Boudreaux is correct about the ability of simple supply and demand curves to provide insights that seem to escape “deep” thinkers who dismiss those curves as simplistic.
The problem of teaching a beginning economic course as a highly technical exercise is an extremely serious problem. The introductory course is the only chance most students have to get an understanding of the benefits we all receive from the amazing economic cooperation made possible only by the markets. And few students gain that understanding from the highly technical presentation they get from many introductory courses. But these students do get clear presentations about market economies in many social sciences and humanities courses that are taught by teachers who have less than an introductory level of economics themselves. What many of them do have is a naïve view that markets are based on exploitation and injustices that can be corrected by government.
Dwight’s point is profound. The teachers who can best enable students to see the unseen, to appreciate what largely goes unappreciated, and to understand the logic of markets too often are derelict in their duty. Too many economics professors today teach ECON 101 as if it’s a course in curve-bending, puzzle-solving, and mathematics. This approach to teaching ECON 101 does indeed, as Dwight observes, render the typical ECON 101 course dull, dreary, dry, devoid of any obvious significance, and unnecessarily intimidating. Real economics goes untaught in too many ECON 101 classes while interesting and accessible (if largely mistaken) takes on markets, prices, and economics are offered in classes taught by economically ignorant sociologists, philosophers, English professors, and [fill-in-the-blank-with-the-name-of-your-pet-oppressed-group]-studies professors.*
It’s a shame.
* Note: I understand that there are some sociologists, philosophers, and English professors who are indeed very well informed about economics. Many of these are my friends. Yet they are the exceptions.
… is from page 172 of my Mercatus Center colleague Dan Griswold’s 2009 volume, Mad About Trade (link added):
Trade barriers “dumb down” our economy by undoing the good work of our best engineers, scientists, and entrepreneurs. The most creative and best-trained minds in America developed the jet engines, the containerization technology, and the Internet and global telecommunications that have done so much to promote the growth of global trade and output. In contrast, trade barriers are a kind of anti-technology. The mind-numbing columns of arbitrary tariff rates in the Harmonized Tariff Schedule and the tangled regulations that limit trade and investment stand in opposition to decades of technological advancement. We find a way to move goods, services, and capital around the world faster, more efficiently, and at lower cost, only to watch the politicians in Washington throw sand into the gears by erecting artificial barriers to commerce.
DBx: Trump, of course, is the most blatant and boastful trade-obstructing bully roaming the DC sandbox in decades.
When taught well and wisely, supply-and-demand analysis is the central part of the economic way of thinking. This way of thinking both deepens and broadens students’ understanding of economic reality. Contrary to Kwak’s assertion, such analysis teaches neither that prices automatically and without friction move to equilibrium levels nor that nothing matters except consumers’ and producers’ narrow material concerns.
Instead, the economic way of thinking incites students to ask probing questions about reality that they would otherwise never ask. It encourages them to search for and discover aspects of reality that would otherwise remain hidden. It prompts students to ponder the reality far more profoundly and fully than they would otherwise do. Junking or radically changing Econ 101 would leave students ill-prepared to understand the world around them.
I then go on in this essay to explain how Kwak’s dismissal of ECON 101’s criticisms of minimum wages reveals only that Kwak doesn’t think carefully and critically in the way that good ECON 101 students do. Kwak not only fails to see the unseen, he mistakes mirages for reality.
With the advent of the digital age, however, economic production has been utterly transformed; what constitutes “means of production” has now become broad and open-ended. Accordingly, socialism has had to adapt to the times: rather than owning the means of production outright, it now proposes to centrally regulate people’s behavior, and to redistribute portions of their productive output, in preferred directions. Whether realizing socialism’s moral goals requires owning the means of production depends, then, on historical circumstances, but what will always be required is to centrally organize political-economic decision making. Without that, there is no socialism; with it, fairness, equality, and community can, it is hoped, be achieved.
By contrast, socialism’s antithesis, capitalism, has at its core decentralized political-economic decision making. Its preferred values might be justice, liberty, and individuality (again, properly defined), but it holds that allowing individuals or voluntary groups of individuals to make political-economic decisions for themselves with little state interference is what enables the realization of the values it holds dear. So the former position tends to favor planned patterns of social order, or the correction of unplanned patterns, according to principles and authority centrally derived and administered; while the latter tends to favor unplanned or “spontaneous” patterns of social order that are deferential to what individuals and voluntary groups decide to do and skeptical of what third parties might like to mandate or nudge them to do.
You describe Trump’s proposed scheme to artificially inflate U.S. trade-deficit figures as an attempt to “deceive” (“A Trump Statistical Trade Trick,” Feb. 21). Exactly. Counting goods shipped to other countries through the U.S. as U.S. imports but not as U.S. exports is simply fraudulent.
If the Trump administration gets away with this swindle, don’t be surprised to see it used for other purposes – especially, to further Trump’s goal of stoking Americans’ fears of immigrants. The same logic that allegedly justifies what you correctly call “single-entry trade bookkeeping” would justify counting all non-Americans who come to the U.S. – even those who come only to visit – as ‘immigrants arriving in the U.S.,’ yet none who return to their home countries counted as ‘immigrants leaving the U.S.’ If this method of measuring immigration flows sounds Orwellian, it is – but it is no more so than is Trump’s proposed new method for measuring trade flows.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
[Jesse] Ausubel points out that even as farm output and overall population have increased, use of water in the United States has actually declined since 1970. That change reflects greater efficiency in farming. (Ask your friends who proudly “buy local” whether they know how much water their local farmers used compared with the distant farmers from the supermarket imports produce.)
Generally speaking, in a market economy, the combination of incentives and human ingenuity has permitted the human population to grow with a reduction in the rate of resource use. By selling books in digital format, online retailer Amazon is letting us read more while using less paper; Airbnb is giving us more places to sleep without building hotels; and iTunes is allowing us to listen to more music without manufacturing records. We are not only leaving future generations with more know-how and more tools of production, we are also leaving them with more wilderness, more forest, and more vegetation.