Open Letter from Harvard Econ 10 Students

The following letter was sent to Greg Mankiw by the organizers of today’s Economics 10 walkout.

Wednesday November 2, 2011

Dear Professor Mankiw—

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course—and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class—or the whole discipline of economics—as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

Sincerely,

Concerned students of Economics 10

Sources:

Thanks to William Black's Blog for the lead on this.

Voices Faulting G.O.P. Economic Policies Growing Louder

In case you missed this one, it was one of the most popular NY Times pieces a few days back:

Voices Faulting G.O.P. Economic Policies Growing Louder

Fact-based world is intruding on the fantasy-based polices being pushed by Republicans. The S&P US Downgrade report is one of the voices.

For Your Convenience:

• Contact the Broadcast Media
• Contact the US Senate
• Contact the House of Representatives

Sources:

GDAE Podcast - Episode 44

Journalism & Democracy in Crisis

• Econ 101: The notion that giving the wealthy class, or owner class, tax cuts to spur jobs and economic growth is a widely held belief in our society... What's the real story today?


• Feature on the Broken Corporate Media: Communications Professor Robert McChesney on Journalism and Democracy in Crisis
  

Play Episode 44:


Click to Download Episode 44.

Cartoon Economics

Four minutes worth watching for a humorous refresher on how we got into this economic mess, and a prediction for the future.



Psssst... Do Something

• Contact the Broadcast Media
  
• Contact the Newspapers
  
• Contact the US Senate
  
• Contact the House of Representatives

Sources:

Thanks Martha!

What I said in August 2007

Not that you couldn't see it coming if you looked... Here's what I said in August 2007:

... get ready to fight with Congress. The next thing we'll be hearing is that some of these banks and high-flying financial institutions, which give out six-figure bonuses, are "too big to let fail." Congress (read "the US tax payer") will be asked to bail them out. Our answer should be "No." Economics 101 says that businesses must be allowed to fail so that the word "risk" means something, and to clean out the dead wood.

You can read the short piece, which has a funny introductory story involving Winston Churchill.

Psssst... Do Something

• Contact the Broadcast Media
  
• Contact the Newspapers
  
• Contact the US Senate
  
• Contact the House of Representatives

Speculators are not "Investors"

I'm probably not alone in my view of the following statement by Neil Mellor, an analyst at Bank of New York Mellon.

Alongside the dismal outlook painted by leaders in the U.S. automotive industry, growing fears surrounding the drastic rate of disinflation across the globe and renewed fears for the U.S. banking sector, this has sent investors scrambling for cover once more.

If the "instruments" traded on Wall Street have no connection to a tangible economy, then what are they "investing" in? They aren't "investors," they are "speculators" in the worst sense of the term.

Let the speculative "instruments" die so that our society can rediscover an economics founded on fundamentals that benefit real people, not just the cuff-linked and spangled elite. There will be pain in the short run, but that sacrifice will build our character as a nation.

Sources:

Associated Press, Recession fears send world markets down, PAN PYLAS, November 20, 2008.

Economy: A Mess

Stocks plummet after retail, unemployment data

3% drop is big. Watch it swing right back up. Such swings have typically preceded past major economic crashes.... kinda like the nasty wobble before wipe-out, the bright light bulb before burn out, and the wild energy of a fly before death.

Jobless claims jump is bad omen for economy.

"Omen"? It's been a year since the big mortgage melt-dwon, and their still talking about omens for the future?

U.S. House Price Decline Could Be Worse Than Great Depression.

The higher the price, the further it has to fall. Raise your hand if you've heard a friend say, "If I had to buy my house now, I couldn't afford it." A modest house and a solid middle-class income... some speculators got rich and we're paying for it. But don't worry, the free market always corrects itself.

I was a little surprised by the date of a past article of mine. Remember the August 2007 real estate melt-down? Here's what I wrote in May 28, 2007:

Watch the real estate situation unravel this summer. Congress will try to save it, placing the burden on future tax-payers (so much for a "free" market in which bad business decisions are allowed to play out). We've seen it before in the same way the S&L double-scandal was swept under the rug. The twin debts will grow. Eventually, foreigners will diversify out of dollars, more so than they are already, and the US will decline like Spain and Britain did. The "hope" is that the US will do so with grace rather than a holocaust.

Photo Credit: "mess" by skepticillusion.

The Bigger They Are, The Harder They Fall

Paul Krugman zeros in on the how the "widely watched" indicator of trends in the service sector [70% of the economy] "has fallen off a cliff."

More specifically, the Institute for Supply Management reported that its new composite index measuring the health of the service sector was 44.6 in January. A reading above 50 indicates expansion, while below 50 indicates contraction. That was down from 54.4 in December. "This is an absolute collapse of this index," said Nigel Gault, chief U.S. economist at Global Insight... AKA "fallen off a cliff."

Krugman also leads us to a paper by Carmen Reinhart and Kenneth Rogoff - PDF for which there "has been a lot of buzz."

Reinhart and Rogoff explore the historic record for the "Big 5" bank-centered financial crises in industrialized nations. They cite "the five most catastrophic cases" to be episodes in Finland, Japan, Norway, Spain and Sweden.

They address some specifics the common refrain, "but this time it's different," only to make me more uncomfortable with the mainstream economists and pundits who use this refrain. Notworthy is the following:

This time, many analysts argued, the huge run-up in U.S. housing prices was not at all a bubble, but rather justified by financial innovation (including to sub-prime mortgages), as well as by the steady inflow of capital from Asia and petroleum exporters.

So, average Americans are at the mercy of a petro-dollar induced real estate price rise making homes unaffordable and pushing people into exotic mortgages? So, we're supposed to take comfort in the argument that the housing prices, bid up by foreign oil money, will remain high (the bubble won't burst)? Is that supposed to give me confidence in our economy and corporate globalization?

On to the prediction, or should I say comparison.

The figure below compares the US real estate bubble with the average of the "Big 5." Years are marked along the bottom of the graph, with "T" representing the year of the onset of the financial crisis. By that convention, "T-3" is three years prior to the crisis, and T+3 is three years after the onset of the crisis.

The left side of the axis a normalized index of housing prices, allowing comparison between different time periods and currencies. The authors not "the run-up in housing prices in the United States exceeds that of the “Big Five” ... by a lot. One can't help think of the saying, "the bigger they are, the harder they fall."



There's more to the paper, which I'll let you read. It's only 11 pages long and not too techincal.

Sources:

Paul Krugman, A Long Story, February 8, 2008.

Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International
Historical Comparison, Carmen Reinhart and Kenneth Rogoff, Draft, January 14, 2008. (Linked above).

US Service Sector Contracts [recession] in January.