Saturday, 31 January 2009

Economics: three insidious teachings

Philip Salter at the Adam Smith Institute blog refers us to this essay by the economist Anthony de Jasay. In his essay Anthony de Jasay sets out what he considers to be the three insidious mistakes that are taught to secondary school children in Europe. Only three? These mistakes are the distribution-independence, the worker-defence and the property "rights" theses. Salter notes
In regards to the distribution independence thesis, “high school textbooks teach that capitalism, leaving as it does the distribution of income to the free play (or, as some will say, the caprice) of the market, generates inequality. It goes without saying that inequality is bad both because it is "socially" unjust and because it reduces the aggregate "utility" derived from aggregate income.” This of course rests on the supposition that income is independent of its distribution, which is of course patently absurd.

The worker-defence thesis relies on the idea that employers would abuse workers if "workers' rights" were not defined, extended and bolstered by legislation. Of course, in truth the dominant effect of this legislation is to “create excess supply in the labour market by making employers shun the increased risk of hiring.” As a result the bargaining power of workers is weakened.

The property “rights” thesis is the idea that property is a social construction, granted by society (read government). In reality property is “generated by contracts and matched by the corresponding contractual obligations. Lending and borrowing, mortgages, leases, partnerships, insurance policies, options and other derivatives represent property "rights." They are derivatives of property, and are offset by the corresponding obligations of counter-parties as assets are offset by liabilities.” Thus, property is not the governments to give “rights” to.
de Jasay was inspired to write this essay because of the growing concerns expressed in German and French business circles about the type of economics taught in secondary schools. I have yet to hear of such concerns from business people here in New Zealand. Have I missed them? Do business people even know economics is taught in schools here? Or do they think that what is taught is right, or just irrelevant so they don't care?

3 comments:

Matt Nolan said...

I think economics is taught a little more value-free in NZ. They just spend three years learning what a demand and supply curve looks like - and how to work out the area of a triangle ;)

Hence why I think many people suspect economics is boring, when it actually beautiful.

Kiwiradar said...

My jaundiced view of economics was due to having H2 (Heather Simpson) as a lecturer at Otago!

Paul Walker said...

Kiwiradar: That would do it to you!