This cheeky article caught Mankiw’s attention when we ran it in Adbusters #75. We asked him to engage with us in a debate, but he refused. That was before the meltdown. Now it’s time to challenge him again – this time with feeling!
You might not have heard of N. Gregory Mankiw. The Harvard economics professor and former adviser to George W. Bush is one of the most gifted economists of our generation. He is also one of the most effective and talented propagandists of our times. His target: young economics students. His field of operation: the world’s universities. His weapon: the best-selling textbook in the world. It includes 36 chapters and 800 pages of color illustrations, graphs, stories and interesting asides. Don’t worry if you or your kids don’t speak English, Mankiw’s text surely exists in your language.
What is most worrisome is that Mankiw’s text presents economics as a unified discipline, one entirely committed to the neoliberal agenda. Mankiw believes that markets are the solution to everything – and he would like students to believe likewise. According to Mankiw, if a problem persists, it can only be for one of two reasons: the market is imperfect, or it is nonexistent. No other explanation for persisting economic or social problems is permitted.
Unemployment is an example of the market being imperfect. For Mankiw, if unemployment exists, it is only because of human interventions such as unemployment benefits, trade unions and minimum wages. Without these interventions, he maintains, there can be no unemployment. Mankiw presents this as a consensual view among economists. In fact quite a few of them admit that the labor market is a very special “market” indeed, where the price – the wage – is not set the same way as the price of other “goods.” As Alan Krueger put it, “it is a gross oversimplification to say that ‘wages are set by the competitive forces of supply and demand’ or that there is a unique, market-determined wage.”
He is also one of the most effective and talented propagandists of our times. His target: young economics students.
This specificity in the way wages are set is one of the reasons why 600 economists (including stars like Kenneth Arrow, Robert Solow and Joseph Stiglitz) have recently argued in favor of an increase of the US minimum wage. But when students and workers at Harvard asked for a “living wage,” Mankiw opposed it. As he told Harvard Magazine in 2001, even a modest raise in the minimum wage for janitors at Harvard would “compromise the university’s commitment to the creation and dissemination of knowledge.” No kidding. Of course, Mankiw does not discuss the possibility that the salary of tenured professors might be above its “equilibrium” value; not to mention the very existence of tenure, which goes against the principles of a perfectly competitive labor market.
While unemployment is an example of an imperfect market for Mankiw, pollution is an example of the nonexistent market. He admits that, in some cases, markets do not ensure that the environment is clean, and the result is excessive pollution (what economists call a “negative externality”). But what is the solution to pollution? According to Mankiw, it is to define property rights to pollute. Public authorities would issue “pollution permits” to polluting companies (who then cannot pollute more than the amount covered by the permits they hold). Companies then buy and sell these permits on the market, depending on how much they will pollute in a year. The fewer the permits, the higher their price and the higher the incentives for firms to reduce their pollution. This system is not stupid. Indeed, there are instances where such permit systems might work to solve simple pollution problems. But the problem is that, to the amazement of his students, Mankiw never mentions self-restraint, and he downplays government regulation as a way to regulate production and diminish consumption or waste. Nor does he bring up the imperative to use renewable sources of energy. In fact Mankiw even insists in his textbook that we are not running out of resources because if that were the case, the price of oil would be much higher than it is now. Climate change is a critical issue, caused by ever-growing economic activity – but it doesn’t even merit an index entry in Mankiw’s book.
Incredibly, in Mankiw’s chapter on growth, the only two factors of production cited are capital and labor. Apparently workers and firms somehow do not use land or electricity, gas, oil and coal. They produce with their hands and their brains, and work on machines that run day and night on … what, exactly? Nobody knows. But you can be sure that it’s not energy. As natural resources and energy are absent in Mankiw’s model, they cannot become a problem – for economists, that is.
Some of my students at Harvard have described Mankiw’s course to me during private conversations as “massive conservative propaganda.”
Some of my students at Harvard have described Mankiw’s course to me during private conversations as “massive conservative propaganda.” One of them told me he thought Mankiw managed to “indoctrinate a whole generation.” In 2003 a protest against a similar course proposed by professor Marty Feldstein, an ex-adviser to President Reagan, led to the creation of an alternative intro economics course taught by radical economist Steve Marglin. But while Mankiw’s course gives the required credits to students, Marglin’s does not. As a result, Mankiw has around 800 students, and Marglin 100. Not to mention the more than 100,000 students around the globe who learn from Mankiw’s textbook.
According to Mankiw, since markets are a good way to organize economic activity, supply and demand is just about all you need to know in economics. Whatever you desire, you can pay for in the market: tomatoes, health care, housing, a car. That’s demand. On the other side of the market, firms compete to supply consumers with the latest cool clothes, mobile phones and housing. That’s supply. When supply is higher than demand, the price falls (holiday travel to a country at war). When demand is higher than supply, the price rises (a war in Ivory Coast reduces the supply of cocoa). And supply and demand apply to absolutely every issue you can imagine, including organ scarcity. But Mankiw’s text is all about trivial choices, such as how many slices of pizza you are willing to give up to buy yourself an extra can of Coke. This method is extremely effective in hiding the magnitude of what is at stake. The reactions of the students would be different if the textbook addressed how much health care people have to give up to be able to buy basic food. Also, the very notion of “need” is absent from Mankiw’s text. One may wonder how students would feel if we discussed the fact that a millionaire’s desire for a yacht will always be met because it is backed by money, while a poor family’s need for a roof won’t. But such discussions are avoided.
By repeating his trivial examples, Mankiw accustoms the students to the idea of individual choices and preferences. The words “poor” and “rich” are rarely used. But more surprisingly, there is also no mention of the power of corporations to shape tastes. This is because Mankiw’s world is a world of small firms operating in perfectly competitive markets. “Corporate America” is not part of the picture. No McDonald’s, no Nike, no Microsoft.
Also, Mankiw downplays inequality despite the growing gap between rich and poor in the US over the last decade that has commanded the attention of more and more American economists, even within the mainstream. But Mankiw is not one of them. True, he admits there is more disparity in the US than in Europe (even if he forgets to mention that this was not the case in the 1960s). But he goes on to remark that there is less disparity in the US than in Brazil and China. So we can all relax.
Mankiw knows that the vast majority of his students are not going to become economics majors. He is not interested in training economists – his textbook is too simplistic to prepare a student for advanced study in economics. As he explicitly tells his teaching fellows, Mankiw’s interest is in shaping the minds of thousands of citizens and future leaders around the world. Mankiw’s world is one where “there is no such thing as a society.” Rather, the world is made up of isolated individuals. But it is also a world where fairness prevails: everybody gets what they deserve. It is a world where – thanks to the magic of markets, private enterprise and property rights – standards of living rise constantly. It’s a beautiful world … if only it existed.
While Mankiw’s text is easy for professors to use, it oversimplifies economic theory and omits the ways in which markets can degrade human well-being, undermine societies and threaten the planet. Each year tens of thousands of students go out into the world with Mankiw’s biases as a road map to the future. But we know that the neoliberal agenda is more and more disputed outside universities. Within universities alternative textbooks are flourishing. One can thus hope that these new textbooks, with their greater relevance to real-world problems and better acknowledgment of the diversity and complexity of economic thought, will soon out-compete Mankiw’s bible. As a believer in competition, Professor Mankiw could only consider this to be fair game.
Gilles Raveaud is currently assistant professor of economics at the University Paris 8. He is cofounder of the post-autistic economics movement (paecon.net). He has a blog and can be reached at [email protected].