Sunday, December 25, 2011

Juliet Schor at Occupy Harvard

Another fine talk at Occupy Harvard, but I suggest that you listen to the previous post with Stephen Marglin's talk. Juliet Schor refers to it.
  An interesting point that both of them make is that what becomes 'mainstream economics' is influenced by the broader political climate in the society more generally. It follows that actions to change that political climate feed back to help to change economics, creating openings in which critiques of what's currently mainstream economics can get traction.


At one point she says that there was a great disconnect between what macroeconomists were advocating (more growth to lower unemployment) and what climate scientists were saying -- more growth worsens climate change problems. The major exception among economists was Nicholas Stern, who argued that to undertake much-needed investments to tackle climate change would also help to address the unemployment problem.
RH

Saturday, December 24, 2011

A great talk by Stephen Marglin

Stephen Marglin's talk at Occupy Harvard is well worth a listen. How I wish I could have had a course like his when I was an undergraduate!


RH

Saturday, December 17, 2011

The ultimate effect of unrealistic assumptions?

I read Arjo Kalmer's Conversations with Economists shortly after it came out in 1984. One of the most striking interviews was with Leonard Rapping, the orthodox economist turned dissident, who took refuge at the University of Massachusetts in his last years. (He died at only 57 in 1991.)

In the interview (pp.221-222), Rapping says of Milton Friedman's famous Essays in Positive Economics that Friedman "hit on an argument that was incredibly powerful. What seemed like an innocent point in logic and scientific methodology is, through the workings of the mind, transformed into a description of the world for his students." This comes about because
people, myself included, can't stand the idea that we can draw true conclusions from false premises. (Of course, a lot of people argue that you want to start with realistic assumptions.) Friedman's position is too extreme. The students, in the end, can't stand to live with that position, so they solve the problem by seeing the world as competitive, making the assumption 'true'.
RH

Wednesday, December 14, 2011

The true face of Father Christmas

Dani Rodrik on simplistic undergraduate econ instruction

Dani Rodrik's recent Project Syndicate column "Occupy the Classroom?" is well worth a look. It's a thoughtful piece on the doublethink that many economists seem to practice that expands on the earlier remarks of his that we quoted in The Economics Anti-Textbook (pp.5, 262).

Rodrik

Rodrik distinguishes between the limitations of what economists really know and thus what they tell graduate students, and the stripped-down version offered to undergraduates because, apparently, all the qualifications are "deemed to be in appropriate (or dangerous) for the general public". (I wrote a bit about this theme in an earlier blog.) Instead, what economists are apt to do is to choose from the plethora of models available ones "that best accord with their own personal ideologies".

He concludes:
the economics we need is of the “seminar room” variety, not the “rule-of-thumb” kind. It is an economics that recognizes its limitations and knows that the right message depends on the context. Downplaying the diversity of intellectual frameworks within their own discipline does not make economists better analysts of the real world. Nor does it make them more popular.
RH

Wednesday, November 30, 2011

Economists' Statement on Occupy Wall Street

Economists are being invited to sign onto a statement at Econ4 (a website worth exploring) opposing the expulsion of "advocates of the public good from public spaces" and extending "support to the vision of building an economy that works for the people, for the planet, and for the future".


The plutocracy has a dialogue with Occupy students at UC Davis
RH

Sunday, November 27, 2011

Joan Robinson on marginal productivity theory

There's something refreshing about Joan Robinson's take-no-prisoners critiques of economic theory. In the 4th volume of her Collected Economic Papers, there's an essay entitled "The second crisis of economic theory".




Joan Robinson, Cambridge University


On page 104, she offers a frank comment on marginal productivity theory:
There is the problem of the relative levels of different types of earned income. Here we have the famous marginal productivity theory... The real wage of each type of labour is supposed to measure its marginal product to society. The salary of a professor of economics measures his contribution to society and the wage of a garbage collector measures his contribution. Of course this is a very comforting doctrine for professors of economics but I fear that once more the argument is circular. There is not any measure of marginal products except the wages themselves. In short, we have not got a theory of distribution. We have nothing to say on the subject which above all others occupies the minds of the people whom economics is supposed to enlighten.
Ouch!

RH

Sunday, November 13, 2011

An "anti-Mankiw" student blog

"Memoirs of an Economics Student" (a blog I've linked to on this page) reports the latest in a student-led "anti-Mankiw" effort, this one in the form of a blog.

Of course, it's nothing personal. Mankiw's principles text just happens to be a prominent feature of an orthodoxy that predictably evades any real critical examination of the status quo. As the status quo becomes more and more unacceptable to more and more people, its unsatisfactory nature becomes ever more apparent.

RH

Saturday, November 5, 2011

The walkout in Mankiw's Ec 10 class

The students who left Greg Mankiw's microeconomics principles class on November 3rd provoked a lot of attention and comment. The report in The Harvard Crimson quoted an organizers' statement:
Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.
I can hardly disagree, as this "bias" -- as expressed in all of the mainstream textbooks, not just Mankiw's -- was the central theme of our Economics Anti-Textbook, whose primary goal was to help students in such courses defend themselves against it.



Some students outside Sanders Theatre, Harvard, after leaving Ec 10.  From The Harvard Crimson.


I hope, however, that the students don't think that the problem lies with Mankiw himself. The organizers' statement (which Mankiw posted on his blog) also says:
Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. 
But an "unbiased perspective on economics" is not possible, as we try to argue in the Anti-Textbook. Value judgments pervade everything and 'objectivity' is unattainable. Howard Zinn's comments about the impossibility of objectivity in studying history carry over here, for example. (For example, see his wonderful book The Politics of History, p.10. He writes "That the scholar has decided that he prefers peace to war does not require him to distort his facts... Our values should determine the questions we ask in scholarly inquiry, but not the answers.")

However, a problem arises when students fail to appreciate how pervasive value judgments are. The Harvard Crimson quotes one:
Harvard Republican Club Secretary Aditi Ghai ’14, who took the class last year, said she doesn’t think the class is biased. “The class is about pure economic efficiency. Ideology comes into play when we determine how to balance efficiency with social equity,” she said.
But a decision to focus the course on "economic efficiency" is a value judgement in itself; it puts some questions to the fore; backgrounds others. Our values determine the questions we ask, as Zinn notes, and the questions we don't ask. In the Anti-Textbook (pp.208-210) we also argue that it doesn't make sense to think of "efficiency" as a primary social objective like equity is, although this student has, not surprisingly, been given the impression that it is.

While it's not possible to be "unbiased", and Mankiw is as entitled to his biases and value judgments as anyone else, the textbooks pretend to be unbiased, to be just doing 'economic science', or 'positive economics' while 'normative economics' is supposedly set aside. As noted earlier, that's not possible. (Gunnar Myrdal's little book Objectivity in Social Research is all about this point, but I expect that 99% of all economics students now have no idea who Myrdal was... Apparently all you need to know is in the most recent journal articles.)

I read the students' open letter to Mankiw as also asking for a broader perspective in the principles course. ("As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics.") That's a key thing that's lacking in the typical mainstream text, and thus in the typical mainstream economics course. As the small number of alternative principles texts demonstrates, it doesn't have to be this way.

RH

Postscript: The sort of alternative texts I mean are books like Bowles, Edwards and Roosevelt, Understanding capitalism (Oxford University Press), Goodwin, Nelson, Ackerman and Weisskopf, Microeconomics in Context (ME Sharpe) or Sherman, Hunt, Nesiba, O'Hara and Wiens-Tuers, Economics: An Introduction to Traditional and Progressive Views (ME Sharpe).

Sunday, October 30, 2011

A note on the minimum wage in the US in historical perspective

A couple of weeks ago (16 October) in his blog, I noticed that Greg Mankiw gave some data about the growing importance of the minimum wage in the U.S. He writes:
The minimum wage has a much larger role now than it did three years ago, in large part because of the legislated increase in the minimum wage from $5.15 to $7.25 an hour.  For example, comparing the 2010 data with the 2007 data, one finds the following:
  • The percentage of all hourly-paid workers paid at or below the minimum wage rose from 2.3 to 6.0 percent.
  • The percentage of part-time workers paid at or below the minimum wage rose from 5 to 14 percent.
  • The percentage of teenage workers paid at or below the minimum wage rose from 7 to 25 percent.
Question for class discussion:  In light of what is occurring with the overall economy during this period, how would you evaluate the policy change regarding the minimum wage?
Of course he's hinting that the 'right answer' is that raising the minimum wage was a bad idea in a time of rapidly falling demand.

Mankiw forgets to mention the timing of the increases: it was already $6.55 in July 2008 two months before the financial meltdown, so post-meltdown only 70 cents was added to raise it to $7.25 in July 2009. As well, a bit of historical perspective might help students too in thinking about whether the minimum wage is unreasonably high.

I found this nice summary at a webpage at Oregon State University:
According to these calculations, the federal minimum wage was actually higher in real or inflation-adjusted terms back in the mid-1950s. It was higher or about equal to the current level for the entire period from 1956-1983.

RH

Friday, October 28, 2011

30 Ways To Be An Economist

I stumbled on this page of interviews at the Institute for New Economic Thinking after listening to one of them --  Philip Mirowski on the story of where the so-called "Nobel Prize" in Economics came from and the effects it's had.

Philip Mirowski

Professor Mirowski was a member of the Department of Economics and Policy Studies at Notre Dame until that department was disbanded by the university and its members scattered in the winds so that orthodoxy could reign supreme in the (other) Department of Economics. If you don't know the sad story, you can read a brief account of how the original economics department split in two in 2004 here, an argument (in the form of a petition) for a continuation of heterodox courses at Notre Dame (as the shadow of the axe was seen), and finally accounts of the ax falling in 2010 (in the Chronicle of Higher Education with some blog comments here and here).

Perhaps that thing that's most unusual about the purge at Notre Dame is that there were so many heretics there in the first place.

RH

Thursday, October 27, 2011

Textbook happyface: Unemployment as leisure?!

With unemployment so high in so many countries -- and set to get worse because of misguided policies -- it's worth thinking for a moment about the way that unemployment gets portrayed in the textbooks. I was reminded of this recently when I read a paper by Lars Osberg, a labour economist at Dalhousie University in Halifax, Nova Scotia. In "Why Did Unemployment Disappear From Official Policy Discourse in Canada?", Osberg contrasts the condemnations of unemployment and the vivid descriptions of its social and psychological costs that appeared in widely used textbooks forty years ago with the modern textbook:
Modern labour economics texts (e.g. Benjamin, Gunderson, Lemieux and Riddell, 2007) are shorn of any hint of moral outrage at unemployment, or empathy for the unemployed. ... there is little sense that unemployment is socially destructive.
Much of the typical text is taken up with models of voluntary unemployment: the labour-leisure choices of individuals, and micro model of optimal search behaviour. Osberg writes "Major attention is paid to the debate on how the 'incentives' of unemployment insurance in Canada may have influenced behaviour." The great deal of attention paid to these topics could give the impression that we'd better give priority to watching carefully for people gaming the system and creating large costs by sitting at home collecting pogey (as it's called here in Canada) while pretending to look for work.

"I heard there might be a vacancy..."

If as much attention were given to the subjective, psychological costs of unemployment, a rather different impression might be given to students. Osberg (pp.149-152) has a good review of the current evidence from studies of subjective well-being. He quotes the German economist Rainer Winkelmann, who has done important work in this area:
It is also clearly understood that the negative effect of unemployment on well-being goes well beyond the effect that the income loss associated with unemployment can bring about. Indeed, the non-pecuniary cost of unemployment seems to exceed the pecuniary cost by far.
You might be thinking that perhaps it's unfair to criticize micro approaches to employment because involuntary mass unemployment is more of a macroeconomic phenomenon and a symptom of the system's dysfunction at that level. Unemployment is indeed seen as costly because less stuff is produced, but (believe it or not) it's also accompanied by the benefit of greater leisure.

For example, here's Daniel Thornton writing on "The Costs and Benefits of Price Stability"  in the Federal Reserve Bank of St. Louis Review (1996, Vol. 78, No. 2). He explains (pp.25-26) that lower inflation in the future brings benefits in the form of higher future output, but at a cost of lower output today (as high interest rates induce a recession). "[T]he costs and benefits [of this policy] could be adequately represented by output gains and losses", which is "common in much theoretical and virtually all applied work," but there are "[t]wo important limitations on this practice". The first is the imperfect measurement of production, such as the omission of home production. The second is that "output does not include the utility individuals obtain from leisure." Incredible, yes, but that's what he wrote.


Another important finding from many studies of subjective well-being is that the entire population is affected by high unemployment, as rising economic insecurity permeates the society. This is actually the largest single well-being cost of high unemployment. (Osberg cites an important new paper by John F. Helliwell and Haifang Huang, "New measures of costs of unemployment: evidence from the subjective well-being of 2.3 million Americans".)

Ten years before Thornton wrote what I quoted earlier, Willem Buiter and Marcus Miller, in a 1985 paper ("Costs and Benefits of an Anti-Inflationary Policy: Questions and Issues" in Inflation and Unemployment. Theory, Experience and Policy-Making, edited by V.E. Argy and J.W. Nevile) commented with apparent exasperation: "Overwhelming empirical evidence on the importance of work (i.e. of being employed, of having a job) for most people's well-being, happiness and even sanity has not made much of a dent in the ‘extended holiday’ approach to unemployment." 

This seems to be another zombie idea that staggers around in economics, causing damage and refusing to die.

RH

Tuesday, October 25, 2011

Twill Magazine reviews The Economics Anti-Textbook

Twill, Issue #14, has Economics as its theme. While most of it is in Italian (except for a piece by James Galbraith), it also has a brief review in English of The Economics Anti-Textbook and a four-page excerpt.


RH

Monday, October 24, 2011

Howard Zinn Memorial Lecture Series @ Occupy Boston


The lectures here, including one by Noam Chomsky last Saturday. As he says, it's a shame Howard Zinn didn't live to see it.
RH

Sunday, October 23, 2011

A look at Greg Mankiw's blog

Rather than work on what I'm supposed to be working on this Sunday afternoon, I found myself having a quick look at Greg Mankiw's blog. (As everyone knows, he's the author of a widely-used principles textbook.)

Strange stuff. On 8 October, for example, he offers this quote without any comment:
A major factor behind the weak recovery and gloomy outlook is a climate of policy-induced economic uncertainty. An index we devised shows U.S. policy uncertainty at historically high levels.
Does Mankiw actually think this is the case? The quote is taken from a piece  that Paul Krugman demolished in just a few sentences in his blog.

A few days before that, on 5 October, in "Obama versus Clinton on Tax Policy", he writes
You can agree or disagree with that policy choice.  But the facts are clear.  President Obama's policy preferences are more focused on income redistribution (aka "class warfare") than President Clinton's tax policy ever was.
So "income redistribution" in the form of a slightly more progressive income tax is "class warfare"? For a more reasonable interpretation of class warfare in the United States, it'd probably be better to listen to Warren Buffett:
"There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
In his entry for today, Mankiw links to his piece in today's Sunday New York Times. Again, more strange stuff as Mankiw offers a whirlwind tour of the economic experience of Zimbabwe, Greece, Japan and France. He writes:  "Each illustrates a kind of policy mistake that could, if we are not careful, presage the future of the United States economy."  Uh, Zimbabwe with its hyperinflation? Mankiw writes:
Some may find it hard to imagine that the United States would ever go down this route. But reckless money creation is apparently a concern of Gov. Rick Perry of Texas, who is seeking the Republican nomination for president.... Mr. Perry is not alone in his concerns. Many on the right fear that the Fed's recent policies aimed at fighting high unemployment will mainly serve to ignite excessive inflation.

Rick Perry takes aim at Ben Bernanke

What does Mankiw think? Is Perry a buffoon and an ignoramus like Paul Krugman seems to think? He doesn't say directly (Mitt Romney is Mankiw's candidate) but gives the hyperinflation scenario some credence with his introductory remark quoted earlier about what would happen "if we are not careful".

Then Mankiw turns to the case of Japan, where he cites the views that the policy response to bubbles bursting there in the early 1990s was not sufficiently strong to prevent a long stagnation, hence the attempts at active monetary and fiscal policy in the United States. Incredibly, he writes:
The more we rely on deficit spending to keep the economy afloat, the more we risk the kind of sovereign debt crisis we have witnessed in Greece over the past year. The Standard & Poor's downgrade of United States debt over the summer is a portent of what could lie ahead.
So there's at least one person in the world who still takes Standard & Poor's seriously; others (like Krugman) dismissed it as an obvious political ploy that seemed to be ignored by the markets.

Next comes the "get our fiscal house in order" stuff: "To maintain current levels of taxation, we will need to substantially reduce spending on the social safety net...", already minimal in comparison to most other industrialized countries. Note, no mention here of the bloated military and intelligence establishment, corporate welfare or the pilfering of the public purse that David Cay Johnston has written so much about.

Finally, Mankiw comes to the supposedly scary story of France where taxes are a far higher portion of GDP and GDP per capita is considerably lower because of fewer work hours (not lower productivity per hour). He hints that there's possibly a connection, although "economists debate" this. Warning that Americans could end up with 5 weeks of paid vacations (compared with zero currently) is apparently the best argument he can muster against European levels of taxation. Bring it on!

"Je suis en vacances."
RH

Wednesday, October 19, 2011

Drug companies

We pointed out in The Economics Anti-Textbook that the standard textbook assumption of consumers having perfect information misses some important aspects of reality. Among other things, we gave the example of the use and marketing of prescription drugs (pp.83-85)
  I was reminded of that a couple of days ago when the CBC [Canadian Broadcasting Corporation] reported that the American Academy of Pediatrics had issued some new guidelines recommending that "Four-year-olds showing debilitating signs of attention-deficit hyperactivity disorder should be evaluated by doctors".

Nothing a spanking pharmaceutical company can't fix

The report went on to say:
The revised guidelines suggest doctors first prescribe behaviour therapy for preschoolers, and that methylphenidate or Ritalin may be prescribed if that does not significantly improve “and there is moderate-to-severe continuing disturbance in the child’s function,” the group’s 14-member committee said.... [And, finally, at the end of the article:] Some of the guideline authors said they have consulting relationships with companies that sell ADHD medications.
 The pharmaceutical companies' influence on and corruption of parts of the medical profession should be a serious concern to everyone. I highly recommend the essays and book reviews in the New York Review of Books by Marcia Angell of Harvard Medical School.


RH

Sunday, October 16, 2011

Milton Friedman's pencil: reality check

Dani Rodrik has a good comment about Milton Friedman and his pencil. This duo appeared on the cover photo of Milton and Rose Friedman's book Free To Choose. In the first chapter of the book, the Friedmans tell a story of how the invisible hand of the market wondrously produces pencils without the need of any central direction.
"I'll bet those Commies can't make pencils like this!"

As Rodrik notes (and the Friedmans footnote), the pencil story was taken from a piece by Leonard E. Read, "I, Pencil", written for the libertarian propaganda publication The Freeman, published by an outfit called the "Foundation for Economic Education" [sic]. (Anyone who has read the Wealth of Nations will recognize that its real inspiration is Adam Smith;s tale about a linen shirt at the end of the chapter one.)

Rodrik remarks that
The Friedmanite perspective greatly underestimates the institutional prerequisites of markets. Let the government simply enforce property rights and contracts, and – presto! – markets can work their magic. In fact, the kind of markets that modern economies need are not self-creating, self-regulating, self-stabilizing, or self-legitimizing. Governments must invest in transport and communication networks; counteract asymmetric information, externalities, and unequal bargaining power; moderate financial panics and recessions; and respond to popular demands for safety nets and social insurance.
Indeed. More ironically, with regard to pencils, Rodrik asks where pencils are now made and why....

A modern-day Friedman might want to ask how China has come to dominate the pencil industry, as it has so many others. There are better sources of graphite in Mexico and South Korea. Forest reserves are more plentiful in Indonesia and Brazil. Germany and the United States have better technology. China has lots of low-cost labor, but so does Bangladesh, Ethiopia, and many other populous low-income countries.Undoubtedly, most of the credit belongs to the initiative and hard work Chinese entrepreneurs and laborers. But the present-day pencil story would be incomplete without citing China’s state-owned firms, which made the initial investments in technology and labor training; lax forest management policies, which kept wood artificially cheap; generous export subsidies; and government intervention in currency markets, which gives Chinese producers a significant cost advantage. China’s government has subsidized, protected, and goaded its firms to ensure rapid industrialization, thereby altering the global division of labor in its favor.

RH

Saturday, October 15, 2011

Indoctrination begins in the principles course and is hard to undo



A new review of The Economics Anti-Textbook, written by John Barry of Queen's University, Belfast, appears here in the Marx & Philosophy Review of Books along with a review of Mary Mellor's The Future of Money: From Financial Crisis to Public Resource (Pluto Press, London, 2010). 


Professor Barry writes: 
What Hill and Myatt reveal in their book is on many levels frightening. The almost ‘full spectrum domination’ of the teaching of economics by the neo-classical paradigm means that every year hundreds of thousands of students across the world who read and learn about ‘economics’ from the many neo-classical economics textbooks that are available and set as required reading are effectively indoctrinated. Students reading these textbooks and taking associated economics courses are systematically denied any exposure to alternative forms of economic analysis ... [S]tudents almost cannot but come to the view that there is only ‘one’ or ‘true’ way of thinking about economics. That is of course that the free-market, capitalist status quo is not just the ‘best’ way to think about and organise the economy, but actually the only way.
He also adds an important comment that prompts the rest of this entry:
A telling and very interesting point raised by Hill and Myatt – though insufficiency explored in my view – is that while more advanced postgraduate texts and monographs within the broad neo-classical economics paradigm (and indeed by some of the same authors of the standard undergraduate textbooks), do acknowledge (some of) the deficiencies of the simplistic textbook presentation of the free market model, these are all routinely absent or downgraded within the textbook presentation. 
 He's quite right that we didn't explore this; the statement was more of an aside, but it does require further exploration and thought. That same assertion of ours prompted this question from a reader in recent correspondence:
If advanced level economics is so different, why are economists happy to engage in the teaching of what they must understand to be pernicious lies? In school chemistry classes they teach you things about electrons that are later revealed to be wrong, but what they teach you at school is not dangerous. It is not going to cause you to decimate your society.
A few years ago, Tony Myatt and I were at a session of a conference where (in response to our paper) someone cheerfully admitted that he lied to his students. We were shocked, but I guess he didn't see the consequences of that as 'pernicious'.

So how are advanced level courses and their texts different? And why, if they're different, doesn't it matter to the indoctrination (to use Professor Barry's term) that students have received earlier in their training? I'll try to briefly set out some preliminary ideas.

Here's an example of what we had in mind: Everyone is familiar with the crude treatment of the gains from free trade set out early in the typical micro principles text. (See pages 28-30 of the Anti-Textbook). As we note in our critique of that (starting on p.43), if one looks in an undergraduate trade text (typically studied in 3rd or 4th year by economics majors) one finds facts about international trade that are tactfully omitted from the principles account because they're inconvenient. Most trade takes place between apparently rather similar countries and often in very similar goods (with countries both importing and exporting cars, for example). The Ricardian comparative advantage story, with its focus on differing production possibilities and trade in different goods looks beside the point.

The trade texts also quickly discard the Ricardian model in favour of models that examine the effects of trade policy on income distribution (in the form of changing factor prices). It becomes easier to see in such models that being in favour of 'free trade' is also being in favour of a particular change in the distribution of income. That might lead one to think about whether that change is desirable in terms of social welfare and to the perennial question of how we judge whether a society is better off or worse off after any policy change.

If one throws into the mix, the effects of changes in the terms of trade (ie. a change in the relative prices of the goods a country exports compared with what it imports), it's even possible that total incomes fall for a country after free trade.


Comic relief
The logo of one of the typical whines of the right-wing propaganda machine that pretends that American universities are full of lefty profs indoctrinating the young.

So do these kinds of analyses reverse whatever 'indoctrination' took place earlier? (For 'indoctrination', you can substitute 'adherence to overly simple models learned early on'.) For some people who have the strength to think for themselves and not run with the herd, it could. Some are undoubtedly less susceptible to indoctrination than I was. But from my own experience as a student, I found that my value judgments about the outcome of 'trade liberalization' were somehow set very early on and I placed undue weight on the possibility of potential Pareto improvements. In other words, it was enough for me that total incomes might be likely to grow. It took a surprisingly long time to shake this off.

What I'm suggesting is that what we learn early on sets the framework for our thinking and that framework can get selectively reinforced by incorporating later learning into it. One more thing before I wind up this overly long note...

A well-known textbook author wrote to us that
One interesting thought that I would like to see checked out is that first year texts have more contact with the real world and less with the imaginary world of perfect competition and optimality than second year books that are usually highly abstract with most real world applications stripped away.
Clearly the abstraction just gets more extreme in senior undergraduate and in graduate level texts. As happens in any cult, the devotees are led step by step into a world of increasing craziness and detachment from reality, with those unable to stomach it leaving the group for other pursuits. 


But it seems to me that the "contact with the real world" in the first year texts is, to some extent, pernicious in itself. Perhaps in a bid to sell the 'relevance' of the theory while glossing over methodology, the micro principles texts try to make that connection too hastily. 


I think student should be told from the beginning that we are studying an "imaginary world" that they should, in no way, confuse with the real world. Instead, they have to think carefully about how or whether any of the imaginary worlds we'll construct on the board has relevance to the real one, and how we make that judgement. 
RH

Thursday, October 13, 2011

A Case Study in Plutocracy for the 'Occupy Wall Street' crowd

"What, me pay taxes?! Surely you jest! Heads, I win, tails, taxpayers lose!"

The Center for Public Integrity's iWatch News has a nice report today entitled "How an Obama fundraiser turned Oklahoma into a personal tax haven". The bagman in question is Tulsa billionaire George Kaiser (pictured above). It seems Kaiser has used every trick in the book to avoid taxes (the iWatch report links to a chapter in a 2001 book, The Cheating of America with details) while making piles of money. Yet when his investment in Solyndra, a firm making solar panels, went belly up, it was taxpayers who were on the hook -- for $535 million in loan guarantees. 

That's how plutocracies should be run, of course, and plutocracy's numerous hirelings heap scorn on the idea that things could be any different. But some people, like those in the "Occupy Wall Street" protests and their supporters, have other ideas of what a good society looks like...

RH

Monday, October 10, 2011

Corporate welfare: the case of the Spanish fishing fleet


In The Economics Anti-Textbook (pp.165-166), we briefly point to the on-going destruction of the world's fisheries, carried out at public expense. Here are some good new reports on the subject, looking at enormous EU subsidies to the Spanish fishing fleet (and misbehaviour by the industry). The source, the International Consortium of Investigative Journalists, is well worth keeping an eye on, given the dearth of investigative reporting in the corporate media.

RH

Saturday, October 1, 2011

Accounting for Pollution

An entry about the costs of pollution in Paul Krugman's blog yesterday had the title "Markets can be very, very wrong". Indeed. A point we wanted to make in The Economics Anti-Textbook was that, for all the talk about Pigouvian taxes and tradeable permits in the microeconomics texts, the textbooks spend little or no time pointing out that governments often don't actually impose the taxes the textbook says they should to improve efficiency.

Perhaps pointing out the obvious would raise 'controversial' questions (Why don't they use such taxes? Whose interests are served by allowing excessive pollution?). Controversy is something to be avoided in Textbookland, where the goal seems to be to maximize the share of the market and not annoy potential adopters of the textbook.

The paper Krugman was writing about was "Environmental Accounting for Pollution in the United States Economy", the lead paper in the August 2011 issue of The American Economic Review, the flagship publication of the American economics profession. The authors, Nicholas Muller, Robert Mendelsohn and William Nordhaus, attempt to compare the gross external damages caused by production in various sectors with the value-added in the sector that is traditionally measured in the national accounts. The idea is that the national accounts should measure the net output of a sector, so that external damages are netted out from the estimate of its value added to get "each industry's net contribution to national output" (p.1672). They conclude that "Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added." (p.1649)


A coal-fired power plant whose pollution damage exceeds the value of its output at market prices according to Muller, Mendelsohn and Nordhaus's paper

They remark (p.1672) that "this does not necessarily imply that these industries should be shut down." [After all, where would ordinary folk take their yachts if there were no marinas?!] "On a formal level, it signifies that a one-unit increase in output of that industry has additional social costs that are higher than incremental revenues. At an intuitive level, it indicates that the regulated levels of emissions from the industry are too high."

Krugman suggests that those opposing greater regulation of pollution are "operating from some combination of knee-jerk defense of the haves against the rest and mystical faith that self-interest always leads to the common good." The promoters of that "mystical faith" have huge resources and are engaging in a long-term campaign of ideological warfare in which the university campus is a key battleground. If you can stomach it, check out the website of "Students for Liberty", funded, it seems, by the usual suspects...

RH

Monday, September 19, 2011

Juliet Schor's Plenitude

Readers of The Economics Anti-Textbook will surely want to check out Juliet Schor's latest book, Plenitude: the new economics of true wealth. We made a number of references to Schor's work in The Anti-Textbook but this one (published also in 2010) was too recent to make it into our book.


I have added her book blog to the links on this page. Who can resist a blog that begins with this forthright statement?
I’m here to plant a stake in the heart of the Business-As-Usual economy and its bankrupt politics.
Not me!

For a neat graphic introduction, see this, or you can watch her lecture here...

RH

Wednesday, July 27, 2011

Economic education for kids, Tea Party style

By some marketing accident, a complementary copy of Bloomberg Businessweek arrived this week in the mail. With a shudder, my wife read me the following (from the 'Fun' section of the 'Companies & Industries section that was describing a variety of summer camps for kids):
Tampa Liberty School, hosted by Tea Party affiliate group The 912 Project, teaches [sic] 8-to-12-year-olds "the principles of liberty, free markets and limited government." Jeff Lukens, 53, whose day job is at an auto auction firm, will run this year's session. The first lesson will teach the campers the difference between European tyranny and freedom in America: After walking into a room that's "kind of dark and gray and austere ... [and being made] to sit down, be quiet and do what they're told ... we tell them, there's this other place you can go to called the New World," says Lukens. Once they've crossed an obstacle course representing the Atlantic, the campers arrive in America. "It's colorful, it's bright, it's cheery -- they get over there and we pop confetti in the air and it's a party," says Lukens. The kids later clean up the mess, so that they know "with freedom comes responsibility." Other lessons teach campers about the gold standard and that "our rights come from God, not from government," he says.
As Noam Chomsky likes to say, comment is superfluous.

RH

Tuesday, May 24, 2011

Contractionary policy in times of high unemployment: pain with or without a purpose?

I always enjoy having a look at the latest issue of The Economists' Voice, a unique e-journal of short articles, comments and letters.
   In the first issue of 2011, Barbara Bergmann has a brief letter about Brad DeLong's column "Pain without Purpose". In his piece, DeLong admitted that he could not understand why so many people in North America and Europe want to prolong high unemployment with contractionary policies. He writes:

when you listen to the speeches of policymakers on both sides of the Atlantic, you hear presidents and prime ministers say things like: “Just as families and companies have had to be cautious about spending, government must tighten its belt as well.”And here we reach the limits of my mental horizons as a neoliberal, as a technocrat, and as a mainstream neoclassical economist. Right now, the global economy is suffering a grand mal seizure of slack demand and high unemployment. We know the cures. Yet we seem determined to inflict further suffering on the patient.

   Bergman responds with the hypothesis that "The Pain Has a Purpose, Namely, Higher Profits". Here's an excerpt:

1. The business community has considerable influence on what governments do and don’t do.
2. Globalization has decreased the concern that managements of large corporations used to have for the well-being of the people in the high-wage economies.
3. The prolonged high unemployment is having the effect of putting downward pressure on wages in the high-wage countries. It is also increasing productivity, as the remaining workforce is being worked harder.
4. That will likely result in higher profits, both now and in the future.
5. The business community likes that.
Unfortunately, this seems like a plausible hypothesis.


RH

Dean Baker on the union maid

As I've noted before, unions get little attention in the micro principles textbooks. In the Canadian edition of Mankiw on my bookshelf, unions appear in one paragraph as a cause of unemployment. That's it.
   In contrast, Dean Baker has a nice column in The Guardian pointing out that the union membership of the maid in Dominique Strauss-Kahn's New York hotel might have been of critical importance in preventing her from becoming unemployed -- by giving her enough protection against arbitrary firing to make a complaint.

RH

Saturday, May 14, 2011

Economists and conflict of interest: the documentary "Inside Job"

I finally got a DVD of the fine documentary on the 2008 bubble collapse/financial crisis/recession Inside Job, whose website, incidentally, contains a wealth of information. (You can watch the movie for free on YouTube here.) It's very well done and, particularly if you're an American, you should make sure you see it and that your library has a copy.


The movie shows the deep corruption in the financial industry and, in turn, its corrupting influence on the political and regulatory system, with very costly consequences for the society --  nothing there was really new to me.
   What I wanted to note here, though, was what it had to say about the conflicts of interest that those economists have when taking money or other rewards while serving this corrupt system. The narrator says that the financial services industry "has corrupted the study of economics itself" (at 1:22:35 of the film). It asserts that academic economics played an important role in providing intellectual cover for the deregulatory movement that it claims played a role in facilitating greater risk-taking, and they got paid for it and for producing propaganda. Martin Feldstein, Frederic Mishkin, Glenn Hubbard, and particularly John Campbell, the chair of the economics department at Harvard, made a mistake when they agreed to be interviewed for the film. (Laura Tyson, Richard Portes and Larry Summers, among others, were smarter and didn't agree to be interviewed.)
   When the question of 'conflict of interest' comes up, Hubbard, the Dean of Columbia Business School says that when people do research they should disclose whether there would be a financial conflict and then (laughably) claims that "there would be significant professional sanctions" for failure to put such a thing in a paper, although he does not dispute that there is no policy in that regard. The filmmakers then ask Frederic Mishkin (Hubbard's colleague at Columbia Business School) about a paper he wrote (and was paid $124,000 to write), touting Iceland's "financial stability". He did not indicate in the paper that he was paid to write it. If there were "significant professional sanctions" applied to Mishkin, the filmmakers forgot to mention it.
  At 1:30 in the film, John Campbell, the chair at Harvard, declares that he sees no reason why faculty members should disclose who is paying them money for consulting, being on Boards of Directors, and so on. They come back to him at 1:32:30 and ask him a question that leaves him literally unable to reply. You have to see it for yourself, if you haven't already.

Ambushed

  But the influence of business on economists, particularly those in business schools, runs deeper than just who is getting paid how much to consult, write papers or serve on Boards. The institutions themselves wallow in corporate money and in Canada many of them have even sold their names to rich businessmen or companies. Are these places from which we can expect a critical analysis of the role of business in society?

RH 

Canadian Asbestos: tip of tail still wags dog

When writing my chapters in The Economics Anti-Textbook, probably nothing got me more worked up than the things I read about the murderous asbestos industry and the politicians-without-principle who cater to it, particularly the Canadian ones. Space constraints being what they are, I only wrote a page about it (pp.161-162), but I thought it made a good example of what happens when poor and asymmetric information meet Mancur Olson's dictum about how 'there is a systematic tendency for 'exploitation' of the great by the small' (p.111).
   Today, the CBC's website has a brief report in its 'offbeat' section (reserved for 'Man bites dog' stories) about The Daily Show's mockery of Asbestos, Quebec, a town with an asbestos mine.


The story also has some more serious information, noting how despite considerable opposition, the Quebec government last month approved a loan guarantee for the company running the asbestos mine, which will enable it to expand production considerably.

Mining Asbestos 
[image taken from The Mesothelioma Herald story reporting on the Quebec mine]

   The original CBC report, from 13 April, has a remarkable subheading in it: 'Opinions divided on asbestos' and states "Several studies have linked asbestos dust with cancer and lung disease. Its proponents say the product can be safely used when handled properly, and under certain conditions." Several studies?! Writing this suggests that perhaps the finding of a link is preliminary and not overwhelmingly established. (Some facts about mesothelioma can be found here.) And who are "its proponents"? It tactfully doesn't say that they are just that scourge of the modern world, industry flacks who will say anything for money.


RH
 

Wednesday, April 13, 2011

"Everyone has an ideology" - Krugman

I liked Paul Krugman's blog post today, "Everyone has an ideology". (We say the same thing about what an 'ideology' is in the Anti-Textbook, p.42, actually.) The word is routinely misused as a term of abuse for whoever has an ideology the speaker or writer doesn't like.


Workin' on the chain gang, Georgia 1941

   In his hypothetical example about selling contracts for prisoners to work for corporations as slaves ("indentured workers"), that would actually be legal under the US Constitution. The 13th Amendment, added after the Civil War, reads, in part:
Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
 So slavery has not actually been abolished.

RH

Thursday, April 7, 2011

A case study in externalities, corporate power, and citizen resistance

As yet another term of lectures draws to a close, I have the familiar feeling that there's not been enough time to 'cover all the material'. This is a common objection to using something like the Anti-Textbook in a course: 'there's no time to do what's even in the text!'.
   There's some truth to that, of course, if you really want to try to lecture about everything in a 300-450 page text in one term. Such an objective almost guarantees that it would be hard to do that and to comment on it critically and to get students to read beyond the text.
   One way to economize on class time is to get students to do something outside of it. They could listen to (or watch) a case study that draws themes together and would provide a basis for some discussion in class or a short written assignment. While driving home from an evening class tonight I listened to CBC Radio's Ideas, that featured a superb 50-minute episode called 'Saving Salmon'. (It can be heard here.)
   The broadcast consisted of a wide-ranging interview with Alexandra Morton, a biologist who lives on the north end of Vancouver Island on the west coast of Canada and who has made a career of studying killer whales (or orcas). Because the whales eat salmon, she learned about the wild salmon, and then when the corporate-owned ocean feedlots of farmed salmon appeared, she learned about them and the many external costs that come along with them, including the damage they do to wild salmon. Then she learned about the political power of the (mostly Norwegian) corporations that own the salmon feedlots, and more broadly about the power of big business lobbies that would be happy to see the wild salmon gone so that rivers can be used for other things like dams and pollutants. Then she had to think about how to organize resistance to the politicians whose inclinations are to serve the destructive corporate animal...
  

Alexandra Morton and some orcas, Vancouver Island
(from her website)

The account was told with such clarity and eloquence that, for me, it brought the scene alive and drew together in a powerful and memorable way a set of themes (such as pervasive externalities, corporate political influence, informational problems and citizen ignorance and disorganization, and the possibilities of resistance) that all economics students should be thinking about. It's a great case study. I'll write about another one soon.

RH

Wednesday, April 6, 2011

Where has The Economics Anti-Textbook been selling?

Tony and I recently got a report from Zed about sales of The Economics Anti-Textbook up to the end of September 2010. There were a few surprises, I thought.

Location                                         Hardcover                  Softcover

Europe                                                    9                           197
UK                                                          9                           502
USA                                                       23                          316
Rest-of-World (incl. Canada)                    0                           832

I would not have expected UK sales to exceed those in the US, although the book was released some months later there by Palgrave Macmillan, so perhaps that accounts for it.

Hardcover sales (intended for libraries) are less than I would have expected, but a quick check through our library catalog system shows the book is currently in 157 libraries so far, mostly libraries in universities and colleges, but also public and national libraries. So perhaps those were added after September, or libraries are buying the cheaper paperback.

RH

Sunday, April 3, 2011

Corporate crime pays

If you had any doubts about that, read Ed Vulliamy's report in today's Observer: "How a big US bank laundered billions from Mexico's murderous drug gangs". Here's a few paragraphs from this long report:
More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.
"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.
The conclusion to the case was only the tip of an iceberg, demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.
Naturally, no Wachovia executives went to prison for these trifles.


With financial services provided by guess who

   Economics students will be relieved to know that authors of the mainstream money and banking texts, embarrassed at having neglected to discuss the grim facts of rampant money laundering, corporate crime and sleazy off-short 'tax havens' in their texts to date, are planning whole chapters on the subject in new editions. 


   Just kidding.


RH

Saturday, April 2, 2011

Elizabeth Warren on avoiding regulatory capture

One of the things we griped about in The Economics Anti-Textbook was the lopsided nature of economic power which spills over into the pollution of the political system, all dutifully ignored by the standard textbooks, except in one place. There's typically some brief discussion of how regulatory agencies trying to deal with monopoly power have a tough time because they can be 'captured' by those they are trying to regulate.
   This now-you-see-it-now-you-don't treatment doesn't damage the overall impression students take away of the absence of business power and how one might possibly think of the economy as if it consisted of a lot of perfectly competitive markets. But it fits nicely into a subtext of 'governments often screw up and make things worse' that starts with the examples of government 'interference' in competitive markets.
    An interesting case study to watch will be the evolution of  The Consumer Financial Protection Bureau, located within the Federal Reserve System. Quoting from the NY Times summary of it, the Bureau
was created in response to complaints about deceptive or abusive practices by banks, credit card companies and mortgage brokers. The issue rose in prominence after the credit crisis of 2008, when thousands of Americans lost homes they had bought under mortgages they had either not understood or been misled into signing.In its official language, the bureau was created to "implement and, where applicable, enforce federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent and competitive.

   Elizabeth Warren, a law professor at Harvard, is the interim head of the Bureau. Recently I read Paul Krugman's comment "Elizabeth Warren is not Jesus", and read his link to Yves Smith's Naked Capitalism blog entry "The Elizabeth Warren Rorschach Test". Smith writes that 
The Administration was keen to get her inside the tent to neutralize her. The fact that the Wall Street Journal and some quick-trigger Republicans are doing their thuggish best to intimidate her should not be mistaken an indicator that she has become effective despite the odds. It has far more to do with their pettiness and paranoia than with her ability to escape the shackles this Administration has put on her.
    For various reasons, I've never heard Warren speak (aside from her illuminating appearance in Michael Moore's Capitalism: A Love Story). So this snowy April morning, I settled down in front of the computer to listen to something longer, in this case, her Mario Savio Memorial Lecture given at UC Berkeley last November.


   Warren's lecture (which starts at minute 26 followed by a question and answer) was deeply impressive. Her ideas about how to design a regulatory agency from the beginning to make it hard to capture were really interesting and must frighten those who make large profits by ripping people off. No wonder their hirelings are yapping at her heels.
   Warren also strikes me as someone that it'd be mighty tough to "neutralize". Paul Krugman's right though. She's not Jesus; she's better than Jesus, who after all made all kinds of fake claims about the product he was selling. She doesn't put up with that kind of thing.


RH

Friday, April 1, 2011

A glimpse of how nuclear industry bosses think

As the mess at Fukushima gets slowly worse and worse and more leaks out about Tepco's lying, cost-cutting and ignoring of safety requirements, we've seen the debate about the future of nuclear energy heat up too. I was reminded of investigative reporter Mark Hertsgaard's book, Earth Odyssey: Around the world in search of our environmental future (1998), in which he has a memorable account of a conversation with a "top executive" in a nuclear company.

   Hertsgaard brought up with him the thorny issue of safely isolating the enormous and growing quantity of radioactive materials "from ecosystems and human contact for a period of time equal to the known length of human civilization" (p.144). He'd been assured by others that there were all kinds of great solutions to this ten-thousand-year problem. Then he writes (p.145):
And if the industry's certainty about nuclear waste storage turned out to be wrong, so what? "To me, it's the craziest thing," another top executive told me, referring to the many governors, legislators, and average citizens who had declared their states off limits to nuclear dumping in the late 1970s. "Neither they nor their descendants are going to be there at the time when anything could conceivably go wrong. If you do a halfway decent job of disposing of [nuclear waste], it's at least a few hundred years before anything could go wrong, and they won't even be there then."
  And the nuclear industry wonders why people don't trust it.
RH

Friday, March 25, 2011

Samir Amin reviews 'The Economics Anti-Textbook' and '23 Things They Don't Tell You About Capitalism'

Samir Amin recently wrote a review (that appears here, and originally here) of The Economics Anti-Textbook and Ha-Joon Chang's 23 Things They Don't Tell You About Capitalism, a book that I'm just starting to read now. It was certainly nice to read Amin's first sentence: "Every honest economics teacher absolutely must make the book written by Rod Hill and Tony Myatt ... compulsory reading for their students, fed almost exclusively on the conventional textbooks that are prescribed reading."

Samir Amin

Amin's essay contains many of his own observations about how both books could have gone further, and is well worth reading.


For an introduction to Ha-Joon Chang's book, you can listen to him giving a talk about the book's themes here.

RH

Tuesday, March 8, 2011

The Uncut Movement

Perhaps something interesting is about to happen to challenge the quiet system of tax avoidance and evasion that has been allowed to develop in recent decades around the world. I think it's fair to say that this system has been studiously ignored in the economics textbooks at all levels -- something that I will try to document in the near future -- and it gets little play in the corporate-owned media, naturally enough.
  In a recent article in The Nation, Johann Hari (who writes for The Independent in London and for Slate.com) describes how UK Uncut came about. The concept has since spread to many places: there's Canada Uncut, US Uncut, Australia Uncut, among others.
  What I like about this new 'Uncut' movement is that it's not just opposing regressive cuts to public spending, but it's pointing to where the money is that isn't being paid to public treasuries to support public services. After all, the plutocracy doesn't like paying taxes and have been quite skillful in avoiding doing so. Naming names and taking public action might prove quite effective.
  In the USA, Warren Buffet and his companies might be a good target. In a recent piece, "Warren Buffet wants your taxes", the indefatigable David Cay Johnston (author of Perfectly Legal and Free Lunch, great books about corporate plunder of the public purse) writes "Legendary Omaha investor Warren Buffett loves stuffing tax dollars into his pockets, which means that money never gets to schools, police, and libraries." Johnston then details how Buffet uses accounting tricks and lax regulation to pocket tens of millions in corporate income tax revenues that should be paid to government.

Propaganda for the suckers

RH

Saturday, February 26, 2011

Why should students put up with textbook nonsense about labour unions?

The heating up of the class war in Wisconsin (nicely described by Paul Krugman in his recent NY Times commentaries and that generated this great spoof phone call from the Buffalo Beast that outed "Koch whore" Gov. Scott Walker) prompts a brief comment about the textbooks' treatment of labour unions.




 Protesters in Cairo Madison

[Photos from The Chicago Tribune]


   As we wrote in The Economics Anti-Textbook, "unions get a 'bad press' in mainstream economics textbooks" (p.173). This is partly because the default model of the labour market is the usual one of perfect competition, so employers have absolutely no market power over the wage. When a labour union is introduced into such a setting, it appears as a source of unopposed monopoly power and students have been already been persuaded of the evils of monopoly in their study of product markets.
   As Michael Parkin and Robin Bade write in their 2006 Canadian edition of Microeconomics, "Just as a monopoly producer can restrict output and raise price, so a monopoly resource owner can restrict supply and raise the price of the resource. Labour unions are the main source of market power in the labour market." (p.413). No evidence is provided for this assertion, naturally; I can't really imagine how this could be measured in any reliable way, but it clearly neglects the simple fact of pervasive employer power in actual labour markets. [For details, see the Anti-Textbook, p.187]
   Unlike some texts, Parkin and Bade do discuss a monopsony model, in which the employer has market power, although (as with almost all texts that mention this model), they marginalize it by defining it in a very narrow way: "a market in which there is a single buyer", a market type that "is unusual, but it does exist" (p.416). They go on to present a brief discussion of monopsony and unions. They write: "If the union (monopoly seller) faces a monopsony buyer, the situation is called bilateral monopoly. In bilateral monopoly, the wage rate is determined by bargaining." (p.417).
   But wait! Students who are alert and thinking for themselves could realize that wage determination by collective bargaining is not "unusual" at all. So employers' market power over the wage must not be unusual either. Perhaps, such students might conclude, unions are just exerting 'countervailing power' -- to use the term coined by the most famous Canadian-born economist, John Kenneth Galbraith, whose name does not appear in Parkin and Bade's book.


John Kenneth Galbraith, at home in Cambridge in 1995. (The Boston Globe/ File)


   Parkin and Bade's treatment of labour unions looks good in comparison to Mankiw, Kneebone, McKenzie and Rowe's Principles of Microeconomics (3rd Canadian edition, 2006) where labour unions get mentioned in only a single paragraph in a 500 page book. That explains only that unions can achieve "above-equilibrium" wages through the threat of a strike. Monopsony and employer power over the wage are concepts omitted from the book.
   I suspect that it will be the rare student who escapes the subtle (or not so subtle) indoctrination here that labour unions are not socially desirable. Not all books, however, are this bad.
   For example: Frank, Bernanke, Osberg, Cross and MacLean's Principles of Microeconomics (3rd Canadian Edition, 2009) has a detailed yet concise description of the actual effects of labour unions, concluding that "studies suggest that union productivity may be sufficiently high to compensate for the premium in union wages. So even though wages are higher in unionized firms, these firms may not have significantly higher labour costs per unit of output than their non-unionized counterparts." (p.373).
    In their Microeconomics in Context (First US Edition, 2005), Goodwin, Nelson, Ackerman and Weisskopf not only discuss monopsony and bilateral monopoly, but they write: "More common are cases of oligopoly and/or oligopsony (few buyers) in labor markets. In many labor markets the employers, employees, or both have some amount of market power, and their relative power is important in predicting outcomes." (p.314).
   These few examples suggest that there are significant differences in the textbooks' treatment of the nature of labour unions and their economic effects. Now how can the situation for students be improved?
   The simplistic story of consumer sovereignty -- where producers just produce what the consumer wants -- does not work here. The consumers are the students, not the professors who (believing themselves benevolent dictators) choose their texts. But the dictatorship of the professoriate is not necessarily a benevolent one.
   Dissenting students really have two choices: exit or voice. With exit, they give up on economics courses and study other subjects. With voice, they complain and try to make things better. Up until now, I suspect that 'exit' has been the option of choice. It's easier and requires no organization, but it does little to improve the situation and those students who exit miss out on the real benefits of studying economics.
   The process of much mainstream economics training from first year to PhD has too much in common with being drawn step by step into a strange cult. At first, it all seems innocuous enough, but then it gets progressively weirder (with more and more people dropping out) until those left at the end find themselves seeing the world in a way that seems like lunacy to those outside the cult. ("A dynamic stochastic general equilibrium model of the macroeconomy? Makes sense to me!")
   One of the reasons we wrote The Economics Anti-Textbook was to help students to see the kind of subtle indoctrination they were being subjected to by the typical mainstream introductory text and to protect themselves against it. But they can also use it for 'voice', to challenge their professors' choice of text.


RH