Monday, April 18, 2022

 


Mankiw's Principles of Microeconomics:
Chapter-by-chapter commentaries

As part of the World Economics Association's Textbook Commentaries Project, I've started writing a series of commentaries, one on each chapter of the most recent US edition of Mankiw's micro principles text. The first eight chapters are currently posted with more to follow. Their goal is to provide students with some assistance in thinking critically about the text if they find it assigned to them.

Not surprisingly, the themes from The Microeconomics Anti-Textbook come in handy here, but there are also specific things to be said about the rhetoric and the content of this particular book. One thing that has surprised me is the lack of accuracy here and there – things that should have been weeded out of a book in its ninth edition by an author with no lack of resources for research assistance and accuracy checking. The Commentaries have to stick to important themes, rather than take up space and the reader's patience with what might appear to be nitpicking, but here's an example.

Many economics graduate students will be familiar with Ronald Coase's famous 1974 essay "The Lighthouse in Economics". He examines the way in which the lighthouse has sometimes been portrayed in economists' writings as a pure public good without actually looking into the institutional detail of how lighthouses operated. (Reminder: a pure public good is a good where many can benefit from it without reducing the benefits received by others, while no one can be compelled to pay for the good - the use of the light in this case . This leads to the conclusion that public financing of the good would likely be necessary to try to have the correct amount of it.) 

Mankiw includes a Case Study section, clearly inspired by Coase's essay, entitled "Are lighthouses a public good?" Writing of 19th century England, Mankiw says: “Instead of trying to charge ship captains for the service, however, the owner of the lighthouse charged the owner of the nearby port. If the port owner did not pay, the lighthouse owner turned off the light, and ships avoided that port.” Mankiw gives no source for this, but it bears no resemblance to anything in Coase' exhaustive description of the British lighthouse system. 

Coase explained that in England in the 19th century, the “role of the government was limited to the establishment and enforcement of property rights in the lighthouse. The charges were collected at the ports by agents for the lighthouses”. At the ports, not from the ports. Lighthouse owners did not turn off their lights as part of a negotiating process with shipowners or anyone else. “In Britain. no negotiation has been required to determine individual charges and no lighthouse keeper has ever turned off the light for this purpose” (Coase, The Firm, The Market, And The Law, University of Chicago Press, 1988, p. 212).

RH





 



The Macroeconomics Anti-Textbook: out this fall

The publication of the long-awaited companion volume has been announced on the website of Bloomsbury Publishing! Updates will follow here.

RH

Friday, October 8, 2021

The Microeconomics Anti-Textbook – production continues


 Just a brief update; the end is in sight. The index is being prepared so I will have the tedious task of trying to check it and fix it up. The copyright date has been changed from 2021 to 2022, but the Canadian Amazon website says that December 16 will be the release date. I've been told nothing officially yet by the editors at Bloomsbury.

While many of the anti-text parts of the chapters have been substantially rewritten, probably the major change is the scrapping of the old Postscript on the financial crisis (which seems a long time ago now). It has been replaced with a new Postscript on 'A case study of climate change and the textbooks'.

RH

Saturday, July 17, 2021

The minimum wage – a different perspective

Peter Baker's long essay "How much is an hour worth? The war over the minimum wage" originally appeared on The Guardian's website in 2018. I happened to listen to it last night on their Long Reads podcast, as it was being repeated.

The new edition of the Anti-Textbook updates the examination of the minimum wage, including the debate on the effects of a $15 minimum wage in Seattle, but I realized on listening to the podcast that the discussion fell entirely into the framework that is shared by almost all economists studying the question. This focuses on a narrow set of questions dealing with how hours of work change and whether workers end up with higher paychecks when the dust has settled.

The point that Peter Baker makes is that a broader question is being overlooked. It is nicely encapsulated in a couple of quotes that he gives near the beginning and the end of his essay.

When the minimum wage was being introduced in the United States under Franklin Roosevelt's administration (long after it had been initially introduced in New Zealand and Australia), Roosevelt had this to say in 1933: “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” Baker writes that Roosevelt "openly declared his desire to reshape the American economy by driving out 'parasitic' firms that built worker penury into their business models." (I know, it is almost unimaginable that an American president could have said and thought such things, but those were very different times.)

Then at the end of his essay he returns to this theme: "I met with Kshama Sawant, the socialist economist who [as a member of the Seattle city council] had been so instrumental in passing the $15 wage." Baker writes that "her most impassioned argument wasn’t about the studies [of the effects of the change in the minimum wage in Seattle]– and it was one that Roosevelt would have found very familiar.

“'Look, if it were true that the economic system we have today can’t even bring our most poverty-stricken workers to a semi-decent standard of living – and $15 is not even a living wage, by the way – then why would we defend it?' She paused. 'That would be straightforward evidence that we need a better system.'”


Seattle Councilmember Dr. Kshama Sawant




Thursday, July 8, 2021

The Microeconomics Anti--Textbook is in production


I finished correcting the first draft of the page proofs a few days ago, so things are proceeding at last. I will post an update once I know when the book will be in print. The index has not yet been created, so more work remains to be done.

RH