politics and methodology: alternative teaching resources

"Pyramid of Capitalist System"

We at Anti-Mankiw are no strangers to the idea that politics shapes economists' theories about how the world works. Unlike Mankiw, who regularly asserts in his textbook an ideal-type of "observation, theory, observation" method of economic science, the fact of the matter is that how we view the world often shapes our evaluation of the facts of that world.

Perhaps in no other place in economic theory is this fact more true, and thus more dangerous, than in the Marxian vs. non-Marxian (or neoclassical) theory of distribution. When Marx argued that the source of all wealth is the laborer and that surplus value, or profits, were taken from the laborer by the capitalist, neoclassical economists replied with a theory of distribution asserting that capital earns its fare share of the output, too.

The neoclassical response in the late 1800s offered a new theory, or new way of looking at the world. This subsequently helped shape how all neoclassical economists thought about the source of profits: instead of seeing them as fundamentally sourced from workers, these economists saw capital and entrepreneurs simply getting their fair share of the pie -- represented by the marginal price of capital multiplied by the marginal physical product of capital, or the value added by capitalists to production. This victory was a major one for capitalists because it essentially legitimated their control/monopoly over the means of production, which is really the main role capitalists play.

No more explanation for all the profit was necessary! And the political consequences were indeed severe. For one, the neoclassical response to Marx came in the 1870s, when labor militancy across Western Europe and America was reacting to a rapidly growing capitalist power in politics and the workplace. And the political victory is felt even up to today: even when compensation starts to be outstripped by worker productivity as it did in the 1970s, neoclassical economists could simply ignore it because in their baseline model, workers get what they put in, and so does capital. The rest was just minor details.

Why do we mention this now? Because Fred Moseley from Mount Holyoke College has written an excellent introduction to the neoclassical theory of distribution as well as some ways to critique it for an introductory- or intermediate-level class. Find it here. We highly recommend checking it out and trying it out in your own classes!

advanced pedagogical techniques: introducing the topic of exploitation

"The Intimately Oppressed": How to talk about exploitation in the classroom

 A few years ago, in a conversation one of us had with a fellow graduate student, the issue came to surface of how to approach certain issues that have become a mainstay of the mainstream curriculum over time. We were specifically discussing the issue of how easy it is to fall into the so-called "markets in everything" trap -- whereby you start thinking about how markets for everything from organs to healthcare could solve most of the problems of social inefficiency. But the issue is much more general than that, and exposing that generality is the topic of this post.

So when one of us was discussing how to approach the "markets in everything" issue, which is really quite widespread among the blogosphere (particularly Marginal Revolution, which has made a type of blog series out of the idea... but Greg Mankiw is also guilty of perpetuating the idea, not surprisingly), our friend made the point that, why not start from the other direction, and work your way back? Instead of beginning with the idea that everything should be marketized, begin from the idea and theory that nothing should be marketized, and then ask what would qualify something to be marketized. That is to say, we should expose students' inherent repugnant feelings about a market for body parts or healthcare from the start, and then work backward from there, adding in markets as a qualification of the general argument that commodification should not exist. (In fact, if you think historically, this is actually the way in which the debate occurred -- we didn't start out with a fully marketized society and we only got there from peeling off various layers of social-institutional control!)

It's simple, and it works remarkably well. Furthermore, such a logic can be applied to other ideas which are not easily raised in the classroom, such as the issue of class or exploitation. By starting with certain ideas of exploitation that are more easily recognizable to students (such as the treatment of women in the workplace vs. men), it becomes easier to identify general principles of exploitation that may be applied to workers.

Talking about how women have traditionally been discriminated against in the workplace is a clear example of exploitation. Or talking about how, when they were first integrated into the industrial labor force in the early 1800s, they were pulled from both directions -- into the home because of preconceived notions of women's place in a private sphere; and out to work because of the need to make enough money to feed their children and support their family; all the while not being allowed to vote -- shows vividly how gender norms shape capitalism and employer behavior more generally. The continued persistence and use of racism after formal political freedom had been established by emancipation is another example of using the tools of race or gender to strike at ideas and issues of class exploitation.

Similar arguments can even be made for immigrants. Here is an example of how one of us has incorporated gender into a story of industrial capitalism. We have found that through doing so, it then becomes easier to talk about exploitation in the workplace more generally, because now students have seen how management policy has affected women workers. It is just a small step (really!) from that point to then talking about workers in general.

Sports Stars Versus Business "Stars"

Mankiw links to a Ken Rogoff piece that asks why people seem to have no problem with star athletes pay versus supposed star-CEOs and private business executives.   Mankiw, while not explicitly stating so, appears to agree with Mr. Rogoff. 

The argument is nonsensical for a few big reasons.  First, it assumes that people don’t think superstar athletes are overpaid.  Informal evidence suggests otherwise. Second, athletes are not generally paid millions for leading his or her own team’s failure. Third, athletes, while not always the pinnacle role models we wish them to be, have never contributed to the disintegration of an economy while simultaneously leading the perversion of our democracy -- controlling special interest lobby groups on one hand and begging for government bailouts on the other.

There are differences. Equating 'stars' in the sports industry to the top private sector businesses simply doesn't make sense.

we know what we're protesting

This Crimson article by Harvard undergraduates Rachel Sandalow-Ash and Gabriel H. Bayard from November 2011, addressing the fundamental issues underlying the Occupy Ec 10 movement, did not get nearly the amount of attention that it deserved. Published about a week after the walkout on Mankiw's class, very few sources on the walkout linked to it, instead choosing to focus on the open letter and Crimson editorial(s), which were good, but not very carefully articulated.

We think the exclusion of the Bayard-Sandalow-Ash piece is very unfortunate. The articles which Greg Mankiw chose to cite in this New York Times article "Know What You're Protesting" did not accurately portray the types of issues that most people who chose to walk out have with his course. It would have done more for discourse around the issue if Mankiw had actually spent time dealing with the substantive attacks, instead of largely arguing past the protesters.

For example, Mankiw chose to concentrate his Times article on the argument that economics is mostly a tool, not an ideology. In other words, Mankiw sees the standard introductory economics curriculum as introducing the student to a scientific framework in which students can approach any kind of problem related to public policy or current events. This is a very familiar argument to those of us who have taken an economics course or two -- the idea that we're equipping ourselves with tools to go out and change the world. Too bad those tools are stained with ideology. Let us explain

The issue which Sandalow-Ash and Bayard rightly point out is that the frameworks Mankiw presents are themselves value-laden and politically motivated. So while the efficiency-equity tradeoff seems to offer an analytical framework in which government intervention can be "objectively debated", underlying the framework is a market-centered approach that fails to point out how a more equal society, through promoting stability and long-run health, can help to promote efficiency. And though Mankiw goes to some length to present a consensus among mainstream economists about core issues such as the adverse effects of minimum wages and free trade in his book, both historical experience and a growing literature on these topics have already successfully taken on seemingly-unobjectionable tenets of neoclassical theory.

Overall, we strongly suggest you take a look at the piece by these two very intelligent and socially conscious Harvard students. This is where the Occupy movement's critique is truly located.

anti-mankiw links - or, the defense of manufactures

The other day Professor Mankiw linked to a piece by Christina Romer in the New York Times on why manufacturing should not be subsidized by government policy.

On one hand we can see why this might be a smart policy: manufacturing is past us, isn't it? The U.S. has increasingly moved into smarter, faster sectors of growth like technology, finance, and higher education. The last thing we would need, argue economists such as Romer and Mankiw, is a return to 60s-era economics.

On the other hand, as Jeff Madrick observes in the NewDeal 2.0 blog, manufacturing is only seen as dead because we don't necessarily know what a smarter, leaner, and more efficient manufacturing sector might look like. What is the contradiction between smart technology and good manufacturing jobs? Once upon a time, there wasn't any such clash. But as competition for cheap labor and a variety of factors overwhelmed businesses in the 1970s, "low road" policies were inevitably taken which compromised quality for productivity and low wages. Finance, Madrick notes, took manufacturing's place as the key driver of growth -- and what has that gotten us in the last 40 years? High inequality and relatively stagnant growth and living standards.

Manufacturing -- potentially with a focus on green technologies at the frontier of certain frontiers of economics growth -- can itself become a hotbed of innovation. As Madrick notes, "Isn’t [manufacturing] where the scientists and engineers are? Don’t we learn and innovate by doing? One commentator recently said that those innovations are exploited by others, so it doesn’t matter. Really? Then maybe we should stop promoting R&D altogether." Research and development is key to a vibrant economy. There is no reason to halt our attempts at strengthening them.

A similar point regarding the potential dynamism and value added of the manufacturing sector can be found in the debate which took place in the Economist last summer between Ha-Joon Chang and Jagdish Bhagwati over this same issue. (Chang won the debate). Chang makes an interesting point in his rebuttal to Bhagwati's scepticism about "manufacturing fetishism" which we will end on, here:

Take the case of the Netherlands. Unbeknown to most people, it is world's third largest agricultural exporter, despite having little land (it has the world's fifth highest population density). This has been possible because the Dutch have "industrialised" agriculture by, for example, deploying hydroponic agriculture (growing plants in water) that uses computer-controlled feeding of high-quality chemicals—something that would not have been possible if the Netherlands did not have some of the world's most advanced chemical and electronics industries. In contrast, despite being the world's second most high-tech exporter (measured by the share of high-tech products in manufactured exports), the Philippines has only $2,000 per person income because it makes those products with other people's technologies.

Overall, we at Anti-Mankiw definitely think that the promotion of manufacturing could be an excellent way to revitalize the economy. How the government (or other branches of the state) does so is a different point -- but let's not relegate such an important source of a country's material wealth to the trashbin too quickly!

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keeping your head above water: anti-mankiw links

If someone is being "overpaid" here, it surely isn't workers

There are multiple things wrong with Professor Mankiw's recent post about comparing public and private sector employees by compensation.

First of all, the title of the post, "Are federal government workers overpaid?" is misleading. We usually say that someone is overpaid when they are contributing less than they are being compensated. But the CBO report is examining compensation differentials, which is a different issue. The problem is complicated by the fact that public sector workers are engaged in activities (such as education or security) which have clear positive externalities on society, so it's even more difficult to talk about being over or underpaid. (Are the participants in the securitization of bad loans over or underpaid?) It's clear what Mankiw is actually trying to accomplish in his post, and we at Anti-Mankiw can assure you that it has nothing to do with accurately conveying economic research.

Second of all, the report is only for workers in the federal government. In this excellent report by John Schmitt at the Center for Economic Policy Research it was found that state and local government employees are actually paid less than their private sector counterparts, after controlling for observable characteristics (similar to the methodology in the CBO report).

Finally, if a dynamic analysis were performed (i.e., examining the trend of wages in each sector over the last 30 to 40 years), readers would quickly realize that there are more pressing issues at play here. The most important of which may be the fact that wages for both public and private employees have been stagnating since the 1970s. Sure, public employees may have been paid more (according to the study from which the above graph is pulled, however, even that is a contested issue), but the story is more like: private sector wages are falling behind as public sector wages struggle to keep above water. Comparing with the elite 1% over the same 30, 40 year period, you see the drastic explosion of inequality that is the main subject of public debate today. In short, Mankiw is really doing a disservice to the more pressing macroeconomic issues by choosing to focus on whether one sector is more compensated than the other.

Here is another, similar report on this issue ("Public and Private Sector Workers Are in This Together") which focuses on college graduates: http://vox-nova.com/2011/03/17/public-and-private-sector-workers-are-in-this-together/.

Hardly a rosy picture -- for either public or private sector workers. Someone definitely seems to be overpaid here, but it's not workers!