Nishanth
Pathy’s criticism of microeconomics 1 makes the classic mistake of
presuming that you can criticise something before you actually understand it. We
don’t teach Euclid from a nuanced perspective despite the fact that
non-Euclidian geometry is now an occasional feature of doctoral-level
mathematics. The same reasoning lies behind why optimal patent length doesn’t
feature in micro 1.
It is perfectly sensible that students are not taught the
foundations of microeconomics from a critical standpoint from the word go.
There’s a lot to take in. Students need to master the basics before they move
on to complexity. I wonder what Mr Pathy would want taken out of an already jam-packed
course to make room for a nuanced discussion of the general equilibrium effects
of tax.
The following comment from Mr Pathy’s article is
instructive:
“First year micro students...will be sold a narrative that government is generally harmful, that corporations are generally beneficial, that short term economic efficiency is all that matters and that markets generally achieve the best outcomes when undisturbed. None of that is inherently true.”
Well, actually, it is, or at least it is when you don’t
straw man. Economics does not suggest that government intervention is
‘harmful’. That’s a moral judgement, and anyone who has spent ten seconds with
academic economists knows they contort themselves to avoid value claims.
Rather, economics suggests that government intervention in market activity is
generally inefficient. This is a
mathematical concept, and empirical evidence supports the claim. You can’t be
taught that in first year because you don’t have the skills yet to understand
empirics.
It must also be noted that
‘market-failure’ and the need for government intervention is a topic in most
micro 1 courses.
Corporations are indeed, ‘generally’ beneficial, or at least
so says the last 50 years of research in development economics. Markets don’t
produce the ‘best’ outcome (whatever that means), they produce the most efficient outcome in a Paretian sense. Perhaps
Mr Pathy missed the lecture on efficiency-equity trade-offs. It’s usually topic
2.
Economics is also not so stupid as to suggest that short-term
economic efficiency is all that matters. One of the most fundamental models in
macro is the overlapping generations model. Yes, we don’t learn it in macro 1—that’s
because you need to understand a phase diagram to grasp the model, and first
years don’t.
Mr Pathy worries that students only take micro 1 and nothing
else, so perhaps they will never grasp a phase diagram. Sure, but then all
those PPE kids will also take political science courses, ethics courses and
social philosophy courses. Finance students will learn about superannuation and
optimising over an infinite time horizon; business kids will learn about
building equity and sustainable business growth. In short, people will get an education somehow, somewhere, to
compliment what they learn in micro 1, which will give them the broad
perspective everyone obviously needs.
Mr Pathy might also consider things from the point of view
of economics educators. Perhaps, knowing that they only have 1 semester to work
with, they ensure students pick up some general themes rather than simply
having yet another opportunity to impose their prejudices on a body of
knowledge. One academic who teaches foundation economics remarked to me late
last year:
“Most of my students are public servants. I can see that a lot them don’t care; they just want the piece of paper. So I make sure that if they take home one lesson, it’s that government interference in the market will always have unpredictable outcomes. It might still be sensible, but they should have some humility”.
That’s some tight advice for undergraduates: have some
humility. Learn something thoroughly before you move to criticise; say, in your
honours thesis.
This article was originally published here, by Woroni
I don’t totally agree. I also think that is bad and in a sense even dangerous for people to base all their knowledge on economics from a very simplistic Microeconomics 1 class. It is exactly some of those people who later on become free-markets champions for the sake of the so called “efficiency” that as you said, not necessarily translates into the best outcome; deeming government intervention as the source of all our problems. This without having been exposed to those more complex (and more realistic) models you mentioned. In my opinion, that would be like studying science history and stopping at the 17th century to then champion the idea that the earth is flat.
ReplyDeleteI would rather consider a more holistic first-time exposure to Economics through a class that portrays the importance of it, its mathematical soundness, but also its limitations when dealing with unmeasurable variables and human choices.