In January, James Kwak wrote about how basic economic principles can be applied to public policy in misleading ways. A letter to the editor, followed by James’s reply, is below.
Thanks to Professor Kwak for his 2017 article in The Atlantic entitled “The Curse of Econ 101.” We participated in a discussion of this article in a recent economics conference, and it served as an excellent launching pad for our reflections on the pros and cons of our Principles of Economics courses as currently taught.
Those in attendance teach Economics at research universities, liberal-arts colleges and community colleges, and we agreed that we did not recognize our Principles courses in the description of Economism advanced by Professor Kwak. He defines Economism as “the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case.” While we do not count upon reaching consensus among our students, we do make every effort to give them a fundamental theoretical structure that they can extend as appropriate when evaluating real-world problems. We then present them with those real-world problems and demand that they analyze the specifics of those problems using the theoretical structure of economics.
The presentation of the minimum wage in our classes—Professor Kwak’s specific example—is a good example of the appropriate mix of theory and real-world experience in our classes. We do not ask our students to ignore empirical observations that seem to contradict our theory, but we use those observations as jumping-off points to consider appropriate extensions of the theory in that specific case. Professor Kwak cites a 1994 study by professors David Card and Alan Krueger as a reason to reject the insights of Economics 101 on the minimum wage; we see it and the many other empirical studies of the impact of the minimum wage as ways to engage students in extending their application of economic theory to the real world.
We enjoyed Professor Kwak’s point of view, and look forward to reading his book. In the meantime, we hope that he’ll sit through a semester of Econ 101 on his campus. We think he’ll find that the class challenges the students to extend their thinking to embrace complex economic phenomena rather than encouraging them to treat each phenomenon as a “simple, open-and-shut case.”
Professor, Department of Economics, University of North Carolina at Chapel Hill
Emeritus Professor, Department of Economics, University of Connecticut
Carlos J. Asarta
Director, Center for Economic Education and Entrepreneurship, University of Delaware
Director, Center for Economic Education, University of North Texas
Senior Lecturer, Department of Economics, Penn State University
Michael A. MacDowell
Managing Director, Calvin K. Kazanjian Economics Foundation, Inc.
Emeritus Professor, Department of Economics, University of North Carolina at Chapel Hill
Professor, Agricultural Economics and Economics Departments, Montana State University
Professor, Department of Economics, Georgia College
James Kwak replies:
I appreciate your reading the article (which is an excerpt of my book Economism), and I’m honored that your group chose to discuss it.
I am sure you are correct that most first-year economics classes do not blindly apply the competitive market model to complex issues. In the article and the book, my focus was not on first-year economics classes themselves, but rather on a broader social phenomenon: the unreflective way that the competitive market model is used to justify certain policy and political positions (often with a ritual invocation of “Economics 101”) without asking whether the model accurately describes the real world. My book is concerned less with how economics is actually taught than with our media and political landscape and the caricature of Economics 101 that, in my opinion, has become disproportionately influential today. When it comes to the minimum wage, my main point was not to say that Dube is right and Neumark and Wascher are wrong, but to say that there is a serious empirical debate about these issues; the people who are wrong are the politicians who say with certainty that a higher minimum wage must increase unemployment, and they are the ones who claim that “economics” is on their side.
I do hope you read the book.