1857. Why do economics texts not begin….

Provocation # 88

Why do no economic textbooks begin with some crucial facts about society, the kinds of things we need to understand and have serious conversations about?  Imagine if the following were the open paragraphs of economics 101. Why does so much economics fail to deal with economics?

(From Henry liu    http://www.henryckliu.com/public_html/page71.html)

“Rockefeller wrote:
The Standard Oil Co has been one of the greatest, if not the greatest, of upbuilders we ever had in this country – or in any country. All of which has inured to the benefit of the towns and cities the country over; not only in our country but the world over. And that is a very pleasant reflection now as I look back. I knew it at the time, though I realize it more keenly now. We had vision, saw the vast possibilities of the oil industry, stood at the center of it, and brought our knowledge and imagination and business experience to bear in a dozen, 20, 30 directions. There was no branch of the business in which we did not make money … Here was a force that reorganized business, and everything else followed it-all business, even the government itself, which legislated against it.
Tarbell rejected that view.

[John Rockefeller’s] importance lies not so much in the fact that he is the richest individual in the world, with the control of the property that it entails; it lies in the fact that his wealth, and the power springing from it, appeal to the most universal and powerful passion in this country – the passion for money. John D Rockefeller, measured by our national ambition, is the most successful man in the world – the man who has got the most of what men most want … Mr Rockefeller is a hypocrite. This man has for 40 years lent all the power of his great ability to perpetuating and elaborating a system of illegal and unjust discrimination by common carriers. He has done more than any other person to fasten on this country the most serious interference with free individual development which it suffers, an interference which, today, the whole country is struggling vainly to strike off, which it is doubtful will be cured, so deep-seated and so subtle is it, except by revolutionary methods. It does not pay. Our national life is on every side distinctly poorer, uglier, meaner, for the kind of influence he exercises.

Tarbell, missing the point that it was the system that made the man, went on to attack the wrong target: “I never had an animus against Standard Oil’s size and wealth, never objected to their corporate form. I was willing that they should combine and grow as big and rich as they could, but only by legitimate means. But they had never played fair, and that ruined their greatness for me.”

Tarbell was excusing the system and blamed it on the man, a common error made by American liberals. The same attitude perseveres on their reaction to the Enron, WorldCom, Citibank, AIG scandals in recent years, that it was the few apples rather than the barrel that were rotten.

Rockefeller, of course, disagreed: “It was the law of nature, the survival of the fittest, that [the small refiners] could not last against such a competitor. Undoubtedly … some of them were very bitter. But there was no band of greedy men plundering them. An able, intelligent, far-seeing organization simply outstripped men in the casual, haphazard way of doing business. That was inevitable.”

Yet the purpose of civilization is to improve on the laws of nature. The fault was in the system, not the persons who excelled in the barbaric game. These robber barons had a common vision of the need to create a centrally controlled order out of decentralized democratic chaos. Above all, they recognized clearly that in a society where wealth was denominated in money, the way to achieve great wealth was to control the nature of money. What they did was to stage what amounted to an autocratic coup d’etat on the United States’ monetary regime.


I think most agree these are crucial reflections about what happens with economy. Why is such a discussion not forthcoming? Especially in economics departments and core textbooks?


One thought on “1857. Why do economics texts not begin….

  1. Hi Doug–In the Jan 27 2017 “Chronicle Review” insert to the Chron. of Higher Ed. (p B11), James Kwak adapts part of his new book, “Economism,” to take on the question of how to reform undergrad economics education. (He says the premise of economism is that ” ‘economics’ says only one thing: that unregulated competitive markets produce the best outcomes for all people.”) His treatment oddly leaves Smith as only a supply-and-demand guy, but he points out that neither Alfred Marshall nor Paul Samuelson confused the map for the real world, whereas–to your point–today’s texts, even by center-left authors such as Alan Blinder, “emphasize rational individuals … guided by Adam Smith’s invisible hand…” Samuelson “lamented” that despite his efforts, students tended to conclude that markets Trump gov. (because, we all would say, their livelihoods depending on believing that). His suggestions include deconstructing Econ 101, offering intro courses that deal not only with modeling but also with the real world, such as “the factors that determine the set of opportunities available to different people on different parts of the planet” (the politics pushing economism will still limit the content of such a course, eh? but it creates a bleeding edge to the conversation) (he cites Partha Dasgupta on this approach). And a course on what we know about human behavior. These and others could replace Econ 101 (“I studied history and I teach law, neither of which has a single ‘101’ class”). ICYMI, though you seem to miss little!, Kwak was co-author with former IMF chief economist Simon Johnson on a good book on the political economy of the financial crisis (“13 Bankers”) (I have to mention, another important book exposing more specifically the false financial ideology advanced by big banks is “The Bankers’ New Clothes.”). Kwak and Johnson have an informative blog, “Baseline Scenario.”

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