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03-11-11 an Open Letter to Greg Mankiw

03-11-11 an Open Letter to Greg Mankiw

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Published by William J Greenberg
Several correspondents have just told me that some of Greg Mankiw’s students at Harvard are staging a walkout from his first year class. They’ve written an open letter to Mankiw to explain why
Several correspondents have just told me that some of Greg Mankiw’s students at Harvard are staging a walkout from his first year class. They’ve written an open letter to Mankiw to explain why

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Published by: William J Greenberg on Nov 18, 2011
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Harvard starts its own PAECON against MankiwBySteve Keenon November 3rd, 2011 at 9:04 amPosted In:DebtwatchSeveral correspondents have just told me that some of Greg Mankiw’s students at Harvard are staging a walkoutfrom his first year class. They’ve written an open letter toMankiw to explain why:An Open Letter to Greg Mankiw
I applaud them for this move. Mankiw’s various economics textsare among the most simplistic of the many neoclassical textbooksthat parade this flawed paradigm as a flawless jewel of humanreasoning. I’m delighted that his students have taken therebellion against this paradigm to one of its key promulgators.I did likewise forty years ago–against far less well-knownadvocates of neoclassicism. At the time, I probably knew as muchas these students do today of the enormous literature thatestablishes how fallacious neoclassical theory is, and which of course neoclassical texts like Mankiw’s completely ignore. These students will undoubtedly be told that they havemisunderstood and misjudged both the theory and Mankiw’scourse–which I was also told when I revolted against Simkin’seconomics at Sydney University back in 1972. They are certainlylacking knowledge of the literature–and they rightly attribute thisto the “education” they are receiving in Mankiw’s course:A legitimate academic study of economics must include a criticaldiscussion of both the benefits and flaws of different economicsimplifying models. As your class does not include primarysources and rarely features articles from academic journals, wehave very little access to alternative approaches to economics.
 
Already, another student has published a rebuke to these rebelsalong the lines that they don’t appreciate the depth and wisdomin the subject:
 The following extract from this defence is worth highlighting–
for the sake of the argument being made by the rebels
. The authorobserves that much of the course follows Mankiw’s text, in whichthere is a summary of ten main points of neoclassical wisdom:Sections largely follow
The Principles of Economics
by N. GregoryMankiw, and to reconstruct what students learn at these classmeetings, I dug out my notes from freshman year. Here are thesupposedly biased takeaway points that Mankiw’s propagandamachine pounds home in section:
 Trade and specialization of labor can make society better off.
Demand curves slope downward and supply curves slopeupward (usually).
Sometimes, things happen that make demand curves andsupply curves shift.
Comparative statics can be a useful way of thinking abouthow changes in some variables will affect changes in othervariables.
Some goods are elastic–more volatile to changes in quantityconsumed for a given price change–and some goods areinelastic.
 Taxes, subsidies, price floors, and price ceilings can changeequilibrium outcomes, and sometimes this causesdeadweight loss.
 Tariffs and quotas often cause a loss in total social surplus.
 
Externalities cause free-market outcomes to be differentfrom socially optimal outcomes.
Public goods are neither excludable nor rival.I won’t indulge in a root-and-branch critique of the entire list, butthere are just a few that are provably false:
“Demand curves slope downward”
 There is a convoluted procedure used to provethat
individual
demand curves slope downwards, but it has beenproven, in what are known as the Sonnenschein-Mantel-Debreuconditions, that a
market
demand curve can have any(polynomial) shape at all. Here’s an extract from the Handbook of Mathematical Economics on that one:First, when preferences are homothetic and the distribution of income (value of wealth) is independent of prices, then themarket demand function (market excess demand function) has allthe properties of a consumer demand function . . .Second, with general (in particular non-homothetic) preferences,even if the distribution of income is fixed, market demandfunctions need not satisfy in any way the classical restrictionswhich characterize consumer demand functions… The importance of the above results is clear: strong restrictionsare needed in order to justify the hypothesis that a marketdemand function has the characteristics of a consumer demandfunction. Only in special cases can an economy be expected toact as an ‘idealized consumer’. The utility hypothesis tells usnothing about market demand unless it is augmented byadditional requirements. (Shafer, W. & Sonnenschein, H., (1982).‘Market demand and excess demand functions’, in K.J. Arrow, andM. D. Intriligator (eds),
Handbook of Mathematical Economics
(Vol.II), North-Holland, Amsterdam, pp. 671-693)

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