Wednesday, January 09, 2008

Mainstream economics under attack for not being left-wing

Some anti-consumerist magazine recently called Greg Mankiw, a Harvard professor of economics, a propagandist because he teaches the mainstream version of economics, neoclassical economics, which, apparently, is right-wing propaganda. This is of course the same thing as saying that a professor of biology who teaches evolution is a left-wing propagandist. In other words: when science doesn't support your particular view of society the science must go.
According to Mankiw, if a problem persists, it can only be for one of two reasons: the market is imperfect, or it is inexistent.
Neoclassical economics is value-free. It's mostly concerned with efficiency: how to allocate scarce resources without creating waste. One way to do this is through competition, which is a sufficient condition for efficiency. Competition may not always be perfect but free competition is perfect enough when resource allocation is based on price signals i.e., the market mechanism. When scarce resources are not wasted more goods and services are going to be produced. Even if you're a redistributionist you should appreciate this efficiency because it allows for more redistribution than a system that doesn't create wealth.

About pollution (a negative externality):
But the problem is that, to the amazement of his students, Mankiw never mentions self-restraint, and downplays government regulation as a way to regulate production and diminish consumption or waste.
Again, economics views this from an efficiency point of view. Because of imperfect property rights it may be economical, from a producer's point of view, to pollute. People are seen as utility-maximizing individuals and producers are no different. Mankiw downplaying government regulation may be simply because government regulation might make things much worse since governments are not well aware of all the costs associated with regulation.
Neoclassical economics can in fact help explain how an increase in demand for "green stuff" can make it possible for producers to profit from being green. This profitable self-restraint is caused by consumer behavior that's based on voluntary exchange of goods.
Also, the very notion of “need” is absent from Mankiw’s text.
I haven't read Mankiw's textbooks but I doubt they are much different from, say, Varian's. I'd be surprised if Mankiw's textbook didn't mention utility and indifference curves, both based on individual preferences.
Also, Mankiw downplays inequality, even if the growing gap between rich and poor in the US over the last decade has commanded the attention of more and more American economists, even within the mainstream.
I don't see how this is relevant. A society can be well-off, everyone can have an access to free education and health care even if the rich are a billion times wealthier than the poor. Pleasing some petty, envious and greedy people who are unable to feel good about their own lives for as long as someone else is making more money than them is not economics.
Each year, tens of thousands of students go out into the world, with Mankiw’s biases as a roadmap to the future. But we know that the neoliberal agenda is more and more disputed outside universities. And within universities, alternative textbooks are flourishing.
Yes, and that scares the shit out of me. It's like creationist textbooks taking over books that deal with evolution from a biological point of view. Economics is one of the few social sciences that has, so far, been able to guard itself against bias and fanatic left-wing idiotarianism.

This label calling for students to "Download this warning label and glue it to orthodox economics textbooks" is particularly alarming and - humorous:

Economics based on efficient allocation of scarce resources is in fact the only suitable system for a planet facing ecological limits.

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January 10, 2008 3:18 PM  

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