I don’t recall what time frame exactly I am talking about. As I recall the story, an entrepreneurial dean hired Davidson to make the department distinctive. But after some change of administration, the Post Keynesians were purged. Some will tell you that the rancor of the orthodox economists was a cause of Eichner’s heart attack and death in 1988.

But more important even than that are the examples that are used to illustrate issues. Matt Yglasias made the point a while back about how often the examples used in introductory economics classes tend to support conservative politics – eg. minimum wage laws and unemployment.

Introductory economics courses can have a particularly corrosive effect on students, because they are often required or encouraged for students who don’t go on to major in economics. Economics majors might get exposed to a more complex view and more heterodox viewpoints, but a history or business major whose main exposure to econ is the intro class is likely to come away thinking that it is “obvious” that minimum wage causes unemployment, rent control is bad for tenants, etc.

An extremely good point to make! I see this all the time with people who supposedly have a “good” education.[1] Not that this doesn’t happen in other subjects, but they tend not to be as er, relevant, in day to day life – Boltzman Brains are just so much nonsense, ditto for relativistic mass, the magical healing qualities of magnetic bracelets, etc. But believing in these bits of foma doesn’t have the quality of life consequences for one’s fellow man that believing in bad arguments for “free trade” does. Particularly if those bad arguments are accepted as a matter of course by most of the citizenry (at least the college educated ones) as the uncontroversial, thoroughly tested and confirmed last word on the subject.

On edit: I see that this has already been commented upon and in a more well-written way by Bruce Wilder. As usual. Thanks, Bruce :-(

[1]Particularly nasty are the people who should know better by virtue of their avowed education but don’t and who then go on to get work as part of a roster of on-air “experts” who merrily prattle on, spouting nonsense in their most confident voice. I’m thinking of people like the “econoblogger”, She Who Must Not Be Named, MM. Who semi-regularly appears 0n – of all places – NPR, or old standards like George “I are an Intellectual” Will.

On some of the issues being discussed here, see “Wanted: Worldly Philosophers” in today’s (Nov. 6) NYT, in the Sunday Review, by Roger E. Backhouse, a professor of economic history (!) at Birmingham, and Bradley W. Bateman, an economics professor at Denison:
http://www.nytimes.com/2011/11/06/opinion/sunday/worldly-philosophers-wanted.html?_r=1&scp=1&sq=Wanted:%20worldly%20philosophers&st=cse

Re a little knowledge being a dangerous thing: that problem can be countered to some degree just by the existence of courses whose titles, descriptions, and perhaps reputations among students let it be known that there’s a great deal more to a field than its introductory courses begin to address — including challenges to some of the premises of those intro courses. Having just done a lot of pre-registration advising, I can attest that many students do learn a lot simply by poring over the course “catalogue” (though they pore over it less now that it’s all online — not their fault, but a result of the technologies of reading the digitalization entails…).

Tim Worstall @ 104

I have no problem at all with bringing “capital-intensity” into the argument. There’s a whole lot of economics, which I’d like to see brought into the argument, which conservatives seem to think they are justified in excluding by the dogmas of Mankiw’s pathetic economics.

If we accept the marginal product = wage analysis as being approximately correct and applicable (which is questionable, I know), it seems likely that marginal product within some range is a matter of management discretion.

Under assumptions of complete information and perfect competition, the firm does not have a management problem to solve, and there’s no bargaining over wages of any sort; the marginal product is unique. This is the sort of argument Mankiw presents in his textbook.

Under uncertainty, management does have to control the production process, to limit error and waste, and it does have to make choices with regard to capital investment in advertising, capital stock and organization; it does negotiate wages in some fashion and manages workers.

If the minimum wage is low enough, management may use minimum wage workers as slack, neither training them nor using them intensively enough to produce a higher marginal product. They’re cheap, turnover is high, so what? A low minimum wage gives a lot of firms an incentive, in effect, to make wasteful use of the low-wage worker, and deprives the low-wage worker of opportunities to be more productive.

When I was an undergraduate in the early 1970s, in a more liberal era, a full professor on the faculty came to our senior seminar to test out a policy idea he was thinking of promoting: ratchet up the minimum wage systematically, and use macroeconomic policy to restore full-employment after each ratchet up, as a way to promote increased capital investment in the service businesses that employed low-wage workers. In the shadow of Abba Lerner and functional finance, and Baumol and Bowen and Baumol’s cost disease, this argument had a superficial plausibility at the time, I guess, although the students hooted derisively. I remember he framed his argument with a folksy tale about the life and prospects of a young gas station attendant he knew. Most people here are too young to remember that gas stations once had attendants, who came out and pumped your gas and checked your oil, and chatted briefly but amiably as they took your money and brought you change, like a bartender in a restaurant — you never got out of the car except to use the restroom. Friendly and capable attendants were a selling point; in advertising they were super-clean, handsome middle-aged men; in movies and on tv, they were sexy, sullen teenagers or young adults, that a rebellious teen-age daughter might flirt with.

This seminar presentation was just before the first oil crisis set the world on the path to convenience stores selling groceries, which also have self-service gas pumps.

Now, we’re in a neo-liberal era, in which Ned Phelps goes around trying to sell a macroeconomic policy of ratcheting down wages, coupled with capital disinvestment, and no one says, boo. In the U.S., the Earned Income Tax Credit is promoted as a bi-partisan ideal solution to poverty, because Republicans recognize that it is a government subsidy for low-wage employers, and Democrats are too corrupt to notice.

John Stuart Mill said something once about conservatives being the natural party of stupid. Well, Mankiw promotes an economics of stupid, because that works for conservative desiderata. Given that he’s teaching at Harvard, in a huge lecture course that would shame a cash-strapped state university, makes the whole sorry spectacle a prime example the rot at the top.

The most tendentious studies sponsored by right-wing think tanks claim that for each 10% rise in the minimum wage, there is a 3% rise in unemployment among effected workers. So let’s say the minimum wage rises from $5/hr. to $6/hr. and for convenience sake the average wage among effected workers was $5.50/hr. 6 out of 100 hundred workers lose their jobs with a full-time annualized loss of about $66,000, whereas 94 workers experience an annualized gross gain of $94,000, an increase in the net surplus for the group of $28,000 annually. There may be some relative price effects that curtail demand for some goods, will increasing it for others, but the main effect is simply to shift some purchasing power from high income to low income workers, though B.W. has already covered the minimal monosony-and-efficiency-wage effects by which there might be little change in relative prices rather than improved productivity, not to mention further knock-on effects from the likelihood that low wage workers are related to each other and live in the same communities, such that increased wages stimulate increased economic activity in their communities. (The usual move then is to claim that the minimum wage effects part-time dependent workers, so it is not perfectly targeted at the poor, which, of course, is just a distraction from its effects on the adult working poor).

My point is that the minimum wage likely has only very small positive or negative effects on employment and well-being among the working poor. And, of course, it is trivial to discuss it’s micro-economic effects on employment in abstraction from the macro-economic conditions prevailing. So the issue is really just concern trolling, as a stalking horse for much larger issues, with the added benefit that it shows how those well-intentioned libruls actually harm those very people they would claim to want to help. (That is indeed the boundary-patrolling/immunizing effect pedagogically intended, to make sure that those recruited into the presumptions of professional/educational privilege don’t suffer any bad conscience that might draw into question their theoretical intentionality). But if one really wanted to address the conditions of poverty and the working poor, ya know, like in the direction of largely abolishing them, a much more extensive discussion would be required. Which is why such heavy batteries of sheer pedantry are deployed along such a vanishingly thin line.

Chris, I think attendants started dying out at about the time much larger economic problems were plaguing gasoline distribution and sales. Lots of gas stations, or non-chain convenience stores with a couple of pumps in the front, were getting squeezed out altogether, and their complaints were with their suppliers and the big companies who were setting their prices. One reason gas stations became also convenience stores, most of them chains, or simply convenience stores: the only way actually to make money, since they weren’t making any by selling gasoline. (And what had once been repair shop/gas stations became simply repair shops.) In the midst of all that, competing by providing attendants may well have been impossible. But, the state of NJ might be one place to explore your question. Gas stations there are required by law to have attendants (or at least, they still were as of a few years ago — something my parents greatly appreciated as arthritis made getting in and out of the car a pain). Do gas stations there compete on the basis of the quality of their attendants’ service? (I suspect not. Probably on the convenience of their locations and on the attractiveness of the other wares they peddle — gasoline is just a come-on to those other wares.)
Bruce Wilder’s evocation of that other world, which I remember well, speaks to larger issues, it seems to me. The gap between the 1% and 99% not only corresponds but may in large measure be due to the declining numbers of jobs like gas station attendants. I’m thinking of the decrease in opportunities for a sustained, if usually superficial, sense of personal connection between people of different classes. A middle class person or someone from the upper-middle class regularly had contact with people they knew as individuals who truly struggled economically, and vice versa, so that people weren’t just abstract percentile/class categories to one another. Even more, the decline in the number of towns and urban neighborhoods of mixed incomes has made the poor invisible to the more prosperous, even more than when Michael Harrington published The Other America.

jch: “the minimum wage likely has only very small positive or negative effects on employment and well-being among the working poor.”

I suppose it depends on what you constructively imagine the problems of poverty are. Mankiw, for the purposes of arguing against the minimum wage, constructively imagines them, as the problems of no-account teenagers.

I’m inclined to think the poverty of very poor neighborhoods and regions are problems of macroeconomics and industrial trade policy and economic development, writ small.
That said, to the extent that one of the key problems of poverty as lived by the poor is vulnerability to economic predation, a minimum wage, as part of a general framework of protective labor law, and protective law and supportive institutions generally (usury laws and trustworthy community banks and trustworthy businesses in general — in the very poor neighborhood I lived in for a year in New Haven, the most acute problem was that there wasn’t a supermarket) is appropriate and effective. If a minimum wage results in unemployment, because it makes predatory exploitation unprofitable, that’s a good thing that serves to highlight the endemic “macro” problems of a region.

chris @112 “ISTM that the disappearance of gas station attendants is only partly about rising wages and mostly about improving technology”

No — not about wages or tech. It’s about the price of gas. In a network, having a very, very low marginal cost of a “transaction” across the network is critical to the network’s productivity. Cross a certain upper threshold and the network can lose its economic viability. A substantial part of the American economy is a network built on cheap gas; suburban America was built on driving to a better house, a better job, a safer neighborhood, better schools for the kids, cheaper stuff at Wal-Mart and CostCo, etc. That only works (meaning, is productive) on cheap “trips” and that means cheap gas.

So, when the price of gas spiked in the first oil crisis, circa 1973-4, it triggered a phase change in gasoline marketing and distribution. Gasoline went from being a cheap, fairly high-margin good, like soap or beer, around which services and marketing mythos, quality illusions and brand loyalty might be built, to being a high-volume good under severe margin pressure at retail.

The archetypal gasoline sales outlet in the 1950s and 1960s was a “service station”, which provided mechanic’s services; selling gasoline was an adjunct to changing tires and doing tune-ups, and making a show of checking the oil or tire pressure or inspecting fan belts served a purpose in that scheme: selling oil changes and fan belts and tires. Most service stations didn’t sell all that much gas by our standards, but they didn’t need to; they needed to be a neighborhood convenience and promote a personal relationship with customers.

Very quickly after 1973, gasoline retailing became a high-volume, very-low-margin business, and attendants were sacrificed to achieve those margins and the higher rate of throughput, which only self-service at lots of pumps can produce. The number of stations in the country declined rapidly, by more than a third seemingly overnight, and surviving stations increased the number of pumps, and the volume of gas sales per station soared. Eventually, it was realized that the higher traffic meant that a convenience store selling groceries was viable, and the sale of gasoline at very tightly controlled margins became a break-even leader for the higher-margin grocery business.

One of my problems with economics, as conceived and taught by the Mankiws, is that it doesn’t give a student the slightest insight into the kind of issues that shape the institutional structure of the economy.

Gene O’Grady @110:
The particular course that has been under discussion in this thread serves, or is intended to serve, two curricular purposes. On the one hand, it gives (or purports to give) students who will never take another formal econ course an “introduction” (i.e. a general basic survey). On the other hand, it also “introduces” the field to students who will go on to further econ courses. (I’m not at all defending the merits of the course; I’m just speaking about its intended function in the curriculum.) In short, your classics analogy, in this particular case, is not apt. Prospective majors and others are in the course together. (Ben Alpers @40 already pointed out that it’s required of Ec majors [or “concentrators,” in Harvard’s jargon].)

@Meredith — mixed-income neighborhoods in the US are not completely extinct, btw. Some still exist. But I think your point about increased separation of classes is probably right.

Henri V. @116:
Perhaps you should be a little bit more careful and narrowly OT here. You’re in danger of giving Tim Worstall some back-handed legitimacy.

Bruce, if trade hurts people they don’t do it. You say people game the system, I say they have misaligned incentives. Prices at McDonalds are administratively determined, but if they are too high people go to Burger King instead. Risk preferences integrate so nicely as a translation from money to utility with declining marginal productivity that I’m surprised you viewed that as a blow against utility. People might suck at making choices, but that would seem to be a fact that once you demonstrate to them makes them want to improve and doesn’t require the oh-so-beneficial national state to interveen.

Henri, tariffs and subsidies will make unemployment worse.

I don’t have the energy or indeed the economic chops to go through this thread post by post. I’ll just have to say that when it comes to minimum wage theory there seems to be too much reliance on what I call the Jimmy the Stockboy theory.

The argument against minimum wage often rests on unemployment at the margin, giving everyone a Quarter an hour wage meaning we have to let poor Jimmy go. But this just builds in a theory of what we could call a Lump of Wages Law, that the overall pool of labor compensation is rigidly chained to OVERALL labor productivity of the organization and that it is impossible to adjust anything other than line compensation (say profits or executive compensation). But there is zero in history that suggests this is true, the ‘Iron Laws of Supply and Demand’ may be able to have lower margins just drive entrepreneurs out of a given market, but mostly somebody will step in to supply the market for hamburgers. For example Washington State has the highest minimum wage in the country yet offers the same MacDonalds Dollar Menu and Two For One National Specials you find anywhere outside Hawaii or the Times Square store.

Supply, demand and price jusn’t aren’t as rigidly sensitive to labor costs as minimum wage theory would have it. You need so many bodies to supply so many burgers, and as at MacDonalds prices might be set at levels totally disconnected from local rent and labor costs. People want their “For a limited time!” McRibs and Big Macs, the idea that total increases in labor compensation simply translate into equivalent loss of employment just theory driven.

And yes I am sure it looks convincing in the hands of Prof Mankiw as drawn up on that whiteboard. Gosh if you are lucky maybe he will throw in some Greek letters! ‘Delta me Doc!’

Yoram Bauman long ago gave the canonical debunking of Mankiw’s “ten principles”. Because Bauman is a conscious stand-up comic as well as an economist, you can find this translation in video form.

PRINCIPLE #4
People respond to incentives.
TRANSLATION: People aren’t that stupid.

The dictionary says that incentive, n., is 1. Something that influences to action; stimulus; encouragement. SYN. see motive. So what Mankiw is saying here is that people are motivated by motives, or that people are influenced to action by things that influence to action. Now, this may seem to be a bit like saying that tautologies are tautological — the reader may be thinking that people would have to be pretty stupid to be unmotivated by motives, or to be inactive in response to something that influences to action. But remember Principle #3: People are stupid. Hence the need for Principle #4, to clarify that people aren’t that stupid.

(Hard to argue with that.)

I’m claiming some of those who currently work at the minimum wage will not work if the minimum wage rises. No one seems to be doubting that,

No one, except for everyone who knows anything at all on the subject. Monopsonistic labor market models, which are more realistic than the freshman stuff you’re parroting, predict that an increase in the minimum wage will raise employment.

No, if people know a trade is going to hurt them they won’t do it.

Well, of course they might still do even knowing that it’s going to hurt them, – if they are in a situation (that was, quite possibly, deliberately created by those offering the trade) where not doing it hurts even more.

Watson, aren’t you a self-proclaimed Marxist? If so, you may be the first textbook Econ 101 Marxist in history.

You don’t in fact need x amount of workers to supply y amount of burgers.

So you’re saying that you can suppy X burgers with no workers?

Applying Worstall logic to Tim Worstall’s arguments is disturbingly satisfying.

Eh, Mankiw’s discussion is adequate for an introductory text, and comparable to those in others. Enough information is furnished to alert the student to the controversy, to glint the broad contours of the argument, and to provide an entrance to a student’s further research into the topic.

His ten principles are meant to be highly basic, highly simplified highlights of ways of thinking within economics – and they certainly accomplish that.

To bring this back for a moment to the actual walkout, there’s something about the protesters walking out a few minutes into a lecture on income inequality that is unintentionally symbolic of the problems and frustrations of the Occupy Wall Street movement as a whole.

So are you saying Watson that you can successfully make cars with zero workers? Interesting claim there.

Class struggle isn’t about labor cartels, its about revolution.

So a strike for better pay, or working conditions, isn’t class struggle. More interesting claims.

Incidentally Watson, your final paragraph is a little hard to follow, but am I right in thinking that you’re arguing that the move from agrarianism to industrialisation was made possible through the ability of people to sell their labour? Because, if so, you might want to acquaint yourself with British social history.

Watson, aren’t you a self-proclaimed Marxist? If so, you may be the first textbook Econ 101 Marxist in history.

Why has Jon Elster been unjustly over-looked?

I remember reading Dan Ariely’s Predictably Irrational which is a potboiler, although an entertaining one. And as he explained experiment after experiment after experiment which showed how ‘irrational’ (very much quote-unquote) ‘our’ buying preferences are, he makes a wee throwaway comment that went off like an explosion in my brain: ‘There are no such things as the laws of supply and demand…..’.

It’s true. There is no law of demand, and there is no law of supply: nor will there ever be such things. Not even ceteribus paribus. And you realise why neo-classical economics could never work, not in 10 years, not in 10000.

Just thought I would throw that one into the pot.

Watson Ladd: “a single buyer will have a downwards sloping demand curve as well.”

I think even Mankiw might flunk you for that one. Stupid is not an argument.

I mean downward in that as price rises quantity demanded decreases. So a single buyer of labor power will demand less labor power as the price rises. Ergo the price floor will lead to a drop in the demand for labor, and hence a decrease in labor supplied.

I mean downward in that as price rises quantity demanded decreases. So a single buyer of labor power will demand less labor power as the price rises.

Why? Why wouldn’t it lead to smaller margins for companies in the sector (I’m assuming this is micro, rather than macro – and that you realise there’s a difference). It might be that consumers are willing to eat the costs. Or it may be that labour is a fairly small component of the overall cost. Or it might simply lead to structural changes in the sector that cannot be modelled in simplistic Econ101 bullshit.

Ergo the price floor will lead to a drop in the demand for labor, and hence a decrease in labor supplied.

I can’t actually work out what you think you’re talking about here. Assuming we’re still talking about minimum wage, then what exactly is going to happen to these workers. Are they going to emigrate? Start new exciting opportunities in the informal economy? Start meth habits?

And if you’re talking about a single sector. Um, are you seriously suggesting that higher wages in a particular sector will result in less workers seeking work in it?

Why can’t students who don’t want to pay $200 for a crappy textbook just get it out from the library or download it off that internet thingummy?

If you go around buying all of the required texts for your course then you’re not going to have any money left for beer or loose women. I don’t want to tell today’s youth how to do their job here, but Jesus…

“the price floor will lead to a . . . decrease in labor supplied”

You already flunked. No need to gild the dandelion. I’m not awarding negative points.

No Watson it really isn’t. You appear to be arguing that a rise in the cost of labour, will result in less workers wishing to supply labour. Its certainly a paradoxical result

I try to be respectful to others here, Watson Ladd, but you’ve been trying my patience in this thread. You don’t seem willing or able to even understand the arguments your interlocuters, here, offer.

An employer with even a vanishingly small degree of monopsony power, facing potential employees with no power, will offer a wage, which is lower than what the competitive (efficient) wage would be. Offered a lower wage, labor supplied will also be less than the competitive outcome. The “market” outcome, in the presence of even a small degree of monopsony power, is lower wages and less employment than the competitive (efficient) outcome.

So, a minimum wage, which is more than the monopsony wage but less than or equal to the competitive wage, will result in a more efficient outcome: higher wages and more employment.

This is a bog standard result. Google it, if you like; Google Books will come back with dozens of textbooks to explain it.

I do not think it is just a matter of unintentionally faulty phrasing. Your drift is blocking the road. You are so bound and determined to be the voice of Dr. Pangloss on meth that you cannot admit even the possibility of unbalanced market power producing inefficient results, let alone exploitation and predation. Yet, the real world is full of examples. What is wrong with you that you cannot complete even these simple steps of reasoning?

I posted on this thread long ago back when it was still on topic, but I have no choice now as all you folks are making me mad.

The simple Ec10 story: labor demand, like demand for most things, slopes downward, so a meaningful wage floor will cause some unemployment. Looking at it another way, different workers have different productivity levels, and there is no doubt whatsoever that some workers have productivity that is equal to or higher than the current minimum wage but lower than a proposed higher minimum wage.

OK, so that doesn’t satisfy you. “Monopsony”, I hear you saying, and other market imperfections causing wages to diverge from marginal product. Instead employers will take thinner margins, and/or consumers will eat the extra cost. Plausible enough. Though also plausible enough is that consumers substitute into household production, or forgoing consumption. Or employers substitute into more capital intensive methods, or decrease production or close entirely (especially if their margins were already thin, which some most definitely are). In the real world, a mix of all of these things happen, of course. The sum total of all effects is impossible to compute. However the overall tendency is going to be in accordance with the ordinary law of demand. You can make pathological parameter assumptions and get a model with the opposite result, but with such a wide variety of actors operating at the low wage end of production, the majority are going to respond to incentives, at the margin, in the ordinary Ec10 way just like on Professor Mankiw’s whiteboard. Especially in the long run.

ps: all you folks who think anything on this thread constitutes any kind of gotcha against Mankiw’s views on the minimum wage, I wonder how you approach a debate on whether the fiscal multiplier (i.e. the effect of “stimulus”) is positive or negative.

Bruce @159: so a policy maker will want to set a minimum wage between the competitive wage and the monopsony wage, in order to ensure the good outcome and avoid the bad one. What assurance do you have that this is the case with current minimum wages, or ever could be the case?

Great, I love data, and since so far I have seen no such data, I look forward to being pointed in the right direction.

Here, let me Google that for you.

Second link: agrees with me

Gee, a propaganda screed from the Mises Institute agrees with you. I’m shocked, shocked I tell you.

The bad-faith cultural narratives which not only justified slavery, but accorded it the status of a natural law ended up being as elaborate as rococo architecture. Why should we be surprised that the purveyors of bad-faith defenses of modern wage-slavery demand to be taken just as seriously?

So tell me, what does happen when we come to the end of the capitalist road, and find that we have all the lawyers, dog-walkers, massage therapists and Walmart greeters anyone could ever want, and we’re STILL unable to profitably employ more than half our population? Do we just let them starve? And while we’re at it, who’s this we, anyway? Are we really sure that we’ll be among the lucky ones?

Forty-plus years ago the Triple Revolution folks took these questions seriously, and many others since then have paused, however briefly to ponder it again, from Rodenberry and his Star Trek Socialism, as Paul Rosenberg has called it, to Freeman Dyson and his dyspeptic essays in futurism. Even today, new people stumble on the same puzzle without any apparent clue that others have been there before them. Why is it, I wonder, that we we never seem to get any further than we’ve gotten in this thread — arguing over what does or doesn’t get us to full employment. It certainly isn’t a failure of the will. Could it be a failure of the imagination?

“As for the presence of monopsonies in the labor market, the labor market is competitive.”

Well, there you have it. As for the presence of market power, the market is competitive. As for the presence of asymmetric information, people have perfect information. As for the presence of externalities, markets are complete. As for the presence of multiple-equilibria, we have proper convexity properties. Econ is EZ.

Anyway, I really, really dislike the use of the minimum wage example, especially given the mixed empirical record and the fact that there are lots of other perfectly good price floor/ceiling examples out there with much better empirical support. As far as the student walkout, I’m not sure what to think, nor am I sure how I’d react if a bunch of students walked out of my environmental econ class because of a perception of left-wing bias on my part.

May I raise a somewhat different question that occurred to me in reading about this episode? Never mind the fiscal morality of assigning one’s own textbook as required reading in one’s classes. What about the pedagogy?

I only encountered this conundrum very late in my teaching career, and was not wholly convinced by my response. Of course when it came out I assigned my (actually “our,” as I was one of a team of authors) textbook, because it was The Best There Was, and I/we had written it to be just that. (Still probably is, but that’s another matter.)

But my teaching for years had been – I came to realize – predicated on at least the possibility of some “dialogue” between myself and the text: spots at which I could disagree with the book, or point out that it failed to stress some important development, or the like. Introducing the students to the idea, which was new to many of them (especially in Hong Kong), that respected “authorities” could actually disagree on issues, and that part of their job was to learn how to evaluate such disagreements and Make Up Their Own Minds.

And this was much harder to do when using my own Practically Perfect textbook. Of course if I’d been able to hang on for a few years, I suppose I could start introducing “Yes, this is what we thought in 2005, but *now* we know . . .” and I’d be off again. (Assuming there wouldn’t have been a revised and updated edition, a reasonable assumption in my arcane field.)

Anyway, if any of you can spare time from analyzing Mankiw’s morality and/or the principles of economics, and have views on this peripheral topic, I’d be interested to hear them.

Well, Tim, you’d find many on the left willing to discuss that kind of bargain. On the right, though…

The fact remains that there is shockingly little empirical support for the Econ 101 story about the minimum wage, given the brazen assurance with which it’s usually propagated.

I don’t know how many people here have read one of Mankiw’s textbooks, but I have. I’m not going to go into the stuff taught in the text because everyone is doing a very good job fleshing out the sillier parts of it. However, one thing I found hilarious about the text, and my Prof always mentioned how he loved this, was that the margins on the sides of each page were HUGE. The idea was that these increased margins allowed students to write their notes/whatever in them. I don’t think my Prof understood how these margins caused for a minimum of 50 extra pages in the text, which of course caused the book to cost more than it otherwise would have.

Does Mankiw still do this with later editions of his text? I had the class in 06.

http://anti-mankiw.blogspot.com/

cian @178

I can’t really blame him for being confused; economics is confusing. It’s not “Supply” and “Demand” that he fails to grasp; it’s “competitive”.

Economics defines “competitive” in its archetypal model of perfect competition, a model in which the key assumption is no strategic behavior, and establishes a defining contrast in the classic model of monopoly, in which the strategic behavior of the monopolist is circumscribed to the narrowest possible terms: the monopolist can vary output, and can notice the effect on price — that is the monopolist faces a downward sloping demand curve and knows it, but, otherwise, acts without strategic awareness or purpose — and that’s it. The firm’s monopoly consists simply in a downward-sloping demand curve for the firm’s product.

This kind of careful thinking about the simplest possible “toy” models can be very useful in working out the logic of functional relationships and gaining the holy grail of the high economic theorist: “insight”. It is not, however, descriptive, but many economists do not seem to grasp that.

It is commonplace in the economics classroom for teachers to make an informal “numbers” argument, with regard to the models of perfect competition and monopoly, to say that perfect competition is something approximated in a case of a market for a commodity with a very large number of buyers and sellers, and monopoly is the rare case of a firm with “no” competitors, such as a public utility distributing electricity. It is in this kind of informal “plausibility” argument — the introduction of a dramatic narrative to “explain” the spare analytic result in a way that stick in the story-telling human brain — that economics goes off the rails.

What the teacher of economics should say about the polar opposite models of competition and monopoly is that neither is descriptive or realistic. They are exercises in defining ideas. An absence of strategic behavior in economic exchange is an absurd impossibility, and numbers have nothing whatsoever to do with it. Every firm (and every household) is strategically aware, and inventive. In any case where it can make any sense to think in terms of a schedule of demand, the so-called demand curve slopes downward for every firm. If the firm’s awareness of downward-sloping demand defines “monopoly”, monopoly is not just commonplace, it is universal.

Most textbooks and teachers admit as much in a subsequent chapter subsection or a later class, as they move on to the model of monopolistic competition, in which the assumed bounds on strategic behavior are loosened a bit more. And, if the student is awake for “price discrimination”, the idea that no sensible monopolist would restrict output to raise price might surface. A sensible monopolist — think Microsoft — might well expand output beyond the counterfactual, competitive, one-price ideal. But, I digress.

My point is that a degree of “market power”, and strategic exploitation of it, is ubiquitous, and numbers have nothing to do with it. This is what Watson Ladd either doesn’t know or refuses to acknowledge. As I remarked earlier, the simple strategic capacity of employers to make take-it-or-leave-it offers affords a sufficient degree of power, that monopsonistic models of labor market employment and wage-setting make sense. The details should scarcely need to be argued; a “competitive” labor market is as impossible as any “perfectly competitive” market scenario. It is simply absurd to assume that any economic exchange relationship is going to exhibit an absence of strategic behavior.

In the abstract, “comparison” of the monopsonistic model with a competitive model helps to work out the logic: the strategic exercise of superior power by employers will move the wages and employment away from the ideal standard of a competitive market setting wages and employment. It is not realistic or descriptive, though. The actual world is far more complex, and how the restrictive inefficiency of the actual “monopsony” (or “monopoly”) finds expression is a matter for empirical investigation. People, who go out into the world and look, tell us that employers, who must pay a higher minimum wage may adjust other dimensions of their management — the turnover rate, for example — and this accounts for vanishingly small effects on final product or service output prices.

Realistically speaking, I do not think the intuition that firms might exploit their power to reduce wages and increase employment is necessarily wrong. I can easily conjure up ways in which a “monopolist” might, using price discrimination, actually expand output beyond the ideal “competitive” mark. If that’s his intuition, Watson Ladd might be correct in many cases. It is in the denial of the harm done to employees that I think he errs.

Uninformed and unindoctrinated by hacks like Mankiw, most people would recognize that low-wage workers are typically in a vulnerable negotiating position, and a minimum wage may help them. An economist with a modicum of analytic skill can come up with a monopsony model and maybe the concept of an efficiency wage, to give formal expression to the untutored intuition, if there’s a humane will to do so. Of course, that humane will is absent in Mankiw.

I apologize for long-windedness, to any who happen upon this thread in its final death throes. This will be my last word for a while.

To reiterate, the notion that “perfect competition” has something to do with numbers of buyers or sellers is false. That common idea is a product of uncritical story-telling. “Perfect competition” is an assumed circumstance in which neither buyers nor sellers act with strategic awareness; it can be one buyer and one seller exchanging a single good, which it is, in some analytic models. So, the idea that numbers are some indication of the degree to which a market is “competitive” is as absurd as the idea that buyers and sellers in any actual market act without strategic awareness.

All economic exchange implies a bargain over the terms of trade. “Perfect competition”, in which neither party is able to take undue advantage, corresponds to a kind of ideal efficiency, but efficiency can be compromised in the attempt of one party or the other to achieve more favorable terms of trade. That Mankiw dedicates himself to obscuring that reality and rationalizing the oppression of the many by the few and mighty marks out his hackish contemptability.