Monday, July 13, 2009

Those Who Can't Do Sometimes Really Do Teach

A young friend of mine is taking an on-line course in macroeconomics at the local community college. He recently sent me a note quoting one of his midterm exam topics with a request for my thoughts on it.

The topic was

11. The presence of market failures implies that:
A. money is not an effective tool for exchange in a market system.
B. there is an active role for government, even in a market system.
C. individuals and firms should strive to be self-sufficient rather than specialize.
D. command systems are superior to market systems in the allocation of resources.

My friend's dilemma was knowing the distinction between the correct answer--as in what his professor wanted him to select--and the correct answer--as in the truthful one. That the truthful answer was not even an option made this dilemma all the more annoying.

The professor, of course, wanted answer B: "The presence of market failures implies that there is an active role for government, even in a market system."

While my friend knew that he could simply select B and claim the point on the exam, he boldly decided to protest on principle.

He sent the professor an email saying
I don't believe any of these choices are correct. If the intended answer is B, which I think it is, I believe that would be a matter of opinion and not fact. First, "market failures" may not simply be attributed to the market itself and even so, this would not imply [necessarily] that the solution would be the government taking an active role. I just found the question to be misleading and the answer selections to all be false. If I was misled could you please offer some clarification.
The professors replied "CALL ME ASAP" (yes, in all caps).

In their telephone conversation, the professor explained how fiscal policy can correct market failures, and when my friend took him to task on this, noting that there are alternate approaches to the issue.

One thing that he could have mentioned (and I don't know if he did do so) is that the only time that a change in fiscal policy can correct a market failure is when when bad fiscal policy in the first place disrupted the economy and caused the market failure, and the new fiscal policy is a good or at least better one.

What people call "market failures" are really "market adjustments," whereby the market retools itself to operate under new conditions. Through the Federal Reserve System, the government attempts to boost the economy with its monetary policies, but in doing so creates the "boom" that leads to the "bust" in the "boom-bust" cycle. Then the government blames the bust on the market and says that it (the government) needs more regulatory power over the market in order to protect the people from market failure.

Since most people don't understand how markets work and how fiscal policies disrupt the market and force it to readjust to new conditions, they accept the government's/politicians' line. The politicians who tote the line do so either because

  1. They are ignorant of how markets function and naively hope that their well-intended policies will make things better.
  2. They are ignorant of how markets function but arrogantly assume that they know better for producers and consumers than producers and consumers themselves.
  3. They are informed of how markets function but can use "market failures" as opportunities to enhance their own power and prestige.
Unfortunately, all of these choices suck. However, unlike the topic on my friend's midterm, these are all correct answers.

After several minutes of debate, my friend's professor fell back to "Well, yes, it depends what school of thought you are from" (obviously not the school of thought that warns against ending a sentence with a preposition).

With this statement, my friend knew that he had drawn blood, for it forced the professor to accept that it was possible that all choices on the topic could be wrong (depending, of course, upon your school of thought--e.g. Keynesian or Austrian).

However, instead of conceding the point, the professor came out with "OK, so you get marked down one point if you get this wrong, big deal."--to which I am near to exploding with rage.

Hell yes it is a big damn deal. It may only be one point on an exam, but the issue here is that this guy is forcing students to select incorrect answers if they wish for a good grade. If a professor at a medical school taught that bloodletting was the best option for curing influenza, and then required students to answer accordingly on exams (or risk losing points and earning lower grades), then this guy would be tarred and feathered by the media, the courts, and the medical school.

If my friend's professor wanted to phrase the topic fairly, he would have said, "According to the Keynesian school of thought..."

However, doing so would have suggest that there are alternate schools of thought. Inquiring students might then look into those schools of thought and agree with them. Not wishing for this, the professor worded the topic as he did, and for that he is dishonest. Even if the professor believes that government intervention will protect markets from failing (and I'll wager that he does believe this), this doesn't get him off the hook--it merely makes him a dishonest fool. He's so unequipped to refute his opposition that he pretends as if his opposition doesn't exist.

My friend was more polite than I would have been. When the professor gave his "It's only one point" excuse, my friend only said, "I know what answer you want me to choose I just think the question gives students the wrong idea."

The professor said, "OK is that all?"

"Yes," I said.

"Then have a nice day."

What an a-hole.


  1. I'm going to jump out on a ledge and assume that you meant "monetary policy" when you wrote: "Through the Federal Reserve System, the government attempts to boost the economy with its fiscal policies..." It's somewhat ironic to write an entire post criticising an econ professor on his phrasing only to make such a common sense error in econ jargon. Monetary policy as practiced by the Federal Reserve through fractional reserve banking revolves around creating (and occasionally destroying) money by manipulation bond markets. Fiscal policy is just a fancy phrase for spending money.

    I can attest that this is common practice within our econ department at Michigan and within the field as a whole. Entire Macro texts are written (Greg Mankiw's is a particularly popular one) that don't even acknowledge other schools of thought. I had hoped that the current economic crisis could be a watershed moment for macroeconomics - allowing economists to reanalyzed their assumptions. But it appears as though we collectively feel like blame-storming instead - in doing so, crystalizing most into their preexisting dogmas. We simple econ folk don't need to feel left out though as "scientific consensus" is sweeping academia. Apparently all climatologists now agree on catostrophic, man-made global warming. And nutrititons now think that too much meat in the diet is the problem - or was it carbs? I though it was fats...

  2. I'm going to jump out on a ledge and assume that you meant "thought" when your wrote: "I though it was fats..." It's somewhat ironic...

  3. As for so flippantly dismissing Drew's picky comment, I was in a rush and didn't have much time. However, I have a moment now to apologize, noting that since I had used the word "fiscal" a couple of times before, it just flowed with what I was thinking. It's not really that great of a mistake. Monetary and fiscal may not be exact synonyms, but they are hardly antonyms.


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