Thursday, September 12, 2013

Why I won't read a first year textbook on economics.

While researching material for my previous blog post "series" on the notion of collusion in competitive markets I came across an article by Nick Rowe asking people who comment on his blog to, please, read an economics textbook. In his post he gives a pretty accurate description of myself, perhaps except the "smart" thing:
You are probably very smart. You are probably very well-educated -- either formally, or self-educated, and probably both. You spend a lot of time on the internet reading economics blogs and commenting on those blogs. You maybe even have a blog of your own, where you write about economics topics. You are probably politically engaged. You are probably a lefty, but may be a righty, or someone who is not easily categorised on that political spectrum. You probably think of yourself as a critic of economics, or a critic of what you see as orthodox economics. You are probably sympathetic to what you see as heterodox economics.
But you have never once read a first year economics textbook.
Well, I have read The Cartoon Introduction to Economics (volumes one and two), but I guess they don't count. I have also read many books on economic topics by various people, among them many economists, mostly on specific aspects of the modern globalized economy:
  • George Monbiot: Captive State
  • Joseph E. Stiglitz: Globalization and its Discontents
  • James K. Galbraith: The Predator State
  • Naomi Klein: The Shock Doctrine
  • Ha-Joon Chang: 23 Things They Don't Tell You About Capitalism
  • Steve Keen: Debunking Economics
  • Moshe Adler: Economics for the Rest of Us
...and on the financial crisis in particular:
  • Matt Taibbi: Griftopia
  • John Lanchester: Whoops!
  • Yves Smith: ECONned
From these and other books that I cannot remember from the top of my head (and I'm too lazy to walk to the bookshelf to look up), but in particular from Steve Keen's Debunking Economics, I developed a sense that economics is not really a science but a theology (cult?) of the market. So while I am very sympathetic to Nick Rowe's wish, there is a reason why I won't read an economics textbook and actually would discourage anyone from doing so. The reason is simple:

Economics textbooks lie to you. Insidiously.

In his book Debunking Economics, Steve Keen describes many instances where economists' claims have been disproven by other economists, sometimes even those of the same school of thought, yet are still taught in textbooks as if they were still valid. Sometimes they ignore the refutation (no mention in the textbook), sometimes they muddy the waters (as in "the conditions for the claim to be valid are beyond the scope of this discussion"), but sometimes they simply lie (as in "is this claim valid? It certainly is!"). Sometimes they massage the assumptions in a way that makes "true" after all, what had been logically disproven (as in "if we don't find a direct road from A-town to B-ville, let's rename C-city to B-ville, because now there is"). Other claims cannot be justified when contrasted with the real economy ("minimum wage leads to unemployment"), or cannot be replicated when simulated in software ("in a perfect competition, price equals marginal cost"). Sometimes a valid theory has been (silently) replaced by another theory because one of the implications contradicted the dogma, even if — as Moshe Adler writes — "each economics professor is left to invent his own parable" because there is no evidence for their claims.

I am quite certain that I would be able to read a book on, say, Dyanetix — a term that I just made up and bears no relationship to any existing concept or method whatsoever — without becoming a follower of that concept, because the notions in this book would likely be so patently absurd that no sane people would accept them. I am quite immune to bullshit.

But if I read a book on, say, a historic event where the author would take some liberty with facts, assumptions and causes, I'd have no way of telling if and how I was being misled. My desire to learn would be insidiously exploited to implant false facts and ultimately false thoughts into my mind. Facts would blend with fiction to create a pseudo-history that starts shaping my experience of the world, perhaps even to my detriment.

This is exactly the case with economics textbooks. I have no way of telling whether a certain claim is reasonable (because it might contradict the evidence — irrespective of whether it appears logical) or whether a certain assumption is permitted (as it might predispose a certain outcome). Strangely enough, in mathematics or physics textbooks even the most innocuous claim is routinely subjected to a rigorous mathematical proof, whereas in economics textbooks, where they would be most needed to expose sometimes rather blatant distortions, they are (deliberately?) omitted even for grand claims and theories that affect whole national economies and the livelihoods of whole peoples.

Here's a proposition: What if a couple of economics professors of different economic factions — some orthodox, some heterodox — came together and wrote an economics textbook describing the economic mainstream that is taught in economics classes around the world, but in a manner that allows the reader to see which parts are disputed. For example, theories that have been logically disproven or that contradict the empirical evidence would be printed in red, hypotheses that have no supporting evidence or whose validity are disputed would be printed in blue, and so on. Of course, the logical flaws and the grounds of the dispute would have to be listed. Uncontested parts could remain in black ink. If there are alternative theories to the mainstream ones, they'd be contrasted side by side. This way the reader would get all the alleged benefits of being exposed to the mainstream economic thought without being misled or brainwashed with claims that are contradicted by logic, evidence or other economics. Now, that is a textbook I'd be more than happy to read!

Update: It appears that such a textbook does indeed exist! I just bought the The Economics Anti-Textbook by Rod Hill and Tony Myatt, and in it, they argue that the claim of economics to be a value-free science is a myth. The book is a guide to decoding the textbooks, it reveals the hidden value judgements, ignored evidence and unmentioned alternative theories. Exactly what I was looking for. It just moved to the top of the stack of books to be read.


  1. Maybe Steve Keen is wrong.

    But maybe sometimes sorta right.

    You scared to find out? Don't you trust your own judgment? You read Steve Keen, now won't you read a first year textbook?

  2. Ralph,
    Have you read or followed John Rapley?
    Ping me at michael at ivpcapital dot com. would like to run some ideas about digital network effects and the notion of "equilibrism" that can be coded into these networks to achieve universal service settlement systems to retard the growing wealth and digital divides.