Economics Anti-Textbook

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* Book: The Economics Anti-Textbook, A Critical Thinker's Guide to Microeconomics- by Rod Hill & Tony Myatt

URL = http://www.economics-antitextbook.com/

an introduction to, and critique of the typical approaches to economics teaching, written by Rod Hill and Tony Myatt in 2010. The main thrust of the authors' argument is that basic economics courses, being centered around models of perfect competition, are biased towards the support of free market or laissez-faire ideologies [1]

Description

"We (Rod Hill and Tony Myatt) are professors of economics at the University of New Brunswick and the authors of "The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics" (Zed Books, London & New York; Fernwood Books, Halifax & Winnipeg, 2010). In preparation are a Chinese edition by Shiwenbooks, Beijing, and a Swedish edition by Studentlitteratur, Lund. We'll use this blog as a place to post discussion with readers of our book. We'll also use it to write further about economics textbooks and their content, as well as about new books coming out that critique textbook economics. Feel free to write to us at rodntony [AT] gmail.com. We also have Facebook group "The Economics Anti-Textbook" at: http://www.facebook.com/group.php?gid=316689352715&v=info&ref=share and a discussion group at LibraryThing.com: http://www.librarything.com/groups/theeconomicsantitext"

2. Wikipedia summary:

"An example of the book's approach is the theories surrounding minimum wage. Classical micro-economic theory dictates that in a perfectly competitive market, raising the legal minimum wage will increase unemployment, as it prevents the hire of workers whose market value falls below the legal minimum. Society therefore loses from the imposition of a minimum wage due to the loss of allocative efficiency. While real markets may not be perfectly competitive, the model of perfect competition provides a good approximation to real market behaviour.


A number of counterarguments to this are given.

  1. The classical model, while neat, is only a hypothesis which should be experimentally verified before being accepted as fact.
  2. Over 30 years of econometric studies have failed to conclusively prove or disprove the hypothesis that raising minimum wage will increase unemployment. The theory is surrounded by a `protective belt of assumptions' which makes conducting such studies near impossible.
  3. The existence of market friction, asymmetric information and search costs all violate the assumptions of perfect competition. The authors argue that monopolistic price theories may depict reality better than the perfectly competitive model. In this case it can be shown that raising a minimum wage can in some circumstances, lead to a decrease in unemployment.
  4. The existence of multiple equilibria in a supply/demand system may mean that imposition of a minimum wage forces the system over a tipping point from a less efficient to a more efficient equilibrium.
  5. Arguments in favour of increasing allocative efficiency were in any case constructed in an era where society was less wealthy than it is today. Recent studies have shown that for well-off societies, the happiness of a population has little correlation with its absolute wealth. Therefore efficiency may not necessarily be an important goal of resource allocation in any case. In any case, efficient markets can have morally undesirable outcomes.

Later chapters explore the concept of bounded rationality and how it confounds classical arguments in favour of laissez faire; in particular it is noted that the very existence of an advertising industry disproves rational behaviour. Arguments from the field of game theory explain limited rationality and the balance of power of corporations over the individual.

Overall, the authors argue - with reference to Thomas Kuhn's Structure of Scientific Revolutions - that the existing economic paradigm is due for a change. The book presents their own paradigm for interpreting economic behaviour."
(http://en.wikipedia.org/wiki/The_Economics_Anti-Textbook)