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Economics 10 at Harvard: A Teachable Moment

As economic educators we are always concerned with how the principles of the "dismal science" are received by our students, and we work very hard to provide the best educational instruction as possible. So it came as a surprise when a group of Harvard Ec 10 students organized a noisy walk out of celebrated economics professor Gregory Mankiw's introductory class on economics. The students claimed that Professor Mankiw's economic instruction lacked a "progressive" theoretical approach which they believe more accurately explains the current economic malaise. The students then published "An Open Letter To Gregory Mankiw" in an online student journal where they elaborated their dissatisfaction with Professor Mankiw.

Perhaps we might be amused at the effrontery of the students, publicly castigating a professor whose number one ranking textbook is used nation wide in college freshmen and high school AP economics courses, and who is well known for his congenial demeanor and his ability to welcome differing points of view in economic debates. But then the students have youth and inexperience on their side, which of course trumps all else.

And yet, this is a teachable moment.

Author and columnist Amity Shlaes offers a measured response to the Harvard students in "Harvard's Walkout Students Misunderstand Economics" that suggests where the students are correct in their anxieties about the economy:

Let's start with where the protesters are correct. First, Ec 10 is a defined and therefore limited course. As taught by Mankiw, a great talent, it conveys modern macro- and microeconomics mostly through the prism of capitalism, rather than through socialism or communism. It's also true that there is a gap in the U.S. between rich and poor; although whether that's a problem per se has to be debated. Third, and most important, macroeconomic theory did fail to predict the most recent recession. At Harvard in 2007, many professors and students took for granted that we were in an era of "great moderation," and that life should henceforth progress smoothly down the decades.

Shlaes then continues to suggest where the students are wrong in their presumed solutions. Her column presents a short lesson on two pertinent economic theories: the first, Schumpeter's theory on the cyclical nature of boom and bust:

One is a theory laid out by Joseph Schumpeter. Schumpeter, an Austrian economist who arrived at Harvard in 1927, warned that capitalism was "by nature a form or method of economic change and not only never is but never can be stationary." Great busts would inevitably follow great booms. Schumpeter inspected the inequality that the Ec 10 students abhor, and liked it: Only when large gains are to be made do entrepreneurs take the risks necessary to create innovative products.

And the second, public-choice theory: 

Harvard is also short of scholars who focus on what is known as public-choice theory. That concept, for which economist James M. Buchanan won the Nobel Memorial Prize, is wonderfully simple. It says that while government agencies pretend to be virtuous and sophisticated, they are actually as primitive as crustaceans. Government offices will do anything -- scavenge and cannibalize -- to survive or take away from the private sector. That description fits creatures like Fannie Mae and Freddie Mac.

Shlaes' column then applies these two theories to the present day problems of our struggling economy. It is a masterful reply -- respectful and informative from an educator to a group of students whose ideological passions may have prevented them from acquiring a more robust understanding of economics.

Here is an opportunity to hear Professor Mankiw's response to his students' walkout in a televised interview. (We would also like to recommend stopping by Greg Mankiw's Blog which is often witty, educational, for economics, rather entertaining.)

Economic Freedom on the Net

Here's a quick round up of some internet offering we think might be useful enrichment for your classroom discussions and further understanding of economic freedom.

"Does U.S. Economic Inequality Have A Good Side?" In this PBS interview, law professor Richard Epstein offers a concise argument for the long term benefits of economic inequality, acting as a driving force on innovation. This is a remarkable interview -- packed with precision thinking.

Doing Business, a World Bank organization, has published Doing Business in a More transparent World,  a 2012  index that ranks countries according to the ease of doing business. This index provides a nice supplement to other Economic Freedom Indexes, further developing the argument that greater economic freedoms produce greater prosperity.

A video of George Mason Economics professor, Professor Russell Roberts testifying before House Oversight Committee in 2010. From the description: "Roberts major point is, the majority of the blame for the financial crisis lies with government, not Wall Street. Washington bailing out irresponsible rich corporations reinforces irresponsible behavior and rewards companies based on their political connections, not the success of their business."

 

Can Poetry and Economics mix? Why not, suggests The Kauffman Foundation, which has offered econbloggers the chance to submit economic haikus on the current economic state of the world. These haikus represent a wide range of economic perspectives, making it an interesting exercise. Check out the results in "The Economy in Haiku" at the Economist Magazine online. This has the potential for an interesting and fun activity in the classroom.

Also of interest, Harvard Professor Gregory Mankiw's recent column, "Financial Lessons From Four Nations, in The New York Times, offers an interesting perspective on American economic problems and its attempt at solutions from the problematic decisions of four other countries.

Pope Prays for Peace

Pope Benedict XVI prayed that religions promote justice and peace in the world. In Assisi recently, the Holy Father said:

"Violence never again! War never again! Terrorism never again! In the name of God, may every religion bring upon the earth Justice and Peace, Forgiveness and Life, Love". VIS 20111028 (610)

An Editorial On Taxation From The Vatican's L'Osservatore Romano.

Here's an interesting editorial "Noah's Horizon," by Ettore Giotti Tedeschi in the Vatican newspaper L'Osservatore Romano  on taxation -- arguing for fiscal restraint on certain types of taxation that impede growth and investment and increase the hardship on the economy and it citizens. Here's a brief snippet from the column:

"During a prolonged crisis, inheritance taxes, new forms of taxation or similar alternatives reduce or wipe out resources for investments, discouraging the trust of investors, penalizing the cost of the public debt and the possibilities of its renewal at its expiration. In this context, imposing taxes on property and on income is equivalent to a suicidal anti-subsidiarity of the state to the citizen. Those who legally possess assets, on which they have paid the proper taxes, have contributed to creating wealth and, thanks precisely to these assets, continue to produce them with investments and consumption.

"Further forms of taxation would not be synonymous with solidarity but only with greater public spending and, perhaps, a higher debt and more widespread poverty. High taxes penalize saving, generate distrust in the ability to stimulate recovery, hit families and prevent the formation of new ones, as well as creating uncertainty and precariousness in employment. In short, they lay the foundations for another phase of unsustainable development."

*art: Peter Brughel, the Younger: "Paying the Tax Collector," 1620-1640