What We Learn When We Learn Economics

Is a little economics a dangerous thing?

Christopher HayesNovember 27, 2006

There’s a case to be made that the sin­gle most intel­lec­tu­al­ly and polit­i­cal­ly influ­en­tial neigh­bor­hood in the Unit­ed States is Chicago’s Hyde Park. Inte­grat­ed, afflu­ent and qui­et, the 1.6 square-mile enclave on the city’s south side is like a tiny com­pa­ny town, where the com­pa­ny hap­pens to be the august, goth­ic, emi­nent­ly seri­ous Uni­ver­si­ty of Chica­go. Stu­dents at the U. of C. sell T‑shirts that read Where Fun Goes To Die,” and the same could be said of the neigh­bor­hood, which until very recent­ly had a book­store-to-bar ratio of 5:2.

Conservatives have long critiqued academia for the ways professors use their position to indoctrinate students with left-wing ideology, but the left has largely ignored the political impact of the way people learn economics, though its influence is likely far more profound.

But the uni­ver­si­ty is prob­a­bly best known for the school of eco­nom­ic thought it has pro­duced. When the Chica­go School first emerged in the 50s, its zeal­ous sup­port of free mar­kets and cri­tique of gov­ern­ment inter­ven­tion were con­sid­ered reac­tionary and extreme. Among elites in eco­nom­ics and pol­i­tics the con­sen­sus was, as John May­nard Keynes had argued, that cap­i­tal­ism could only func­tion with reg­u­lar and robust gov­ern­ment man­age­ment. Indeed, so total was this con­sen­sus that in 1971 Richard Nixon announced a plan to impose wage and price caps in order to curb infla­tion, declar­ing, We are all Key­ne­sians now.” Just 25 years lat­er, how­ev­er, Bill Clin­ton, the first Demo­c­ra­t­ic pres­i­dent to be re-elect­ed since FDR, announced that the era of big gov­ern­ment is over.” He might as well have said, We are all Chicagoans now.”

Neo­clas­si­cal eco­nom­ics, as the Chica­go School of thought is now called, has become an inter­na­tion­al elite con­sen­sus, one that pro­vides the foun­da­tion for the entire glob­al polit­i­cal econ­o­my. In the Unit­ed States, young mem­bers of the mid­dle and upper-mid­dle class first learn its pre­cepts in the acad­e­my. Polls rou­tine­ly show that econ­o­mists and the gen­er­al pub­lic have wide­ly diver­gent views on the econ­o­my, but among the well-edu­cat­ed that gap is far nar­row­er. A 2001 study pub­lished in the U. of C.‘s Jour­nal of Law and Eco­nom­ics showed that those with col­lege degrees are more like­ly to sub­scribe to the views of neo­clas­si­cal econ­o­mists than the gen­er­al pub­lic. This isn’t sur­pris­ing. At elite col­leges, eco­nom­ics is con­sis­tent­ly one of the most pop­u­lar majors (near­ly a quar­ter of under­grads at the U. of C.), and across all schools, intro­duc­to­ry eco­nom­ics, often a required course, has been one of the 10 most pop­u­lar class­es for the last 30 years. Grad­u­ate schools — from busi­ness to pub­lic pol­i­cy to polit­i­cal sci­ence to, most notably, law — are now suf­fused with eco­nom­ic par­a­digms for under­stand­ing not only finan­cial inter­ac­tions but all human behavior.

Con­ser­v­a­tives have long cri­tiqued acad­e­mia for the ways pro­fes­sors use their posi­tion to indoc­tri­nate stu­dents with left-wing ide­ol­o­gy, but the left has large­ly ignored the polit­i­cal impact of the way peo­ple learn eco­nom­ics, though its influ­ence is like­ly far more pro­found. So in order to find out just what stu­dents learn when they learn eco­nom­ics, I head­ed down to Hyde Park, where the Uni­ver­si­ty gen­er­ous­ly let me enroll in Prin­ci­ples of Macro­eco­nom­ics” for a quarter.

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Allen Sander­son, 62, has been teach­ing the intro macro and micro cours­es at the uni­ver­si­ty for the last 18 years and though he ini­tial­ly appears some­what grave and under­stat­ed, it is quick­ly appar­ent that he is a mas­ter of tech­nique. His lec­tures skip along, pro­pelled by a series of wry, con­trar­i­an quips, each punc­tu­at­ed with a visu­al rimshot: a slight pause and a thrust jaw. When you hear, The eco­nom­ics depart­ment at U. of C.,’ one’s free asso­ci­a­tion is pro-busi­ness, greedy bas­tards,’” says Sander­son (pause, jaw thrust) in the first lec­ture. I tend to think that’s not the case. Greedy bas­tards we may be, but we’re not pro-busi­ness. Repub­li­cans tend to be very pro-busi­ness. It’s a genet­ic defect of Repub­li­cans. Democ­rats tend to be anti-busi­ness, anoth­er genet­ic defect. We are not anti-busi­ness; we are not pro-busi­ness. We are pro-choice in the ulti­mate sense of pro-mar­ket. Based on empir­i­cal work, macro and micro solu­tions are prob­a­bly bet­ter worked out by pri­vate mar­kets than gov­ern­ment intervention.”

His sec­ond lec­ture begins with a thought exper­i­ment. Not­ing that there are only 26 spots left in the class for the 52 stu­dents who would still like to enroll, he asks, How should we fig­ure out who gets to go into the class?” The stu­dents — eager, stu­dious and seri­ous — shoot their hands up and offer a vari­ety of ideas: Senior­i­ty? First-come, first-serve? Ask prospec­tive stu­dents to write an essay? It takes about a minute for a con­fi­dent young man to give the answer Sander­son­’s look­ing for: auc­tion by price.”

As a rea­son­able indi­ca­tion of how much you want some­thing, how much you’re will­ing to pay is a pret­ty good means of mea­sur­ing,” Sander­son says. A lot of things in eco­nom­ics will turn in one way or anoth­er on price. Price has a lot going for it as a gen­er­al­ized expres­sion of com­mit­ment. The thing we don’t like about, say, first-come, first-serve, is that if some­one real­ly wants to get in, they could start lin­ing up now. But the prob­lem is that I don’t real­ly ben­e­fit from your expres­sion of inter­est, where­as if you pay me, we both are benefiting.”

This makes sense, but I’m uneasy. Would­n’t giv­ing a place in class to the high­est bid­der result in the rich stu­dents get­ting in and the finan­cial-aid kids being left out? And since peo­ple don’t have equal amounts of mon­ey to spend, how good a mea­sure of desire is price in this situation?

Ran­dom and first-come have the ben­e­fit of being fair,” Sander­son says, antic­i­pat­ing the objec­tion. There’s an inter­est­ing dichoto­my of fair vs. effi­cient.” But, Sander­son asks, what, real­ly, is fair? If we think some kind of ran­dom lot­tery draw­ing was a fair way of get­ting into the class, would that be a fair way of award­ing grades? Obvi­ous­ly not!,” I think. Why? Sander­son lets us mull that over, but the answer floats up imme­di­ate­ly: because I work hard for my grades and I deserve them. In oth­er words, those who work hard and get good grades are like those who work hard and have a lot of mon­ey to win spots that are auc­tioned by price.

We’re try­ing to bal­ance these things out,” Sander­son con­tin­ues. What’s effi­cient? What’s fair? Often they are in tension.”

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Effi­cien­cy is the Chica­go School’s defin­ing val­ue. The free mar­ket econ­o­mists who came before — most notably Aus­tri­an Friedrich Hayek — offered a philo­soph­i­cal cri­tique of the polit­i­cal con­se­quences of state reg­u­la­tion and con­trol of the econ­o­my. But Mil­ton Fried­man, his col­league George Stigler and the entire Chica­go School focused on the actu­al eco­nom­ic prob­lems of state con­trol, name­ly, inef­fi­cien­cy. They reject­ed Keynes’ con­tention that mar­kets func­tion best with rou­tine gov­ern­ment inter­ven­tion and instead harkened back to Adam Smith’s clas­si­cal con­cep­tions of equi­lib­ri­um. Chica­go School the­o­ries gained pop­u­lar­i­ty when glob­al cap­i­tal­ism hit a major funk in the 70s – a peri­od of slow growth and high infla­tion. Fried­man argued, plau­si­bly, that it was too much gov­ern­ment that had caused the problems.

What may seem a sub­tle rhetor­i­cal shift had major con­se­quences. It trans­formed what had been con­ser­vatism’s moral argu­ment about cap­i­tal­ism bestow­ing the most ben­e­fits on those who worked the hard­est — and the inher­ent injus­tice of a coer­cive state forcibly redis­trib­ut­ing cap­i­tal — into a tech­ni­cal argu­ment about the inef­fi­cien­cies asso­ci­at­ed with non-free-mar­ket solu­tions and the per­verse incen­tives that made any social pro­grams des­tined to fail. Thus, argu­ments about the way the world should be were con­vert­ed into asser­tions about how the world actu­al­ly was. Or, to put in terms that econ­o­mists favor, nor­ma­tive argu­ments became pos­i­tive ones.

In the text­book Sander­son uses, author Michael Parkin defines the dif­fer­ence this way: pos­i­tive state­ments are about what is” and they might be right or wrong.” Nor­ma­tive state­ments are about what ought to be” and because they depend on val­ues, they can’t be test­ed. Be on the look­out,” Parkin warns, for nor­ma­tive propo­si­tions dressed up as pos­i­tive propositions.”

Park­in’s warn­ing, how­ev­er, turns out to be sur­pris­ing­ly dif­fi­cult to heed. Neo­clas­si­cal eco­nom­ics smug­gles a great many nor­ma­tive wares under­neath its pos­i­tive trench­coat, both in its assump­tions about how humans oper­ate — as indi­vid­u­als ratio­nal­ly max­i­miz­ing their util­i­ty — and its implied pref­er­ence for mar­kets in every­thing.” Because neo­clas­si­cal eco­nom­ics always presents itself as a val­ue-neu­tral descrip­tion of the world, its ide­o­log­i­cal com­mit­ments can be adopt­ed by those who learn it with­out any recog­ni­tion that they are ide­o­log­i­cal. This is the source of some very spir­it­ed debate with­in the field itself. A grow­ing glob­al move­ment of het­ero­dox” econ­o­mists has crit­i­cized the ide­o­log­i­cal con­fines and blindspots of the neo­clas­si­cal approach. As Nobel Lau­re­ate Joseph Stiglitz put it, the dom­i­nance of the neo­clas­si­cal mod­el is a tri­umph of ide­ol­o­gy over science.”

In the pop­u­lar press, how­ev­er, such dis­sent is almost entire­ly absent. When pro­test­ers dis­rupt­ed the 1999 World Trade Orga­ni­za­tion meet­ing in Seat­tle, WTO offi­cials, main­stream econ­o­mists and the New York Times’ Thomas Fried­man ignored the fact that in much of the world neo­clas­si­cal reforms had failed to pro­duce the promised growth. Fried­man went so far as to dis­miss the pro­test­ers as flat-earth­ers.” For Thomas Fried­man (and, indeed, Allen Sander­son), peo­ple can’t dis­agree” with neo-clas­si­cal eco­nom­ics. They can only fail to under­stand it.

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As a stan­dard part of his first lec­ture in both his macro and micro­eco­nom­ics class, Sander­son reads a David Bar­ry quote: Democ­rats seem to be basi­cal­ly nicer peo­ple, but they have demon­strat­ed the man­age­ment skills of cel­ery. Repub­li­cans would know how to fix your tire, but they would­n’t stop.”

In the wake of Kat­ri­na and Iraq, this might seem quaint, but what Sander­son is doing makes sense. Tem­pera­men­tal­ly, it reflects his own, lib­er­tar­i­an-inflect­ed, pox-on-both-their-hous­es” cen­trism, but his insis­tence on polit­i­cal equa­nim­i­ty is also cru­cial to his ped­a­gog­i­cal suc­cess. Stu­dents are most like­ly to have been exposed to macro­eco­nom­ic issues with­in the con­text of polit­i­cal debates about free trade, the size of the bud­get deficit, tax rates, etc. In order to assure stu­dents that they aren’t just learn­ing a set of polit­i­cal talk­ing points, he must go out of his way to ham­mer home the fact that what he’s offer­ing is unbi­ased and non­par­ti­san: pos­i­tive not nor­ma­tive, facts not opin­ion. I don’t have a dog in this fight,” Sander­son tells the stu­dents. So every joke about George Bush is fol­lowed by a joke about Hillary Clin­ton, every shot at a Demo­c­rat quick­ly bal­anced by a shot at Republicans.

The effect, inten­tion­al or not, is that Sander­son appears to rep­re­sent the exact cen­ter of the polit­i­cal spec­trum, and that can leave stu­dents with a strange per­cep­tion of just where the cen­ter lies. Dur­ing a dis­cus­sion of flat, pro­gres­sive and regres­sive tax struc­tures, a stu­dent asked about the argu­ment against the flat tax. What’s wrong with the flat rate tax?” Sander­son replies. Well, the bad thing was that Steve Forbes was the spokesman. It’s not obvi­ous that there’s that much wrong with it. There’s sort of a move­ment out there for a flat rate tax. Because it strikes some peo­ple: What could be fair­er than that? It also does­n’t dis­tort incen­tives. It has a lot going for it.”

It’s true that there’s sort of a move­ment” for a flat tax, but those in favor of what would be the sin­gle most regres­sive redis­tri­b­u­tion of wealth in Amer­i­can his­to­ry are not locat­ed in the polit­i­cal cen­ter. Far-right Repub­li­cans like for­mer House Major­i­ty Leader Dick Armey have long pushed the idea, as have con­ser­v­a­tive think tanks like Amer­i­can Enter­prise Insti­tute and the Her­itage Foun­da­tion. But polit­i­cal­ly, it’s a non-starter. The basic notion of fair­ness that those who get more out of our econ­o­my should pay a greater per­cent­age of their income in tax­es is deeply embed­ded in Amer­i­can polit­i­cal cul­ture, even dur­ing years of Repub­li­can dom­i­na­tion. The stu­dents sit­ting around me, I start to fear, are going to walk out of the lec­ture think­ing that the flat tax is a sen­si­ble, cen­trist idea. And as thou­sands of stu­dents pass through class­es like Sander­son­’s every year, I wor­ry that it will become a sen­si­ble, cen­trist idea.

Sander­son­’s pol­i­tics aren’t one-dimen­sion­al, and he cer­tain­ly isn’t a pro­pa­gan­dist. But the fact remains that he has the pre­dis­po­si­tions of some­one who learned eco­nom­ics from Mil­ton Fried­man.” First, there’s a ten­den­cy to see trade-offs between equi­ty and effi­cien­cy even where they might not exist. Dean Bak­er, an econ­o­mist at the Cen­ter for Eco­nom­ic and Pol­i­cy Research and author of the book The Con­ser­v­a­tive Nan­ny State, points out that poli­cies can be both fair­er and more effi­cient. For instance, Bak­er told me, it is not clear that a flat tax is more effi­cient than a pro­gres­sive income tax. This is entire­ly an empir­i­cal ques­tion. It is entire­ly pos­si­ble that tax­ing mid­dle-income work­ers and Bill Gates at a 25 per­cent rate will cre­ate more dis­tor­tions than tax­ing mid­dle-income work­ers at a 15 per­cent rate and Bill Gates at a 40 per­cent rate. … They want lib­er­als to say that we care about fair­ness and they care about effi­cien­cy. This is crap. They find ways to jus­ti­fy redis­trib­ut­ing income upward and pro­claim it to be effi­cient. The real­i­ty is it is not fair and gen­er­al­ly not effi­cient either.”

But when equi­ty and effi­cien­cy trade-offs do arise, econ­o­mists like Sander­son are sys­tem­at­i­cal­ly biased in favor of effi­cien­cy because that’s what they are experts on. Effi­cien­cy they can mea­sure and ana­lyze. Fair­ness? That’s the turf of philoso­phers and politi­cians. This ten­den­cy is most pro­nounced in dis­cus­sions of eco­nom­ic growth, and how the ben­e­fits of that growth should be dis­trib­uted. Sander­son para­phras­es his Nobel Lau­re­ate col­league Bob Lucas, who says that once you start to think about the ben­e­fits of high growth, it’s hard to think about any­thing else.” In oth­er words, first wor­ry about how best to grow the pie, then how to slice it up. Let effi­cien­cy trump equi­ty, cre­ate wealth, and then you can use the extra wealth you’ve cre­at­ed to alle­vi­ate inequality.

This makes a cer­tain amount of sense. But when this rhetoric comes to dom­i­nate our pol­i­tics, the prob­lem of inequal­i­ty is nev­er addressed. Now is always the time for grow­ing, lat­er is always the time to address con­cerns about equi­ty. The result is pre­dictable: In coun­tries that have adopt­ed the neo­clas­si­cal pol­i­cy pre­scrip­tions (includ­ing the Unit­ed States), there has been an ever-widen­ing gap between rich and poor.

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As taught by Sander­son, eco­nom­ics is a sat­is­fy­ing­ly neat machine: com­pli­cat­ed enough to war­rant curios­i­ty and dis­cov­ery, but not so com­pli­cat­ed as to bewil­der. Like a bicy­cle, input match­es out­put (wind the crank and the wheel moves), and once you’ve got the basics of the mod­el down, every­thing seems to make sense. As the weeks go by, and I trek down to Hyde Park, fight for a park­ing space and slip in between the hun­dred-plus stu­dents into the lec­ture hall, 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.”

Take, for instance, the min­i­mum wage. In Sander­son­’s intro micro class, he uses a sim­ple sup­ply and demand mod­el of a labor mar­ket to show why a min­i­mum wage will cause unem­ploy­ment, and there­fore be self-defeat­ing. Most econ­o­mists, myself includ­ed, are opposed to liv­ing wage ordi­nances and min­i­mum wage laws peri­od,” he says. But a series of empir­i­cal stud­ies has estab­lished that the most recent increase of min­i­mum wage in 1997 had essen­tial­ly no impact on unem­ploy­ment. In fact, in Octo­ber, 650 econ­o­mists, includ­ing five Nobel Lau­re­ates, signed a let­ter advo­cat­ing an increase in the U.S. min­i­mum wage to $8 an hour.

Of course, some eli­sion and sim­pli­fi­ca­tion is unavoid­able. Sander­son­’s not try­ing to cre­ate future econ­o­mists, but rather give stu­dents some sort of cul­tur­al lit­er­a­cy” about how the econ­o­my works. He often starts class by lead­ing us through a kind of Socrat­ic decon­struc­tion of a news­pa­per arti­cle that com­mits some egre­gious eco­nom­ic sin. About mid­way through the semes­ter, dur­ing the unit we spend learn­ing about how the gross domes­tic prod­uct is com­put­ed, he reads to the class from an arti­cle in the Chica­go Tri­bune with the head­line, Cor­po­rate Giants Dwarf Many Nations.” The piece com­pares the annu­al sales of large cor­po­ra­tions like Wal-Mart with that of small coun­tries, like Israel, show­ing that many of the world’s 200 largest cor­po­ra­tions are as large as entire nation­al economies, and there­fore have a great deal of polit­i­cal and eco­nom­ic clout. After quot­ing at length, Sander­son points out how implau­si­ble it is that 200 com­pa­nies, with one third of one per­cent of the world’s work­force, could pro­duce 28 per­cent of the world’s eco­nom­ic activ­i­ty. There’s a word for it,” Sander­son says. Two words, actu­al­ly. The first is Horse.’ “

The prob­lem, Sander­son notes, is that sales” is a ter­ri­ble mea­sure­ment for the eco­nom­ic out­put of a com­pa­ny like Wal-Mart, because it only pro­duces a very small per­cent­age of the val­ue of any prod­uct is sells. When you buy pis­ta­chios at Wal-Mart, it’s not like those nuts were grown on a Wal-Mart farm. Wal-Mart bought them from some­one and then resold them for a prof­it. If we were count­ing GDP, we just want to count what’s the net con­tri­bu­tion, what’s the val­ue added?” he explains. Last year, world­wide Wal-Mart sold $285 bil­lion worth of goods and ser­vices, but paid man­u­fac­tur­ers $220.” Sander­son­’s point is pret­ty obvi­ous, if you think about it. And yet the arti­cle gets it wrong over and over, which near­ly sends Sander­son around the bend. This hap­pens to be the polit­i­cal rhetoric: These 200 cor­po­ra­tions dom­i­nate the world.’ They don’t. They’re a very small per­cent­age of GDP,” Sander­son says. Those who are crit­i­ciz­ing very large multi­na­tion­al cor­po­ra­tions are doing a dis­ser­vice if they don’t get the math right.”

This con­trar­i­an approach is cen­tral to Sander­son­’s world­view: It’s the coun­ter­in­tu­itive, every­one-says-x-but-real­ly-what-mat­ters-is‑y” for­mu­la­tion that has become the sta­ple of mag­a­zines like the New Repub­lic and Slate. (A head­line from Slate’s Octo­ber 14Under­ground Econ­o­mist” col­umn: Char­i­ty is Self­ish.”) But as with any coun­ter­in­tu­itive rhetoric, what mat­ters is how you define the con­ven­tion­al intu­ition” that you’re skew­er­ing. And with Sander­son, the tar­get is almost always sta­tist, reg­u­la­to­ry and lib­er­al: The idea that you can, indeed, get a free lunch, by, for instance, man­dat­ing bet­ter incomes for work­ers by rais­ing the min­i­mum wage. Think­ing of eco­nom­ic pol­i­cy as a series of trade-offs and oppor­tu­ni­ty costs and, most impor­tant­ly, unin­tend­ed con­se­quences is a hall­mark of the Chica­go School, and it was a con­stant theme through­out the course: When­ev­er you try to alter the mar­ket, the mar­ket extracts its revenge.

In Sander­son­’s zeal to play gotcha’ with the press, he too can slant the pure data. That evening, I went online and found that Wal-Mart’s $65 bil­lion of net rev­enue was still larg­er than the GDP of 132 coun­tries, includ­ing Bangladesh, which has a pop­u­la­tion of 144 mil­lion peo­ple. I wrote an e‑mail to Sander­son, who prompt­ly wrote back, say­ing the big­ger point was to dri­ve home the prob­lem with inap­pro­pri­ate com­par­isons and dou­ble count­ing. I tried to point out that these apples v. oranges com­par­isons are all over the place,” he wrote, and added that the dou­ble-count­ing error could be found every­where from the Wall Street Jour­nal to some intro­duc­to­ry text­books. Thanks,” he wrote, for con­tin­u­ing the out-of-class dialogue.”

— —  —  —  —  —  — –

Sander­son is so like­able and mas­ter­ful that the entire quar­ter goes by with the class eat­ing out of his hand: They take care­ful notes, class atten­dance is almost per­fect every day and each pre-exam study ses­sion is packed. But the final unit of the class is devot­ed to free trade, and sud­den­ly things change.

Sander­son begins the class by telling us that in trade, there’s an enor­mous amount of agree­ment between econ­o­mists about what con­sti­tutes the truth. The dis­agree­ments are between econ­o­mists and every­body else.” His cen­tral con­tention is that allow­ing any two giv­en coun­tries to trade their goods freely will nec­es­sar­i­ly make both coun­tries bet­ter off. It’s the same log­ic, he says, that we use every­day. When you decide to have some­one do your dry clean­ing or fix your car, you’re decid­ing to spe­cial­ize in what you do best, and trade for the oth­er things you need. Spe­cial­ize and trade: That was Adam Smith’s cen­tral insight into the nature of the wealth of nations,” and, Sander­son says, it remains as true today as it was then.

But when lec­tur­ing on trade, Sander­son­’s tone is notice­ably dif­fer­ent. His agen­da and ide­ol­o­gy are more up front, such that the class­es felt for the first time almost — almost — like pro­pa­gan­da. And dur­ing these lec­tures, some­thing incred­i­ble hap­pens. The class rebels. Where­as for the dura­tion of the quar­ter Sander­son had made the stu­dents feel as if he was their guide in see­ing through the Matrix, sud­den­ly Sander­son morphs from being Lau­rence Fish­burne to the FBI agent in a suit. The class prods and push­es back as if they are being fed spin. As Sander­son talks about the impor­tance of nations spe­cial­iz­ing in what­ev­er they have a com­par­a­tive advan­tage in, a stu­dent rais­es his hand: Isn’t there a prob­lem if you put all your eggs into one bas­ket, and then if there’s a prob­lem with that sec­tor you’re in trouble?”

That ends that day’s class, but it con­tin­ues in the next. Sander­son argues that lib­er­al­ized trade cre­ates more jobs than it destroys. Free trade cre­ates win­ners and it also cre­ates losers. It turns out that win­ners are quan­ti­ta­tive­ly larg­er than the losers.” A stu­dent asks, flat out, Why are we to believe that?” Sander­son restates his point, but the stu­dent holds his ground, say­ing he’s read that there sim­ply does­n’t exist an accu­rate mea­sure to fig­ure out how many jobs are being cre­at­ed and destroyed. Sander­son con­cedes that this is true, but insists it must” be a net positive.

You can hear papers rustling and side con­ver­sa­tions break­ing out. Hands begin to shoot up and Sander­son began to sweat notice­ably as the mutiny spreads. One stu­dent asks about attach­ing labor or envi­ron­men­tal pro­tec­tions to trade deals. Sander­son replies that such stip­u­la­tions (like requir­ing work­ers be paid $14 an hour) sim­ply oper­ate like tar­iffs, rais­ing the price of goods and sav­ing jobs in the U.S., union jobs that are rel­a­tive­ly high paid, and tak­ing peo­ple in devel­op­ing coun­tries who are not well off and mak­ing them poor­er. I tend to be against laws that make poor peo­ple poorer.”

OK,” responds the stu­dent, who with a beard and long hair looks a bit like the stu­dent rad­i­cal who’s been miss­ing all quar­ter. Let’s say the stan­dards are not ridicu­lous. The work­ers have a right to orga­nize, or we can’t pol­lute the only source of the vil­lage’s water supply.”

How do we define what’s ridicu­lous?,” Sander­son shoots back. Once you start, it’s very dif­fi­cult to draw the line, in terms of what work­ers have. Should oth­er coun­tries not trade with the U.S. because we have cap­i­tal pun­ish­ment? Should we not trade with coun­tries that don’t allow abor­tion? My prob­lem with sweat­shops is, quite frankly, the only poten­tial def­i­n­i­tion is peo­ple who work long hours for low wages, and that’s what the U.S. was 120 years ago. A lot of what eco­nom­ics is about is how to increase the world’s income, and not for Bill Gates and Oprah, but for the world’s poor. Unions don’t like trade agree­ments. They’ve nev­er seen one they like, and they want to find a rea­son in envi­ron­men­tal stan­dards or things like that.”

We do draw the line every day,” the stu­dent responds, not both­er­ing to raise his hand this time. There are hands up all over and the class has now devolved into a free-for-all. We don’t trade with Bur­ma. We did­n’t trade with Iraq. We do trade with Sau­di Ara­bia. It’s not impos­si­ble to re-imag­ine how to draw the line.” Sander­son is not win­ning this argu­ment. These are tough issues,” he says, and the class ends.

It occurs to me that Sander­son­’s prob­lem is that he’s been too hon­est about his bias­es. It’s far more effec­tive to com­mu­ni­cate a world­view through sub­text than to argue for it explic­it­ly. For eight weeks, Sander­son had been the mod­el of equa­nim­i­ty, the cen­trist arbiter of com­pet­ing fac­tions, and because of this stu­dents seemed to accept his word with­out ques­tion. But on the very first day of class he’d tipped his hand that he was an ardent free-trad­er,” and his clear desire to have stu­dents come away believ­ing, as he does, in the ben­e­fits of free trade, was backfiring.

By the next class, Sander­son has regrouped, and calm­ly and method­i­cal­ly leads the class through a Socrat­ic dia­logue. Tobac­co farm­ers have lost their jobs because we smoke less: Does that mean we should have the gov­ern­ment do some­thing about it? Peo­ple lose their jobs all the time because the work they do — whether open­ing envelopes for mag­a­zine sub­scrip­tions or wrap­ping Her­shey’s Kiss­es — becomes auto­mat­ed. Trade works the same way as tech­no­log­i­cal progress: While it might put some peo­ple out of work, in the end, it makes every­one bet­ter off. The class is nod­ding, atten­tive and silent.

Fur­ther­more, free trade is a moral imper­a­tive because it makes poor­er coun­tries bet­ter off. I don’t want to sound like Miss Amer­i­ca,” Sander­son says as he wraps up the final class of the quar­ter. I think world pover­ty is where it’s at in terms of where you try to place resources. My sense is that sig­nif­i­cant redis­tri­b­u­tion of wealth is prob­a­bly not the answer. Part of it is that there is not enough wealth to redis­trib­ute. There’s not a lot of rich peo­ple and too many poor peo­ple. And the gap between rich and poor is too vast. It comes down to eco­nom­ic growth, how fast we can make economies grow. Eco­nom­ic growth does tend to raise all boats.”

As the class files out, I see a stu­dent I’d talked with a few times over the course of the quar­ter, an unas­sum­ing kid with a long mop of brown hair. I remem­ber a con­ver­sa­tion we’d had at the begin­ning of the semes­ter: I hope it does­n’t all end up to be wrong,” he’d said, refer­ring to the Chica­go School the­o­ries he was about to learn. Like in Latin Amer­i­ca. That wor­ries me a bit.”

Six months after the class end­ed, I e‑mailed him to ask whether he was still wor­ried. I got this e‑mail right after my Econ 201 class, the inter­me­di­ate sequence for the major require­ment,” he wrote back. So it looks like I’m no longer wor­ried that what I’m learn­ing is wrong.’ Actu­al­ly, the con­ver­sa­tion we had does­n’t real­ly make sense to me any­more. I now under­stand that any one school of eco­nom­ics can’t explain and pre­dict all the intri­ca­cies of human economies.”

What he’d come to real­ize, he wrote, was that it isn’t a ques­tion of cor­rect the­o­ry or incor­rect the­o­ry, but whether or not the results of the imple­men­ta­tion of that the­o­ry are right or wrong in a moral sense.”

In oth­er words, it’s a ques­tion that eco­nom­ics alone can’t answer.

Christo­pher Hayes is the host of MSNBC’s All In with Chris Hayes. He is an edi­tor at large at the Nation and a for­mer senior edi­tor of In These Times.
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