Assignments for the Economist blog

I'm pleased to see that the Economist has entered the blogging age, with its Free Exchange blog. As per the Economist's rules for its print magazine, there is no identification of the authorship of individual posts, but I have it on good authority that Megan McArdle is using her invisible hands to guide its development. As I am knee-deep in day-job activities, I would like to welcome Free Exchange into the blogosphere by requesting that it comment on two memes currently making their way through the blogosphere: 1) Over at Crooked Timber, Chris Bertram asks a pointed question to libertarians -- what kinds of inequality matter? [T]he crux of Tyler [Cowen]?s argument has been that Europe?s ageing population matters because it will lead to lower growth rates and that the compounding effect of these will be that Europe?s position relative to the US (and China, and India) will decline, and that that?s a bad thing for Europeans. Whilst Tyler insists that these global relativities matter enormously, Will [Wilkinon] suggests that domestic relativities between individuals matter hardly at all. Since I think of Will and Tyler as occupying similar ideological space to one another, I find the contrast to be a striking one, and all the more so because I think that something like the exact opposite is true. That is to say, I think that domestic relativities matter quite a lot, and that global ones ought to matter a good deal less (if at all) just so long as the states concerned can ensure for all their citizens a certain threshold level of the key capabilities. UPDATE: Drezner gets results from Free Exchange!! 2) The left half of the blogosphere is praising to the high heavens an article by Christopher Hayes from In These Times about the "neoclassical indoctrination" that allegedly takes place in introductory economics classes: As taught by Sanderson, economics is a satisfyingly neat machine: complicated enough to warrant curiosity and discovery, but not so complicated as to bewilder ..., and once you?ve got the basics of the model down, everything seems to make sense. As the weeks go by, ... I come to love the class. The more reading I do, the more sense the op-eds in the Wall Street Journal make. The NPR program ?Marketplace? becomes interesting. I even know what exactly the Fed rate is. A part of the world that was blurry and obscure begins to come into focus. My classmates seem to feel the same way. ?I never thought I?d be interested in economics,? one sophomore told me. ?Sanderson convinced me I was.? The simple models have an explanatory power that is thrilling. Once you?ve grasped the aggregate supply/aggregate demand model, you understand why stimulating demand may lead, in the short run, to growth, but will also produce inflation. But the content of that understanding turns out to be a bit thin. Inflation happens because, well, that?s where the lines intersect. ?A little economics can be a dangerous thing,? a friend working on her Ph.D in public policy at the U. of C. told me. ?An intro econ course is necessarily going to be superficial. You deal with highly stylized models that are robbed of context, that take place in a world unmediated by norms and institutions. Much of the most interesting work in economics right now calls into question the Econ 101 assumptions of rationality, individualism, maximizing behavior, etc. But, of course, if you don?t go any further than Econ 101, you won?t know that the textbook models are not the way the world really works, and that there are tons of empirical studies out there that demonstrate this.? The problem cited in the last graph is the exact reverse of how I remember my own Econ 101 class. In that course, we were first introduced to perfect competition, and then we were exposed to the ways in which the real world deviates from perfect competition -- monopolistic competition,oligopoly, monopoly, and, most important, the problem of externalities. We then learned that the best way to solve many of the problems of externalities was to use market mechanisms (i.e., taxes) rather than direct controls. The end result of the course was an appreciation of how technocrats can use incentives to improve social outcomes in the economy. Fair enough. But it was not until graduate school that I saw anything resembling the public choice approach to economics, which calls into question the ability of the government to act as a Platonic Guardian in the world of regulation. To be fair, Hayes wrote his piece after taking a macroeconomics course, where many of these issues would not have arisen. From my experience, however, after Econ 101 students probably have a greater appreciation for how markets work, but also develop a new enthusiasm for the ways in which the government can influence market outcomes. I'd be curious whether others who took Econ 101 had my experience or Hayes' experience.