"Balanced Budget Fundamentalism"

Simon Wren-Lewis compares balanced budget fundamentalism to anti-evolutionists:

Europeans, and particularly the European elite, find popular attitudes to science among many across the Atlantic both amusing and distressing. In Europe we do not have regular attempts to replace evolution with ‘intelligent design’ on school curriculums. Climate change denial is not mainstream politics in Europe as it is in the US (with the possible exception of the UK). Yet Europe, and particularly its governing elite, seems gripped by a belief that is as unscientific and more immediately dangerous. It is a belief that fiscal policy should be tightened in a liquidity trap. 

In the UK economic growth is currently strong, but that cannot disguise the fact that this has been the slowest recovery from a recession for centuries. Austerity may not be the main cause of that, but it certainly played its part. Yet the government that undertook this austerity, instead of trying to distract attention from its mistake, is planning to do it all over again. Either this is a serious intention, or a ruse to help win an election, but either way it suggests events have not dulled its faith in this doctrine. 

Europe suffered a second recession thanks to a combination of austerity and poor monetary policy. Yet its monetary policymakers, rather than take serious steps to address the fact that Eurozone GDP is stagnant and inflation is barely positive, choose to largely sit on their hands and instead to continue to extol the virtues of austerity. (Dear ECB. You seem very keen on structural reform. Given your performance, maybe you should try some yourself.) In major economies like France and the Netherlands, the absence of growth leads to deficit targets being missed, and the medieval fiscal rules of the Eurozone imply further austerity is required. As Wolfgang Munchau points out (August 15), German newspapers seem more concerned with the French budget deficit than with the prospect of deflation. 

There is now almost universal agreement among economists that tightening fiscal policy tends to significantly reduce output and increase unemployment when interest rates are at their lower bound: the debate is by how much. A few argue that monetary policy could still rescue the situation even though interest rates are at their lower bound, but the chance of the ECB following their advice is zero.  

Paul De Grauwe puts it eloquently.  

“European policymakers are doing everything they can to stop recovery taking off, so they should not be surprised if there is in fact no take-off. It is balanced-budget fundamentalism, and it has become religious.” 

"Predictions and Prejudice" among that cohort of right-wing hacks posing as social scientists

Krugman @ NYT on the shame - or should I say "shamelessness" - of too many in his profession:

The 2008 crisis and its aftermath have been a testing time for economists — and the tests have been moral as well as intellectual. After all, economists made very different predictions about the effects of the various policy responses to the crisis; inevitably, some of those predictions would prove deeply wrong. So how would those who were wrong react?

The results have not been encouraging.

Brad DeLong reads Allan Meltzer in the Wall Street Journal, issuing dire warnings about the inflation to come. Newcomers to this debate may not be fully aware of the history here, so let’s recap. Meltzer began banging the inflation drum five full years ago, predicting that the Fed’s expansion of its balance sheet would cause runaway price increases; meanwhile, some of us pointed both to the theory of the liquidity trap and Japan’s experience to say that this was not going to happen. The actual track record to date:

Tests in economics don’t get more decisive; this is where you’re supposed to say, “OK, I was wrong, and here’s why”.

Not a chance. And the thing is, Meltzer isn’t alone. Can you think of any prominent figure on that side of the debate who has been willing to modify his beliefs in the face of overwhelming evidence?

Now, you may say that it’s always like this — but it isn’t. Consider the somewhat similar debate in the 1970s over the “accelerationist” hypothesis on inflation — the claim by Friedman and Phelps that any sustained increase in inflation would cause the unemployment-inflation relationship to worsen, so that there was no long-run tradeoff. The emergence of stagflation appeared to vindicate that hypothesis — and the great majority of Keynesians accepted that conclusion, modifying their models accordingly.

So this time is different — and these people are different. And I think we need to try to understand why. Were the freshwater guys always just pretending to do something like science, when it was always politics? Is there simply too much money and too much vested interest behind their point of view?

The Crime of 2010

Professor Krugman blogs this indictment of the Beltway, Business and Media Elites @ NYT. Millions of lives have been ruined by the cruelty of the Deficit Hawks, the willful ignorance or appalling timidity of insider DC elites - including many top Democrats - and the flaming idiocy of the TeaBaggers, who converged to force the country into an austerity discourse when the economy quite clearly needed a robust injection of federal spending:

(W)hat we’re learning from a number of sources: it’s really hard to get employers to look at people who have been out of work for an extended period, so any sustained increase in long-term unemployment tends to become permanent.

The best way to avoid this outcome, then, is to avoid prolonged periods of high unemployment.

So let me make the obvious point, just in case anyone missed it: the “pivot” of

From the Annals of Deadly Expert Advice

2010 — when all the Very Serious People decided that the danger from debt trumped any and all concern for job creation — was an utter disaster, economic and human. It was even a disaster in fiscal terms, because a permanently depressed economy will cost far more in revenue than was saved by slashing the deficit by a few percent of GDP in the short term.

Now, you might think that this post should be titled The Mistake of 2010 — but that would only be appropriate if it were truly an honest error. It wasn’t. Some of the austerians were self-consciously exploiting deficit panic to promote a conservative agenda; some were slipping into deficit-scolding rather than dealing with our actual problems because it felt comfortable; some were just going along for the ride, saying what everyone else was saying. Hardly anyone in the deficit-scold camp engaged in hard thinking and careful assessment of the evidence.

"Why Janet Yellen, Not Larry Summers should lead the Fed"

An appointment of Larry Summers to the Fed Chair fits perfectly the definition of insanity attributed to Albert Einstein: "Insanity is doing the same thing over and over again and expecting different results."

In that vein, Joseph Stiglitz argues contra Mr. Summers @ NYTs, with a great in-depth analysis of the background and the stakes in this appointment:

The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective.

But why, one might ask, is this a matter for a column usually devoted to understanding the growing divide between rich and poor in the United States and around the world? The reason is simple: What the Fed does has as much to do with the growth of inequality as virtually anything else. The good news is that both of the leading candidates talk as if they care about inequality. The bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.

The Summers of our discontent

Jason Linkins @ Huffington Post:

Way way back at the end of this period of time that we like to call "the 1990s," Time magazine featured Alan Greenspan, Robert Rubin, and Larry Summers on its cover and called them "The Committee To Save The World." And that was basically the moment that put the American economy on the Darkest Timeline. Somewhere, out there, there is a parallel universe where Brooksley Born, Sheila Bair, and ... I don't know, let's say a bottle of sriracha were appointed to the same committee, and there, the economy is humming and Elizabeth Warren didn't even need to run for Senate.

How did that work out?

In the intervening years since the Frio Trio were plastered all over your dentist's office, Greenspan has been forced to admit that his overarching theories were kinda-sorta all cocked up. Rubin ... well, he at least fell into a swimming pool at a big Wall Street to-do at the 2012 Democratic National Convention, in the most cosmically just thing that has ever happened at a political event. But Larry Summers has proven to be the sort of dread beast that even Ash Williams couldn't send off to a spectral dirt nap. Now, it is being rumored that Summers is atop the list of possible replacements for Ben Bernanke at the Federal Reserve.

Lordy, it was just 18 months ago that we were forced to ruminate on the possibility that Summers might end up leading the World Bank. At the time, the best (among many!) arguments against this came from Felix Salmon, who recognized that running the World Bank called for "a very high level of cultural and interpersonal sensitivity," and not, say, a high level of whatever personality traits lead one to opine, "I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable."

Reinhart And Rogoff's Pro-Austerity Research Now Even More Thoroughly Debunked By Studies

Mark Gongloff @ Huffington Post:

The debunking of Carmen Reinhart and Kenneth Rogoff continues.

The Harvard economists have argued that mistakes and omissions in their

influential research on debt and economic growth don't change their ultimate austerity-justifying conclusion: That too much debt hurts growth.

But even this claim has now been disproved by two new studies, which suggest the opposite might in fact be true: Slow growth leads to higher debt, not the other way around.

In a post at Quartz, University of Michigan economics professor Miles Kimball and University of Michigan undergraduate student Yichuan Wang write that they have crunched Reinhart and Rogoff's data and found "not even a shred of evidence" that high debt levels lead to slower economic growth.

And a new paper by University of Massachusetts professor Arindrajit Dube finds evidence that Reinhart and Rogoff had the relationship between growth and debt backwards: Slow growth appears to cause higher debt, if anything.

America's #1 "Very Serious Person" on the Austerity Imperative

Colbert digs deep into the data:

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The Debate over mortgage debt

It seems the administration's economic team - most notably Tim Geithner and Larry Summers - just never got the centrality of "underwater" housing debt in putting brakes on a recovery.  This is an interesting piece in The Washington Post on how the "debate" unraveled on the inside, how it continues with what appears to be total denial on Geithner's part - and the lingering impact of the mortgage crisis:

One year and one month before President Obama won reelection, he invited seven of the world’s top economists to a private meeting in the Oval Office to hear their advice on what do to fix the ailing economy. “I’m not asking you to consider the political feasibility of things,” he told them in the previously unreported meeting.

There was a former Federal Reserve vice chairman, a Nobel laureate, one of the world’s foremost experts on financial crises and the chief economist of the International Monetary Fund , among others. Nearly all said Obama should introduce a much bigger plan to forgive part of the mortgage debt owed by millions of homeowners who are underwater on their properties.

Obama was reserved in response, but Treasury Secretary Timothy F. Geithner interjected that he didn’t think anything of such ambition was possible. “How do we get this done through Congress?” he asked. “What could we actually do that we haven’t done?”

The meeting highlighted what today is the biggest disagreement between some of the world’s top economists and the Obama administration. The economists say the president could have significantly accelerated the slow economic recovery if he had better addressed the overhang of mortgage debt left when housing prices collapsed. Obama’s advisers say that they did all they could on the housing front and that other factors better explain why the recovery has been sluggish.

Income Inequality - the Second Gilded Age

Brad DeLong at SFGate:

A third of a century ago, all of us economists confidently predicted that America would remain and even become more of a middle-class society. The wealth inequality of the 1870-1929 Gilded Age, we would have said, was a peculiar result of the first age of industrialization. Transformations in technology, public investments in education, a progressive tax system, a safety net and the continued decline in discrimination on the basis of race and sex had made late-20th century America a much more equal place than early-20th century America and would make early-21st century America even more equal - even more of a middle-class society - still.

We were wrong.

America is at least as unequal as, and might be more unequal than, it was back at the beginning of the 20th century when Republicans, such as President Theodore Roosevelt of New York condemned the power wielded by "malefactors of great wealth," and Democrats such as perennial losing presidential candidate William Jennings Bryan of Nebraska denounced shadowy conspiracies that had somehow manipulated the financial system to rob the typical family of its proper share in America's prosperity.

Four major factors have driven rising inequality over the past 35 years:
Waning progressivity of our tax system: We no longer tax the rich a significantly greater share of their income than we tax the middle class. The idea behind the cut in relative tax rates on the rich was that it would release blocked entrepreneurial energy and trigger a burst of more rapid economic growth.

It did not: Economic growth overall has been slower since President Ronald Reagan began waves of tax cuts for the rich.

An appeal to the Fed - take aggressive action to help recovery

At NYTs, Former Council of Economic Advisors Chair Christina Romer:

THE next meeting of Federal Reserve policy makers, on June 19 and 20, will probably be contentious. The latest employment report, showing anemic job growth for a third consecutive month and an uptick in unemployment, will surely make some Fed members want to take additional expansionary action. Others, however, appear steadfastly opposed.

The argument for additional monetary action is straightforward. By law, the Fed is supposed to aim for maximum employment and stable prices. But the unemployment rate is 8.2 percent — a good two percentage points above what even the most pessimistic members say is its sustainable level. Moreover, the spate of disappointing data and the deepening crisis in Europe make continued weakness all too likely...

Some Fed members contend that monetary policy has already done its share. Other policy makers, they say, need to step up. Both the Fed’s chairman and its vice chairwoman have talked about the need for additional near-term fiscal stimulus as part of a gradual deficit-reduction plan. And many Fed committee members have called for a more aggressive housing policy. Indeed, the Fed raised some hackles in January when it sent an unbidden white paper to Congress, outlining possible administrative and legislative initiatives to deal with problems like foreclosures and underwater homeowners. 

I agree that we need more effective fiscal and housing policies. But neither is likely to happen, at least not before the presidential election. As a result, the Fed is the only plausible source of immediate help for the American economy. It was set up as an independent body precisely so that somebody can do what’s right when politicians can’t or won’t. 

"Easy Useless Economics"

Currently reading Professor Krugman's "End This Depression Now!", from which he's essentially lifted today's column in the NYTs.  A Must Read!  Krugman's also been batting down - without mentioning names - some of the nonsense that's being peddled by his "colleague" David Brooks about structural problems trumping any effective solutions to the current crisis.

Money quote today is Krugman quoting Keynes - "Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again":

A few days ago, I read an authoritative-sounding paper in The American Economic Review, one of the leading journals in the field, arguing at length that the nation’s high unemployment rate had deep structural roots and wasn’t amenable to any quick solution. The author’s diagnosis was that the U.S. economy just wasn’t flexible enough to cope with rapid technological change. The paper was especially critical of programs like unemployment insurance, which it argued actually hurt workers because they reduced the incentive to adjust. 

O.K., there’s something I didn’t tell you: The paper in question was published in June 1939. Just a few months later, World War II broke out, and the United States — though not yet at war itself — began a large military buildup, finally providing fiscal stimulus on a scale commensurate with the depth of the slump. And, in the two years after that article about the impossibility of rapid job creation was published, U.S. nonfarm employment rose 20 percent — the equivalent of creating 26 million jobs today. 

So now we’re in another depression, not as bad as the last one, but bad enough. And, once again, authoritative-sounding figures insist that our problems are “structural,” that they can’t be fixed quickly. We must focus on the long run, such people say, believing that they are being responsible. But the reality is that they’re being deeply irresponsible. 

"Learned Helplessness" in Hard Times

Economist Robin Wells @ The Guardian:

Yet another disappointing statistic today from the US labor market – only 115,000 jobs added in April, barely enough to keep the unemployment rate from rising given the growth in population, and a significant fall from the 154,000 jobs added in March. While not necessarily a sign that the economy is headed for another turn downward, April's job numbers signal a repeat of the pattern seen in 2011 – a recovery that is halting, unpredictable, and agonizingly slow...

And it's not surprising given the continued heavy drag on the economy from high levels of household debt, high oil prices, and significant budget cutbacks by state and local governments. Moreover, the longer the economy limps along, the harder it appears to be for policymakers to accept that another outcome is possible. Months with stronger numbers will be seen as confirmation that the economy is turning the corner, and months with weaker numbers will be seen as confirmation that there's little one can do in the face of the need for longterm adjustments in the economy. Learned helplessness sets in.

One could not have asked for a clearer example of learned helplessness than Ben Bernanke's recent press conference, where he labeled calls for further Fed stimulus "reckless" and appeals for a higher inflation target "irresponsible" because it would, in his view, sacrifice its commitment to a 2% inflation target. Higher inflation helps stimulate a depressed economy as consumers and businesses find it less appealing to sit on cash, and it reduces the real cost of pre-existing debt. Ironic given that a 4% inflation rate during the Reagan years was considered perfectly acceptable...

Stiglitz: "We're in the 5th year of crisis and we haven't solved it."

Nobel Prize-winning economist Joseph Stiglitz on academic economists and the current economic crisis:

Joe Stiglitz at Occupy Wall Street

Academic economists played a big role in causing the crisis. Their models were overly simplified, distorted, and left out the most important aspects. Those faulty models then encouraged policy-makers to believe that the markets would solve all the problems. 

Before the crisis, if I had been a narrow-minded economist, I would have been very pleased to see that academics had a big impact on policy. But unfortunately that was bad for the world. After the crisis, you would have hoped that the academic profession had changed and that policy-making had changed with it and would become more skeptical and cautious. You would have expected that after all the wrong predictions of the past, politics would have demanded from academics a rethinking of their theories. I am broadly disappointed on all accounts...

Within academia, those who believed in free markets before the crisis still do so today. A few people have shifted, and I want to give credit to them for saying: “We were wrong. We underestimated this or that aspect of our models.” But for the most part, the response was different. Believers in the free market have not revised their beliefs...

If my forecast about the consequences of austerity is correct, you will see a new round of protest movements. We had a crisis in 2008. We are now in the fifth year of crisis, and we haven’t solved it. There’s not even a light at the end of the tunnel. When we come to that conclusion, the discourse will change...

Discussing the Obama recovery efforts & financial regulation

Some great economic discussion this morning on MSNBC's Up with Chris Hayes, featuring guest host Ezra Klein, Noam Shrieber (author of a new book on the Obama recover strategy in the wake of financial collapse), former administration economist Jared Bernstein, Alexis Goldstein of Occupy SEC and William Cohan, former Wall Streeter and author of a book on Goldman Sachs. Excellent TeeVee:

Visit msnbc.com for breaking news, world news, and news about the economy

Visit msnbc.com for breaking news, world news, and news about the economy

"Incoherent in our hour of need..."

Paul Krugman trashes his profession's performance in context of the 2008 crisis:

"New Clothes!"

To say the obvious: we’re now in the fourth year of a truly nightmarish economic crisis. I like to think that I was more prepared than most for the possibility that such a thing might happen; developments in Asia in the late 1990s badly shook my faith in the widely accepted proposition that events like those of the 1930s could never happen again. But even pessimists like me, even those who realized that the age of bank runs and liquidity traps was not yet over, failed to realize how bad a crisis was waiting to happen – and how grossly inadequate the policy response would be when it did happen.

And the inadequacy of policy is something that should bother economists greatly – indeed, it should make them ashamed of their profession, which is certainly how I feel. For times of crisis are when economists are most needed. If they cannot get their advice accepted in the clinch – or, worse yet, if they have no useful advice to offer – the whole enterprise of economic scholarship has failed in its most essential duty.

And that is, of course, what has just happened...

Three key regulators saw the warning signs of a serious financial crisis. All three were ignored. All were women.

Keith Chrostowski of The Kansas City Star:

Summers: "Issues of women's intrinsic aptitude?"

More people in positions of power — government regulators, especially — should have foreseen the subprime financial crisis coming.

They could have saved us from this mess.

But wait …

Three regulators did indeed ring warning bells — at the right time, in the right places, and loud enough for other banking and financial system overseers.

Brooksley Born

 All three were women: Brooksley Born, Sheila Bair and Susan Bies.

All three were ignored.

You may have heard before about the warnings issued by Born, the head of the Commodity Futures Trading Commission in the 1990s, and Bair, the chairwoman of the Federal Deposit Insurance Corp. from 2006 to 2011.

Bies’ concerns, however, came to light recently when the Federal Reserve released transcripts of its policy meetings from 2006, a full two years before the crisis exploded.

Susan Bies

Bies was a central bank board member from 2001 to 2007. Several times in the transcripts she said she was worried about the housing bubble.

Bies warned fellow board members that exotic mortgages — for instance, negative amortization loans in which balances become bigger and not smaller over time — were too dangerous for consumers.

Sheila Bair

She warned about the Wall Street-created securities backed by risky mortgages.

“I just wonder about the consumer’s ability to absorb shocks,” she said at Fed meeting in May 2006.

“The growing ingenuity in the mortgage sector is making me more nervous as we go forward in this cycle, rather than comforted that we have learned a lesson. Some of the models the banks are using clearly were built in times of falling interest rates and rising housing prices. It is not clear what may happen when either of those trends turns around.”

Economists at Sea...

Economist Robert Johnson suggests some ways to salvage the reputation and relevance of his profession in the wake of multiple economic crises and an increasing sense that the "experts" have been either bought off or are clueless:

As the Oscar-winning documentary Inside Job illustrated, there is a very lucrative market for false visions of financial-market behavior that legitimate the desires of participants to be unshackled and make more money. But good policy prescriptions are public goods that represent the social good and not just the concentrated financial interests. Unfortunately, as economists beginning with the work of Adam Smith have repeatedly shown, public goods are under­provided in the marketplace. In addition, the reputation of the economics profession is itself a collective good, and those who have tarnished it are not adequately penalized for the damage they do to their fellow professionals when they accept large sums of money in return for marketing a perspective that benefits vested interests.

These are problems that some within economics have been aware of for a long time, but the discipline as a whole has been unable to address them. The onus is on the profession to face these challenges and help lead society off the rocks.

How to Save Economics

"Nobody Understands Debt"

Well, not "nobody."  But most of the people talking the loudest about government debt and deficits don't have a clue - they are steeped in ill-informed ideology that doesn't match empirical evidence. (Or perhaps they are invested in the public not having a clue because of a self-interested anti-government agenda.)

Paul Krugman offers a New York Times column that is a useful primer on the real and imaginary issues related to federal budget deficits:

In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.

This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

"No, Conservatives, the Bush Recession Did Not Alleviate Economic Inequality"

Winning Progressive takes on some recent right-wing push-back and misdirection as the issue of income inequality gains resonance with the American public:

Showing how out of touch they are with everyday Americans, conservatives have latched

onto the news that the share of national income taken in by the top 1% fell from 23% in 2007 to “only” 17% in 2009 to contend that the focus of Occupy Wall Street and others on economic inequality is somehow misguided.  For example, in a post titled “The 1% Ain’t What It Used To Be,” conservative blogger Megan McCardle responded that “we don’t want to spend years focused on income inequality, only to learn that the financial crisis fixed it for us.”  Conservative economics professor Steven Kaplan of the University of Chicago business school echoed such doubts and actually offered a defense of inequality, stating in the New York Times that:

“It’s very interesting that [inequality] has become such a big topic now when the numbers are back to where they were in the 1990s,” said Steven Kaplan, an economist at the University of Chicago’s business school. “People didn’t seem to be complaining about it then.”

Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”

Kaplan’s effort to link growth and economic inequality as inherently related is historically incorrect.  For example, from 1950 to 1980, the share of income taken by the top 1% remained below 12% in all but one year, and was below 10% in 13 of those years.  During that same time period, the US economy experience virtually uninterrupted growth.  When the economy dipped in the early 1980s, the share of income taken by the top 1% increased.  While it is true that most recessions lead to a decline in the share of income for the top 1%, the historical record does not support the contention that economic inequality is the inevitable byproduct of growth.  In addition, while some level of inequality may be necessary for economic growth, elevated levels of inequality – such as those in the US today - actually stunt economic growth.

The failure of mainstream economics

University of Massachusetts economics professor Nancy Folbre at Economix discusses the limitations of her profession:

The Occupy Wall Street movement, displaced from some key geographic locations, now enjoys a small but significant encampment among economists.

Concerns about the impact of growing economic inequality fit neatly into a larger critique of mainstream economic theory and its deep faith in the efficiency of markets.

Many unbelievers (including me) insist that we inhabit a global capitalist system rather than an efficient market. Willingness to use the C-word (capitalism) often signals concerns about a concentration of economic power that unfairly limits individual choices, undermines political democracy, generates financial and ecological crises and limits access to alternative economic ideas.

We can’t address these concerns effectively without a wider discussion of them.

Seventy Harvard students dramatized dissatisfaction with the economics profession when they walked out of Prof. Gregory Mankiw’s introductory economics class on Nov. 2, protesting, in an open letter to their instructor, that the course “espouses a specific — and limited — view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.” (Professor Mankiw, a periodic contributor to the Economic View column in the Sunday Business section of The New York Times, discussed the protest in an interview with National Public Radio.)

The event prompted online discussion of conservative bias in introductory economics textbooks, including an anti-Mankiw blog set up by Daniel MacDonald, a graduate student in my own department. Prof. John Davis of the University of Amsterdam and Marquette University posted a video arguing that economic researchers, like fish, engage in herd behavior in order to minimize individual risk...