Sunday, December 18, 2011

an A for ideology, an F for technique

In this article Greg Mankiw describes the argument behind a New York Times opinion piece written by Yoram Bauman, of "10 Principles of Economics, Translated" fame. The thrust of Bauman's thesis is that economics majors, by drilling ideas about incentives, private property, and self-interest into their heads for their classes, are thereby trained to be more selfish. It is supported, supposedly, by evidence showing how the economics majors were less likely to contribute to two charities presented to them when registering for classes.

Greg Mankiw doubts this implication of Bauman's findings. Mankiw basically takes issue with the following quote from Bauman's article:
You may question whether these groups actually serve the common good, but that’s mostly beside the point. Regardless of the groups’ actual social value, a purely self-interested individual would choose to free-ride rather than contribute; after all, a single $3 donation is not going to make a noticeable difference in tuition rates.
Mankiw, in criticizing this passage, makes a fair point: the supposedly positive externalities of any public good do need to be carefully examined and analyzed, even for small values of contribution, and someone with a social science background, particularly economics, may be well-equipped to do so. They might be less willing to dole out cash to a random charity, but their education is put to use in other ways that are beneficial to society.

While Mankiw may have a point, we at Anti-Mankiw strongly disagree that Bauman's essential claim that economics is ideological evaporates in the face of Mankiw's criticism. In fact, published studies have been done on surveys of students who have successfully completed an introductory course to economics in which the mainstream view is presented without any critical perspective, and these studies offer an interesting take on how ideology matters in the classroom.

The findings? The majority of students 6-12 months after taking such a course recall most quickly the normative aspects of the course but are relatively less able to solve simple problems related to these ideas (to see how they might work or not work in practice). Ideas like "taxes are bad for efficiency, though not for equity", and "prices not set by the free market lead to welfare losses and are therefore undesirable" are common, but give them a question to solve on calculating consumer surplus, for example, and they cannot deliver. These are consistent with our own experiences in teaching introductory courses offering a mainstream view, and indeed, on a certain level makes sense: most cases, you may just get the main point of an argument and not necessarily the details behind the argument. But nevertheless, it's presented as an argument, and therefore not of course the only perspective!

[See Bartlett, Ferber, and Green's "Political Orientation and the Decision to Major in Economics" in International Review of Economic Education; and Faravelli's "How Context Matters" in Journal of Public Economics for two resources. These ideas were also reflected on based on a correspondent's current dissertation research which we are not allowed to cite openly.]

The lesson learned?  That market-centric views and market-centric efficiency criteria are at the center of any policy evaluation of a student, leaving no room to discuss how efficiency is not a scientific concept. (See this article by Rick Wolff, entitled, "Whose Efficiency?" which does a great job of breaking down the different models. Duncan Kennedy and Frank Michelman also have a nice piece as well entitled "Are Property and Contract Efficient?".) Second, it is highly questionable whether an intro course "enlightens" the student in the way Mankiw believes it does. Admittedly, part of the problem here is with education itself -- how we train our students and so on -- but Mankiw, writer of the currently most successful textbook, is therefore part of the problem, not the solution.

It's a short step from this final point to the idea that a better economics textbook -- which either clears away the ideological content and works more like the seminar room or offers a critical approach that draws on many different worldviews (or both) -- is just on the horizon...

Wednesday, December 14, 2011

anti-mankiw links; or, education and income inequality -- in which direction does the causal relationship go?

In this article from a few days ago, Mankiw links to a post which suggests that increased education, particularly graduate school training, is a way of lessening income inequality in the U.S.

How does Greg see the relationship between education and income distribution? For him, increased opportunity, fostered through more education, leads to gains in an individual's productive potential. This does not necessarily imply, for him, that education will automatically lead to gains in income -- just that the potential for gains will be increased. This view is reflected in this article from his blog.

But what if the causal mechanism actually goes the other way -- i.e., from economic backgrounds and economic inequality to human capital growth? That is the story behind this Crooked Timber article and the associated New York Times article it quotes. A collection of other works questioning the role of education as an engine for social mobility can be found here, at the Legal History Blog.

When "class matters" to human capital accumulation, we are, all of a sudden, in very different territory -- not just because financial resources become important -- but because of the disproportionate impact the rich have on democratic institutions (an argument which, we believe if push came to shove, Mankiw would not disagree with).

But, thankfully, it is not unfamiliar territory. As education theorists have known for decades, economic elites have a disproportionate impact on the educational system in terms of funding and also in terms of influence. A classic in this line of literature is Bowles and Gintis' Schooling in Capitalist America, which argued that classrooms operate as training grounds for an obedient and productive workforce. The Bowles-Gintis theory of human capital seems to be supported by more recent discussions on the importance, or lack thereof, of creativity in the classroom (via MarginalRevolution). Though Tabarrok is a libertarian, we are certain he would agree with a corollary of the argument advanced in his article that educational policy (influenced by elites with political power) promotes a docile student body.

In summary, there seems to be two main ways in which one can view education and the "human capital" question. One may view education as a source of increased opportunity for a productive workforce. On the other hand, one may think that the problem lies in economic inequality and its egregious influence on educational institutions -- which means that more education will not address the problems of inequality in society and that it may in fact promote such problems. Let us not forget that there is, historically or cross-sectionally, no unidirectional relationship between the average education of a society and economic inequality!

We at Anti-Mankiw believe that more attention should be placed on this latter issue, given that there is more convincing evidence of that thesis.

Monday, December 12, 2011

rodrik on occupy ec 10

Responding to the issues surrounding the Ec 10 walkout, highly acclaimed development economist Dani Rodrik weighs in on the particular question of the ideological content of mainstream economics here.

We at Anti-Mankiw are glad to see the debate moving past the difficult-to-support claim that mainstream economics is not political, or that Mankiw's ideology is "not at all obvious". As we tried to emphasize in a previous article, a key sign of an ideological approach, especially in economics, is when space is not opened up to a critical analysis of the economy.

We are hoping that Mankiw can begin to address the most important question behind the walkout, namely, why any group of students would choose to walk out on a course that has (in theory) so much potential for enriching discourse on the economy. Thankfully, Rodrik suggests to us an entrypoint. His premise is the vast set of  policy proposals often invoked in economic theory. As he states succinctly here:

Indeed, though you may be excused for skepticism if you have not immersed yourself in years of advanced study in economics, coursework in a typical economics doctoral program produces a bewildering variety of policy prescriptions depending on the specific context. Some of the frameworks economists use to analyze the world favor free markets, while others don’t. In fact, much economic research is devoted to understanding how government intervention can improve economic performance. And non-economic motives and socially cooperative behavior are increasingly part of what economists study.

It is not clear to us how Mankiw's particular assumption set -- i.e., his 10 principles -- makes him immune to Rodrik's point. Aren't they just another assumption set, chosen by a professor with certain political aims? The weakness in Mankiw's approach is in the level of critical analysis that takes place in discussing economics. And why should introductory students at Harvard be spared of learning about the tools necessary for critique? Rodrik continues:
Now let the reporter go undercover as a student in the professor’s advanced graduate seminar on international trade theory. Let him pose the same question: Is free trade good? I doubt that the answer will come as quickly and be as succinct this time around. In fact, the professor is likely to be stymied by the question. “What do you mean by ‘good?’” he will ask. “And good for whom?” 
In other words, economic policy proposals are much more nuanced than Mankiw seems to present. (A similar argument could easily be made for recent economics work on minimum wages.) And if we were to add such nuance, this does not necessarily make things to difficult to grasp. At UMass, we ask these kinds of questions to our undergraduates: we ask them how different efficiency criteria might change ones policy proposal, and we question the foundations of a hedonistic approach to economic theory. While such discussions admittedly require sources outside of the standard textbook, there is no need to go "too far" for a solid discussion of these issues. They are definitely in the reach of first year students.

We'll let Rodrik have the last word here:
Applied appropriately and with a healthy dose of common sense, economics would have prepared us for the financial crisis and pointed us in the right direction to fix what caused it. But 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.
That's right. Contrary to what Mankiw might say, there is much that students can learn about the financial crisis which would come from a different approach to introductory economics. Let's not speak so condescendingly of them!

Wednesday, December 7, 2011

anti-mankiw links; or, the dangers of technocracy

On his blog and in his New York Times articles, N. Gregory Mankiw has slowly but carefully advanced a position which is critical of fiscal expansion. He has given a variety of reasons for his position. These include: fiscal responsibility provides more certainty for investors in determining the future potential of economic growth; as well as observing that the short-sighted character of most politicians leads them to underestimate how difficult an unbalanced budget can be to get out of in the long run.

In presenting these views to the public (i.e. in terms of his rhetoric), Mankiw has often said that he's demonstrating a centrist view of the issue -- evidenced, for example, by his signature on the Simpson-Bowles plan which garnered the support of people on the left and right. Deficit reduction is just simple economics, according to him, because we need investors to stay confident in the strength of our economy.

But deficit reduction is not that simple and focusing on it during a recession might not be the best option. Indeed, the argument that deficit reduction sustains confidence does not hold up. The correct argument for deficit reduction actually seems to be something a bit different: namely, that it can potentially reign in overzealous spending at a time when the economy can afford to do so. That is the gist behind this report by Arjun Jayadev and Mike Konczal entitled "The Boom, not the Slump". In that article (which was referenced in a blog post by Paul Krugman) they work through a few case studies which analyze the timing of austerity measures vis-a-vis movement in some of the economy's broad indicators to show that the case for austerity is weak. And on the other hand, as the Great Depression and World War II showed us, the standard argument for deficit spending in the case of recession has much stronger empirical support.

Still, even when Mankiw's "confidence fairy" argument falls, can he rely on a sound logical footing for his argument? The Jayadev and Konczal paper suggests at first glance that he can't. That is to say, the "sound" economics of Mankiw is really just ideology dressed up as science. In this interesting Monthly Review piece, Marcello Musto applies that exact idea to Europe. Simply put, technocratic discourse is sometimes laden with violence against anyone willing to speak out against the "science" of economic thinking. The result, at least in Europe, is one of the most acute forms of class warfare.

As Musto himself puts it:
The separation between economics and politics that differentiates capitalism from previous modes of production has reached its highest point.  Economics not only dominates politics, setting its agenda and shaping its decisions, but lies outside its jurisdiction and democratic control -- to the point where a change of government no longer changes the direction of economic and social policy.
Introductory economics should start off with a very simple idea: be immediately distrustful of anyone you see (especially elites) presenting the "consensus" view within the economics profession as the "right" policy platform. And, indeed, this is the type of "apolitical" discourse that can end up being the most lethal kind for workers or other groups with less power in the economy.

Thursday, December 1, 2011

Mankiw on the Consensus View Within Economics

Mankiw often likes to tout the view that there is vast agreement in the economics profession over most of the major economic issues. In chapter 2 of his textbook, for example, he argues that while most economists differ on normative claims in economics (i.e., what ought to happen), there is widespread agreement about its positive claims (i.e., what actually happens). He often cites various polls of economists in support of his argument. His most recent cite is here.  Another one here. Another one here....  It's almost as if he's not only trying to convince the public that economists largely agree on everything; he's trying to convince himself.  

There are, however, a few problems with how his argument is made.  

1. It's easy, though misleading, to cite sentence-long themes framed in a specific way and obtain consensus - it's much harder to dig into the details and find the same level of agreement.   For example, the statement "If the federal budget is to be balanced, it should be done over the business cycle rather than yearly" might get 85% support among polled economists, but one wonders whether, if the question were asked "how" or via "what mechanism" etc., the agreement would be drastically reduced.  This piece by Arindrajit Dube leads us to reflect on the idea that if the survey questions were framed differently or according to greater detail, they might reflect a growing consensus within economics that minimum wages do not necessarily have a significantly negative impact on employment. Other examples abound.

2. It's easy to get consensus if you only ask people who agree with you. I'm not suggesting that no members of the AEA or other academic economists polled have any heterodox inclinations (for example John Kenneth Galbraith was actually president of the AEA in 1972), but when the vast majority of economics departments and its institutions are run by and for mainstream economics, and when heterodox economists are so marginalized from the profession that they may not even be a part of mainstream professional institutions, you are bound to get the mainstream response.   All you've really proven is that on some things there exists agreement among mainstream academic economists only.    Additionally, if you only ask American economists, the skew is even greater because the United States has some of the least academic support for heterodox thought.   A good example of this fact is the story of how a whole heterodox department is forced to close its doors. Expand this to business economists and financial economics experts who may not call themselves 'academic economists' but who, nevertheless, are prominently featured in policy circles and mainstream media outlets, and the skew could get even wider.

3. Perhaps the most important point is that agreement does not make you right. When groupthink is set as a priority above seeking the truth, that in and of itself suggests there is a fundamental problem within the economic profession. And that, at the end of the day, is the direction Mankiw would have mainstream economics continue to travel - a conglomeration of brainwashed groupthinkers who close their eyes to any alternative dialog that might challenge their worldview.