ABSTRACT

No discipline has ever experienced systemic failure on the scale that economics has today. Its fall from grace has been two-dimensional. One, economists oversaw, directly and through the prevalence of their ideas, the structuring of the global economy that has now collapsed. Two, except for a few outcasts, economists failed to see, even before the general public saw, the coming of the biggest economic meltdown of all time. Never has a profession betrayed the trust of society so acutely, never has one been in such desperate need of a fundamental remake. As an epistemological event, the 2008 meltdown of the global financial system ranks with the observation of the 1919 solar eclipse. If professional practice in economics resembled, even in the slightest, that in the natural sciences, then in the wake of today’s global disaster economists would be falling over each other to proclaim the falsity of their theories, the inadequacy of their methods, and the urgent need for new ones. It is now evident to nearly everyone except economists, and increasingly even to many of us, that our collective failure to see the calamity before it occurred and the fact that the system that collapsed had been tailored to fit mainstream teachings, mean that we, the textbooks we use, and the courses that we teach harbour fundamental misconceptions about the way economies, most especially their markets, function. And in economics nothing is more important than teaching, because, as Galbraith senior once observed, economics is primarily a teaching profession. This makes economics pedagogy a natural starting point for an analysis both of how economics went so horribly wrong and of how it might be made less a facilitator of human disaster in the future. Gregory Mankiw’s Principles of Economics, in all its five versions, has been the dominant basic text internationally for more than a decade. Also its author, as chairman of President Bush’s Council of Economic Advisors from 2003 to 2005, was directly involved in the engineering of the disaster. So Mankiw’s textbook seems an ideal place to look for clues as to how both the economics profession and the public which it educates became so ignorant, misinformed, and unobservant of how economies work in the real world. Because we are dealing with a systemic failure, in what follows I am concerned not with specific issues covered by Mankiw’s text. Instead I want to

consider its general approach to understanding economic phenomena and, no less important, how the author treats the position of trust that he enjoys vis-à-vis the student. A defining characteristic of traditional or orthodox economics is that it subscribes to a Neoplatonist theory of truth, i.e. it holds its basic tenets or propositions from which it then deduces everything else to be self-evident. This quaint epistemological doctrine was notably enunciated for economists by Lionel Robbins in An Essay on the Nature and Significance of Economic Science (1932). He wrote: “the propositions of Economics are on all fours with the proposition of all other sciences. As we have seen, these propositions are deduction from simple assumptions reflecting very elementary facts of general experience” (1932: 104). And:

In Economics, as we have seen, the ultimate constituents of our fundamental generalisations are known to us by immediate acquaintance. In the natural sciences they are known only inferentially. There is much less reason to doubt the counterpart in reality of the assumption of individual preferences than that of the assumption of the electron.