A critique of Samuelson’s and Nordhaus’s Principles of Economics

Econ 101 textbooks are misleading more than a million students a year in the U.S. alone because they leave the lasting impression that markets could solve all our economic problems if only they were left to themselves. Not even the horrendous sub-prime mortgage-crisis bailout in 2008 and 2009, amounting to trillions of dollars, shook the professions’ faith that the markets know best. They continue to invoke the “invisible hand” metaphor coined by Adam Smith in 1776, without conceding that the global economy has undergone several revolutions and changed profoundly during the intervening centuries. Outdated metaphors will not help but only hinder any effort to understand where we have gone wrong, and why, and what to do about it.  

Happily, some students are beginning to see the disconnect between the idealized, theoretical version of economics thought on blackboards and its real-world variant. That is exactly why students walked out of Gregory Mankiw’s Principles of Economics (Econ 10) class at Harvard in 2011,1 and provided him a written explanation for this symbolic gesture:  

“[the course] espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today … Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. … If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.”  

In conjunction with the anti-Wall Street “Occupy Boston” movement, this walkout was part of a worldwide effort to establish valid new paradigms in economics. No doubt the protesters were not under the illusion that their walkout would have any impact on the well-being of the 45 million people living in poverty in the US alone, but it did serve notice to academic economists that they could not be duped indefinitely. The point of this volume is to indicate how much is left unsaid or said in a misguided manner in thousands of classrooms around the globe and not only in Professor Mankiw’s auditorium.3 We shall demonstrate below that the economics being taught on most blackboards makes it appear as though markets descended straight from heaven while maintaining a conspiracy of silence about the Achilles heals of free markets. These include that markets do not pay sufficient attention to safety, they care nothing about the environment, they are notoriously lax with providing precise information in a timely manner, and are completely indifferent to the welfare of future generations. We shall expand on these weaknesses in the chapters to follow.

from this newly published book from WEA eBooks.  Download and read it now.

Principles of Economics for a Post-Meltdown World 

by John Komlos     $20

A critique of Samuelson’s and Nordhaus’s Principles of Economics

Introduction
Chapter I. Basic Concepts
Chapter II. Micro: Supply and Demand in the Product Markets
Chapter III. Micro: Supply and Demand in the Factor Markets
Chapter IV. Applications of Economic Principles
Chapter V. Macroeconomics Economic Growth and Business Cycles
Conclusion