Academic economic theories are damaging in the real world

Recently, the Columbus Dispatch published an op-ed by Musbah Shaheen, a Ph.D. candidate in educational studies from Ohio State. Shaheen classifies as “brainwashing” Ohio’s recent legislative initiative to mandate financial literacy classes that teach free market principles. Shaheen’s op-ed, though, is useful only insofar as it exposes the anti-economic nonsense coming from academia—a type of nonsense that has bled into federal policies with disastrous effects for the American economy.

The Ohio law against which Shaheen inveighs is simply: Public education should instruct students in free market capitalism. Shaheen’s problem is that his opposition is replete with errors and strawmen.

An obvious strawman is Shaheen’s insistence that teaching economic reality means “No talking about race or slavery or gender or sexuality. No talking about what socialism—or even communism—mean [sic].” The contrary is true: Those of us that went to Ohio public schools did learn about slavery, segregation, the Civil Rights movement, and other racial issues. The difference then was that educators did not try to inflict guilt on certain students because of their racial background and associated privileges.

As for the sexual content in schools, it never stops. There are books used or available at schools that describe in graphic detail sexual acts performed on or between children, sexual encounters between teens, visual how-to representations of sex acts, fetishes, and other deviant sexual behavior. These are not books like Catcher in the Rye with a broader literary theme and brief passages including profanity. They are, instead, books of dubious value to education unless that education is meant to change sexual attitudes and orientation.

Shaheen also sets up a strawman aimed at the proposed curriculum’s acknowledgment that capitalism is imperfect by mischaracterizing both the crisis at hand and the free marketers’ approach. He is offended that the proposed curriculum acknowledges that “[T]he free market can include effects and market failures where at least part of the cost of the transaction, including producing, transporting, selling, or buying, is born by others outside of the transaction.”

Image: The free market at work by freepik.

Rather than challenging the argument, Shaheen snidely comments, “So, kids, don’t worry if daddy loses his job or mommy has to take an extra shift. This is just a ‘side effect’ of the free market.”

In fact, back in the 1970s, economist Milton Friedman was already answering these strawmen:

Any market failure, however minor, is a sufficient excuse for government intervention. The market has failed, therefore the government should step in. But this is a basic error because it involves a double standard. There’s not just such a thing as a market failure, there’s also such a thing as a government failure.

Friedman understood that believing in the free market does not mean guaranteeing outcomes but, instead, means letting free will and world realities determine them. This acknowledges human behavior rather than aiming for a theoretical egalitarian ideal. It’s apparent that Shaheen’s work history, which seems to have been limited to academia, shielded him from economic realities. In other words, the real fault lies with academia.

There’s no question about academia’s leftist tilt. In 2017, Inside Higher Ed responded to then-Education Secretary Betsy DeVos’s accusation that academics let their liberal bias cloud their teaching by admitting that the reliable studies showed a political bias of 11.5 left-wing professors to every conservative. In economics departments, the number is “only” 4.5 left-wing professors to every conservative, but conservatives are still outnumbered.

The majority of these leftist economists are Keynesian professors like Dr. Paul Krugman, the New York Times’ booster for massive spending, famous for encouraging a housing bubble in 2002. The year that bubble popped in 2008, Krugman received a Nobel Prize in Economics.

Another, former Chairman of the Federal Reserve Ben Bernanke, was himself awarded the Nobel Prize this year despite his incompetent monetary policy during that period. In 2018 Bernanke claimed in a paper that “[e]conomists both failed to predict the global financial crisis [of 2008] and underestimated its consequences for the broader economy.”

Bernanke’s successor, Janet Yellen, is the current Treasury Secretary. In May, she admitted on live TV that she had been “wrong then about the path inflation would take” in reference to previous comments she had made in 2021 regarding Biden Administration spending. Each of these economists has taught at the Ivy Leagues: Krugman and Bernanke at Princeton; Yellen at Harvard.

These three represent the current academic orthodoxy—believers in generous state spending and loose monetary discipline—but they aren’t even the worst out there. Dr. Stephanie Kelton is a tenured professor of economics at Stony Brook University, despite penning a 2020 book called The Deficit Myth, which argues that the greater the public debt, the more the economy will grow. Kelton was the chief economic advisor to the Bernie Sanders 2020 campaign. We are living in the reality Kelton spells out in her book…except for the growth part.

Then there’s Dr. Richard Wolff, a professor at The New School in Manhattan, who teaches Marxian economics. In 2015, he railed against the austerity policies proposed in Greece by characterizing efforts by France and Germany to enforce its debt obligations as extortionate.

Shaheen’s essay exposes a major blind spot among academics, the “town vs. gown“ division between ivory tower professors and the world around them because he is a perfect example of a “gown.” Thus, he lives in Franklin County, a bastion of progressivism around the state capital Columbus. I also live in a similar Ohio county but commute to work in one of our adjacent rural counties.

I wonder how often Shaheen steps outside of his Ivory Tower comfort zone. He must have known that, in the recent midterm elections, Republican candidates won 85 of 88 counties in the gubernatorial race, 80 of 88 in the US Senate election, supermajorities in both state legislative chambers, and swept three state supreme court races. Did he ever wonder why ordinary people, outside of academia’s reach vote this way? Does he ask himself why the people writing in our newspapers, speaking from university lecterns, and often also teaching in our classrooms have such a disconnect with the public to which they theoretically communicate?

Shaheen is one among many: People in academia and politics whose theoretical ideas dominate American discourse (and economic policy) even though the people propounding these theories are not the ones who must live with their consequences. Until that changes, America’s economic situation is unlikely to improve.

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