View source for Mainstream Economics as Ideology: An Interview with Rod Hill and Tony Myatt -- Part I

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{{DES | des = [[Rod Hill]] and [[Tony Myatt]], authors of [[The Economics Anti-Textbook]], explain the ideology that pervades mainstream economics, an ideology that conceals the importance of power. | show=}}
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Mainstream Economics as Ideology: An Interview with Rod Hill and Tony Myatt — Part I
Rod Hill and Tony Myatt are Professors of Economics at the Department of Social Science at the University of New Brunswick in Saint John. Their new book, The Economics Anti-Textbook is available from Amazon. They also run a blog at www.economics-antitextbook.com.

Interview conducted by Philip Pilkington.

Philip Pilkington: Your book seems to me a much needed antidote to the mainstream economics textbooks and can either be read alone or together with them. I think that’s a great approach because it allows students to become familiar with what is being taught in the classroom but also allows them to take a critical perspective on this material. So, let’s start with the format of these textbooks. In the book you say that they “cloak themselves in an aura of objectivity”. You then relate this to the fact that economics is not a value-free discipline and contains necessary ideological judgements. Could you talk about this a bit?

Tony Myatt: That’s correct. We say the texts cloak themselves with an aura of objectivity while at the same time implicitly (and repeatedly) making value judgements that reflect a particular ideology. Indeed, one of our main objectives in our Anti-Textbook is to provide overwhelming evidence of that. We believe that students subjected to the mainstream textbooks sense the bias in those texts (and the courses that rely on them) and it turns them off. They realize they are being sold something. They don’t like being bamboozled. Evidence for this is provided by the recent walkout from Mankiw’s introductory economics course. Even though the students could not elaborate very clearly the nature of the bias (in the letter they wrote explaining their actions), which unfortunately made them seem quite naive, those students were correct that the bias is there. One might say they intuitively sensed it.

Delightfully for us, Mankiw replied to these students in his New York Times column, saying “I don’t view the study of economics as laden with ideology…It is a method rather than a doctrine….a technique for thinking, which helps the possessor to draw correct conclusions.” Notice the wording he uses, “correct conclusions.” If there were “correct conclusions” to be drawn from using the economic method of thinking, there would be a consensus among economists on most positive economic questions. And while the mainstream texts always claim that such a consensus exists, the evidence suggests otherwise. I’m not just talking here about the profession’s response to the financial meltdown and the ongoing economic crisis, but even more mundane questions such as the effect on unemployment of an increase in the minimum wage. So, Mankiw is simply showing his own bias by implicitly claiming a consensus, by saying there are “correct” conclusions to be drawn.

Our perspective is that there is an ideology that pervades mainstream economics, especially in the way it is currently practiced and taught. There is an important point here: that we can distinguish between neoclassical economics itself, and the mainstream practice and teaching of neoclassical economics.

The point is that it is more difficult to argue that there is a bias in neoclassical economics itself. The neoclassical paradigm is remarkably malleable. It is capable of transforming itself, of shedding many an unappealing feature in the hands of ‘this analyst’ or ‘that analyst’ or ‘this paper’ or ‘that paper’. Moreover, the boundaries of mainstream neoclassical economics are blurry. It is not clear, for example, whether recent work on ‘limited rationality’ lies within the neoclassical paradigm or is a direct assault upon it. As another example, the work on imperfect information by Joseph Stiglitz overthrows many of the neoclassical presumptions about the efficiency of otherwise competitive markets, and the harmfulness of government intervention, and we see his work as being squarely within the neoclassical paradigm. One could even use neoclassical economics to show the importance of community ties and social cohesion, even though in the normal practice and teaching of neoclassical economics these things are totally ignored.

That’s why we called our book an “Anti-Textbook”. The mainstream textbooks are remarkably uniform and do reflect a narrow range of world views. This is a much easier target to attack. And the mainstream textbooks do reflect the core beliefs of mainstream economists that inform their policy prescriptions.

Your question to us was to explain why we feel economics is not a value-free discipline and necessarily contains ideological judgements. We can answer that question. But first, to understand what we did in our book, let’s answer the easier question of why textbooks must necessarily contain ideological judgements.

The textbooks necessarily contain ideological judgements because they are necessarily selective. They must include and emphasize some things and exclude or downplay others. They ask certain questions and not others. They place some topics and questions in the forefront, and put others in the background or leave them out entirely. Those decisions reflect implicit value judgements about what is interesting and important. No ‘objective’ account is possible. For most people – including many economists – this is not a controversial claim.

So, our methodology, our way of getting around the amorphous nature of the neoclassical paradigm, is to focus on the mainstream neoclassical textbooks themselves. We point out their biases of omission and commission. We notice when claims are made without any supporting evidence, or when the so-called evidence is irrelevant or out of date. We notice when two thirds of the text assumes perfectly functioning markets which prohibits (by assumption) the importance of power.

This focus on the textbooks does not mean that we feel there is no bias in neoclassical economics itself. Far from it. Every approach has a bias just as all economists have a bias. Our perspective is that it’s best to acknowledge that fact at the outset. But I’ve said enough. Better let Rod have a turn…

PP: The issue of power is an interesting one. I think what many students who feel instinctively critical of economics courses note from the outset is that the theories taught imply some sort of level playing field. Yet, you would have to be blind not to notice divisions of class and race in even the most prosperous societies. Could you talk about this a bit?

Rod Hill: I think power is central to understanding the reality of economic life. For that reason, it’s important that it be effectively obscured in the principles texts as students are taught how to ‘think like an economist’. The texts typically manage this very well, although I’m sure their authors have no conscious intention to set out to do this. (This remarkable aspect of our propaganda system helps to make it so effective.)

The texts do indeed imply a sort of ‘level playing field’ between buyers and sellers in both markets for goods and services as well as in the labour market. This follows from the central place that’s given to the supply and demand model (which is “short-hand” for the perfectly competitive market).

There, everyone is a ‘price taker’. There is no room for businesses to use their bargaining power to squeeze workers’ wages, to prevent workers from unionizing, to force down their suppliers’ prices, or to raise their selling prices once they’ve eliminated their competition. (Think Walmart.)

But ‘market power’, the ability to push the price away from a hypothetical competitive level, is just the tip of the power iceberg. At least the texts acknowledge this form of power, even if they downplay it. If students think for themselves, they could realize the practical irrelevance of the perfectly competitive market structure. More likely, at least with those who stick with economics, they will start to see the world as composed of competitive markets, regardless of their actual structure. Indeed, some textbooks explicitly justify this by asserting that most markets are ‘competitive enough’ to be approximated by perfect competition.

Most aspects of power remain discreetly out of sight in the texts, even though, as you say, you’d have to be blind not to see them in real life. I like to paraphrase a line from Ben Bagdikian’s The Media Monopoly: the texts can’t tell you what to think, but they can tell you what to think about.

So while they focus students’ attention on these powerless markets, they say little or nothing at all about the power of the wealthy, or the businesses they own, and how they can influence the ‘rules of the game’. As Ha-Joon Chang reminds us in the first chapter of 23 Things They Don’t Tell You About Capitalism, there is no such thing as a ‘free market’: all market exchange takes place within a set of rules and institutions and those matter to market outcomes. But any serious discussion of what determines them would draw attention to the links between economic and political power. It would also provide an extra reason to be concerned about the rapid growth of economic inequality in many countries.

In the world of the texts, the managers of profit-maximizing firms allegedly spend all their time trying to hire the right combinations of labour and capital while spending no time trying to increase profits by influencing laws and regulations. In the world of reality, small armies of lobbyists and corporate lawyers work to do just that, even helpfully drafting laws for busy legislators whose political campaigns they help to finance.

Incidentally, the one notable exception to this in the texts is the discussion of regulating monopoly. The story is that regulators are often ‘captured’ by the industry they are supposed to regulate so that with government screwing up (as it often does in textbook examples) no regulation might be the better option. An ideologically convenient story!

Other aspects of power are also absent. The firm is largely treated as a black box, so authoritarian relations within it are ignored; questions of economic democracy do not arise. The analysis of trade and foreign investment ignores the effects of the relative power of different countries.

I can’t prove how all this affects students. But in my own case I feel I was effectively blinded for an embarrassingly long time to many of these obvious aspects of the world.

PP: And how do you think the textbooks go about hiding these sorts of assumptions?

Rod Hill: In a way, I think the texts hide these assumptions in plain sight while using the magician’s trick of focussing the students’ attention elsewhere. When the supply and demand model is introduced, the texts don’t stress the unrealistic assumptions of the perfectly competitive model (perfect costless information, no geography so that all transactions take place on the head of a pin, no one has any power over prices, no product differentiation). In part, this is because these are deemed to be not important for the questions being asked.

Students’ attention is directed to questions where the model’s predictions seem to accord with common sense: demand goes up, prices rise; costs go up, prices rise, and so on. The student might think this looks plausible and, for much of the text and the course, it’s the only game in town.

But the model also predicts ‘no advertising’, ‘no political contributions by firms’, ‘little or no research and development spending’, ‘all sellers sell identical goods for the same price’ , and ‘people doing the same work get the same wages’ in the labour market. However, no questions about those things are asked, so the predictions are not confronted by the evidence that would refute them. Students would have to figure this out for themselves. And not coincidentally, these questions also raise issues of power: firms’ power over consumers, firms’ power in the political arena, firms’ power over their workers.

So independent-minded students could ask these questions, but (unless they stick around long enough to go to graduate seminars) they are not shown any way of thinking about them in their principles of economics class.

Tony Myatt: And I’d add to that it’s not just a question of emphasis – that the texts assume perfectly competitive markets for three quarters of the book. It’s also a question of placement and progression. The usual progression is an early chapter on methodology, which emphasizes that the realism of assumptions doesn’t matter – it’s predictive power that matters. This is followed by a section often called ‘How Markets Work’, which applies demand and supply to every conceivable type of market. If students are paying attention they might notice that the results of these applications are usually treated as facts – not predictions that need to be tested against the evidence – and certainly not treated as predictions that need to be compared against the predictions of alternative models. And this is a real irony: having sold the student on the unimportance of the realism of assumptions and the overriding importance of predictive power, the texts don’t follow their own methodology. They never take the business of comparative model testing seriously. And for practicing economists, we know that’s where the real fun begins.

Emphasizing (or assuming) perfect competition is the same as assuming away power because in this market structure there are no ‘large’ market participants who can exercise influence over either market outcomes or political outcomes. Neither buyers nor sellers have influence over prices. Sellers are small and lean, just covering their costs. On their own, they lack resources and the incentive to lobby politicians. Such firms would also lack resources to invest heavily in research and development. And this is another irony, because technological change is the one thing that you could say capitalism has done well. Yet, the texts emphasize a market structure that is incapable of explaining this exact feature!

PP: You say that no alternative models are taught in the classroom. I’ve heard this criticism raised many times before and it has always struck me as rather strange. In just about every other social sciences class it is a prerequisite that the lecturer teach the major different approaches, to do otherwise would be considered biased. In your opinions, how do economists get away with this where others cannot?

Tony Myatt: Well, we need to be careful here. Other models of market structure besides perfect competition are taught. Monopoly, monopsony, imperfect competition, and oligopoly are all taught. But they are placed towards the end of the book. Later, when we need to explain the distribution of income, or the benefits of trade, the texts return to assuming perfect competition, to the demand and supply framework, as if that intervening stuff never happened. The argument is that perfect competition is simpler, and is good enough as a first approximation to all markets. But perfect competition is actually a lot more complicated than monopoly. Why not apply monopoly as a first approximation? But that would have a huge ideological impact. It would mean that power, cronyism, and exploitation are potentially important. It would mean that the economy doesn’t necessarily operate efficiently (as a first approximation), and that unions don’t necessarily cause inefficiencies. It would mean that there is a potentially much bigger role for government regulation. And the point is, when discussing a particular topic – international trade say – the texts don’t say “if we assume perfect competition we get these predictions; if we assume imperfect competition we get these predictions; now let’s compare the predictions to the facts”. This is thought to be too complicated, too advanced. But this is a cop out, a dereliction of duty, and is inconsistent with the methodology which the textbooks purport to endorse.

So, while other models of market structure are taught, they are downplayed. On the other hand, no other paradigms are taught. The mainstream textbooks only contain information about the neo-classical paradigm. How do they get away with this?

Again, it’s a question of keeping things simple. They argue they don’t want to confuse the student. It’s hard enough to teach neoclassical concepts without further confusing students with critiques of what they are learning. There’s a nice video of Stephen Marglin addressing the Occupy Harvard movement where he discusses this. (Here’s the link http://www.youtube.com/watch?v=Pf0-E8X-GHo ). He tells how, in his “critical perspectives” introductory economics course, he begins by teaching the neoclassical theory. Then he introduces several critical perspectives. And he acknowledges that this is a huge undertaking. He acknowledges that it takes most students most of their time to get their heads around the neoclassical concepts. But he also acknowledges that in most economics departments there is never a good time for the critique. If it’s too hard for first-year economics students, it’s certainly too hard for high-school students. And then graduate students need to have a ton of maths packed into the curriculum, so there’s no time there. So, as he says, “economists are all for critical thinking, just not today…tomorrow.”

In fact in my own “critical perspectives” course I use our Anti-Textbook. I teach the mainstream material (that’s the first part of each chapter). And the students teach the Anti-Text material (the second part of each chapter). They enjoy shooting me down! So far, it seems to work well. But I’ve been fortunate to have a small class.

Rod Hill: I’d just add that the dominance of the neo-classical paradigm (at least in the English-speaking world) means that there’s less internal pressure within the profession to provide other viewpoints in a principles course than there might be in, say, sociology. Lecturers trained only in neo-classical economics are comfortable using textbooks that contain only that viewpoint.

Most students come to their undergraduate studies in economics with no knowledge of different approaches so they are not in a position to ask ‘Hey, what would ecological economics have to say about that?’ They rely on their instructors to tell them what economics is.

I remember as an undergraduate stumbling upon a copy of Galbraith’s The New Industrial State in a used book shop, reading it and finding it interesting, and wondering ‘Why have I not heard about this in my courses?’ But I rarely asked such questions and had no access to the kind of guidance that we’re trying to provide in The Economics Anti-Textbook.


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