Download introductory economics: tools for clear thinking, or

INTRODUCTORY ECONOMICS: TOOLS FOR CLEAR THINKING, OR IDEOLOGICAL INDOCTRINATION?
Eric A. Schutz Rollins College Winter Park, Fla.
October, 1988
For presentation at the Valencia Community College conference on "The Introduction
to College Economics: Are We Attaining Our Goals?", Orlando, Fla., Oct. 20, 1988. I
am grateful to my colleagues at Rollins College for many helpful discussions on the
subject of this article -- and of course, accept full responsibility for the
particular thoughts offered here. Comments would be appreciated.
Introductory Economics: Tools for Clear Thinking, or Ideological Indoctrination?
Eric A. Schutz
Marx's analysis that labor is exploited to provide surplus value to a class of
capitalists bent on expanding capital was a danger to the ruling classes, especially
after the industrial proletariat, responding to the development of capitalism's
productive forces, began to gain consciousness of itself as a class. This growing
challenge, conciously perceived, stimulated bourgeois theorists to fashion analyses
of capitalism that would absolve it of sin. These analyses, Marx stated, were
mystifications [that made it] doubly difficult for others to understand what was
actually going on within the bourgeois mode of production.
John G. Gurley, "Marx and the Critique of Capitalism", in
Albelda, Gunn & Waller, Alternatives to Economic
Orthodoxy, p. 289.
The structure of thought [that these analyses still] expound was long ago proved to
be hollow. It consisted of a set of propositions that bore hardly any relations to
the structure and evolution of the economy they were supposed to depict.... The aim
of teaching was to build up a screen to prevent students from glancing [in the
direction of Marx]. This was reinforced during the McCarthy period by the fear of
being suspected of dangerous thoughts. Thus the academics were anxious to present
the economy in a pleasing light and did not care to examine it to see what it was
actually like....
The most pertinent question to ask is: What characteristic of the private
enterprise system is it that condemns the wealthiest nation the world has ever seen
to keeping an appreciable proportion of its population in perpetual ignorance and
misery?
The professional economists keep up a smoke-screen of "theorems" and
"laws" and "payoffs" that prevents questions such as that from being asked. This
situation is, I think, inevitable. In every country, educational institutions in
general, and universities in particular, are supported directly or indirectly by the
established authorities, and whether in Chicago or in Moscow, their first duty is to
save their pupils from contact with dangerous thoughts.
Joan Robinson, "The Disintegration of Economics", in
Albelda, Gunn & Waller, Alternatives to Economic
Orthodoxy, pp. 60-67.
What Robinson and Gurley are saying in the above quotations may be a
little difficult to swallow. I'm sure that few of us who teach economics would
honestly say that our "first duty" to students is to prevent their entertaining
"dangerous thoughts" about the nature of our economy. Indeed most of the teaching
economists I've known in my own experience, regardless of their particular political
leanings, have seen themselves as practitioners of a fundamentally "subversive
activity". Whatever our views and pedagogical styles, most of us believe ourselves
to be followers of the Socratic tradition: we feel at our best in the classroom when
we are helping people think critically about things, in ways that they seldom have
opportunities for outside of academia. We believe we have accomplished our highest
goals when our students depart from us with new attitudes and skills that may
ultimately "subvert the status quo" by helping them become active in "changing the
world for the better". But Gurley and Robinson are right, for there is a particular
set of "dangerous thoughts" that most teaching economists in the U.S., most of the
time, do consistently deny their students' considering in any significant way:
critical leftist views and analyses of the nature of our economy are, in fact,
systematically slighted in classroom economics, even by many who might be convinced
of the intellectual legitimacy of such analyses. And when the gap formed by omission
of these alternative analyses is filled in with a focus on other matters, the result
is truly a"smoke-screen".
Especially in the introductory economics courses, many concientious teachers
feel obligated to teach first and foremost a "mainstream" of economic thinking
that, because it is the most widely used set of "conceptual tools", is believed
also to be the most useful one for clear thinking on any political viewpoint to
which such tools may be applied. Since ours is a "positive" and
not a "normative" science, many believe that we must, in all honesty and humility,
leave it to others -- the political science, sociology or philosophy teachers -- to
discuss in any depth concerns like those of the critical "fringe" of our discipline.
The most that economists can legitimately contribute is our own particular set of
"tools" -- and of course, the earnest hope that these may be helpful to others for
the resolution of the great social issues. Yet the left "fringe" argues that it too
has a "set of conceptual tools" -- different, of course, but nonetheless quite as
intellectually elegant, logically rigorous, and firmly based in reality as those of
the mainstream. If that's true, then the left can legitimately ask, why are these
particular tools, equally helpful for understanding social issues, not also taught?
There is, of course, the argument that leftist views and analyses are on the
"fringe" of our discipline precisely because they are not truly legitimate by
purely intellectual criteria: that's why concientious economists have no business
promulgating them before young and impressionable minds that are not yet facile
with the "legitimate" tools of our discipline. In upper-level college and graduate
school courses, leftist ideas are less systematically omitted from students'
consideration -- especially in such courses as History of Economic Thought and
Comparative Economic Systems. Once in a great while upper-level students may even
be exposed to sympathetic treatments of these ideas, e.g., in courses with titles
like "Critical Views on the American Economy" or "Radical Political Economics". If
little or no significant consideration is given leftist ideas in the introductory
courses, then that simply reflects the conclusion -- amply available for
demonstration in upperlevel and advanced courses -- that these ideas have, in fact,
been long
discredited: introductory course students would themselves come to exactly the same
conclusion were they to go further in their studies in economics.
But we are, in effect, making decisions for introductory course students,
particularly those who are not economics majors, that in principle they ought to
be allowed to make for themselves -- for it is not clear that they would, with
further study, find leftist ideas to have been at all "conclusively discredited".
Anyone who manages to keep his/her head through the ups and downs of political
fashion, and who does not simply kow-tow to the
intellectual "authority" of Harvard, M.I.T., Chicago and U.Va. knows that there has
been, for over a century now, an on-going and increasingly widely-attended arqument
over these ideas the world over. The anti-capitalist and socialist movements in
Europe, the Soviet bloc, and throughout the Third World are in no sense "dead", nor
even "dying", repeated prophesies to the contrary notwithstanding. Certainly the
economic analyses that form the intellectual underpinnings of these movements are
far from being considered "intellectually illegitimate" in a portion of the world
that is, face it, quite sizeable. The simple fact that there is such an argument
going on, albeit largely outside the confines of "economics as taught in the U.S.",
ought to alert us, as it does many of our upper-level and advanced students
themselves, to the possibility that leftist views and analyses may actually be
leqitimate alternatives to our "mainstream".
If one critically accepts that possibility, then it is difficult to avoid
6urley's and Robinson's conclusion that economics as usually taught in the U.S. is
essentially an ideological "smoke-screen" -- and particularly so in our introductory
courses, the vast majority of whose students never get even the least opportunity to
ponder what might lie behind it. Of course, we don't feel
as if we are functioning as the "ideologues" or "propagandists" in some "grand
conspiracy" to distract students from thoughts that might be dangerous to our
"cause". But the actual outcome of our work is essentially the same, for most of us
certainly do systematically omit any deeply critical leftist views and analyses from
our introductory courses. We may not be a part of any "conspiracy" to omit these
ideas, but nonetheless as graduates of the institutions in which teaching economists
are properly "certified" for their work, most of us are at least dimly aware of the
various processes, both within and outside of academia, by which the omission is
accomplished: people associated with the left "fringe", and the ideas they submit
for broad discussion and propagation in their discipline, do in fact seem to get
"screened" from both graduate and under-graduate institutions and curricula. Thus,
for example, were "the leftists" booted from positions in economics at Harvard in
the 1970's, over the vociferous protests of such colleagues as Kenneth Arrow, J.K.
Galbraith, and Wassily Leontief. Thus too are such "alternative" ideas as the
Kaldor-Kalecki theory of aggregate saving & consumption omitted even from mention in
most macroeconomic theory at both the under-graduate and the graduate levels,
despite having been "empirically verified" no less conclusively than any of the
mainstream theories. The people and ideas of economics are the very medium in which
we ourselves circulate, and most of us have at least some inkling about how, as a
social medium, it works: it is no accident that our field has shunned leftist views
and analyses like the plague. If terms like "smoke-screen" and "ideology" seem a
little harsh as descriptions of what we end up giving our students, then that does
not essentially change the actual color of our product, and we are after all,
wittingly or not, classroom ideologues:
ideologue -- an advocate of a given ideology; especially, one of its
official exponents.
ideology -- the body of ideas reflecting the social needs and aspirations of
an individual, group, class, or culture.
[Macmillan Contemporary Dictionary, my emphases].
What is it exactly that is being omitted from our introductory curricula? The
various schools of the left "fringe" contrast most clearly with both the
conservative and the liberal currents of mainstream economics in their consistent
and careful concern with matters having to do with social class and the
distribution of income and wealth. In the mainstream these matters either are
largely ignored -- again, "positive" scientists refrain from critical reflection on
things better left to others -- or else they are addressed only half-heartedly and
with a set of preconceptions many of which have been long considered in other
disciplines to be, at the least, debateable.
Briefly, the mainstream argues that the "market" or "private enterprise" system
-- either with significant government help (in the liberal view), or without it (in
the conservative view) -- is the best conceivable kind of economic system there is,
and in the long historical term, the only feasible one as well. It follows that the
distribution of income and wealth, privilege and power, that arises in the course of
this system's development is either (a) ultimately the best possible distribution,
or else if not, then (b) never to be corrected by any means that would significantly
alter the "normal functioning of markets", regardless of whether such correction
might conceivably be more just, conducive of social harmony, or even "efficient". It
is because of this that leftists see mainstream economics as a social "ideology":
the message it conveys to people is that there simply can be no question about
whether their society's privileged and/or ruling classes have any right to such
status.
Because mainstream economics is so enamoured with the private enterprise
system, it more or less consistently conveys a real underestimation of the viability
of alternative economic structures -- not to mention their possible desireability -especially, of course, those structures instituted in the advancing socialist world.
Thus it is a rare introductory text that even mentions the enormous improvements in
literacy, health and life-expectancy that have occurred in major parts of the
socialist world whose long-term prospects along these lines were at one time dim at
best. Which of several different major alternative paths of development might
succeed in those countries whose prospects are still dim today is apparently not an
issue. Preferring to focus on the various "allocative and decision-making
inefficiencies" common in the various socialist economies, introductory texts ignore
whatever dynamic and distributive efficiencies the history of these economies might
conceivably have demonstrated. They are indeed anxious to cast the particularly
American (and to a lesser extent, the Western European) development experience in as
pleasing a light as possible -- their eagerness in this effort sometimes even
leading to simple logical errors of analysis:
If the Soviet Union is to achieve its objective of surpassing the United
States, its economic growth rate must be twice our own. In other words, because our
GNP is twice the GNP of the Soviets, only if their growth rate is twice the size of
our own rate can they increase their GNP as much as we do.
[Gordon & Dawson, Introductory Economics, 5th Ed., p. 68]
(The authors of this one have assured me they will correct it in their next
edition.)
The particular structures by which income and wealth are distributed in the
private enterprise system are, in introductory economics, taken to be simply "the
way it must be, now and forever". Thus the classical economists'
taxonomy of incomes -- wages, rent, interest, and profit -- is seen as a taxonomy of
functionally appropriate private incomes. Among introductory economics texts, it is only
in the most "rigorous" or "high level" ones -Samuelson's, or Lipsey & Steiner's -- that
any brief mention is made that these classifications are just as applicable to public
income as to private. That an advanced and democratically constituted government might,
for example, appropriate all of a society's land rent, as in Henry George's view, is
apparently inconceivable by the larger lot of introductory textbook authors. Even in the
more "rigorous" introductory texts, the private appropriation of "property-incomes" -rent, interest and profit -- is argued to be functional for an "efficient allocation of
resources", by enabling explicit market prices to guide the social use of land, capital
goods and entrepreneurial services. There, by means of the best that "high economic
theory" can bring to the understanding of such matters at the introductory level, it is
repeatedly demonstrated that other possible modes of allocation are "unambiguously" less
efficient -- despite profound, and by now widely understood difficulties with the very
notion of "allocative efficiency".
The major lot of introductory textbook authors either ignore the whole issue of
private property-incomes, or else advance the notion, considered quite groundless by a
great number of their colleagues in other disciplines, that these incomes are
"deserved" on account of the valuable "services" their recipients perform. That
private land-owners receive rent in return for absolutely nothing is obscured by
elaborating on the "economic rent" received by the likes of star athletes and licensed
city cab-drivers, or by carefully considering the temporary "economic rent" that the
people in the private enterprise system generously forego to "technological
innovators". Private
contributors of capital are said to "deserve" their interest-income on account
of their "postponing present consumption" -- god rest their philanthropic souls! -and since the competitive rate of profit is simply equivalent to the interest-rate,
it too is merely the "time discount-rate on the utility of future consumption"
(whatever that might be). Monopoly profit is clearly bad, but on the other hand
apparently not very significant: monopoly power never lasts very long, and is
furthermore relatively unimportant as a source of great accumulations of personal
wealth (even if virtually conclusive and widely-known empirical evidence exists to
the contrary). Mostly such fortunes are urged to derive from the temporary "economic
profit" that is the proper reward for valuable new ideas and bold risk-taking, and
has nothing to do with any privileged or fortunate access to either investible
capital or legislative clout.
Thus the only questions about the distribution of income in our economy that
are considered of any interest in most introductory texts are: (1) whether
employees ought to be allowed to form labor-unions; (2) whether women and blacks
are discriminated against in pay and hiring; (3) how the poor might be given
welfare in a way that doesn't diminish the useful work they might perform for
society (how to get useful work out of landlords and coupon-clippers in return for
their incomes is, of course, not an issue); and (4) whether we ought to have a
progressive income-tax (the possibility of significant wealth and inheritance
taxes or property-income tax-surcharges is generally not discussed). Even some of
these issues, certainly not at all themselves unimportant, are ignored in quite a
few introductory economics texts.
Nor are these dubious attitudes on the subject confined solely to the
microeconomic analysis of income per se: they are reflected quite clearly also in
the mainstream introductory textbook treatment of macroeconomics as well. There
again we find the mainstream enamourment with private enterprise.
Thus "saving", for example, is something done only by private individuals: that
three-fourths of total private sector saving actually consists of business savings
is ignored -- in favor of extended laments about the low saving-rate of households.
"Investment", on the other hand is done only by private businesses: that government
spending of tax revenues is functionally equivalent to the private investment of
savings funds is generally not noted, even by liberals who are otherwise careful to
argue elsewhere the public good of democratically constituted government activity:
corporations invest, government merely "spends".
The possibility that the distribution of income and wealth in our economy might
be an important matter for consideration in macroeconomics is apparently a
completely alien notion. For example, most introductory texts note that household
saving-rates are directly related to household incomes, yet few point out that the
aggregate "mpc" and "mps" are therefore functions of the degree of equality of the
distribution. Seemingly unaware of the clear implications this has for such
"theories" as that of the supply-side tax and welfare-spending program, even the
more rigorous of the introductory texts carefully focus instead upon the household
consumption/saving "choice" as a matter of "permanent income maximization" or of
"life-cycles" in the behavior of aging individuals. And the rest of the texts seem
unaware that the "theory" of supply-side fiscal policy itself has anything to with
redistributing income to the already wealthy: macroeconomic policy is always
assumed, "for analytic clarity", to be "neutral" in its effects. Thus the
disproportionate impact of
tight money on small business owners and employees, widely publicized during the
early Volcker years, is ignored as irrelevant to the predominant concerns of macro
theory. Similarly, on the matter of government spending deficits, instead of noting
the obvious redistributive impact of the concentrated personal ownership of
government debt among the wealthy, most of these texts focus upon the "crowding out"
problem, or the inflationary effect of monetizing the debt, or even the increasing
ownership of it by foreigners. And of course, where such matters are noted, it is
presumed to be quite clear that nonetheless the benefits of economic growth in the
private enterprise system do always and consistently "trickle down" to the nonwealthy classes.
Again, even the simplest kind of errors sometimes follow from these
attitudes. Consider this one:
Borrowers usually gain from rising inflation. Since the redistribution
caused by inflation generally benefits borrowers at the expense of lenders, and
since both lenders and borrowers can be found at every income level, we must
conclude that... CiJnflation does not always steal from the rich to aid the poor,
nor does it always do the reverse.
[Baumol & Blinder, Economics, 4th Ed., p. 1041
Anyone familiar with the distribution of wealth knows that statistically both
lenders and borrowers are not "found at every income level": net lenders are
predominantly wealthy, while net borrowers are predominantly not (i.e., the
distribution of household financial net worth is grossly skewed), and rising
inflation does therefore systematically redistribute from the rich to the poor. (Why
else would it be that in popular politics conservatives are generally distinguished
from liberals by their concern with fighting inflation rather than unemployment?) If
macroeconomics seems like a mess in these confusing times, then it's partly this
sort of thing that makes it so: the ideological
"smoke-screen" we conjure up for our students sometimes ends up confusing even
ourselves!
Such confusion may be the worst of the effects of omitting deeply critical
reflection from the field of economics generally, for economists are not only
teachers but also counselors whose advice can often help color the political and
cultural tones of whole decades. Thus when President Carter lost the election to
Reagan by having alienated the vote of many traditionally Democratic lower-income
groups, it was partly due to the tight money policy that had been put in effect by
his Federal Reserve appointee Paul Volcker: someone had probably conveyed to him the
notion, widely held by economists at the time and certainly still mostly taught
today, that a major.advantage of attempting a tight money approach to the problems
at hand was the "neutrality" of its effect on various social classes. At the same
time, the way had already long been paved for what would prove to be an
embarrassingly easy acceptance of the Reagan "supply-side" program -- by the
widespread and largely uncritical adherence of U.S. economists to the "trickle down
theory" of how our system works.
Is the ideological bias of mainstream economics in the U.S. "inevitable", as
Joan Robinson asserted in the quotation with which I began this paper? I would
argue that it is not. Elsewhere in the capitalist world -- in Japan, France, even
in some of our more politically oppressive Third World allies' countries -critical leftist ideas are routinely taught alongside "orthodox" economics to
students at all levels. This may well reflect some deeply rooted "cultural",
"political" or "historical" differences between those societies and ours, but it is
no less also the product of conscious and deliberate decisions made by individuals
all along the way. Just as our own popular political
lexicon has shifted so far to the right in recent years that someone like Michael
Dukakis can brazenly be called "out of the American mainstream", so too can the
academic "mainstream" be expanded over shorter or longer lengths of time by
individual people committed to doing so.
Precisely what individual teachers of economics in the U.S. can do to help
make our discipline something better than an "ideological smoke-screen" is pretty
clear. First and most obviously, introductory economics teachers can simply begin
introducing their classes to critical leftist ideas alongside those of the
mainstream. Appropriate economics texts that consider these ideas more or less
adequately are scant, of course, but here are four that I've used myself at various
times:
Robert Carson, Economic Issues Today, 4th Ed., St. Martin's Press, NY,
1987.
Tom Riddell, Jean Shackleford & Steve Stamos, Economics, 3rd Ed., AddisonWesley, Reading, MA, 1986.
Samuel Bowles & Richard Edwards, Understanding Capitalism, Harper & Row, NY,
1985.
E.K. Hunt & Howard J. Sherman, Economics, 5th Ed., Harper & Row, NY, 1986.
These are listed in ascending order of "radicalness": Carson's book (which is also
available in macro' and micro' "splits") gives an equal balance to
conservative, liberal and radical views and analyses on a variety of particular
issues in economics, hence provides an excellent alternative to mainstream
supplemental "issues" texts. Riddell, Shackleford & Stamos offer an eclectic but
consistently critical coverage of both standard material and "contemporary issues".
Bowles & Edwards' book is a "New Left" analysis of the U.S. economy today -- offered
as a main text for introductory economics courses, it presents the material as "the
textbook truth" with exactly the same forcefulness as
mainstream texts do their particular "truth". And Hunt & Sherman provide yet another
similarly forceful text from the perspective of the "Old Left". Any of these books,
depending on the structure of one's introductory course curricula, can be used
either as a stand-alone textbook, as a main text to be supplemented with other
material, or as a supplement to another main text -- I've tried all of these
approaches with more or less success. Teachers should, however, especially if they
are new to leftist ideas, take care in selecting from among these texts -- they each
take very different pedagogical approaches and advance very different sets of
"leftist views".
Second and more importantly, since what we are able to teach competently in the
introductory courses is primarily a distillation of what we've learned at a more
"rigorous" level, teachers can make an effort to become versed in leftist analyses
beyond the level of the introductory texts listed above. There is, believe it or
not, an enormous volume of reading available that advances leftist views and
analyses -- though college libraries often are not well stocked with it. The
introductory texts listed above all have excellent bibliographies, and most of the
material they cite as "outside reading" is as appropriate for teachers as it is for
students of economics. "Comparative" readings, i.e., those that specifically detail
leftist analyses in contrast with the mainstream, are particularly helpful for
teachers in this regard. For people totally unfamiliar with such sources, as good a
place as any to begin might be
Randy Albelda, Christopher Gunn & William Waller, Alternatives to Economic
Orthodoxy, M.E. Sharpe, Armonk, NY, 1987.
Third and perhaps most difficult, once committed to introducing leftist
ideas in their courses, teachers must begin developing pedaqoqical approaches
and styles in the classroom that are appropriate to the expectations of both their
students' and themselves. Students in these conservative times, especially economics
students, are nearly always reluctant even to hear critical leftist views, much less
to be "held responsible" for achieving some understanding of them in their courses.
The variety of reactions they have when confronted with these ideas is enormous -ranging from true disbelief or a reflexive "political sloganizing" on the one hand,
to excitement or "anger at the whole world" on the other. Thus most teachers are
naturally abashed at the very thought of spending any significant time on these
ideas in the classroom.
Teachers should bear in mind, however, that while students may have little real
"material" interest in leftist ideas -- indeed many believe that even discussing
such ideas may be destructive to their careers -- they nonetheless do have great
intellectual interest in them: students are, like other human beings, both
fundamentally curious and deeply concerned to understand their world and the
particular place they have in it. Thus even teachers who themselves have trouble
believing in the legitimacy of the critical left can always deal with it as simply a
set of ideas and nothing more. There's no question that especially for such teachers
this is difficult, for in reality, particularly from the viewpoint of academic
intellectuals, no idea is merely "an idea". But bear in mind that that's partly why
such institutions as those in academia exist in the first place: to provide a space
in which people may come to the particular kind of understanding about things that
occurs when, suitably detached from pressing concerns and interests, they are able
to reflect dispassionately upon each others' ideas. Academia may well be a place
where "ideology is promulgated", but it is also a place where people are invited to
question any and all particular versions of "the Truth". Bear in
16
mind too that few leftist economists have any trouble teaching mainstream economics
alongside their own versions of "what the truth really is" -- indeed they are more
or less consistently asked to do so in most of the courses they teach. Certainly
this must be difficult for them -- but they do it nonetheless, and presumably with
no greater difficulty ultimately than "mainstreamers" might have teaching leftist
ideas alongside theirs.