Economics students were asked to believe the following when I was a student in the 80s
I will add more detail over time.
That this was a social science taught from observed facts.
I was lucky; other courses are much worse, so I'll add a bit.
That such a belief is reasonable to hold and held in most university departments.
"Today many people call for restrictions on trade, even though every economist worth that title knows that free trade is good for both sides in almost all circumstances.", says a Mr Tim Leunig who has three maths-based economics degrees and got a piece published in The Guardian. He also refers to the idealistic, verbal, text-based part of the subject found in books like Mr Paul Collier's Bottom Billion which suggests preferential tariffs for the worst-run countries, dispite bad effects on better-run countries that buy dumped goods. When I put the argument in a sarcastic way, as a sentence, it's not convincing. Three maths-based economics degrees have removed powers of verbal reasoning that Mr Tim Leunig probably had before he started at university.
I expected university economics to be based on computer modelling, or verbal reasoning with a few diagrams, or a mixture of the two.
I hoped that someone, somewhere, was looking at data and working-out theories from it, even if we undergraduates weren't able to. Dispite moving where we lived to study full time on a course that was more than a third economics, from economists, for three years. That's a big deal but somehow nobody complained that we were neither told plausible things nor allowed to check facts for ourselves.
In fact, a literature review shows an increasing number of journal articles based on theory rather than fact during the period 1962-1984 because economists, like the rest of us, aren't able to compute much by hand or even with a calculator. There was a lot of showing-off with mathmatical-looking graphs for students to digest and algebra for the more advanced journal articles which looked like bamboozelement. Even more so now. The truth is that if a point of view sounds like something you'd hear in a golf club in the home counties, that's probably where it came from. Not data. Not discussion of bad competition or low investment as other factors alongside; these are filtered-out for purity of argument.
That computers don't do stats
In 1984-7 when I did my econonomics degree, I'm sure there was a wordprocessor in the department office because I got a memo typed on tractor-feed paper. If it was a PC or early Amstrad it would have had the Supercalc spreadsheet bundled with whatever word processor. Nevertheless, we had two hours class time a week, in a course taught as a minor subject, to learn something called "quantitive methods" or "stats". That only left the odd lecture or a thing called a "class" in macro economics to make up the rest of the core course. The time was shared with micro-economics, a subject that all of usare interested in but fits awkwardly into a college course, away from the reality of work. I might revise this to fit reports of what students do nowadays, which is play endlessly with computers to complete various puzzles set by the authors of the textbooks online. So the point is that students are set tasks to do which are not worth the tuition fee.
- micro-economics without real live examples
- obviously un-true theories of macro-economics: the ISLM diagram that seems to show demand leading to something good, although in fact it leads to lots of imports and the investment side of the diagram doesn't quite make sense
- obviously un-true theory of macro-economics: the idea that interest rates can be manipulated to reduce use of credit in an economy and make it more real, particularly in how people bid-up wage rates and cause inflation, had never had much to do with reality. As with the previous model, a higher interest rate just raises the value of the currency and sucks-in imports, closing factories for good rather than lowering their staff wages
- fairly un-true theory that the momentum of annual pay bargains can be a factor in raising prices. (In the 1970s, plenty of industries did their pay bargaining like ASLEF and Transport for London today, and got on the news a lot. The most frequent strikes were in shipyards, but the car manufacturers were a better emblem to report and had plenty of strikes too - often as an outlet for frustration at a madenning job, rather than directly for pay according to someone I saw interviewed about Ford at Dagenham.) Dispite the headlines, it was known in the 1980s that inflation was caused by OPEC oil price rises in the 1970s, a point lost on the textbooks from america and taught as though a sensible and informed point of view.
- that the course is somehow useful and respectable without any mention of what it might be used for or what jobs students are thinking of doing when they graduate.
This is an optical character recognition scan of MacroEconomics: an introduction to Keynsian Neoclassical Controversies by Rosalind Levacic of Open University and Alexander Rebmann of Middlesex University, second edition, published by McMillan in 1982. I can't blame anyone for my choice of textbook, but there was nothing to suggest it was a bad book to revise from; the recommended course textbook on my course made similar points. It's often cited all-over the world. There was no chance to discuss these points on my course.
The Phillips Curve - transcript in progress to be tidied-up later[p345] ...which the price level could be stable. The natural rate of unemployment is determined by the real factors which affect the amount of- frictional and structural unemployment in the economy.
The government has been told that there is a trade-off between unemployment and inflation. It therefore chooses to keep the economy at point A of the short run Phillips curve PC0 by expansionary policies which increase the money supply. The rate of inflation now rises to 5 per cent and the level of unemployment. falls to U1. We need an explanation of why unemployment falls and output rises when the rate of inflation increases. In the neoclassical inlerpretation of the Phillips relationship this occurs only because the inflation is unanticipated. Since demand has increased firms start raising prices and bidding-up the money wage rate to attract more labour. Because workers' expectations of inflation are below the actual rate of inflation, they think that the higher money wages now being offered means that real wages have risen. The supply of labour therefore increases. This is shown in Figure 18.4) as downward shift in the labour supply function from SS to S'S'. When actual ;Ind expected inflation are equal the labour supply schedule is SS. When intl;i Hon increases but expected inflation lags behind workers are deceived into offering to work for a lower real wage. The demand for labour increases Firms move down the demand for labour schedule. Unemployment falls and out put rises as the economy moves up the short-run Phillips curve PC „. As expectations adjust towards the actual rate of inflation, workers realise that real wages are lower than they had anticipated and therefore require more rapid increase in the money wage rate. The supply of labour schedule shills back up until it regains its initial long-run position once expected and actual inflation are equal. As the supply of labour shifts back to its original position, the short-run Phillips curve also shifts outwards because the expected :de of inflation is rising. When expectations have fully adjusted to the new lugher rate of inflation the short-run Phillips curve in Figure 18.4 has shifted lip PC,, which is its position when the expected rate of inflation is 5 per cent he economy is now at point B in Figure 18.4. Unemployment is back to its natural rate but there is now a 5 per cent rate of inflation. (This requires a permanently higher rate of increase in the money supply.) The idea that there is no
The analysis also implies that if the government attempts to bring down the nes-30) Stt rate of inflation, unemployment will temporarily rise above the natural rate if expected inflation adjusts with a lag. For a while the expected rate of inflation based on past experience will lie above the actual inflation rate. Workers are offered a slower rate of increase in money wages by employers, given their increasing inability to raise prices in product markets at the previously experienced rate. As workers' expectations of inflation have not adjusted downward with this new development in the product market, they bargain for money wage rates in line with their unadjusted price expectations and their reservation money wage rate rises in line with these expectations. This leads to an upward shift in the supply of labour schedule in Figure 18.5. Real wages rise and employment falls. At first the economy moves down the current short-run Phillips curve (such as PC, in Figure 18.4) but as expected inflation falls the tstA R.0 ley short-run Phillips curve shifts downwards and the natural rate of unemployment is restored once actual and expected rates of inflation are equal.