Teaching Today's Economics Students
Christopher Westley, an assistant professor of economics at Jacksonville State University, delivered this paper at the Mises Institute's 20th anniversary celebration in Auburn, Alabama, on October 19, 2002.
I was asked to talk today about how my work contributes to the Mises Institute and to the advancement of civilization. Saving civilization is a weighty subject. It is not especially emphasized in grad school. They don't offer a course in it. Once you are out, you can still earn a paycheck defending property rights, but suggest to your employer you are trying to save civilization in the process and you are likely to find a pink slip in your box sometime following the tenure-review process. This is especially true if you work in a state-funded institution.
I would say that most universities assume that civilization is saved by attacking such antiquated and anti-egalitarian notions as property rights and freedom of association. This is ironic, because universities used to be concerned with the business of discovering and teaching the truth. Many universities have Latin mottoes with the word veritas in them. Pro Veritas—for Truth. The liberal arts education itself is based on the very notion that it is possible to know and live the truth. This implies that truth exists.
Even the term "versity" in "university" suggests the original project and purpose of higher education. Nowadays, universities seem committed to diversity—or to the idea that there are many different types of relative truth, and that you can pick one that serves your needs. In such an environment, original university mottoes mock the current charges of higher learning.
I don't want to deride public education completely. Mises himself has some positive things to say about it. In fact, he wrote in Human Action: "Public education can work very well if it is limited to reading, writing, and arithmetic. With bright children it is even possible to add elementary notions of geometry, the natural sciences, and the valid laws of the country. But as soon as one wants to go farther, serious difficulties appear." 1]
He later added: "On the high school and even on the college level the handing down of historical and economic knowledge is virtually indoctrination. The greater part of the students are certainly not mature enough to form their own opinion on the ground of critical examination of their teachers' representation of the subject." 2]
That is why, I think, college is very much a battleground of ideas, of dueling doctrines of how the world is and how it should be. Students soak up this battle, or at least the students that matter do. And since the state funds much of what happens in college classrooms, it is going to be sure that its ideas get more than a fair hearing. Consider my school.
Jacksonville State University is a smaller sized, fairly conservative, regional state school about two and a half hours north of here. My students are probably like most students the professors at the conference see each year, except of course for those who teach at schools like Hillsdale and Grove City and Hampton Sydney that attract a much better median student. Students at these private schools, I think, are a different caliber in that they are more likely to read for enjoyment or to enjoy a good argument about political economy than be concerned with who should be leading the NASCAR standings.
Not that I don't have that type of student where I teach. I do—these students are simply farther from the median. I am reminded of this whenever I attempt class discussions and hear things like the following (which was said on the first day of one of my classes this semester): "If the U.S. is the world's only superpower, wouldn't we be crazy not to try to rule the world?"
It is students like these that I actually wish did care more about the NASCAR standings. This is the type of question you get when you have students who don't read very well or very much, whose opinions about political economy are found when accidentally getting stuck on the CNN or History Channels for a few seconds when channel surfing between MTV and ESPN. They are probably as well informed as the typical voter. They make me grateful for the excellent students I find at JSU, and as soon as I find them I try to steer them toward this building in Auburn.
Getting more students interested in the messages associated with the Mises Institute is imperative, because the state broadcasts its messages practically everywhere. The state's messages, however, aren't found solely on television, even though much of the state's messages can be found even on MTV and ESPN, but in literally every textbook the students are forced to read while in school. As a result, most students probably leave college more accepting of the state's messages than when they enter. If we can simply reduce that number by teaching good economics, then we are doing our job.
For instance, let me tell you about the Industrial Organization book I happen to be using this semester. It is the leading text in the country for this subject. Every few pages has a slight dig at the market system. Sometimes it is serious; other times, it is tongue-in-cheek. In both cases, the message is the same: government is basically benign, and markets tend toward failure.
The discussion of cartels suggests that business cycles result from cartels' use of target pricing agreements (which is as good as any explanation given by neoclassical economics), while treating every group of businessmen as a potential band of robbers who would immediately form a cartel if they were allowed to by legal and moral laws. The section on monopoly seems to treat the Post Office as a monopolist in the sense that Microsoft is, forgetting that Microsoft benefits from no legal barriers to entry. It quotes the deep social thinker and former Atlanta mayor, Andrew Young, as saying "Nothing is illegal if a hundred businessmen decide to do it."
Of course, according to this book, the savior of the market system is antitrust law.
Now this book, and most economics books, though far from perfect, are much, much less egregious in such biases, compared to standard sociology, political science, or history texts when they delve into areas having to do with political economy. This means that students are likely to be misled less in an economics class, in relative terms. Many business schools are likely to have a handful of free market types, but they will be free market in a Chicago-school, Cato Institute sense, meaning that while they will be likely to be very much pro-market, they will also be pro-state in the sense that they will think that, absent the state, the market cannot maximize its potential.
They will rarely question the primacy of the state as a monopoly producer of money, for example, while thinking that education vouchers introduce competition to public education without strings attached to their recipients. These teachers also become biased over time because many will have been making an income and enjoying a lifestyle in exchange for an amount of work that would never be required of them in the free market. Nonetheless, coming in contact with these teachers will be better than the typical Marxist sympathizers that dominate most other departments.
My point is that most students may go through school without coming in contact with any professor who may not think the market is at least a little bit evil, that left on its own it produces greedy children such as Enron's Ken Lay and ImClone's Sam Waksal, therefore requiring some supervision from the adults in government. The result is that while many students, perhaps even a majority, enter college with general dispositions against the state, they leave with these dispositions less so, if only due to the proportion of anti-market professors to pro-market professors they will come into contact with.
This situation should be expected in a democracy. As Prof. Hoppe has explained in many places, democracies eventually provide a venue through which the lazy plunder the industrious, and I am sad to say that many people are attracted to tenure-track jobs only because of the anticipated increase in future leisure-work ratio. These people are not going to attack the golden calf that makes this possible.
Democracy also means that those who are successful in effecting political change are successful to the extent that they can get into voters' heads. So they institutionalize thought control in the culture. It is not just the major themes that are recycled in and out by the political and media establishments. It is also in the curriculum of your first grade daughter's class, or on the soccer field of your third grade son. After all, there is no better way to affect peoples' dispositions, their likes or dislikes, than in capturing their minds at the youngest age possible.
So we see elementary schools require a book entitled Fifty Simple Things Kids Can Do to Save the Earth. We see the city council in the District of Columbia propose compulsory public education for two year olds. We see government agencies from the FBI to the Federal Reserve add "kids pages" to their web sites, complete with coloring books and connect-the-dots games and lesson plans for lazy teachers. We see high school economics teachers using the Enron Corp. as the primary vehicle for explaining the normal tendencies of free market systems.
And many of these students then make it into a freshman economics class.
I said earlier that most students enter college with general pro-market dispositions. This is a reflection of the non-political institutions, both civic and religious, that still influence society. But the attempt for political indoctrination goes into high gear at the college level, perhaps because the social engineers realize that they will rarely have another shot at these young people after graduation. I have often wondered if this is why, for example, administrators attack students' morals, tempting them with, among many other things, free birth control in the same way that the snake offered Eve the apple.
This has always reminded me of the 19th century socialists' belief that the morally weak are easier to control, because they are less likely to remain attached to traditional institutions, such as the Church and the family. These institutions represent the last formidable opposition to state power. But unlike the relationship between profit and loss, the relationship between these institutions and the state is zero sum, meaning that any lost dependence on the Church or the family implies increased dependence on the bureaucratic agencies that comprise the state.
Hoppe and very few others have been very good on this issue. He has written:
The state, in order to enforce its claim as ultimate judge, must eliminate all independent jurisdictions and judges, and this requires the erosion or even destruction of the authority of the heads of households, families, communities, and churches.
This is the underlying motive of most state policies. Public education and welfare serve this destructive purpose, and so do the promotion of feminism, non-discrimination, affirmative action, relativism, and multiculturalism. This, in a nutshell, is the project of the modern university. To varying degrees, and pushed within the framework of egalitarian ideology, all undermine family, community, and church. They "liberate" the individual from the authority of private institutions, in order to render him "equal," isolated, unprotected, and weak vis-à-vis the state.
If you doubt that states knowingly do this, consider: A few weeks ago, United Press International reported on testimony former Israeli prime minister Benjamin Netanyahu gave to Congress, suggesting that the United States should attack Iran with soft porn. With the help of U.S. tax dollars, the Israelis have been piping in this type of broadcasting into the southern part of the West Bank, out of recognition that this can weaken moral opposition to its policies there.
So, similarly, much of what happens in college represents an attempt to effect moral readjustment. In business schools, many students are taught that business ethics begin with the assumption that businessmen and private property are evil, that one man's profit is another man's loss, that a minimum wage should be a family wage, and that organized labor provides an essential peaceful and moral influence in the labor market. And let's not forget that Roosevelt saved capitalism from itself. Outside the business classes, many students are taught that the "Civil War" was fought over slavery, that Toni Morrison and Shakespeare are writers of the same tier, and Anita Hill is still invoked as a heroine for drawing attention to the true nature of men.
My experience is that most students (to their credit) roll their eyes at this stuff and try to give the teachers what they want on tests so they can advance closer to graduation. Still, it takes a toll on the way they think upon leaving college. The idea is planted that this is the way that educated people think and that educated people, among other things, do not like the market.
This tendency is thwarted when students come in contact with a professor who is familiar with the Austrian School. So let's just say that, by the small chance the typical college student finds himself in the classroom of an alumnus of Mises University, or at least of someone who knows that Human Action is more than the name of a new rock band in Seattle, he is in for a surprise.
He is in for a surprise because after learning some of the basic Austrian interpretations of economics, then he will know that economics can actually be quite interesting and quite descriptive of the real world as he knows it and that it is much more than the dismal, mathematical science that is usually presented.
For instance, he is going to learn that voluntary exchange is one of the most basic of human actions, and that attempting to oppose or control it is an attempt to oppose or control human nature. Austrians explain that trade is mutually beneficial when it takes place without coercion. This is so obvious to the undergraduate who is rather nervous about his first economics course. After all, nothing about economics is supposed to make sense except in a mathematical sense. But instead he hears: If I like what you have more than what I have, and you like what I have more than what you have, then we can both be made better off if trade can take place. Such trades reflect a degree of human freedom and the desire to improve one's circumstances. And if it is voluntary, we can both improve our condition without giving credit to any third party.
Mainstream economics does not completely buy this analysis of trade. It is too simplistic. It is based on subjective utility, which implies that it cannot be measured. There are very little policy implications that flow from it. What's more, the more widespread such trades are , the more individuals can be autonomous and independent. Part of this bias must have to do with the fact that the state itself is based on involuntary trade. It takes your money in the form of taxes and gives you public schools. It takes your votes and then sends your sons off to fight overseas. Much of this is justified in public finance literature with dressed-up Benthamite theory by saying that these trades are, at least on the net, utility enhancing, and therefore justified.
For instance, you will read in the public finance literature that racking up public debt to be paid for by future generations is justified because it provides goods which will be consumed by future generations. So the fact that we are still paying off the debt that helped bring Interstate 85 into existence in the 1960s is justified because people who were born after the 1960s use the interstate, and they should be grateful for it. Compare the economic cost of providing it and the economic worth today, then such spending is truly a bargain. And our use of it today is ex post proof that this is a good that the present generation would have paid for.
Needless to say, this is an explanation that is not exactly intuitive. When the Austrian take on trade is taught, then students quickly see through this fiction. The fact is that very few people who drive on public roads think that this service is something they would have paid for voluntarily. In truth, it was thrust upon them by past generations. But in thinking through this analysis, students learn that economics actually can be intuitive.
Or what about inequality as the basis of trade? Both neoclassicals and Austrians recognize that trade results from the existence of inequality. But mainstream economics models this action as though equality can be achieved through trade. And if for some reason inequalities still exist, well then, markets are failing, and this then justifies government intervention. (Forget about if rectifying inequality should be desirable or even possible.)
Austrians look at inequality as a natural inborn state of being that is the basis for welfare-enhancing voluntary trade, which, in turn, provides the basis for the market economy, because absent inequality, there would be no basis for social cooperation. By extension, if no inequality, then no civilization. Welfare can never be equalized, because this is something that cannot be measured. And since inequality is the natural condition of man, it is something that can only be fixed by placing man in an unnatural state.
When students hear that Austrian take on trade, they find it much more intuitive. If they accept it, they are more likely to resent the state's attempts to reduce its benefits, whether through taxation, regulation, or even demand- or supply-management policies. They recognize that practically all legal trade is affected, in some way, by the government, usually by its taking a share of the benefits (in the form of taxes), and by manipulating incentives to trade via fiscal and monetary interventions in its never successful (and yet never-ending) attempts to master the business cycle.
Addressing trade in these terms makes much more sense to students because it corresponds with what they have witnessed in their own lives, at their jobs, and in their families. It builds upon what they have witnessed in the real world. It is also quite counterintuitive to what they might learn in a non-Austrian's classroom, where they may be taught that government intervention in the economy is justified whenever trade creation effects offset trade diversion effects. Or that trade is simply a glue that connects consumers to factor markets and factor markets to governments and business firms, and government and business firms to product markets, and product markets back with consumers, and then the circle begins again.
Or consider the teaching of property rights. This concept is essential to economic theory, and it is an area in which neoclassical economists are often quite good too. By and large, they recognize, along with the Austrians, that privately-controlled property results in more property being directed in socially beneficial ways, that it causes property to be better cared for and managed, that it increases the likelihood that the property will be conserved, and even that it instills a sense of responsibility into society as the result of individuals being held liable for misuses of property.
Yet this is another area in which students find the Austrian approach intuitive and the mainstream approach contradictory and lacking. The reason is because most economists closely relate economic theory to policy formation, and policy itself requires violations of property rights at least in the form of taxation and monetary inflation. It does not help that many non-Austrian economists seem to advocate private property only because their models support the contention that this increases real output, and not for any deeper philosophical reason. In other words, it is accepted only because they consider it empirically correct. This means that if, for some reason, their models come to a contrary conclusion, then they would abandon this belief.
Much of what Milton Friedman has said about property rights is excellent. Some passages of his Capitalism and Freedom read like Human Action (although the books are hardly comparable). And yet there is an enormous disconnect between those biases and the fact that much of the Chicago School's research today is based on trying to help governments become more efficient in their violations of such rights. While it touts the positive economic benefits to be had when property rights are well defined, it bemoans (a little gleefully, I think) the fact that they are often not well defined, resulting in non-socially optimal market production, and that this provides a role for government (as well as jobs for economists).
State apologists often invoke this argument to justify the state's involvement in national defense, public education, public radio and television, highways, subways, interstates, airports and airport security, police forces, fire departments, hospital administration, a legal system, a national park system, a national forest system, a national highway system, water systems, space exploration, bank management, gun control, libraries, retirement savings, weather forecasting, worker training, accreditation, home loans, business loans, regulatory oversight, sewage treatment, research grants, and agriculture policy. Thanks, Milton, for the influence of the Chicago School in legitimizing these interventions on the basis that their justification should be tied to their being made more efficient.
When I teach property rights, I am very clear that if there are benefits from private ownership, and costs to public ownership, then there should be no exceptions. But the argument is that the government must provide these services on market failure grounds—meaning that the private sector provides them even less efficiently than the public.
When you suggest otherwise, however, students accept it readily. Government ownership will provide sub-optimal results. It controls things not to heroically save the hapless market from itself, but to satisfy special interests and its own controlling nature. Again, it corresponds to what they know already. It is as obvious as pointing out that the emperor is not wearing any clothes.
But this is not an idea that most academic economists are willing to concede yet. Consider a note I received by a university professor whom I have always respected as a staunch free-marketer, admonishing me for arguing as much in a Mises.org column I wrote entitled "The Myth of Market Failure". He wrote:
Because much of the public and its elected leaders believes that the market is generally deficient, organizations like [the] Mises [Institute] cannot afford to undermine the general truth of the libertarian argument with excessive generalization.
There are certainly some instances of market failure. In a few of those instances, government intervention replete with its own failures can improve on the market. Pollution episodes come to mind as good examples. Some are severe enough to merit government intervention, at least to clarify property rights.
Please don't use titles like "The Myth of Market Failure". [This] gives otherwise reasonable people reason to dismiss Mises scholars as right-wing wackos. We can't afford that.
You will note that he said that there is general truth to the libertarian argument, but not specific truth, in respect to pollution and externalities. Why? My point in the article was that private owners of Enron (shareholders) effectively shut the firm down once it was found out how fraudulent and wasteful the firm was. Yet the whole world knows how much more fraudulent and more wasteful the Post Office and Amtrak are, and yet no one thinks that these organizations won't be around 10 years from now, doing the same things they are today. Isn't this a good example of the benefits to be had from private ownership? Isn't this a greater scandal?
To this professor, it wasn't, because to take the logic of property rights in that direction is to risk being labeled a wacko. If you do it too effectively, people may start applying it to the state, and then where would we be? He seems to think that there can exist a government that only clarifies property rights. His message, actually, is this: Property rights are great, they are essential, they are important, they are crucial—but not really. Like my Industrial Organization book says: The truth is the greatest lie.
Perhaps that is the greatest message today's college students need to overcome.
Mises wrote that "[t]ax supported universities are under the sway of the party in power. The authorities try to appoint only professors who are ready to advance ideas of which they themselves approve." 6] This explains why there is a tendency for academics to give the state the benefit of the doubt, even among otherwise good free-market economists. But what it wants in academia is what Timothy Terrell once called lab coat welfare—scientists committed to advancing the government's own place in society, as opposed to searching for Truth (Veritas). It perverts the idea of the university in the process.
Mises was right when he said that many students enter college without well-formed opinions about many things, but they will form opinions in college, and they can spot inconsistencies in the dominant paradigm when they are pointed out. Nowadays, college professors like to be addressed as doctor, as in Dr. Smith, instead of as Prof. Smith. This must be, in part, because professors profess something. They should profess the truth, whether or not this contrasts with the state's agenda. When more of us make that our goal, we will be doing our job with respect to teaching economics, continuing the work of the Mises Institute, and advancing civilization.
Christopher Westley, an assistant professor of economics at Jacksonville State University, delivered this paper at the Mises Institute's 20th anniversary celebration in Auburn, Alabama, on October 19, 2002. See his Mises.org Daily Articles Archive. Send him MAIL.
 Ludwig von Mises, Human Action (Auburn, Alabama: The Ludwig von Mises Institute, 1998), p. 872.
 Mises, p. 873.
 Cf. Hans-Herman Hoppe, Democracy: The God That Failed (New Brunswick: Transaction Publishers, 2001), pp.95–106.
 Hoppe, "Reviving the West" http://www.lewrockwell.com/hoppe/hoppe6.html
 See, e.g., Charmaine Seitz, "Palestinians Battered in Psychological War" in The Palestinian Chronicle, April 5, 2002. "At first no one could believe it. Palestinian television in Gaza announced that the Israeli army had taken over Amwaj television and warned viewers to beware of false information. But what Ramallah residents found when they turned to the station was that soldiers were broadcasting a German soft-porn channel."
 Mises, p. 868.