Monday, June 24, 2019

Samuelson Slams Mankiw Over the Fed and the Great Recession

Robert J. Samuelson writes in The Washington Post:
Harvard professor N. Gregory Mankiw is one of the most influential economists in the United States. But the 61-year-old’s authority does not stem from advancing an arcane scholarly finding. Nor has Mankiw coined some catchy phrase that captured the popular imagination (see, for example, “The Affluent Society” by John Kenneth Galbraith). Instead, Mankiw’s power derives from his position as the author of one of the most widely used introductory college economics textbooks.

Chances are that if you decided to study college economics today, you’d start with Mankiw’s “Principles of Economics.” He has been writing and revising it for more than two decades. It’s now in its eighth edition, and the ninth is expected in about six months. Mankiw estimates that there are roughly 4 million copies of the book circulating in the world, with about 2 million in the United States. He figures that his book has from 20 to 25 percent of the market for starter economics books...

But as a teaching device, “Principles of Economics” has fallen behind...

There’s some misleading information about the Great Recession and parallel financial crisis. On Page 691, we have this: “Today, bank runs are not a major problem for the U.S. banking system or the Fed.” This would surely surprise the Fed, which poured trillions of dollars into the economy to prevent financial collapse.
Samuelson is correct here---as far as he goes. However, I doubt he is thinking about Austrian School business cycle theory as being the necessary addition to introductory economics textbooks. It is one addition that should be made, among many. Kirzner on entrepreneurship and Hayek on economic methodology are two others, for example.

Then, of course, the fantasy land concepts such as indifference curves should be eliminated.

Come to think of it, there is so much wrong with Mankiw's text that it should be completely junked. This would be a good start for a replacement with these supplemental readings 1, 2, 34 and 5.


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