Economics Texts: Old and New

Harry Pollard

[Reprinted from a Land-Theory online discussion, December 2002]

Back in the fifties, I did a survey of Canadian Universities. I wanted to know what textbooks they were using for Basic Economics. I must say the selection (I thought) was pretty poor -- and in some cases hilarious.

I remember the text used by a McMaster University econ professor (that's in Hamilton, Ontario for non-Canadians). It was his own and he wrote it with only two terms defined in the whole book.

The first was "ilth" (I think originally coined by Ruskin). Ilth was bad wealth he explained. Things like guns and munitions, artillery, and bombs. All of these were ilth.

However, he pointed out, when our "freedom loving nations" are confronted by Goering producing all this ilth, they must willy-nilly produce their own ilth. However, this ilth is called "Necessary Ilth".

So, his unfortunate students faced the world of economics with two defined terms solidly under their belts - Ilth and Necessary Ilth. There were some others that were fun -- but most universities used the standard textbooks, which were often good anecdotal reading but seemed to offer little in the way of science. I recall a book published around then which analyzed 14 American texts used in our most prestigious universities, and was horrified to find that in half of them the term Wealth was used in perfunctory fashion, while in the other half the term was not used at all.

While pointing out that terms may change in a science, the author (E. C. Harwood) pointed out it is strange to change basic terms without coming to some agreement with other members of the profession. Also, it was even more strange when the "Father of the Science" began it with a book entitled the "Wealth of Nations".

However, that was 50 years ago. What is the situation now?

I grabbed three books that were convenient on my shelves. A new Holt High School text, an economics text by Fusfeld from the seventies, and the latest McConnell text which it says is the nation's "best-selling economics textbook".

Other than that one of them brings in "ilth" again - they are very confusing. It would take too long to look at them all, so we will stay with McConnell. His piece about "Theoretical Economics" is acceptable only by beginning students who know little. Under the subhead "Terminology" he refers to laws. principles, theories, and models - then says 'we' will "use these four terms synonymously". (Why waste four words when apparently one will do.)

He follows the "unlimited desires" assumption of Classical Political Economy, but complicates it and makes it less useful. "Society's material wants, that is the material wants of its citizens and institutions are virtually unlimited and insatiable."

His second "fact" (he doesn't call them assumptions) is: "Economic resources - the means of producing goods and services -- are limited or scarce." He includes all the Factors of Production in his concept of scarcity.

Apparently, if we are hungry, food must be scarce, so we pick an apple and eat it. This by reducing the number of apples by one should make food even more scarce. Or, are there degrees of scarcity?

I would say that price (or cost) is a factor. There is a scarcity of Rolls-Royce's at $20,000 apiece. There is no scarcity of the cars at $256,000 (sticker price). Economists don't like this argument.

Then, they discover we can't do everything at once. This leads to the incredible discovery that we have to choose between various alternatives.

What happened to scarcity? Now, apparently, we have so much, we can make choices. Which brings in the nonsense of opportunity cost. This is another biggee and is taught with a straight face to all the embryo economists.

When you choose something, there is something else that is unchosen. The something that you didn't choose, the sacrifice you made, is called the opportunity cost.

I would expect you to choose the something which advantages you most (that which is most desirable). Which implies the thing you didn't choose was not so much advantage to you - was not so desirable.

How can not getting something you didn't want be a cost? It would seem more likely to be a benefit. However, that's the way it is with the neo-Classicals.

We've had a lot of fun with the "invisible hand". Brad still doesn't understand, or doesn't want to because he'd lose some good lines if he did.

Classicals analyzed from the point of view of individuals. If everyone in the community is trading to their benefit, then (as if by an invisible hand) the community would be benefited.

Classical analysis is simple. Labor (human exertion) used Land (Natural Resources) to produce Wealth, probably with the aid of Capital (Products used for more production).

People traded their products and by doing so multiplied the value of their production. When a lot of individuals traded, they formed a community, or a nation -- but nothing changed the basics. Perhaps now whole corporations traded with other corporations, but the end result -- Wealth -- finished in the hands of the people.

The neos don't think this way. They start with the economy and often never arrive at persons. People are almost an afterthought.

This from McConnell:

"Economics is concerned with the efficient allocation of scarce resources to achieve the maximum fulfillment of society's material wants."

This is the opposite of the invisible hand. It says, if the community is doing well, the individuals must also be doing well. Well!

However, whereas the neo-Classicals are concerned with allocating scarce resources efficiently to maximize production, the Classicals are analyzing where that maximized production goes.

McConnel devotes a full quarter-page to "unequal distribution of wealth" -- something he does without comment.

The Classicals spend much time on why people are poor, perhaps crystallized in Henry George's question (which you have heard before):

"Why, in spite of the enormous increase in the power to produce, is it so hard to make living?"

The question is still relevant.