Tom Green in Adbusters....
I don’t care who writes a nation’s laws – or crafts its advanced
treaties – if I can write its economics textbooks.
— Paul Samuelson
If you’re a business undergrad, the introductory economics course is a prerequisite – no way to avoid it if you want to get out with that degree. Maybe you figure the course won’t be all bad. After all, you’d like to understand how the economy works, how it affects your future. Climate change is on your mind, and you know rising greenhouse gas emissions are linked to economic growth. You’re also concerned about social justice, whether free trade will lift people out of poverty or whether it’s a race to the bottom. You want your economics course to help you deal with these issues.
Scenario 1: Faced by over a million North American undergrads in 2007
“You’ll need to memorize 1001 supply and demand curves, be able to regurgitate stuff for the exam that you know is wrong,” warns the second-year student as you hand over your cash for his tattered text, “It’ll put you off economics for good.” You brace yourself for the worst.
Flipping through Paul Samuelson’s Economics, you see that it was first published in 1948, and you wonder how they can teach from a text that had already celebrated half a century in print before the new millennium rang in. Samuelson, now in his nineties, has handed over the pen to Nordhaus, who put out the eighteenth edition. (Even for those students whose introductory textbook isn’t written by Samuelson, there’s a good chance they are pretty hard to tell apart. Since Samuelson helped rewrite large parts of economic theory, his textbook inspired dozens of copycats.)
Introductory microeconomic theory rests on the idea that individuals are perfectly rational and seek to maximize their “utility.” Samuelson admits that utility is a construct that has no basis in psychology; although he uses the terms ‘consumer’ and ‘individual,’ his model is built around a fictional character that critics have dubbed Homo economicus. This economic man (yes, he is male) never had a childhood, never has children, has never depended upon a caregiver and does not have anyone he provides care for. He only experiences well-being by consuming. He is rational, selfish, a psychopath.
Economists must never question whether Homo economicus’ consumption actually makes him happy. They assume he isn’t influenced by hundreds of billions of dollars in advertising or the purchases of his neighbors. If Homo economicus buys something, it gives him utility; his consumer sovereignty must be respected.
Relying on Homo economicus excuses us from tackling difficult questions about how real individuals, groups of citizens or members of families actually seek to find happiness. The framework within which he acts excuses us from troubling ourselves with the distribution of wealth, since utility comparisons between individuals are not allowed. In other words, neoclassical economists will say they cannot comment on whether a millionaire or a pauper would get the most utility from a handful of coins.
Samuelson’s Economics wastes few pages before introducing us to the profession’s magic wand: the word ‘assume.’ The typical economics professor will have already made six implausible assumptions before their students have digested breakfast. To use the word is to signal that we are about to enter into a neverland with features warped as needed to fit into an elegant mathematical model. The next time you hear it, ask what would change if ‘assume’ were replaced with ‘pretend.’
The weakness for basing models on unrealistic assumptions could be a harmless intellectual pastime, equivalent to solving Sudoku puzzles. But these flimsy models are used by economists to formulate policies believed indispensable to solving society’s economic woes. These policies are then flogged to politicians and corporate leaders. Rarely mentioned are the original assumptions that might limit the application of these policies in the real world.
If Samuelson’s book has one take-home message, it’s that societies must promote economic growth now and for all time. With growth, we are all better off. Without growth, we cannot afford to help the poor or to clean up the environment. We must get richer by pumping more oil, mining more ore, chopping more trees, consuming more widgets, so that we have new wealth to tackle climate change from burning more oil, to restore habitat damaged by logging, to help people displaced and poisoned by mining, to dispose of broken widgets. Welcome to the growth treadmill.
How does Samuelson square infinite economic growth with a non-growing planet? By omitting nature, because to economists land is a constant that doesn’t affect our calculations. Ignoring the biosphere makes the math easier and suggests policies that make the corporate world happy.
Meanwhile, over in environmental studies, students discuss the warning of the UN’s Millennium Ecosystem Assessment: “Human activity is putting such strain on the natural functions of Earth that the ability of the planet’s ecosystems to sustain future generations can no longer be taken for granted.” And in the psychology department, an instructor puts up a graph that shows that the average per capita income in the developed world has doubled in a generation, yet people are no happier. Do economists never leave their department hallway?
Samuelson’s Economics, along with the copycats found in classrooms across North America, would be merely a waste of time and trees if they did not have such a noxious effect on public policy. Most students only take one or two economics courses, and while research has shown that the typical student recalls few details from these courses, they do absorb the neoclassical canon. Well-being comes from consumption, economies must grow, free trade makes nations wealthier, governments should let markets do their magic. Equipped with simplistic recipes, many of these same students, in positions of influence and power years later, will make shoddy decisions that damage the climate, result in habitat loss, propagate injustice, or undermine prospects for happiness.
Read part two of this two-part series, in which we look at new alternatives in economics education.
_Tom Green is a Vancouver-based economist who has worked for over a decade using ecological economic analysis to improve resource management. Frustrated by the fact that economics departments are still subjecting their students to obsolete theory, he’s been putting increasing effort into bringing curricula into the twenty-first century.
I don’t care who writes a nation’s laws – or crafts its advanced
treaties – if I can write its economics textbooks.
— Paul Samuelson
If you’re a business undergrad, the introductory economics course is a prerequisite – no way to avoid it if you want to get out with that degree. Maybe you figure the course won’t be all bad. After all, you’d like to understand how the economy works, how it affects your future. Climate change is on your mind, and you know rising greenhouse gas emissions are linked to economic growth. You’re also concerned about social justice, whether free trade will lift people out of poverty or whether it’s a race to the bottom. You want your economics course to help you deal with these issues.
Scenario 1: Faced by over a million North American undergrads in 2007
“You’ll need to memorize 1001 supply and demand curves, be able to regurgitate stuff for the exam that you know is wrong,” warns the second-year student as you hand over your cash for his tattered text, “It’ll put you off economics for good.” You brace yourself for the worst.
Flipping through Paul Samuelson’s Economics, you see that it was first published in 1948, and you wonder how they can teach from a text that had already celebrated half a century in print before the new millennium rang in. Samuelson, now in his nineties, has handed over the pen to Nordhaus, who put out the eighteenth edition. (Even for those students whose introductory textbook isn’t written by Samuelson, there’s a good chance they are pretty hard to tell apart. Since Samuelson helped rewrite large parts of economic theory, his textbook inspired dozens of copycats.)
Introductory microeconomic theory rests on the idea that individuals are perfectly rational and seek to maximize their “utility.” Samuelson admits that utility is a construct that has no basis in psychology; although he uses the terms ‘consumer’ and ‘individual,’ his model is built around a fictional character that critics have dubbed Homo economicus. This economic man (yes, he is male) never had a childhood, never has children, has never depended upon a caregiver and does not have anyone he provides care for. He only experiences well-being by consuming. He is rational, selfish, a psychopath.
Economists must never question whether Homo economicus’ consumption actually makes him happy. They assume he isn’t influenced by hundreds of billions of dollars in advertising or the purchases of his neighbors. If Homo economicus buys something, it gives him utility; his consumer sovereignty must be respected.
Relying on Homo economicus excuses us from tackling difficult questions about how real individuals, groups of citizens or members of families actually seek to find happiness. The framework within which he acts excuses us from troubling ourselves with the distribution of wealth, since utility comparisons between individuals are not allowed. In other words, neoclassical economists will say they cannot comment on whether a millionaire or a pauper would get the most utility from a handful of coins.
Samuelson’s Economics wastes few pages before introducing us to the profession’s magic wand: the word ‘assume.’ The typical economics professor will have already made six implausible assumptions before their students have digested breakfast. To use the word is to signal that we are about to enter into a neverland with features warped as needed to fit into an elegant mathematical model. The next time you hear it, ask what would change if ‘assume’ were replaced with ‘pretend.’
The weakness for basing models on unrealistic assumptions could be a harmless intellectual pastime, equivalent to solving Sudoku puzzles. But these flimsy models are used by economists to formulate policies believed indispensable to solving society’s economic woes. These policies are then flogged to politicians and corporate leaders. Rarely mentioned are the original assumptions that might limit the application of these policies in the real world.
If Samuelson’s book has one take-home message, it’s that societies must promote economic growth now and for all time. With growth, we are all better off. Without growth, we cannot afford to help the poor or to clean up the environment. We must get richer by pumping more oil, mining more ore, chopping more trees, consuming more widgets, so that we have new wealth to tackle climate change from burning more oil, to restore habitat damaged by logging, to help people displaced and poisoned by mining, to dispose of broken widgets. Welcome to the growth treadmill.
How does Samuelson square infinite economic growth with a non-growing planet? By omitting nature, because to economists land is a constant that doesn’t affect our calculations. Ignoring the biosphere makes the math easier and suggests policies that make the corporate world happy.
Meanwhile, over in environmental studies, students discuss the warning of the UN’s Millennium Ecosystem Assessment: “Human activity is putting such strain on the natural functions of Earth that the ability of the planet’s ecosystems to sustain future generations can no longer be taken for granted.” And in the psychology department, an instructor puts up a graph that shows that the average per capita income in the developed world has doubled in a generation, yet people are no happier. Do economists never leave their department hallway?
Samuelson’s Economics, along with the copycats found in classrooms across North America, would be merely a waste of time and trees if they did not have such a noxious effect on public policy. Most students only take one or two economics courses, and while research has shown that the typical student recalls few details from these courses, they do absorb the neoclassical canon. Well-being comes from consumption, economies must grow, free trade makes nations wealthier, governments should let markets do their magic. Equipped with simplistic recipes, many of these same students, in positions of influence and power years later, will make shoddy decisions that damage the climate, result in habitat loss, propagate injustice, or undermine prospects for happiness.
Read part two of this two-part series, in which we look at new alternatives in economics education.
_Tom Green is a Vancouver-based economist who has worked for over a decade using ecological economic analysis to improve resource management. Frustrated by the fact that economics departments are still subjecting their students to obsolete theory, he’s been putting increasing effort into bringing curricula into the twenty-first century.
posted by Faint faint faintedink at 4:06 p.m.
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