Re: AS/AD

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

Barkley wrote:
> ... Let me mention one more aspect of this that may extend beyond just the
> confines of the principles of econ class.  If you
> were following at all closely you may noticed me making a big deal about
> whether books were using a vertical AS curve or not.
> This assumption, increasingly widespread in the texts, does have a very
> strong ideological content.

My impression (which is not based on a statistical sample, BTW) is that
fewer & fewer textbooks have a vertical AS curve, except in the long run.
New classical economics and supply-side economics are not very popular
these days (except in attenuated forms) while most textbook-writers want to
sell books and so want to tell (new) Keynesian stories about business
cycles (with an upward-sloping short-run AS curve).

The key classical assumption that pervades economics (and, seemingly, Al
Gore's mind) is not the assumption of continuous full employment but rather
the version of Say's Law that says that increased saving (nowadays in the
form of an increased government budget surplus) leads to increased
investment. Of course, this whole issue is hidden behind the scenes in the
AS/AD diagram. To talk about it using a diagram, the "Keynesian cross" is
needed (or IS-LM or something better ...). This is a crucial critique of
AS/AD: it distracts us from the saving/investment nexus. That doesn't mean
that we shouldn't talk about AS/AD, but it does tell us that it's woefully
inadequate understanding the issues that divide economists.

> ... I also remind that in many institutions, principles is viewed as a
> garbage dump, a place to use grad students, adjuncts, or just anybody
> dragged off the street who can drool to teach. Big Cheese economists teach
> one grad seminar a semester on their research.  But a lot of us on this
> list for well known reasons labor in the intro vineyards/salt mines,
> although personally I enjoy it, despite the frustrations.

There's a contradiction here: if we underlings are left to teach intro (as
I just did for 3 hours or so), then it can't be used very well to
indoctrinate the students to worship the "economic way of thinking." Of
course, that's the usual contradiction in management relationships, of
trying to get the employees to do stuff that they wouldn't normally do.
There are important ways to get us to do it, such as having a limited
number of textbooks, of threatening underlings with not getting tenure
and/or promotion, etc. And it usually turns out that it's much easier to
teach the simplistic pap than to teach a more sophisticated and realistic
vision of economics.

One thing that left-wing economists need to do is to develop ways to
explain the more sophisticated and realistic economics in simple ways. I
thought that Bowles & Edwards' textbook did a pretty good job here. BTW, a
new edition will come out in a few years, by Sam Bowles and Frank
Roosevelt. (It's been delayed since Frank's been sick. I don't know the
details.)

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine