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Don’t Panic

Noah Smith says most of what you learned in Econ 101 is wrong.

Don’t panic.

It’s not that mainstream thinking about anything is never wrong. Often it is.

Still…

When an uneducated person claims to be in on a secret the rest of the world doesn’t know, we call that person a crackpot.

When an educated person sees the world from an enlightened position that the masses–including best selling textbook authors–simply can’t attain to, they write clickbait for Bloomberg. Or CNN.

It’s fun to watch someone explain why they understand something the rest of the world doesn’t:

But Mankiw’s book, like every introductory econ textbook I know of, has a big problem. Most of what’s in it is probably wrong.

After the fun, though, you should listen to the adults in the room:

He doesn’t actually make the case that would support that title….Here’s what’s striking. In an article that purports to show that Mankiw is wrong on many issues, he doesn’t point out how he’s wrong on ANY issues. Moreover, he doesn’t even try. At no point in his piece, does Smith ever relate anything he says to specific things that Mankiw claimed.

Don Boudreaux elaborates

I add here that when I teach supply-and-demand analysis I always label the horizontal axis “Qty./t” – in order to make clear to my students that the quantities demanded and supplied are quantities demanded and supplied “during some specific period of time” such as “per day” or “per year.”  Changing “t” changes the elasticity of both demand and supply.

Any professor who teaches supply and demand in a way that implies that the elasticity of demand and the elasticity of supply are invariant to time, or who otherwise implies that time is not a relevant-enough factor to account for when doing supply-and-demand analysis, is a very poor professor indeed.

I’m fairly certain my freshman economics students understand, after less than a semester of class, that the effects of a price floor or ceiling are smaller in the short term and larger over time.

I expect they also understand that we are working with simplified models that are far less complex than the real world. They might have been led to that thought by my saying it about 1,000 times, or by the hidden part of Mankiw’s text that (translated using a password-protected decoder code) says, “All models–in physics, biology, and economics–simplify reality to improve our understanding of it.” No, wait, that’s in Chapter….2.

So when Noah Smith says, “In other words, minimum wage hikes should quickly put a bunch of low-wage workers out of a job,” I’d like to know: whose “other words” are those? Not Mankiw’s. Not the freshmen students I teach.

Are they Noah Smith’s? But surely he knows better. Who’s getting everything wrong from Econ 101?

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