In Defence Of Microeconomics 1

Nishanth Pathy’s criticism of ANU’s Microeconomics 1 makes the classic mistake of presuming that you can criticise something before you actually understand it. We don’t teach Euclid from a nuanced perspective despite the fact that non-Euclidian geometry is now an occasional feature of doctoral-level mathematics. The same reasoning lies behind why optimal patent length doesn’t feature in Micro 1.
It is perfectly sensible that students are not taught the foundations of microeconomics from a critical standpoint from the word go. There’s a lot to take in. Students need to master the basics before they move on to complexity. I wonder what Mr Pathy would want taken out of an already jam-packed course to make room for a nuanced discussion of the general equilibrium effects of tax.

When we begin with a critical lens we inevitably end up with a bunch of beginners believing themselves smarter than 400 years of more educated theorists. They proceed to straw man arguments in a quest to prove how savvy they are and immoral economics is, and we are left with a collection of arrogant, misinformed zealots. If Mr Pathy is genuinely concerned about the cognitive ability of our future leaders he ought to reconsider his position.
The following comment from Mr Pathy’s article is instructive:
“First year micro students…will be sold a narrative that government is generally harmful, that corporations are generally beneficial, that short term economic efficiency is all that matters and that markets generally achieve the best outcomes when undisturbed. None of that is inherently true.”
Well, actually, it is, or at least it is when you don’t straw man. Economics does not suggest that government intervention is ‘harmful’. That’s a moral judgement, and anyone who has spent ten seconds with academic economists knows they contort themselves to avoid value claims. Rather, economics suggests that government intervention in market activity is generally inefficient. This is a mathematical concept, and empirical evidence supports the claim. You can’t be taught that in first year because you don’t have the skills yet to understand empirics. It must also be noted that ‘market-failure’ and the need for government intervention is a topic in most micro 1 courses.

Corporations are indeed, ‘generally’ beneficial, or at least so says the last 50 years of research in development economics. Markets don’t produce the ‘best’ outcome (whatever that means), they produce the most efficient outcome in a Paretian sense. Perhaps Mr Pathy missed the lecture on efficiency-equity trade-offs. It’s usually topic 2.
Economics is also not so stupid as to suggest that short-term economic efficiency is all that matters. One of the most fundamental models in macro is the overlapping generations model. Yes, we don’t learn it in macro 1—that’s because you need to understand a phase diagram to grasp the model, and first years don’t.

Mr Pathy worries that students only take Micro 1 and nothing else, so perhaps they will never grasp a phase diagram. Sure, but then all those PPE kids will also take political science courses, ethics courses and social philosophy courses. Finance students will learn about superannuation and optimising over an infinite time horizon; business kids will learn about building equity and sustainable growth. In short, people will get an education somehow, somewhere, to compliment what they learn in Micro 1, which will give them the broad perspective everyone obviously needs.

Mr Pathy might also consider things from the point of view of economics educators. Perhaps, knowing that they only have one semester to work with, they ensure students pick up some general themes rather than simply having yet another opportunity to impose their prejudices on a body of knowledge. One academic who teaches foundation economics remarked to me late last year:
“Most of my students are public servants. I can see that a lot them don’t care; they just want the piece of paper. So I make sure that if they take home one lesson, it’s that government interference in the market will always have unpredictable outcomes. It might still be sensible, but they should have some humility”.

That’s some tight advice for undergraduates: have some humility. Learn something thoroughly before you move to criticise; say, in your honours thesis.

 

This Comment is response to Nishanth Pathy’s article ‘The Biased Lens of Micro 1 at ANU’, which you can read here.
Mark Fabian is a doctoral candidate in economics at the Crawford School for Public Policy