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Greg Mankiw’s fascinating, bizarre, twisted logic

February 4, 2011

I have the privilege of taking a macroeconomics class that uses a textbook by Greg Mankiw, former economic adviser to George W. Bush. Which has been kind of weirdly enjoyable, because Mankiw presents such a caricature of economics that it’s really easy to pinpoint weaknesses of the field. His text, for instance, offers absolutely no critique of GDP – he mentions that GDP doesn’t cover the informal sector, but makes no mention of why GDP might be a problematic measure of national well-being.

Here a couple choice things from the textbook we’re using and his Principles textbook, which I found online. First, from the latter:

International trade in goods and services can improve the economic well-being of a country’s citizens. Trade is, in some ways, a type of technology. When a country exports wheat and imports textiles, the country benefits as if it had invented a technology for turning wheat into textiles. A country that eliminates trade restrictions will, therefore, experience the same kind of economic growth that would occur after a major technological advance.

This has got to be the weirdest and least compelling defense of Ricardian comparative advantage I have ever read.

On why capital does not flow to poor countries:

Poor nations have not only lower levels of capital accumulation… but also inferior production capabilities… a second reason capital might not flow to poor nations is that property rights are often not enforced. […] Whichever of these two reasons is correct, the challenge for poor nations is to find ways to reverse the situation. If these nations offered the same production efficiency and legal proetctions as the U.S. economy, the direction of international capital flows would likely reverse. The U.S. trade deficit would become a trade surplus, and capital would flow to these emerging nations. Such a change would help the poor of the world escape poverty.

I like how Mankiw manages to, in one stroke of ingenious logic, blame poor countries for being poor and for perpetuating the U.S. trade deficit.

Less humorous and more indicative of the nature of this textbook are Mankiw’s “Four Most Important Unresolved Questions of Macroeconomics,” with which he closes the book:

  1. How should policymakers try to promote growth in the country’s natural level of output?
  2. Should policymakers try to stabilize the economy?
  3. How costly is inflation, and how costly is reducing inflation?
  4. How big a problem are government budget deficits?

These all seem like real issues, to be sure, but contrast Mankiw’s list with a list in Macroeconomics in Context, an introductory textbook that attempts to present a more holistic economics curriculum. This book ends with a chapter called “Macroeconomic Challenges for the Twenty-First Century” and addresses:

  • Macroeconomics and human development: the relationship between economic growth and human development; human development when there is already “enough”
  • Macroeconomics and ecological sustainability: the relationship between economic growth and global population problems, resource depletion, pollution, and climate change

Economics as a means, not an end: perhaps that’s part of what Mankiw is missing.

Flying Whale

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