Robin Wells on the Mankiw Walkout
By David Henderson
I particularly like the tone of Professor Wells’s comments. This surprised me because in the New Yorker profile of her husband, Paul Krugman, Larissa Macfarguhar had written:
[T]hese days she [Wells] focusses on making him less dry, less abstract, angrier. Recently, he gave her a draft of an article he’d done for Rolling Stone. He had written, “As Obama tries to deal with the crisis, he will get no help from Republican leaders,” and after this she inserted th Ie sentence “Worse yet, he’ll get obstruction and lies.”
But Professor Wells actually shows sympathy for Greg Mankiw.
One of my favorite paragraphs is this:
But what I will say is this: something is shifting out there, and we ignore it at our peril. It would be very easy to dismiss the student walk-out as an exercise in intellectual laziness and grandstanding. (After all, as many have pointed out, Keynesian models can’t be taught until second semester of Harvard Ec10.) But perceptive instructors know that sometimes a stupid question is more than a stupid question. And a really perceptive instructor will take a seemingly stupid question and turn it into the insightful question that the student should have asked.
I agree with all of this. That does not mean, I hasten to add, that the students who walked out are not intellectually lazy or grandstanding. I don’t know whether they are or not and neither, of course, does Robin Wells. But I’ve seen time and time again how a seemingly stupid question can be insightful. And I agree that we ignore student reactions at our peril.
The rest of Robin Wells’s post is interesting for another reason, though. She gives four suggestions for how to teach, the fourth of which is “Adopt Some Humility.” But the other three of her suggestions show the opposite: not humility but a tremendous amount of certainty about what’s going wrong right now, a certainty not justified by the evidence. Consider her first suggestion:
[I]nstructors need to acknowledge the limits of free markets earlier in their courses. Students should understand the difference between the conceptual importance of free markets and their real world limitations. Explain that much of the current economic distress arises from markets that don’t behave competitively — the labor and financial markets.
But both the labor markets and the financial markets are highly regulated. For the labor market, consider the minimum wage and coming laws that will require employers to provide health insurance. For the financial markets, consider deposit insurance and the requirement that various assets be blessed by three firms given government privileges: Standard and Poors, Moody’s, and Fitch. Wouldn’t one want to acknowledge that some of the problems in these markets are due to government regulation?
Interestingly, her second suggestion is:
For example, to the microeconomics student who protests that Keynes and Adam Smith should be given equal time, respond that the issue boils down to why some economists believe that the labor market doesn’t always clear while others believe that its does.
I know that Keynes said that labor markets don’t always clear. Did Smith? I don’t recall that.
Professor Wells’s third suggestion is worth quoting in full:
The dramatic rise in U.S. income inequality compels us as instructors to address it. While international trade and educational differences have clearly contributed to some of the rise, it’s clear that they are only partial explanations: they can’t explain the explosion of income gain at the top 1% of the income distribution, and particularly at the top 0.1%. We shouldn’t extol the benefits of markets while ignoring today’s highly skewed distribution of the benefits. While there is no single definitive explanation, there are many factors that are feasible topics in class: moral hazard and the setting of CEO compensation, the decline of countervailing forces such as unions and higher marginal tax rates at the top end, deregulation, asset bubbles and the financialization of the U.S. economy. And then discuss: to what extent is the level of income inequality a legitimate policy target?
The factors she names are all possible factors, although I think the decline of union monopoly is a stretch. Unions tended to produce wage gains for unionized workers at the expense of non-union workers with no clear impact on income inequality traditionally measured. But notice two major sources of income inequality that she leaves out: the increasing number of households that have two high-income earners and the increasing number of households with one parent due to divorce.
Finally, her major criticism is about the fact that economists talk a lot about the benefits of free markets–too much, according to her. She doesn’t mention the fact that there are still many economists–I suspect her husband is one–who don’t acknowledge the important insights in public choice that help us understand why so many government policies are so destructive.