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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.