creative destruction

If macro, although bad, was bearable, micro was a neoliberal caricature. Each week, I was drawing supply and demand curves on the board. Whatever the question, unemployment, consumption or housing, I had to repeat the same mantra: Perfect competition leads to a “social optimum.” Except in the notable case of pollution, no intervention from the state can improve well-being. And as the market rewards the most productive, inequalities cannot be an issue.

Unemployment is an example of the market being imperfect. For Mankiw, if unemployment exists, it is only because of human interventions such as unemployment benefits, trade unions and minimum wages. Without these interventions, he maintains, there can be no unemployment.

Mankiw presents this as a consensual view among economists—chapter six. In fact quite a few of them admit that the labor market is a very special “market” indeed, where the price—the wage—is not set the same way as the price of other “goods.”

As Alan Krueger put it, “it is a gross oversimplification to say that ‘wages are set by the What is most worrisome about this scenario competitive forces of supply and demand’ or that is not Mankiw’s ideas themselves, but that his text there is a unique, market-determined wage.” presents economics as a unified discipline, one This specificity in the way wages are set entirely committed to the neoliberal agenda. is one of the reasons why six hundred economists “Most economists” is one of the dominant phrases (including stars like Kenneth Arrow, Robert Solow throughout his impressive text. One of the first and Joseph Stiglitz) have argued in favor of an things you’ll learn in its pages is that Mankiw increase of the US minimum wage. But when believes markets are the solution to almost students and workers at Harvard asked for a everything—and it seems by way of his text he “living wage,” Mankiw opposed it. As he told would like students to believe likewise. Species Harvard Magazine in 2001, even a modest raise extinction? Not a problem. Privatize endangered in the minimum wage for janitors at Harvard beasts to keep them alive. It worked for cows, would “compromise the university’s commitment chickens and pigs. Why not rhinos, elephants to the creation and dissemination of knowledge.” and blue whales? You can read about it in chapter No kidding. Of course, Mankiw does not discuss eleven. the possibility that the salary of tenured professors According to Mankiw, if a problem persists, might be above its “equilibrium” value; not to it can only be for one of two reasons: The market mention the very existence of tenure, which goes is imperfect, or it is nonexistent. No other against the principles of a perfectly competitive explanation for persisting economic or social labor market. problems is ultimately permitted. And the While unemployment is an example of externalities now engulfing humanity, well these an imperfect market for Mankiw, pollution is an are trade-offs humans make for living well. This example of the nonexistent market. He admits devil’s bargain is the first maxim on his top ten that, in some cases, markets do not ensure that list of key principles that begin the book. the environment is clean, and the result is Being an unfunded post-doc at Harvard in excessive pollution (what economists call a 2005 and 2006, I worked as a teaching fellow for “negative externality”). But what is the solution Mankiw. The experience was nearly unsustainable: to pollution? According to Mankiw, it is to define