Occupy Greg Mankiw!

by Henry on November 4, 2011

It seems that there has been a bit of a kerfuffle at Harvard over Greg Mankiw’s introductory economics course, culminating in a walkout by a number of the students. The “Harvard Crimson”:http://www.thecrimson.com/article/2011/11/3/ec-walkout-occupy/ gravely pronounces that “Protesting a class’s ideology damages free academic discourse.”

bq. we take issue with the claim that his class is inherently biased because he is the professor and author of its textbook. 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. Professor Mankiw’s curriculum sticks to the basics of economic theory without straying into partisan debate. We struggle to believe that we must defend his textbook, much maligned by the protesters, which is both peer reviewed and widely used.

bq. Furthermore, the students protesting the class who desire that he give more time to other, less accepted schools of economic thought—like Marxism—would do well to remember that such interrogation is the domain of social theory, not economic theory. Supply-and-demand economics is a popular idea of how society is organized, and Mankiw’s Ec 10 never presents itself as more than that. … even if Ec 10 were as biased as the protesters claim it is, students walking out to protest its ideology set a dangerous precedent in an academic institution that prides itself on open discourse. This type of protest ignores opposition rather than engages with it. Instead of challenging a professor to back up his claims, it tries to remove him from the dialogue.

There are many remarkable aspects of the editorialists’ prose style (“struggle to believe”?), as well as their understanding of economics, of the social sciences and of academic freedom. Their suggestion that students walking out of a class stifles “open discourse” is an interesting one (I believe that a “famous economist”:http://abandonedfootnotes.blogspot.com/2011/07/exit-voice-and-legitimacy-responses-to.html has some opinions on this topic).

Even so, the protesters have missed an opportunity. They were not only complaining about the ideological content of Professor Mankiw’s course, but about the “high price of his textbook”:http://articles.businessinsider.com/2011-11-01/politics/30345001_1_show-discontent-harvard-students-textbook (which he himself has authored, and requires students to buy at $175 a pop). But surely (as I’ve argued here “before”:https://crookedtimber.org/2008/03/04/principles-and-practices-of-economics/), the two go together. Greg Mankiw’s book tells us about the evils of monopoly and monopoly pricing. Greg Mankiw exercises a monopoly on required texts for Econ 10. Greg Mankiw’s book tell us about the manifold problems of central planning, in which one hierarchical figure decrees what everyone else should buy. Greg Mankiw – as the hierarchical planner for his course, decides that everyone is obliged to buy his book (and “declines to donate the royalties from this captive market to charity”:https://crookedtimber.org/2010/04/19/greg-mankiw-movement/).

So a _far_ more effective form of protest would be to put the two together. Dissenting students should use the arguments set out in Greg Mankiw’s textbook, to write a short paper with a simple model of the Econ 10 market for said textbook, and the likely incentives that monopolists and authoritative central planners face when they are one and the same actor. For bonus marks, this paper could discuss efforts to limit the impact of competition from the second hand market through frequent updates of the textbook, but I’m not sure that this is strictly necessary. The students should then request – by petition – that Greg Mankiw respond to the paper in class and have a short 30 minute debate with a student who has been nominated by the dissenters, about the relevant issues of monopoly and regulation. This would not only “engage” the professor in the ways that the _Harvard Crimson_ demands, but would serve as an excellent learning exercise for all involved. Certainly, Professor Mankiw could hardly complain about students taking his ideas, and applying them to better understand the social settings that they find themselves in.

And there really is a quite interesting underlying issue here. Either Professor Mankiw is a rapacious monopolist, ruthlessly exploiting his delegated power, and squeezing his captive market for every penny he can, as his own book argues he should do. Or he is the kind of benign regulator whom his theories suggest cannot exist, correctly anticipating the wants of his students better than they themselves can, and requiring them to buy his book for their own good rather than his own. I’d be very interested myself to see which of these he thinks he is.

{ 184 comments }

1

grackle 11.04.11 at 2:41 am

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?

2

JazzBumpa 11.04.11 at 2:51 am

Wow – the excerpt you posted contains at least one straw man and one outright lie.

we take issue with the claim that his class is inherently biased because he is the professor and author of its textbook No. The class is inherently biased because it presents a strictly neoclassical case, ignoring other economic theories.

Furthermore, the students protesting the class who desire that he give more time to other, less accepted schools of economic thought—like Marxism— No again. The letter does not mention Marx. It mentions “Keynesian theory” Which of course is “less accepted” by neoclassisists, whose own theories have been widely debunked.

Full text here.
http://hpronline.org/campus/an-open-letter-to-greg-mankiw/

Steve Keen sheds light on it.

http://www.debtdeflation.com/blogs/2011/11/03/harvard-starts-its-own-paecon-against-mankiw/

Cheers!
JzB

3

Rich Puchalsky 11.04.11 at 3:03 am

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.

4

tomslee 11.04.11 at 3:16 am

It is almost certain that the students will learn more from the debate sparked by the walkout than they would have from any lectures they miss. Although they might want to think about boycotting the exams (something I chickened out of).

5

Leinad 11.04.11 at 3:47 am

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

6

anti-mankiw 11.04.11 at 4:02 am

Actually, Greg Mankiw’s textbook is not a very good case of a monopoly. As a paper which he himself linked to on his blog a while back shows, he and McConnell&Brue roughly take up the same market share for intro texts.

http://gregmankiw.blogspot.com/2010/12/econ-education-at-assa-meeting.html

In terms of occupiers’ strategy, I don’t think they could use the language of Mankiw’s book to attack his position. That just legitimates his analysis of monopoly and puts the debate on his own turf. It’s like trying to argue with him about inequality — he will bring in Okun’s classic tradeoff of Equity vs. Efficiency, and argue that if we want more redistribution it is going to cost us. But does any economist really believe that there’s a tradeoff of those two right now? Something tells me our future might be a little brighter if we had universal health care, etc.

I would suggest we start on a more honestly critical platform by addressing ideas like ideology, or market-centeredness, or homo economicus, which constitute the underlying themes of Mankiw’s entire approach to economics. It can be done, too, at an intro level. I’ve seen it and I’ve done it myself. You’ll just have to spend a little less time teaching your students how to solve systems of linear equations or calculus. ..

7

Warren Terra 11.04.11 at 4:07 am

$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.

8

hartal 11.04.11 at 4:07 am

Perhaps the students will write an Anti-Mankiw similar to the two volume Anti Samuelson written by Marc Linder and others in the 1970s. As James Galbraith has pointed out, the Harvard Econ Dept today is nothing like the Dept of the early 70s where his father, Albert Hirschman, Wassily Leontief and Simon Kuznets could be seen in the corridors. I think Marglin complained a few years back about his being shut out from teaching the introductory econ courses. Then there is the question of the people who have been denied tenure there (Paul Sweezy, Paul Samuelson ? and Samuel Bowles and Herb Gintis whose superb book on capitalist school is being reissued I think).

9

hartal 11.04.11 at 4:14 am

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.

10

hartal 11.04.11 at 4:21 am

Mark Skousen “Keynesiasm Defeated,” in which
Skousen notes that Mankiw’s macro sections do away with consumption
functions, the Keynesian cross, savings propensity, and only scant
reference to the concept of the multiplier.

11

zrichellez 11.04.11 at 4:23 am

12

Meredith 11.04.11 at 4:45 am

Help me out here (I’m very much an economist, not). Is this a micro or macro intro course? Or a combo? Checking my own institution’s econ syllabi (Econ here splits its intro between micro and macro some time ago — doesn’t everybody?), I find no Mankiw, only Krugman/Wells and Abel/Bernanke.

13

geo 11.04.11 at 4:48 am

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.

14

Otto Maddox 11.04.11 at 5:33 am

The demand that Mankiw should teach other econ perspectives should apply to all social science classes, i.e. sociology, history, etc. , not just economics.

15

Sebastian(1) 11.04.11 at 5:38 am

@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.

16

johnw 11.04.11 at 6:44 am

Wait, it’s a micro course? Surely even neoclassical economists can be trusted with micro. As long as they cover rent-seeking, which is what my paper on his textbook would be about.

17

Hidari 11.04.11 at 9:07 am

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

18

Phil 11.04.11 at 9:16 am

I’m facing several ways at once on this one. I’m greatly in favour of students (or anyone else) asserting themselves collectively, beginning open-ended discussions about the conditions they live in, resolving to live without dead time, etc, so just from first principles I support this action. But I’m not over-keen on first-year students skipping introductory anything. Steve Keen makes what look like some good points, but I don’t think they’re pitched at the first-year level, even for Harvard – if this boycott was generalised it might result in some students having a more sophisticated understanding of supply curves, but I suspect you’d also end up with quite a few students who couldn’t define a “supply curve” any better than arts-graduate me.

On the third hand, there’s a question of scale & sustainability. The action is either going to escalate or subside: if it subsides, no pedagogical harm done, and if it gets to the point where (say) final-year exams are being boycotted, we’ll be in a different & interesting situation. Lastly, part of me suspects economics is all a bill of goods anyway, so it won’t do anyone any harm not to learn it.

19

Tim Worstall 11.04.11 at 9:23 am

@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…..

20

Jake 11.04.11 at 10:41 am

Regarding the cost of the textbook, I know that in Canada at least, the price is set by the publisher based on the cost of other comparable works.

We had one professor at my university who wrote a textbook that he intended to sell for $20 to make it affordable, but the publisher set the price to $150 when it was released.

The prof wrote the name of a famous pirate site where his textbook could be downloaded from on the blackboard the first day of class.

21

Alan 11.04.11 at 11:24 am

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?

22

Barry 11.04.11 at 11:54 am

geo

” 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.”

Somebody described Yale Law School (birthplace of the Federalist Society) in the mid-70’s, and full of ‘Old Turks and Young Fogies’. As we slide deeper into the Second Gilded Age, it’s not surprising that Ivy League newspapers revert to their original function of training high-class propagandists.

23

Barry 11.04.11 at 11:55 am

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.

24

P O'Neill 11.04.11 at 11:55 am

It’s odd that HC feels the need to #slatepitch the other crimson-hued magazine given the close personal links between the two.

25

David Kaib 11.04.11 at 11:58 am

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.

26

Barry 11.04.11 at 12:09 pm

grackle 11.04.11 at 2:41 am

” 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?”

Agreed – looks like the main ‘value’ of Mankiw’s book is that Harvard (and other universities, likely) require students to buy it (or have access).

Frankly, what the Harvard students should do is to buy one copy, slice it, scan it, OCR it, and put it on the Web for all. The day that Mankiw has a moral right to complain is long before he worked for the Bush looting spree.

27

Steve LaBonne 11.04.11 at 12:15 pm

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.

28

Adam 11.04.11 at 12:28 pm

I fail to see the issue here. Okay, maybe not entirely: I totally ‘get’ the issue about paying $175 for a textbook. The price alone is ridiculous; the fact that the professor is the author borders on unconscionable.

But other than that, what gives? I may not have attended Harvard, but at my university, it seemed that most of my professors were opinionated blowhards. Not really ‘fair and balanced’ or whatever. That’s not to say all classes were like that, but usually you expect that a professor has a particular axe to grind and that the class will be taught through the lens of said bias. I may have terrible mangled a mixed metaphor there.

I remember, in particular, two classes of the sort: a course titled ‘History of Christianity’ which turned out being an introduction to liberation theology (peppered with long, boring stories of the professor’s experiences with MLK and the civil rights movement) and a basic literature class which served as an introduction to deconstruction.

Methinks the kids protesting Mankiw probably wouldn’t bat an eye at Marxist sociology professor or a feminist American history teacher. That doesn’t mean they don’t have a point, but such delightfully biased professors are just one of the ‘burdens’ you have to bear when you’re privileged enough to pursue higher education.

29

Eric H 11.04.11 at 12:38 pm

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, …

30

Ben Alpers 11.04.11 at 1:16 pm

A classful of one-percenters (either descended from, aspiring, or both) that crank out $50k annually for a prestige degree…

Without in any way denying the skewed demographic profile of the Harvard student body, most of those students are on some sort of financial aid. Few could afford to pay for Harvard out of (their parents’) pocket. Because of Harvard’s wealth, few have to. Just looking at the finances, it’s actually easier for less well-off students to attend a wealthy private university like Harvard than to attend “public Ivies” like Michigan or Berkeley as out-of-state students.

31

Andrew F. 11.04.11 at 1:29 pm

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.

32

Jeff 11.04.11 at 2:06 pm

There are plenty of ways students can get around the price of the textbook. Copies are required to be on call at the library (photocopy any problem sets, use a 1-2 year old edition), international edition often costs like $30 maximum, and if he doesn’t assign problem sets from the book then I guarantee a used version of the 2nd newest edition will be the exact same.

The problem with the students walk out is that they are in way over their head towards what they’re criticizing. I mean they complained about the lack of ‘Keynesian’ economics in the micro portion of the class for crying out loud. Now I’ve never had Mankiw’s class and its surely possible he skews lectures towards his ideological beliefs, but he can’t skew them that far because its still econ101, you aren’t learning that much “controversial” stuff.

Unless you guys just want Harvard to teach heterodox, which I don’t think they will be doing. They’re still the 1%, you know.

33

William Uspal 11.04.11 at 2:25 pm

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?

34

tomslee 11.04.11 at 2:40 pm

Adam #28: biased professors are just one of the ‘burdens’ you have to bear when you’re privileged enough to pursue higher education

This seems to fall into the general scheme of “things were crap when I was a kid, so why should you have it any better?” Students who care enough to voice a critical opinion on the stuff they are taught and how they are taught it seem to me the best kind. How else to improve education?

35

LFC 11.04.11 at 2:47 pm

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”.

36

straightwood 11.04.11 at 3:04 pm

Why stop at Mankiw? The return of Lawrence Summers to a comfortable perch at Harvard is far more compelling evidence of intellectual rot, as is the continuing presence of Robert Rubin on the President and Fellows board. These men, whose enormous and costly errors of judgment contributed to the near-collapse of the US financial industry, are represented as paragons of excellence by Harvard.

37

LFC 11.04.11 at 3:28 pm

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.)

38

Adam 11.04.11 at 3:56 pm

@tomslee – I get your point. But I guess I was thinking more along the lines of, “Anyone who’s ever spent any time in college should be expecting this sort of thing.” That doesn’t mean people shouldn’t try to change things, though.

I think the outrage is probably more likely to be a result of who the professor is and not so much because a professor is showing bias. And that kind of irks me.

In the long run, I try to keep in mind the whole “we teach you how to think, not what to think” ideal. Surely the best defence is to keep an open mind AND be skeptical at the same time. Any halfway-intelligent undergrad should be able to sniff out the BS.

39

Robin 11.04.11 at 4:25 pm

$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

40

Ben Alpers 11.04.11 at 4:42 pm

As a fellow Ec 10 alum from long, long ago, I completely agree with Steve LaBonne and LFC that the lectures were the least consequential part of the course. The sections were where the work got done…and unlike LaBonne, I had a lousy section leader.

Also, back when I took the course, you had the option of taking “special” sections. I know there was a radical section. I’m pretty sure there was also a math-intensive one. I think there may have been others as well. I wonder if these still exist.

Finally it’s worth noting what a zoo Ec 10 is….or at least was. It was the single largest course at Harvard back in the ’80s. It had over 900 students at a time in it, I think ; it filled Sanders Theater for its lectures. It was not only required of Ec majors (and Economics was the single largest major–or “concentration” as H calls them– at Harvard back then), but also of Social Studies majors like myself. And it fulfilled two semesters of the old core curriculum (in fact, though everyone called it “Ec 10,” it was actually designated “Social Analysis 10” during those years).

41

Nine 11.04.11 at 5:29 pm

“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 ?

42

Lemuel Pitkin 11.04.11 at 5:38 pm

you guys just want Harvard to teach heterodox, which I don’t think they will be doing.

Steve Marglin teaches heterodox macro at Harvard.

43

Peter K. 11.04.11 at 5:57 pm

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

I guess they could pitch tents in his office.

44

cian 11.04.11 at 6:00 pm

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 ?

Because they can. Seems to be an American phenomenon. The European edition of the
same book is about $65.

I checked one of the famous pirate sites and Mankiw’s latest edition is available as a print-press PDF. Sometimes it seems like publishers do all they can to encourage piracy.

45

Bruce Wilder 11.04.11 at 6:02 pm

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/

46

cian 11.04.11 at 6:11 pm

For alternative introductions to economics, you could do a lot worse than Hugh Stretton’s. Also a pretty decent social science introduction, so given the nature of the Harvard course it would be perfect.

47

Chris Turner 11.04.11 at 6:13 pm

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).

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ragweed 11.04.11 at 6:40 pm

$175 a pop is not unusual for a textbook in the US. At the 2nd tier finance graduate program I am currently doing, textbooks easily sell through the school bookstore at $150-200 each (though about half of the classes use books available as e-books through the library). I can usually get them online for about half of retail (for current editions – I haven’t tried to use older editions because there have been a few recent events in finance that at least should have resulted in some important updates).

The high cost of textbooks is a big issue in the US – if I recall there were congressional hearings on it a while back.

Mankiw’s class is introductory micro, so it doesn’t necessarily need to address Keynes, but it should address recent criticisms of neo-classical micro economics, particularly from behavioral economics. 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. Part of the reason I never took econ as an undergraduate was because of the number of fellow students who came out of Econ 101 spewing such examples.

John

49

Davis X. Machina 11.04.11 at 7:20 pm

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.

50

Bruce Wilder 11.04.11 at 7:26 pm

“Market economy” is the first lie. If you swallow that one without blinking, the rest is going down the gullet, ready or not.

51

re 11.04.11 at 7:54 pm

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.

52

LFC 11.04.11 at 8:01 pm

re Ben Alpers @40, and with apologies to people who understandably have no interest in the history of Ec 10 (or of Harvard’s curriculum generally):
I’m older than you, took the course in the mid-70s. As best I can recall, there was no ‘radical section’ available at that point, so that came in later, though perhaps not much later. (I don’t know if it still exists.) As far as size of enrollment, it was very large – and the lectures were held in Sanders – though probably it had gotten even larger by the time you took it. (I was a Social Studies major also, though Ec 10 was not required for us at that point, just ‘encouraged’ or something some of us felt we should take.)

53

Warren Terra 11.04.11 at 8:11 pm

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.

54

Watson Ladd 11.04.11 at 8:23 pm

Does anyone know how much Mankiw makes from his textbook? Springer Verlag gets you coming and going, Wiley earns its name, etc. etc. Then again, it is published by a publisher I have never heard of.

55

Mitchell Freedman 11.04.11 at 8:31 pm

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.

56

Davis X. Machina 11.04.11 at 8:34 pm

More generally, there’s just something dramatically wrong with a pricing structure where a textbook loses 98% of its value in four years.

Wow. Glad I majored in classics. I’ll check my Teubner of Pindar, but I’m willing to bet that water is still best, forty years on.

57

Harry 11.04.11 at 8:42 pm

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.

58

Lemuel Pitkin 11.04.11 at 9:07 pm

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©.

I’m teaching this stuff for the first time this semester. And I’m sorry to say that this is probably exactly how most of my students are experiencing the class. And yes, despite the fact that I’ve read, I imagine, quite a bit more Keynes than most people who teach economics, I’m presenting the same IS/LM model as everyone else.

How come? Well, partly because I feel a sense of professional duty to teach economics as it is, and not as I wish it were. Students signed up for a course in Intermediate Macroeconomics, so I think one is somewhat obliged to teach them something the rest of the world would recognize as that. But mainly, to be honest, because it’s the course of least resistance. Teaching is really hard work, even when you’re using a standard textbook. I don’t know any textbook that presents the fundamentals of macroeconomics from a more genuinely Keynesian or radical perspective. And I don’t have quite enough self-confidence, and I’m much too lazy, to build a course from scratch.

It’s not just me. I know a number of people who are unapologetic Marxists in their own work, yet when they teach undergraduate macroeconomics, they use Blanchard or some similarly conventional text. It’s a structural problem. I don’t mean to defend Mankiw, but in some ways I think those of us on the left of the profession are more to blame for the state of undergraduate economics education. We spend too much time on critiques of the mainstream, and not nearly enough developing a systematic alternative. Some people criticize radical economists for just talking to each other, but personally I think we don’t talk to each other nearly enough. We need to spend less time talking to, or about, the Mankiws about why they’re wrong, and more time talking to each other figuring out what we think is right.

It’s true that the ideological policing in economics is very tight — but not at the level of undergraduate teaching. Nobody cares what you do in the classroom, so unless you harbor some hopes of a job at a top research department, or publishing in top journals, there’s already lots of space for alternatives. But people aren’t using it. In my experience, even when people want to bring a “radical” perspective to undergraduate econ, that means presenting the mainstream models and then critiquing them, which just leaves students confused; it doesn’t mean teaching economics they way we claim to think it should be taught.

So yes, Occupy Mankiw, by all means. But maybe we should also think more about the classrooms we’re already occupying.

59

bob mcmanus 11.04.11 at 9:22 pm

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.

60

bob mcmanus 11.04.11 at 9:37 pm

Out of print maybe.

I have skimmed through both the Dornbusch and the Mankiw, read more of the Dornbusch, and Rudi looked pretty good. In my opinionated opinion the Dornbusch mainly written in 1981, manages to miss the thirty years of stupidity (Krugman:”Dark Ages!”) that followed, although the revision comments on them.

And didn’t Krugman just write a macro? I though there were more than 1 or 2.

So why Mankiw? I suspect it is a little more complicated than “There can be only one.” I consider Mankiw to be one of the most insidious influences in the world today, and imagine great masses of professional economists whose names we know from the blogosphere saying “You aren’t using the Mankiw? How interesting.”

I really don’t like the New Keynesians.

61

Lemuel Pitkin 11.04.11 at 9:42 pm

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.

62

cian 11.04.11 at 9:48 pm

and the students owe Mankiw an apology

Well Mankiw owes the American people an apology, but they’re still waiting for that.

63

Meredith 11.04.11 at 9:48 pm

@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.

64

cian 11.04.11 at 9:58 pm

Jim Stanford from the Canadian Auto Workers union posted up a collection of resources here:
http://www.economicsforeveryone.ca/files/uploads/Further_Reading_Only.pdf

Towards the end are a list of alternative economic textbooks. In particular this one looks interesting:

Bowles, Samuel, Richard Edwards, and Frank Roosevelt (2005). Understanding
Capitalism: Competition, Command, and Change (New York: Oxford University Press)

There’s also this book: Stretton, Hugh (2000). Economics: A New Introduction (London: Pluto) – which set out to do exactly what Lemuel asked for. Its pretty hefty, but reasonably priced for a text book. Also a surprisingly entertaining read.

65

cian 11.04.11 at 9:59 pm

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.

66

Henry 11.04.11 at 10:52 pm

bq. 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’m not sure that he would go for this. According to an old HC article

bq. Since N. Gregory Mankiw returned to Harvard to teach the College’s introductory economics class, 2,278 students have filled his weekly lectures, many picking up the former Bush advisor’s best-selling textbook, “Principle of Economics” along the way. So, what has professor of economics Mankiw done with those profits? “I don’t talk about personal finances,” Mankiw said, adding that he has never considered giving the proceeds to charity.

Like you, I have no doubt whatsoever that he thinks that his is the best book on the market, and that he is genuinely doing right by the students by making them buy it. But he doesn’t seem to have any compunction about getting his profits from this captive market (or at least, if he does, he is not letting on in public).

67

Gene O'Grady 11.04.11 at 11:04 pm

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.

68

Walt 11.04.11 at 11:22 pm

Mitchell, I hate to be the one to tell you this, but I’m guessing that your son will miss more than one class in his time at Harvard, Occupy Mankiw or no.

69

Watson Ladd 11.04.11 at 11:34 pm

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

70

Mitchell Freedman 11.04.11 at 11:41 pm

Walt,

I expect him to miss some classes, and maybe even to attend an OWS rally or something akin to it. But bless you for the assumption he’s getting into Hah-vahd at all…

71

Robert Halford 11.04.11 at 11:46 pm

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

72

Meredith 11.05.11 at 12:30 am

Gene, I don’t want my students to have the temptation of “Loeb-ing” it (doesn’t Garvie’s do that, like the other Aris publications?). Bristol (now Bloomsbury, or something, via Duckworth — god, the publishing house permutations) has Easterling introducing Jebb (and I love Jebb, and Easterling, too) — Jebb’s “schoolboy commentary,” though you can also get that version of Jebb free now that copyright restrictions are gone. (Reproductions issues loom high, though). Still, Jebb probably not the best for today’s undergrads’ first whole play in Greek. What happened to Stanford’s Ajax edition? or Pearson’s? Where’s the Cambridge of this increasingly attended to play (think the Philoctetes Project for US vets)?
We classicists shouldn’t be belaboring these problems here, but just a reminder: academic book publishing (beyond a few big sellers, like certain econ texts) is in crisis. And students, including econ students, do still like to use those physical things called books, with proper bindings and all that. Packets and pirating dodges are not a long-term answer.

73

Meredith 11.05.11 at 12:45 am

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.)

74

stubydoo 11.05.11 at 12:45 am

Mankiw is hardly the first professor to indulge in a little rent-extracting behavior to capitalize on his hard-earned position. Harvard is in the business of selling very valuable prestige, and though the institution is nominally non-profit, some actors within it are going to play various games to move the price of that prestige toward the market clearing level. For the Harvard undergrad, that $175 is the least of one’s concerns.

75

Gene O'Grady 11.05.11 at 1:26 am

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

Barry 11.05.11 at 2:00 am

Henry:
“Like you, I have no doubt whatsoever that he thinks that his is the best book on the market, and that he is genuinely doing right by the students by making them buy it.”

Please note that what he claims to think is irrelevant here; there is a major conflict of interest, with no mitigating factors (e.g., Dr X is the leading expert on Y, and so assigns his own book in a class on Y).

” But he doesn’t seem to have any compunction about getting his profits from this captive market (or at least, if he does, he is not letting on in public).”

I believe that a charming movie called ‘Inside Job’ had a section discussing what many elite economists ‘genuinely believe’, and how much they get for ‘genuinely believing’ it.

77

john c. halasz 11.05.11 at 2:03 am

@76:

Dis-intentional hermeneutics are strictly not allowed @ CT.

78

Watson Ladd 11.05.11 at 2:31 am

Meredith, good thing to. The sooner Springer goes bankrupt and Wiley and Sons with it, the better we will all be. They raise journal prices beyond what some small schools, let alone individuals will bear. They perform no services for the community. Editors are increasingly abandoning journals en masse and decamping to the world of Arxiv. Open access is going to be coming very soon, making hunting down papers much easier. When it comes to books, can I interest you in on-demand printing? Now, I love my GTM books as much as anyone, but Springer yellow is made from dollar bills. It should not cost more to photocopy the entire book then to buy it.

79

Bostoniangirl 11.05.11 at 3:04 am

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.

80

Bostoniangirl 11.05.11 at 3:05 am

Oh, and I meant to add that Feldstein made sure that Galbraith spoke–even though he disagreed with nearly everything he stood for.

81

Meredith 11.05.11 at 4:50 am

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….

82

Andrew F. 11.05.11 at 9:56 am

A quick check of Amazon shows that the price is comparable to similar textbooks in the field.

Given the synergies achieved by having the professor use his own textbook, and the fact that (like Mankiw or not) his textbook is considered one of the best of its kind, there is absolutely nothing wrong with Mankiw choosing his own text for the course.

83

Chris Bertram 11.05.11 at 10:03 am

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.

84

Tim Worstall 11.05.11 at 10:57 am

“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.”

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

85

Hidari 11.05.11 at 11:05 am

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

Er………………..no.

86

David Littleboy 11.05.11 at 12:08 pm

Things haven’t changed much. I tried to take intro econ at MIT in the early 70s, and all the examples resulted in completely unacceptable social outcomes, which the prof. and the TAs apparently had no problems with whatsoever. So I dropped the course.

87

Watson Ladd 11.05.11 at 1:20 pm

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.

88

Steve LaBonne 11.05.11 at 1:26 pm

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

Correction- it might have been possible, 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. But since that has been done, there’s no excuse for believing otherwise and even less excuse for givign naive students to believe otherwise.

89

Tim Worstall 11.05.11 at 1:51 pm

“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.

90

Mike Sproul 11.05.11 at 2:45 pm

700 students in ec 10.

Repeat: 700 students.

No wonder they’re getting grouchy. Harvard might try something like having 14 sections of ec 10, with 50 students each, taught by different professors with different viewpoints, but that would violate the Harvard creed: “We don’t care. We don’t have to. We’re Harvard.”

91

Robert 11.05.11 at 3:52 pm

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.

92

Ellie 11.05.11 at 5:12 pm

Another Ec 10 alum here, from the mid-90s (in the Marty Feldstein days) when there was definitely no “special” section on radical economic, although there were special sections for those of us with calculus. The one concession to “alternative” theories across the two semesters came in the one off-textbook reading–a chapter from John Kenneth Galbraith on “social costs,” which was dispensed with swiftly and never tested as I recall. And nobody among the parade of guest lecturers ever even talked about Marxism! Thank heavens for my fabulous (non-American) TA, who was willing to at least discuss the things being left out of the story, if not delve into the ideological bases of neoclassical liberal economics.

93

Bruce Wilder 11.05.11 at 6:03 pm

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.

94

Bruce Wilder 11.05.11 at 6:09 pm

Mike Sproul @ 90

Students, who get a choice, should choose Yale.

95

Tim Worstall 11.05.11 at 8:59 pm

“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?

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john c. halasz 11.05.11 at 9:27 pm

“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.”

I love these libertarian arguments. Once such a fellow asked what if the minimum wage were $100/hr. I responded we’re talking about the *minimum* wage. So just how could the minimum wage be over 5 times the median wage?

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Meredith 11.05.11 at 9:31 pm

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.

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Andrew F. 11.05.11 at 9:35 pm

A few additional points:

Mankiw discusses alternative views of the effects of minimum wage laws, such as those expressed in this thread, in his textbooks. You can use Google Books to find those discussions.

Post walk-out, Mankiw commented favorably on the fact that students were thinking about broader social issues, and noted it as a positive effect of Occupy Wall Street.

Apparently the topic of the lecture at which the students walked out was… income inequality.

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Robert 11.05.11 at 10:53 pm

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.

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Bruce Wilder 11.05.11 at 11:05 pm

I agree, that, properly, “it depends”, and on what it depends, is what Economics, qua analytic theory, can and should teach. I’m interpreting the complaint* against Mankiw — a complaint that I think has considerable merit, given his textbook and the tenor of many of the statements he makes for popular consumption — as being that he uses the “plausibility” hypotheses, wrongly, to promote an ideological doctrine and ignorance. His view of the minimum wage as public policy stands as a prominent example — not that he generally disapproves; I’m not concerned with his political preferences, whatever they may be — of using his authority as an economist, and the purported logic of economics as an analytic theory, to argue for an unwarranted presumption that a minimum wage would harm low-wage workers and reduce employment.

Rightly or wrongly, I read your statement of skepticism regarding “a claim that a minimum wage, at whatever level, does not reduce employment” as endorsing this misuse of economics and its auxiliary plausibility hypotheses. A key paper is Card and Krueger 1994, which provoked a lasting and bitter controversy, exemplifying the religious devotion of reactionaries to their dogma. (I presume that this line of research, and the attendant controversy, is what Steve LaBonne @ 88 was referring to.) “It depends” in this case should include the possibility of an “efficiency wage” as well as recognition of the powerful effects of even a tiny bit of monopsony power by employers, able to make a take-it-of-leave-offer of wages and conditions.

JazzBumpa, in the second comment, provides a link to Steve Keen’s take on a student’s defense of Ec 10. (Mankiw has linked to the student’s defense, but not otherwise commented.) The defensive student, one Jeremy Patashnik, lists several of what he evidently regards as technical or anodyne points — not unlike Mankiw’s official Ten Principles. Near the top of the list is: “Demand curves slope downward and supply curves slope upward (usually).” You will recognize this dual proposition as one that I cited as a product of auxiliary hypotheses chosen for pedagogical reasons.

Keen takes this two-headed proposition on. What he says about the idea that Demand curves slope downward is exactly the sort of critique, which Lemuel Pitkin @58 says would go right over the head of students. It is still true, though; you cannot know, a priori, what an aggregated demand schedule looks like and you should not generalize, without some actual empirics. What Keen says about the idea that supply curves slope downward usually is bit more grounded; what’s observably true is that most firms do not have the rising marginal cost, at, approaching or above average cost, which is posited as exemplary in the theory of the firm presented in Econ 101.

I don’t subscribe exactly to Keen’s critique here, but it correctly illustrates a serious problem with Mankiw’s pedagogy. Students, including the student defending Mankiw, think that they’ve learned something, gained a useful intuition, about the economy in general, and that intuition is false or seriously misleading.

They think a minimum wage — any minimum wage — will reduce employment — or they think a strong presumption of reduced employment is justified — because they’ve learned the logic of an argument that a minimum wage in a competitive market for labor services would reduce employment. They’ve learned the logic of price determination in a “perfectly competitive” market, and think the intuition gained in that exercise generalizes to many or most actual markets. But, that’s doesn’t open the door to understanding what how a more sophisticated and realistic hypothesis might be constructed, or to what empirical research may have found.

In fairness, this misunderstanding is the fault of their teachers, teachers like Mankiw, who finish the demonstration of the analytic model of perfectly competitive price determination, with a gesture out the window at markets, which are allegedly “approximately” like the model. The assumption of perfect competition is often wrongly “explained” as the case of having so many competing buyers and sellers that none bothers to take any strategic notes. And, the unexamined notion that the market metaphor can be applied willy nilly is profoundly anti-empirical.

Economists, themselves, are often seriously confused on these points. They confuse a robust analytic result with a generalization, which is an elementary confusion, and it feeds their general immunity to facts. This really should be unacceptable.

*The actual complaint made by the OWS-inspired protesters is a consumerist complaint, and, as such, uninformed. I’m projecting, on their behalf.

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Bruce Wilder 11.05.11 at 11:19 pm

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.

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Mitchell Freedman 11.06.11 at 12:53 am

Meredith at 97:

My experience at Rutgers in New Brunswick, NJ from 1975-1979 was that the Econ department was filled with Milton Friedman-ites. No Marxists at all existed in the department. It was the same in the 80s based upon people I knew who went there at that time. The only Marxists I ever saw at Rutgers were in the History department.

I leave it to others to talk about what they saw in college in that era of the 1970s and 1980s.

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Robert 11.06.11 at 5:51 am

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.

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Tim Worstall 11.06.11 at 9:38 am

“I love these libertarian arguments. Once such a fellow asked what if the minimum wage were $100/hr. I responded we’re talking about the minimum wage. So just how could the minimum wage be over 5 times the median wage?”

Quite, that’s why it’s an interesting point to make. A minimum wage of $1 an hour makes no difference to anything at all. A minimum wage of $100 an hour is impossible. So, there’s some level of minimum wage which is both possible and makes a difference. What is that minimum wage?

“Rightly or wrongly, I read your statement of skepticism regarding “a claim that a minimum wage, at whatever level, does not reduce employment” as endorsing this misuse of economics and its auxiliary plausibility hypotheses. ”

I’m actually arguing that we should be using economics to tell us what that minimum wage should be. We’ve had the Low Pay Commission (the people who set the UK min wage) pointing out in a report that the NMW did in fact reduce employment….by a very small amount, that was when it was lower than now. A current political concern in the UK is NEETs (Not in Employment, Education or Training) in the 16-24 age group. The rise in NEETs has happened since the 1990s….correlated with the NMW. It would at least be interesting, possibly even important, to have a look and see whether there’s any causation there.

Yet today I’ve just skimmed through a Work Foundation (Will Hutton’s lot) report on NEETs. Bemoaning the whole rise etc. There is no mention of the NMW at all. Which is very odd indeed.

If the NMW were to have an effect on employment we’d expect that effect to show up among the young and untrained. We do see an effect of something or other on the employment rates of the young and untrained. Would be useful, as I say, to try and work out whether there is a connection between these two or not. Even if it’s only to put minds at rest and be able to reject the NMW as a cause.

Worthwhile Canadian did a few posts on when a MW might actually seriously affect unemployment. Their result was under 40% of average (I think mean) wages was very little effect on unemployment. Above 50% considerably more.

Youth NMW in the UK is over 60% of mean wages for the age group for 18-24 year olds and over 70% for 16-18 year olds.

I’m not, here at least, arguing that the NMW really is increasing that youth unemployment. I am arguing that perhaps we ought to find out?

“A key paper is Card and Krueger 1994, which provoked a lasting and bitter controversy, exemplifying the religious devotion of reactionaries to their dogma.”

I’m afraid I’ve never liked that paper. No, not purely out of dogma, out of personal knowledge of the industry they were studying, fast food restaurants. They noted an increase in employment in chain restaurants correlated with a rise in the MW. But the fast food industry is not composed solely of chain restaurants. It is composed of independents and chain restaurants. Independents tending to be more labour intensive than chains. (Quite markedly so in fact, this is where the personal experience comes in.)

To study the effect of a change in the MW on fast food restaurants one needs to look at both the labour intensive and capital intensive outlets, not the capital intensive outlets alone. Using this beyond EC 10 economics which we’re all urging everyone to do we could in fact build a model which led to higher employment at the capital intensive chains and lower total employment across the entire sector as a result of a rise in the MW. So I’m afraid I don’t take that paper as settling the issue quite the way that many others do.

Yeah, I know, interested amateur disagrees with important econ paper. Whoop de do, eh?

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ScentOfViolets 11.06.11 at 3:55 pm

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.

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ScentOfViolets 11.06.11 at 4:23 pm

“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.”

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.

This is why a good education in the sciences – in particular, how the scientific method works (and how various statements are made and evluated as to to truth) – is so important. No one I know of makes the sort of formal claim that Tim just stated above; in fact they don’t make that sort of claim at all.

What they tend to say is that there is no evidence for the simplistic claim that rising unemployment will track with raising the minimum wage.

That’s a very important difference – particularly since those employing that phraseology don’t necessarily disagree with the original claim at all! Most physicists believe in the existence of gravity ways, for example, even though they also mostly believe that there is no direct evidence for their existence and claims to the contrary (cf. Joe Weber’s Honking Big Cylinders) have so far not held up (to use a – hopefully – noncontroversial example illustrating this very important difference).

Unfortunately, those lacking a decent education in The Way Things Are Done, scientifically speaking, will tend to read a statement like “Evidence for the claim that increasing the minimum wage will lead to an increase in unemployment is nonexistent” as the much stronger declaration “Increasing the minimum wage does not lead to an increase in unemployment – at any level of increase”. This sort of basic illiteracy does no one any good.

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Meredith 11.06.11 at 4:31 pm

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…).

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ScentOfViolets 11.06.11 at 4:44 pm

I’m interpreting the complaint* against Mankiw—a complaint that I think has considerable merit, given his textbook and the tenor of many of the statements he makes for popular consumption—as being that he uses the “plausibility” hypotheses, wrongly, to promote an ideological doctrine and ignorance. His view of the minimum wage as public policy stands as a prominent example—not that he generally disapproves; I’m not concerned with his political preferences, whatever they may be—of using his authority as an economist, and the purported logic of economics as an analytic theory, to argue for an unwarranted presumption that a minimum wage would harm low-wage workers and reduce employment.

This is exactly the point. It also goes to the importance of the economics profession doing some sort of minimal self-policing which seems, unfortunately, to be nonexistent in real life.

In fairness, this misunderstanding is the fault of their teachers, teachers like Mankiw, who finish the demonstration of the analytic model of perfectly competitive price determination, with a gesture out the window at markets, which are allegedly “approximately” like the model.

And that is precisely why this sort of ideological hackery is so dangerous. It’s one thing to be a hired gun, to be paid to spout nonsense that one knows is nonsense. There are ways of dealing with that type, after all. Much worse is the existence of vast numbers of people, citizens who are expected to vote, who actually take that nonsense to be the truth – and who consider themselves to be well educated because they believe that nonsense.

Well, you know what they say – “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

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Bruce Wilder 11.06.11 at 5:17 pm

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.

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Gene O'Grady 11.06.11 at 6:32 pm

I’m a bit puzzled by the description of this course as an introductory course — from some of the comments and from things I’ve seen elsewhere, plus the sheer number of students involved, it seems like it’s a final course presenting what one is supposed to believe about economics without further study, while students who are actually going on to do real economics begin with other courses? In classics terms, it’s Roman Civ in translation rather than intermediate Latin or the first major Greek texts in the original.

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john c. halasz 11.06.11 at 6:50 pm

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.

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chris 11.06.11 at 7:26 pm

ISTM that the disappearance of gas station attendants is only partly about rising wages and mostly about improving technology, principally the development of ATMs and their integration into gas pumps. Although, as it turns out, a convenience store/gas station still has employees, they’re just in the store and not at the pump.

But it’s not principally a matter of capital investment; no gas station owner in the 1970s could have invested in a modern ATM/pump because (a) the technology didn’t exist and (b) not enough customers had debit/credit cards for it to be worth deploying if it did exist.

I would be interested to know if, during the time that attendants were dying out, some chain tried to keep their attendants and compete on quality of service before price.

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Meredith 11.06.11 at 8:15 pm

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.

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Watson Ladd 11.06.11 at 8:16 pm

Bruce, an employer has an incentive to increase the productivity of his employees because doing so lets them split the advantage over the competition.

The morality Friedman defends is that of individuals voluntarily associating, and the critique of Marx is that capital is transitional to an expansion of human freedom through providing everyone the ability to work, that industrialization makes transforming your labor power into a commodity dependent on capital owned by private interests. What’s wrong with letting people trade to achieve the goals they desire with the means they have?

What are the ten principles which you claim are ridiculous? I’ve listened to the rap version and I don’t think any of them are unreasonable. Maybe you think we don’t have short-term bounds on resource consumption, or that people cannot be trusted to know their own desires and trade to attain them.

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Bruce Wilder 11.06.11 at 9:36 pm

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.

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Henri Vieuxtemps 11.06.11 at 10:17 pm

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.

Yeah, I’m with Bruce. There is no reason minimum wage (whether imposed by the government or negotiated as a collective labor agreement) should be as low as it currently is in US states; it could be set to $15-$20-$25/hr, inflation-linked. And that would make a hell of a difference. And if it causes higher unemployment, unemployment just needs to be addressed separately, that’s all. By tariffs and subsidies, for example.

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LFC 11.06.11 at 11:21 pm

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.

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Bruce Wilder 11.06.11 at 11:28 pm

Watson Ladd @114: “I’ve listened to the rap version and I don’t think any of them are unreasonable.”

When I wrote my remark about Mankiw’s Ten Principles being ridiculous, I actually thought to myself that you would demur. I’m not sure I could have conceived of a parody, which included, “I listened to the rap . . .”, but OK.

What’s wrong with Mankiw’s Ten Principles is that they are over-simplifications and half-truths. Some, indeed, refer obliquely to core concepts in economics, like “trade-offs” or “opportunity cost”, but stripped of the careful definitions, which make those concepts analytically useful. Others — “People respond to incentives” or “Rational people think at the margin” — are just vague nonsense, a kind of faux profundity. Yes, you face a “trade-off” when you are at the production possibility frontier, but not otherwise; are you always at the production possibility frontier in your decision-making? — it seems unlikely. The analysis of incentives is important in economics, but it should lead you to understand that it isn’t a simple matter of carrots and sticks, but, rather a complex problem not just of reward, but of risk, constraints, and strategic behavior. An employer might adopt a strategy that entails improving the productivity of her employees, as you suggest, or a strategy of exploiting and cheating them; both things happen and many others. People are not automatons responding mechanically to the promised rewards or advertised costs of (marginal) “incentives” nor do they always choose the positive-sum game of mutual benefit; people game the system, any system, and the trick is to make sure that the institutional game they play is socially beneficial in its results for all, but the players can be just as clever as their governors.

Trade Can Make Everyone Better Off, but it doesn’t have to. Markets Are Usually . . ., and rare, and most of the economic activity you are familiar with — at Harvard, at McDonald’s, at the supermarket — is planned, organized and managed by bureaucracies, including the prices you pay, which are administratively determined.

I could go on down the list, but I don’t want to get near the swamp where inflation is either “printing too much money” or employing too many willing workers.

Friedman in the 1960s and 1970s was trying to convince people that the pleasant, well-functioning world produced by the public investments and elaborate regulatory structure of the New Deal 1933-46 was, in fact, the spontaneous and “natural” outcome of a free-market economy approaching an optimal equilibrium, in which government interference could be expected only to make trouble and yield second-best results. His narrative analyses touting the achievements of laissez-faire rested on systematic omission, but he was relentless, and he founded a self-interested market, amid those who dimly sensed an opportunity to profit by dismantling the New Deal, piece by piece.

119

john c. halasz 11.07.11 at 12:31 am

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.

120

Bruce Webb 11.07.11 at 12:33 am

The claim that even a Neo-Classicist can neutrally handle a Micro course that purports to teach “how markets work” and “market efficiency” is laughable. There is a ton of ideology and selective psychological models built in there, you might as well suggest that you can get an open minded approach to theology by attending Saturday Catechism.

I still remember vividly sitting outside Sproul Hall on the UC Berkeley campus early one Fall hearing an undergrad walk by excitedly ‘explaining’ to his friend about how he just learned about the magic of efficient markets that day. Why there was this whole ‘Supply and Demand’ thing the professor illustrated by drawing two lines on the white board! (Still a blackboard then).

Micro absent some understanding of pricing power by whatever means just sets these kids off on indoctrination into a particular ideology. It is not like teaching Statistics or Accounting 10, there is a lot more buried under the surface in Econ . Indeed just the words ‘market efficiency’ raises red flags for me. In that ‘Invisible Hand’ rests on the same kind of faith belief as ‘The Holy Ghost’, just assumed to be in operation.

121

Watson Ladd 11.07.11 at 12:36 am

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.

122

Bruce Wilder 11.07.11 at 12:50 am

“if trade hurts people they don’t do it”

Yes, it’s called involuntary unemployment.

123

Bruce Webb 11.07.11 at 1:00 am

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!’

124

Watson Ladd 11.07.11 at 1:29 am

So why don’t all McDonalds restaurants employ the lower number of people that they are able to in Washington to increase their profits? This isn’t a Lump of Wages theory, and I’m not claiming that the biggest transfer results from zero minimum wage. Rather 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, and no one seems to have anything to say to the person who gets left out of the cosy little $10 an hour cartel.

125

Cosma Shalizi 11.07.11 at 2:32 am

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.

126

Eli Rabett 11.07.11 at 2:56 am

Eli had some excellent rants on textbooks many years ago. Go look up the price of the same textbooks in other countries, and tell the bunny that this is the land of the free.

127

piglet 11.07.11 at 3:27 am

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.)

128

chris 11.07.11 at 4:20 am

Bruce, if trade hurts people they don’t do it.

No, if people *know* a trade is going to hurt them they won’t do it. In real economies, imperfect information is the norm. And, in many cases, a weapon to be wielded against anyone not savvy enough to get out of the way.

Or do you want to argue the point with everyone who invested in Madoff or borrowed from Countrywide? (Or bought CDOs from Countrywide — somehow, the people at *both* ends of that particular deal ended up getting hurt by it; the middlemen made out like bandits, though.)

Or how about everyone who worked in jobs in the asbestos-related industries? Clearly, if those jobs had been capable of hurting them, they wouldn’t have taken them, right?

Idealized model is idealized. The real world isn’t.

129

Lemuel Pitkin 11.07.11 at 4:57 am

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.

130

Henri Vieuxtemps 11.07.11 at 7:23 am

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.

Well, I imagine it’ll probably raise employment and increase unemployment at the same time.

131

Henri Vieuxtemps 11.07.11 at 7:45 am

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.

132

Turner 11.07.11 at 8:47 am

‘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.’

Not only this, but wages are basically a product of class struggle/bargaining power and do not reflect ‘supply and demand’ functions. This means that even in non monopsonistic markets, a decent living wage would not increase unemployment. Moshe Adler covers this well in his book ‘Economics for the Rest of Us’.

133

Walt 11.07.11 at 8:51 am

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

134

Tim Worstall 11.07.11 at 8:55 am

“You need so many bodies to supply so many burgers,”

Obviously never actually run a restaurant. You don’t in fact need x amount of workers to supply y amount of burgers.

You have choices about how you do the task. At one end you can buy in whole meat, grind it, press it, bake your own rolls, wash and slice your tomatoes and lettuce, make your own may, heck, you can make your own ketchup if you really want to. Get it right and you’ll make a pretty yummy burger too.

At the other end you can invest heavily in machinery, buy in your burger patties, buy in your rolls already sliced, buy the lettuce pre-washed, get those little sachets of sauce etc.

One method is labour intensive, one is capital intensive. The relative prices of labour and capital are going to influence (in part) which method you decide to use.

135

cian 11.07.11 at 11:02 am

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.

136

Barry 11.07.11 at 12:28 pm

Bruce: “So, when the price of gas spiked in the first oil crisis, circa 1973-4, it triggered a 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.”

I saw this first-hand; my father started a gas station in 1970 (franchisee). Bad timing; whomever made money off of the oil crises, it wasn’t your corner gas station.

137

Andrew F. 11.07.11 at 12:34 pm

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.

138

Watson Ladd 11.07.11 at 1:59 pm

Turner, I interviewed Adler about his book. He’s not a Marxist and it shows with his love for protectionism. Class struggle isn’t about labor cartels, its about revolution.

Lemuel, a single buyer will have a downwards sloping demand curve as well. Besides, there are many places to work.

cian, if you can make a robot make cars, you can make a robot make burgers. But the capital costs will eat you alive unless the price of labor justifies it.

Henri, what you are saying makes no sense. If someone makes your situation worse off, then they have already wronged you. Your trade can only make you better off. If not trading hurts you more, trading helps. The problem is that access to the tools required to sell your labor is monopolized by a rentier class, and that control over the forms of social life is exercised unconsciously. That we were ripped from agrarianism is a godsend.

139

cian 11.07.11 at 2:06 pm

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.

140

Henri Vieuxtemps 11.07.11 at 2:53 pm

Your trade can only make you better off.

Sure, your trade can only make you better off, except that this statement is completely meaningless. Anything you do “can only make you better off”, including putting a bullet in your head. Otherwise you wouldn’t be doing it.

141

cian 11.07.11 at 3:56 pm

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.

142

sg 11.07.11 at 4:13 pm

Japan still has petrol station attendants. They bow you in, bow you out, stop traffic for your car, and clean your windows for nothing.
Don’t know what that says about the minimum wage. Something, I’m sure.

143

engels 11.07.11 at 4:48 pm

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?

144

Watson Ladd 11.07.11 at 5:00 pm

cian, that’s a very complex history, but I think that the move from serfdom to the Enlightenment society of manufacture was due to an ideology of freedom and social relations based on market relations. The industrial relations puts that into crisis. As for class struggle, Rosa Luxembourg has a great essay on the subject of when strikes are class struggle and when they are not. Todays unions shill for the democrats and are as far from class struggle as ever. Maybe someday this will change.

145

Hidari 11.07.11 at 5:49 pm

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.

146

cian 11.07.11 at 6:02 pm

On this particular topic Watson I don’t particular care what Rosa Luxembourg has to say. Any definition of class struggle which would exclude strikes seeking better conditions or pay, is a pretty stupid definition. A struggle between the working class in the factory (for example) and the owner class that owns the factory over wages is a struggle between two classes.

Now maybe what you mean is that such struggles will not lead to the promised land of Econ101 communist nirvana, or you think it is a false struggle, or a distraction, or whatever. In which case say it.

that’s a very complex history,

that’s a very complex history

Well maybe, but serfdom had largely disappeared in any meaningful sense around the beginning of the C16th.

147

Bruce Wilder 11.07.11 at 6:04 pm

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.

148

Erich Kuerschner 11.07.11 at 6:50 pm

149

Watson Ladd 11.07.11 at 8:50 pm

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.

150

dictateursanguinaire 11.07.11 at 9:15 pm

@ Tim Worstall

There may not be a fixed capital-labor ratio but if you’re in a market where demand for labor is relatively inflexible, if you put a price floor on labor, it seems like only so much of that labor can be replaced with capital, at least in the short/medium run (enough time for a new generation, maybe, who can work around the new tech. env. or be higher educated to be in more secure jobs.) Further, with increasing mechanization, the longterm cost of a dude chopping buns in half vs. a machine is just not going to be a contest — do we really want to force labor to compete with that?? Why not just accept that labor will be replaced by capital sometimes, whether it’s a result of price floors or mechanization, and resolve to deal with the problem via social programs?

151

cian 11.07.11 at 9:16 pm

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?

152

cian 11.07.11 at 9:18 pm

Obviously never actually run a restaurant. You don’t in fact need x amount of workers to supply y amount of burgers.

Well no, but not all restaurants have their cuisine so ruthlessly built around culinary deskilling and mechanisation. Some restaurants even have serving staff.

153

vimothy 11.07.11 at 9:50 pm

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…

154

Jon 11.07.11 at 9:58 pm

Ben Alpers@40,
I took a “math section” of Ec 10, taught by then-grad student Larry Summers. At first all of us in the section thought he was a mad right-winger for what he was teaching about the minimum wage, and then we realized that (it seemed) everybody teaching introductory micro said the same thing. It was an economics thing, not a Summers thing.

FWIW, the casebook (textbook) I just assigned for Constitutional Law I next semester costs $198 new, plus a $36 supplement. Comparable books cost the same thing. What I do is let my students know that they can buy the book used for $35 on Alibris, Half.com, AbeBooks, etc. (They still need to get the supplement new, though.)

155

Bruce Wilder 11.07.11 at 10:17 pm

“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.

156

Watson Ladd 11.07.11 at 10:50 pm

Bruce, just because they want to supply labor doesn’t mean they can. I might have messed up my wording a little, but I think the drift is clear.

157

cian 11.07.11 at 11:01 pm

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

158

Watson Ladd 11.07.11 at 11:14 pm

No, I’m arguing that fewer will be able to supply it because employers will employ fewer people. Wanting a job doesn’t get you one: you need to have someone hire you.

159

Bruce Wilder 11.07.11 at 11:29 pm

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?

160

Robert 11.07.11 at 11:51 pm

Jon@154,

Yes, introductory economics teaching by mainstream economists is, when it comes to the minimum wage, mostly lies and nonsense. Some mainstream textbook writers strive to write slightly less balderdash than others.

161

stubydoo 11.07.11 at 11:52 pm

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.

162

Steve LaBonne 11.08.11 at 12:02 am

However the overall tendency is going to be in accordance with the ordinary law of demand.

Too bad there are lots of empirical data that falsify this prediction. Beautiful theories, ugly facts, etc.

163

stubydoo 11.08.11 at 12:04 am

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?

164

stubydoo 11.08.11 at 12:06 am

Steve @162: “Lots of empirical data”. Great, I love data, and since so far I have seen no such data, I look forward to being pointed in the right direction.

165

Steve LaBonne 11.08.11 at 12:53 am

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.

166

stubydoo 11.08.11 at 1:21 am

Steve @165:

First link: theory paper that does not present data
Second link: agrees with me
Third link: a page for a book that I’d have to buy for $57
Fourth link: the wikipedia page
Fifth link: refers to the data as being “weak”, but doesn’t really say any more about it.

Perhaps that wikipedia page will lead me somewhere interesting, but in the meantime I suggest dropping that LMGTFY gambit from your repertoire. It tends to have a criminally low helpfulness to condescension ratio, and this case is no exception.

167

Steve LaBonne 11.08.11 at 1:25 am

Second link: agrees with me

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

168

Watson Ladd 11.08.11 at 1:25 am

Bruce, you never actually gave that explanation. Instead you merely asserted that monopsony power would lead to minimum wage leading to a more optimal outcome. I don’t understand what you don’t say.

As for the presence of monopsonies in the labor market, the labor market is competitive and it seem that for the low skilled jobs subject to the minimum wage one has many places to apply them. In a large city the number of low wage employers is gargantuan. Academics probably feel the squeeze of monopsony the hardest.

169

William Timberman 11.08.11 at 1:26 am

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?

170

Steve LaBonne 11.08.11 at 1:43 am

First link: theory paper that does not present data

But does present references to papers that do.

171

TheF79 11.08.11 at 6:16 am

“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.

172

Walt 11.08.11 at 6:33 am

Wow, stubydoo, how lazy are you?

173

dr ngo 11.08.11 at 6:56 am

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.

174

Tim Worstall 11.08.11 at 11:05 am

“Why not just accept that labor will be replaced by capital sometimes, whether it’s a result of price floors or mechanization, and resolve to deal with the problem via social programs?”

Sure: which means not faffing about with the minimum wage but increasing the EITC for example. Or having a citizens’ basic income or…….

Fine by me.

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Steve LaBonne 11.08.11 at 11:17 am

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.

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Henri Vieuxtemps 11.08.11 at 3:54 pm

@174,
it seems to me that without a class struggle (such as a push to increase the minimum wage) there will be no replacement of labor with capital ever. Why replace labor (subsidized by someone else with EITC) by machines, when instead you can always re-price labor accordingly, which will certainly guarantee a better ROC, and no risk whatsoever.

You see, if I need to dig a trench, and I can hire as many people as I need for whatever wage I deem reasonable, why would I want to spend $100K on a bulldozer? In fact, why would anyone even fancy to produce a bulldozer? It’s just not necessary.

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Mike 11.08.11 at 6:37 pm

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.

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cian 11.08.11 at 7:08 pm

No, I’m arguing that fewer will be able to supply it because employers will employ fewer people. Wanting a job doesn’t get you one: you need to have someone hire you.

You seem a bit confused about what supply and demand actually mean. There’s a supply of labour, just not all of it will clear. Econ101 rather stupidly assumes that supply will always match demand, which I suppose would explain your confusion. In the real world it ain’t necessarily so, nor is equilibrium something you can assume.

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john c. halasz 11.09.11 at 1:11 am

180

Meredith 11.09.11 at 2:20 am

FN re gas pumps, convenience stores, small profit margins. The beat goes on:
http://www.berkshireeagle.com/local/ci_19286166

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Bruce Wilder 11.09.11 at 7:06 pm

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.

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Andrew F. 11.10.11 at 2:08 am

Bruce, at what end of the compensation spectrum is the labor market most nearly perfectly competitive? At what end of the compensation spectrum does the minimum wage have most effect?

And really, Mankiw lacks a “humane will” because he – along with what seems like a majority of other economists – disagrees with you as to the effects of a minimum wage on certain types of employment? Come on.

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Bruce Wilder 11.10.11 at 2:46 am

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.

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stubydoo 11.10.11 at 3:22 am

As much as I love dropping comments into dead threads, since there’s a false accusation against me above at @172, I’ll answer it now. I’m presuming that the idea that I am lazy stems from a supposed failure to follow the links in the FRB Atlanta paper that came up first on the LMGTFY. Not so however. Which of those papers is supposed to provide me what I am looking for, and was promised by Steve? The most famous of them (Card and Krueger) certainly does not. Their data came only from four fast food chains along one state boundary. Aside from the point made way upthread by Tim Worstall that increases in fast food business could precisely represent a substitution into high capital/ low labor production, there is the fact that a fast food restaurant once established has minimal discretion in staffing levels – individual restaurant management has limited influence over how many customers come in, and they tend to expect the full menu to be available. Even opening hours may have been dictated by corporate policy. And anyway, if the short term effect is a tightening of margins (and short term was the observation period used), then the long term effect is likely to be a decrease in the number of restaurant establishments. I find it puzzling that such a tiny, tiny paper has ended up being treated as a giant in the field.

As I stated, there are a variety of different ways people can react to minimum wage increases. Just identifying a small pocket where one effect (apparently) dominates (in the short term) does not negate any claim about the general overall tendency. There have been many studies showing a negative correlation between minimum wages and employment. By the time Card and Krueger came along, such papers would have been pretty much unpublishable on the grounds that “everybody knows that”.

Every word of my post at @161 gets along swimmingly with the data that can be reasonably found through Steve’s oh-so-helpful LMGTFY link. It is not the case that my beautiful theory has run into trouble with some ugly facts. Instead, you lot have been ignoring the inconvenient data and overinterpreting the convenient data.

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