Tuesday, June 8, 2010

Is There a Market Fundamentalist Message in Principles Textbooks?

At the Canadian Economics Association Meetings in Quebec City at the end of May, Tony Myatt and I participated in a panel session we'd organized with textbook authors around the title of this post. From The Economics Anti-Textbook perspective, the answer to the question of whether there's a 'market fundamentalist' message is 'yes'.
  However, as we argue in the Anti-Textbook, the texts are not crude 'free market', laissez-faire tracts, and our critique is not a personal attack on their authors. What's going on is far more subtle.
  While we don't discuss this explicitly in any detail in the Anti-Textbook, I think a case can be made that the economics texts fit into the propaganda system more generally. For me, Edward Herman and Noam Chomsky's Manufacturing Consent provides a good way of thinking about that system. It's 'free market' propaganda, the result of the uncoordinated and decentralized decisions of a large number of people, all pursuing their self-interest. (Here, 'propaganda' just means the systematic propagation of a particular point of view.)
  In thinking about the products of that system, Herman and Chomsky point out that you have to think about two things. One is what is not said -- the ideas that are off-limits, like economic democracy in this case. That's not always easy to do. To paraphrase one writer about the media: the textbooks can't tell you what to think, but they can tell you what to think about.
 The second thing is to examine what's said. In the preface to their book, Herman and Chomsky write: “... even more important [than the things that are not said] ... is the question of the attention given to a fact – its placement, tone, and repetitions, the framework of analysis within which it is presented, and the related facts that accompany it and give it meaning...” (my emphasis)
  So where does 'market fundamentalism' come in here? George Soros, who originated the term explained that "It holds that the allocation of resources is best left to the market mechanism, and any interference with that mechanism reduces the efficiency of the economy." (On Globalization, p.4)
  Briefly, we argued that the textbooks do give this impression by spending roughly the first half of the book presenting a story of 'perfect markets', where indeed all 'interference' with the market does produce inefficiencies. Smith's 'invisible hand' metaphor is used to describe the market economy. Then, later in the book, students are supposed to unlearn this when, one by one, the sources of 'market failure' are revealed in more detail. But the impression of the efficient market economy has already been instilled. Market failures can appear more as exceptions to the general efficiency of most markets rather than the rule itself. But, as Joseph Stiglitz writes in his recent book Freefall, 'The invisible hand is invisible because it is not there.'