Two heterodox economists respond to an article I blogged about last week, Hip Heterodoxy, published in the Nation, written by Chris Hayes.

Challenging Orthodox Economics – Part I | TPMCafe by Thomas Palley

Economics Outside the Mainstream | TPMCafe by David Ruccio

As our year winds down and we begin getting our materials and lessons in order for our next batch of AP Econ students, it’s unlikely we’ll pause to ask a rather important question: “Is the economics I’m teaching my students the correct and immutable truth?”

After all, isn’t economics still a young science? It’s only been a few generations since Smith, Riccardo and Locke laid the groundwork for what has become the mainstream, neo-classical/neo-Keynesian theory that makes up every major economics text and principles course out there. Who’s to say that in another one hundred years these views, products of the late 20th century themselves, will still be considered the correct solutions for dealing with the economic problem?

As mentioned in a previous post “Keynesian vs. Neo-classical Economics - and what is Heterodox Economics?”, the field loosely described as “heterodox economics” raises difficult questions of human behavior and thinking that challenges the neo-classical view of perfectly rational actors and the efficiency and perfectibility of free markets (the view that we teach in AP Economics). David Ruccio, econ professor at Notre Dame, laments on mainstream economists:

All reasonable arguments are accepted in the marketplace of ideas. Except they (mainstream economists) never read any heterodox economics, and have no idea how the hegemony of their favorite theory shuts out all other ideas…That’s the situation that heterodox economists are trying to change. By using economic theories other than those of the mainstream… By forming journals and associations apart from those of the mainstream (in which their ideas never get aired). And by challenging the mainstream conception of the discipline itself
(including its notions of what science is, and what it means to “think like an economist”).

We do heterodox economics, or what some refer to as political economy—as against economics (which, as Chris correctly argues, has become identified with a tiny number of theoretical approaches). We write about rates of exploitation and the role of power in increasing inequality and the existence of patriarchy and structural racism. Not only do we want to argue that economic actors are sometimes irrational or guided by norms and values; some of us also want to analyze economic institutions and events without even starting from individual actors. Or efficiency. Or constrained optimization.

So, do you feel guilty yet about teaching only the mainstream view in your course? Don’t fret, even Professor Ruccio has to teach his students the neo-classical approach; here’s how he deals with the status quo in his courses:

In all honesty, I mostly prefer not to read maintream economics these days. Either it says nothing of interest, or it gets me very angry. But I teach it, and I teach it in a way that is more rigorous than my mainstream colleagues. Because I teach its basic assumptions (and not as a kind of common sense) and because I present alternative views, heterodox economics. And then I read and do heterodox economics, independently of the mainstream. Because if we spend all our time worrying about mainstream economics, attempting to do mainstream economics (with a tweak here and a changed assumption there), we’ll never get around to developing alternatives.

Professor Ruccio makes an important point here. Before students can become agents of positive change, aware and capable of making the world a better place (and the field of economics a better science) they must first know what needs fixing. I know as much as any AP Econ teacher how rushed this course is, how little time is really left for discussions beyond the basic principles in the syllabus; but in the future, I think I’ll challenge myself and my students to take a little time and find out what alternative approaches to the economic problem are being researched, published, and put into action out there. Technology, the web, blogs: these are the tools that will enable us to easily connect our students to alternative, heterodox economics despite the hectic pace of our AP course. And if your school has access to online journal databases, here’s a few suggestions for economics publications that give a voice to heterodox economists like Professor Ruccio:

The Review of Income and Wealth, the Cambridge Journal of Economics, the European Journal of Comparative Economics, Research in Economic History, Industrial and Corporate Change, CES Ifo Economic Studies, the Eastern Economic Journal, the BNL Quarterly Review and The Economist’s Voice.

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Design That Solves Problems for the World’s Poor - New York Times

It is a luxury right now to sit back and peruse articles about economic topics that interest me. Economic development has been a passion of mine yet I have not had the opportunity to share my passion about economic development with my current AP students. The AP syllabus does not cover this topic and the Lorenz curve is about the closest that my AP student came to learning about income distribution and poverty. This was not an authentic study of or discussion about effective economic development.

So, I was pleased to read the article by Donald McNeil in today’s (5/29/07) New York Times which highlighted a show at the Cooper –Hewitt Design Museum where designers displayed the products that designed to serve the needs of the world’s poor. These products were created to enhance the quality of life of poor people world wide. They were designed as products that would assist the world’s poorest people in climbing the “self sufficiency” economic ladder.

“A billion customers in the world,” Dr. Paul Polak told a crowd of inventors recently, “are waiting for a $2 pair of eyeglasses, a $10 solar lantern and a $100 house.” The world’s cleverest designers, said Dr. Polak, a former psychiatrist who now runs an organization helping poor farmers become entrepreneurs, cater to the globe’s richest 10 percent, creating items like wine labels, couture and Maseratis. “We need a revolution to reverse that silly ratio,” he said.

The designers created new ways to transport water, created human powered water pumps to enable planting during the dry seasons, and designed an apparatus to clean water for drinking as you sip it directly from streams, rivers and lakes. So many inventors spend so much time designing goods and services for the rich that if in this ‘new revolution” were to take hold, the world’s poor might just find ways to make themselves richer.

What I like about this approach to economic development is that it involves giving the poorest members of our world community the tools that they will need to become independent entrepreneurs who will build their own economic success. This is not a “give them some food to eat”, “give them a dam that they don’t need” or a give them some “charity” type of economic development. It is much more than that…The artists and inventors themselves knew that:

“Interestingly, most of the designers who spoke at the opening of the exhibition spurned the idea of charity.

“The No. 1 need that poor people have is a way to make more cash,” said Martin Fisher, an engineer who founded KickStart, an organization that says it has helped 230,000 people escape poverty. It sells human-powered pumps costing $35 to $95.

Pumping water can help a farmer grow grain in the dry season, when it fetches triple the normal price. Dr. Fisher described customers who had skipped meals for weeks to buy a pump and then earned $1,000 the next year selling vegetables.

“Most of the world’s poor are subsistence farmers, so they need a business model that lets them make money in three to six months, which is one growing season,” he said. KickStart accepts grants to support its advertising and find networks of sellers supplied with spare parts, for example”

Now that is the kind of economic development revolution that I want to be part of. For more information about a truly successful worldwide economic development program for woman, check out the Grameen Bank and/or the Grameen Foundation. Both programs combine the power of microfinance, technology and innovative solutions to defeat global poverty. They too put tools in the hands of poor women. The Founder, Muhammad Yunus just won the 2006 Nobel Peace Prize for his work and for his foundation. His work inspires me..

Hello future AP Economics students,

As the school year comes to a close, I thought I’d send a short message to introduce myself and the other AP Econ teacher, Ms. Close (who many of you have had this year). We’re looking forward to a great year of econ next year; we think you will all find this class very interesting, exciting at times, and challenging always. If you do not know me or Ms. Close, please take a moment before school ends next week and introduce yourself, so we can put a face to your name!

As you likely know, AP Economics is a challenging course; it’s actually TWO challenging courses: one semester of Microeconomics and one of Macroeconomics. In fact, you will be sitting for not one but two AP exams in economics next May. To help prepare you for the first week of class, Ms. Close and I are asking you do complete a couple of simple tasks over the summer. No, we’re not giving you chapter from a text, and no you won’t be given a quiz on the first day of class; rather, we want to get an idea of what you already know about economics, and we want you to begin thinking like an economist before the first day of school next year.

Here’s your first assignment:

• Follow this link to your class Wiki, and complete the assignment as described on the page.
• Follow this link to your class Wiki, and read the course description and have a look at the course syllabuses for Micro and Macro.
• Finally, follow this link to Welker’s Wikinomics Blog and have a look at some of the articles posted this year, which will give you an idea of what kinds of things you’ll learn in AP Econ. If you feel confident, post some comments to articles that look interesting to you; feel free to share your opinions, ideas or thoughts about the topics covered. This is where we are going, by next spring you will understand almost everything posted at this site!

If you really want to impress me or Ms. Close, visit a bookstore or Amazon.com this summer and pick up one of the following titles. These are books about Econ written for someone who doesn’t know much about Econ. These are fun, entertaining, and very interesting books that demonstrate how economics can be used to understand the world around us.

Finally, have a great summer and do not hesitate to contact Mr. Welker or Ms. Close with any questions! welkerjason@yahoo.com and michelle.close@saschina.org. -Mr. W

• The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor–and Why You Can Never Buy a Decent Used Car! by Tim Harford. The newest and one of the best in the field, but with hardly any macro content
• Armchair Economist: Economics & Everyday Life . by Steven E. Landsburg. Unforgettably and deliberately provocative and counter-intuitive. Includes macro content, but often too divergent from our received AP curriculum
• Hidden Order: The Economics of Everyday Life by David D. Friedman. The rather similar precursor to “Armchair,” written by Landsburg’s friend (and Milton’s son) David Friedman, using examples that he borrowed from Gary Becker had have been borrowed from them both by the other authors in this group
• Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt, Stephen J. Dubner. The best-selling crowd-pleaser that has really very little to do with our subject, except for some creative examples of how econometrics can be used to answer interesting questions
• The World Is Flat [Updated and Expanded]: A Brief History of the Twenty-first Century by Thomas L. Friedman. The best-selling update to “The Lexus and the Olive Tree,” chronicling the rapid and profound changes that technology has wrought on the world economy since the 1990s. There is no more important book for understanding how our lives are changing around us
• The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade by Pietra Rivoli. Not as interesting as it promises, but it illuminates a lot of economic history and issues of trade, interdependence, Asian development, and downsizing/outsourcing
• Confessions of an Economic Hit Man by John Perkins. I haven’t read it, and it seems to be very loosely connected to our course–except for one word of the title–but other teachers do assign it and recommend it, so here it is on their recommendation
• Nickel and Dimed: On (Not) Getting By in America. by Barbara Ehrenreich. Not my favorite, but often assigned in high-SES schools to alert students to the poverty they don’t know

Kudos to Economan at Squidoo.com for the book list!

NOTE: You may wonder why I’ve got so much time to blog these days. Well, first of all I’m at an international school and have only about 83 students between my grade 9 Asian History, two AP Econs and one IB Econ, so I’ve caught up with all my grading for the semester. This may be my last post in a few days, however, since tomorrow and Thursday my 38 remaining students sit for their final exams which means, I’m guessing, about 10 hours of grading before next week. For now, however, I have a nice class-free day ahead of me, so away I blog!

As my list of other AP Economics teachers’ blogs grows, I continue to hear from teachers around the US and the world who are enthusiastic about integrating this tool into their courses. This is great! If econ professors are out there blogging for the world to read, imparting their knowledge and analysis of events to those interested, why shouldn’t we be doing the same, connecting world events to the often drab details of the AP Economics syllabus, adding relevancy and urgency to what we teach?! Anyway, I heard from another teacher today, Dave Prudente of Delaney HS in Maryland. He’s just joined the blogosphere, starting his own AP Econ blog. Dave sent me the following email, which got me thinking more about how I intend to make this site a useful part of my course next year:

Dear Mr. Welker,
It’s a pleasure to hear from you and it was quite a surprise. Ironically, I’ve just started my blog because I saw your blog last week. I’ve wanted to do something like this for a while but have had little time to even contemplate it. I would appreciate it if you would link my blog to your site and I would like to do the same for your site (with your approval).

I would also love to hear about your experience using the blog this year. I’m trying to figure out how to integrate a blog with my classes next year. My problem is that I have five sections with about 145 students. I’m not sure I can keep up with administrating the site if my students really use it. Knowing my students, they’ll flood me with comments…which I suppose is the goal.

In addition, I have to complement you on your site. It’s like a central repository for all the econ material I’ve used and found on the Internet…great job Would love to hear back from you.

Best Regards,
Dave Prudente
Dulaney High School

I replied to Dave with some of the ideas I had for how to use this blog next year, and thought I might as well publish the email here since these ideas might be useful for other teachers out there who stumble upon this blog and are thinking of creating their own blogs for Econ class

Hi Dave,

I’ve also been brainstormng the optimal way to integrate the blog into class next year. The other day I found the Aplia Econ blog (http://econblog.aplia.com/). While this is actually written by employees of Thompson Publishing, who produce the Aplia program, I do like the format of it, to some extent. It is mostly made up of links to articles relating to the content being covered in the econ course, followed by analysis by the author of the post. This is basically what I’ve tried to do this semester, but what the Aplia blog does in addition is include “discussion questions” which I have not up to this point done. Perhaps the “discussion questions” are a good way to start a comment string among students.

When I read other economists’ blogs, like Mankiw’s and others, readers get their own discussions going through comments. This is what I envision my students doing. It happened a few times this semester, on some posts back in April and early May, but the blog was still new and I had not built it into my teaching yet, which is my goal next year.

So, how do we keep track of who’s contributing? Like you said, with 145 students that sound like a full time job. A science teacher at my school who’s used blogs for a while had a good suggestion. Each week you assign one person from each class to go onto the blog and record the names of everyone who’s contributed a comment for that week (or unit if week is too often). Students whose names are not on the list given to you will not receive their “comment credit” for that week or unit. I thought this was a great idea of delegating responsibility among students, and took it to another level by creating a page on my class wiki where every week the student who’s job it is to monitor the blog can tabulate the contributions from that week. Check it out here: http://welkerswikinomics.wetpaint.com/page/Blog+Contributors

In a way I’m jealous that you have so many students to get involved with the blog. I’ll have around 30 myself, and my colleague Michelle will have another 30 or so, so we’ll have a total of 60 kids reading and commenting on the blog next year. In a way, the more the better, because more diverse views and opinions will be expressed. Man, how do you grade 135 econ tests, though? Don’t envy you there!

Anyway, I’m glad you find my blog useful. Every time I find another good blog or website I think can benefit my students (or other econ teachers) I post a link to the blog. I figure the more useful the site is, the more students will use it. Oh by the way, I have created “categories” into which I place each post I make. My goal is that by the end of next semester there will be a category for every section of the AP syllabus, so at any point I can tell students to go on the blog and comment on a post about “externalities” or “current account” or any other section from the syllabus. They can click on that category and find all the posts I’ve made that relate to that section of the syllabus and post their comments! Pretty cool!

Well I’ve already posted a link to your blog on my own under “AP Econ blogs” and would be honored if you’d do the same for mine! Again, the more connected teachers and students are to others around the world, the better! Keep in touch as you develop your blog, and hopefully we’ll all find ways to make this a useful part of our programs in the future!

Best of luck, Jason Welker

I am wondering how other teachers envision the use of blogs in their Econ courses. If you have any ideas or suggestions, please post your comments here!

Scientific American: The Traveler’s Dilemma

A student sent me the above article. It’s late, and tomorrow I only have one class, so I think I’ll have to tackle this one in the morning! I can already tell this is going to be a good one to use in AP when we study Game Theory, dominant strategy and Nash Equilibrium. Can’t wait to read it!

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Since I began blogging a few months ago, I’ve discovered that the blogosphere is full of teacher like me who are using this medium to communicate and connect with their students, each other, and the world beyond their classrooms! Several of the teachers who created the sites below I have been in touch with and notified that I’d be adding their link to my page.

I would love to create a forum through which high school Econ teachers could collaborate, communicate and share teaching ideas and resources with one another (besides the AP Econ listserve, which tends to be dominated by a small minority of very vocal and strong opinioned teachers who prefer to use it as a forum for voicing their own narrow views about the American economy). I’m thinking an AP Econ teacher Wiki. I’ve had a great experience with my class wiki, and can’t wait to have my students working on that from day one next fall. In the last couple of weeks I’ve found that I’m not alone, that there are many many Econ teachers in the world venturing into the blogosphere to broaden their students’ learning. If you’re one of these teachers, let’s try to figure out how we can harness the web in new ways to strengthen what we’re doing in our classes! Here’s I’ve found so far:

• AP Economics by Mr. Prudente for AP Econ students at Dulaney High School
• AP Macroeconomics- Orange High School. Lakewood, OH The Orange High School AP Macroeconomics blog — A forum that will provide you with various thoughts and comments related to the science of economics.
• Bonaconomics - East Hampton HS, NY For students of Economics at East Hapton HS
• Mikeroeconomics - Muscatine HS, Iowa This blog is for my application of economics to everyday topics.
• ORH AP Macroeconomics the AP Macroeconomics Blog for Mr. Rodriguez at Otay Ranch High School.
• Surrounded by Economics for AP Econ students at Linoln International School in Buenes Aires, Argentina
• The Circular Flow - Powell Center for Economic Literacy The Circular Flow is my take on world events and an attempt to get people to apply an “Economic Way of Thinking” to the news of the day.
• The World of AP Econ Fort Atkinson High School AP Microeconomics blog - a place where we can be together and talk about the higher learning of economics…well, actually a way to get discussion outside of class or answer questions that we may not have time for.
• Walker Economics Blog - The Walker School, Georgia A blog for my AP Economics class to discuss economics-related current issues and news.

NCEE | EconomicsAmerica® | National Standards

A CRITIQUE OF “STANDARDS OF ECONOMICS” from the URPE

What is Heterodox Economics? Perhaps it’s easier to start by saying what it is NOT. Heterodox Economics is NOT what we teach in Advanced Placement Economics. It is not what most major universities and colleges teach in their undergraduate and graduate economics courses. It is not widely accepted as a mainstream view in the field of professional economics. Its economists are not widely published in the top five economic journals. It is not neo-classical in its views that “humans are rational, utility-maximizing agents with fixed preferences, that they make decisions “at the margins” and that the mechanisms of supply and demand (operating free of government interference) will lead to a general equilibrium whereby resources are allocated efficiently.” In other words, heterodox economics challenges the widely accepted view that free markets and free individuals acting in their own self interest will perfectly allocate resources and achieve a general equilibrium where resources are put to their most efficient uses and goods and services are distributed efficiently among individuals in society. Markets are imperfect, and human institutions should offer Adam Smith’s “invisible hand” a helping hand when it comes to allocation of resources and output.

The National Council for Economics Education (NCEE, which publishes the widely used workbook “Advanced Placement Economics”) released in 2000 its National Standards on Economic Education, based on the “essential principles of economics”. High school economics courses, including AP, are rooted in these standards, which themselves are rooted in neo-classical theory originating with Adam Smith and carrying on to Milton Friedman and today’s mainstream economists whose work receives the most acclaim in top economic journals.

On the other end of the spectrum from the NCEE is the Union for Radical Political Economics (URPE), originally founded in the 1960’s by heterodox economics with the following goals:

First, to promote a new interdisciplinary approach to political economy which
includes also relevant themes from political science, sociology and social psychology.
Secondly, to develop new courses and research areas which reflect the urgencies of the day
and a new value premise. Such areas include the economics of the ghetto, poverty,
imperialism, interest groups, and the military-industry complex. And thirdly, political
economics should be sensitive to the needs of the social movements of our day, and have
more group research, with an approach that links all issues to a broad framework of
analysis.

To better understand the differences between heterodox economics and mainstream, neo-classical economics, it may help to examine the heterodox critique of the NCEE’s 20 Standards on Economic Education. The links above will take you to the full critique, but here’s a short excerpt that I think illustrates rather clearly the differing philosophies of these two modern schools of economic thought. The NCEE standards are in bold, the URPE’s critique is italicized:

1 and 2. Resources are limited so people cannot have all they want.
This is the traditional “starting point” of neo-classical economics which focuses our attention on how to allocate scare resources. The focus is on efficiency, which is understood to mean maximizing total production. Thus the central question is how to CHOOSE – how to trade-off one thing for another. Classical economists, such as Adam Smith, looked not only at total production but at how it was distributed between classes (landlords, capitalists and workers), and Marx viewed the appropriation of surplus production (over and above what was necessary for working people) as “theft” by the ruling classes. A total “disinterest” in distribution is one of the defining characteristics of neoclassical economics. An alternative focus for economics would be how to insure a decent standard of living for the people of the world..

3. People choose different methods of allocation of goods and services.
Note throughout the use of terms such as “people” and “individuals” with no distinction between capitalists and workers. Thus “people” choose their economic systems. The assumption here is that the “choice” is merely a matter of the level at which government decisions are made rather than any disagreement about a system which relies on profit-making as the motive force behind the private provision of goods and services, Thus the “command economy” (which is implicitly identified with communism) is presented as one in which the market plays no role, and there is absolutely no mention of the communists’ abolition of the capitalism class, and subsequent end to distribution on the basis of ownership of property.

4 and 5. People respond to incentives and voluntary exchange is beneficial.
There is not reference here to the starting point of this “voluntary exchange. The poverty-stricken will take starvation wages and even sell themselves or their children into slavery – this is, of course, “voluntary” in one sense but a more comprehensive approach recognizes that “they have no choice.”

The list goes on. It’s very interesting to compare the reasonable critique offered by heterodox economists to the “truths” of economics that we teach in our principles courses. It also frustrates me that in our limited time in the AP course we are unable to further explore these alternative, yet very valid and important approaches to understanding economic behavior and policy. I will encourage my students to seek courses in university that challenge the neo-classical view taught in AP Economics. The field of heterodox economic, while it has not yet achieved mainstream status, surely will play a crucial role in the evolution of this science in the decades to come, as social unrest, political turmoil, conflict, scarcity, environmental and social ills continue to plague our ever-changing world.

While adherents of heterodoxy may not yet be widely accepted in the mainstream field, their “human” approach to the “economic problem” will surely gain appeal as growth continues to broaden the divide between rich and poor, haves and have nots, urban and rural. Bright young students who have been exposed first hand to the challenges and downsides of economic growth (such as those faced by the millions o poor migrant workers here in Shanghai) are just the kind of students who can go on to make valuable contributions to heterodox economics.

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Hip Heterodoxy

I just found a link to this long and interesting article about a fledgling field called “heterodox” economics. Heterodox is defined as “not in accordance with established or accepted doctrines or opinions, esp. in theology; unorthodox.”

In the case of heterodox economists, what they don’t believe is the
neoclassical model that anchors the economics profession. Classical
economics refers to the theories laid out by Adam Smith and David
Ricardo in the eighteenth and nineteenth centuries, which emphasized
the power of the “invisible hand” of the market to promote the division
of labor and economic growth. Smith famously summed up the recipe for
prosperity as “peace, easy taxes, and a tolerable administration of
justice,” with “all the rest being brought about by the natural course
of things.”

There’s a lot to digest in this five page article from the Nation. I think I’ll have to blog it in a few separate posts. This will also be a great article for use in my AP Econ course when we compare the neo-classical version of the vertical Aggregate Supply to the Keynesian horizontal AS curve, and the implications therein regarding use of monetary and fiscal policies to achieve macroeconomic stability.

One line that jumps out at me right now is:

Indeed, the cradle for much of our policy discussions can be found in
the first chapter of just about any introductory economics textbook,
where the basic precepts of the neoclassical framework are described
under the rubric of “thinking like an economist.”

Again, I continue to come across evidence that an education in Economics is absolutely crucial to understanding important issues in all realms of society today. As I continue digesting this important analysis and history of competing economic ideologies, I will continue to think about how to use this in my class next fall, and blog any ideas that come to mind. If you have the time and interest, give this article a read and post your comments here!

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Greg Mankiw’s Blog: Colleges vs Universities

A couple of days ago I had a conversation with one of my graduating seniors about whether or not she’d major in Economics at Wellesley next year. She wanted to know more about the department, so we went online, looked at the research being done by the professors, looked into their academic and professional backgrounds, and tried to get an idea of the caliber of the department there. I blogged about our conversation here. This morning I found this old post by Greg Mankiw recounting a conversation he had with former senator Ge