Seven pillars of wisdom for a topic with shaky foundations

Economics. Sixth edition - Foundations of Economics. First edition - Economics. Fourth edition - Essentials of Economics. Second Edition - Principles of Economics. Second Edition - Principles of Economics. First Edition - Economics
June 1, 2001

The number of students taking A-level economics is falling, as is the number of applications to study the subject at British universities. Employers such as the Bank of England and the Treasury worry where their specialists will come from. The Royal Economic Society is concerned about falling student interest and is trying to stimulate demand. So the choice of textbook for the introductory economics course would seem particularly important. Here are seven new books. Could they help to reverse the decline?

I have read these, and written this review, very conscious of being a joint author, with Joseph E. Stiglitz, of another economics textbook, Economics (published by Norton in 2000). With the prospect of working on a second edition imminent, this affords a splendid opportunity to review the competition and consider how to develop Stiglitz and Driffill.

There is no doubt that these are among the best introductory economics textbooks available. Others differ but none could claim to be better in every way or to be in a different class. All are written by distinguished academics. Six are new editions (or versions) of existing texts, succeeding the previous edition by just a few years. We see here evolutionary changes in well-known and widely used texts. Their development involves an army of people, as the prefaces make clear. Content and style have been refined over successive editions (or drafts), partly to accommodate developments, partly to meet users' needs. Each book brings together a vast quantity of material covering an enormous range: theory, statistical data, historical information, examples, case studies, review questions and so on. The texts themselves are part of an enormous and growing package. There are more and more ancillaries: the instructor's manual, the study guide, the CD-Rom, computerised text banks, online resources. The directions of change in textbook publishing are clearly visible.

One is bound to admire the energy and effort, quantity and quality of work that has gone into these books. But I think their size, the momentum they acquire and the pressure of the market have some unfortunate consequences. They are very large and remarkably homogeneous. I cannot help feeling that the clamour of the marketplace has drowned out the individual voices of the authors.

The authors all stress that they have pruned vigorously, emphasised a few key principles over endless facts and opinions and that the books are shorter than previous editions or earlier books. Nevertheless, these are substantial texts. Of the books that offer the full works, the four aimed at the US market, by William Baumol and Alan Blinder, David Colander, Robert Frank and Ben Bernanke, and Gregory Mankiw, are about 800 pages long. David Begg et al 's, aimed at the British market, keeps it down to 634. The two condensed versions are pared down to 426 (Begg) and 568 pages (Mankiw).

These books offer the once-over-lightly first scan of all that economics has to offer, which is the predominant format of the introductory economics course. The length results partly from the admirable desire to make the latest advances in economics available to students who are beginning and partly from the resolutely non-technical exposition. There is scarcely a line of algebra to be seen. It is good that the subject is made as widely accessible as possible by avoiding unnecessary technicalities. But, along with the generous use of examples, it makes the texts long winded.

Economists have firm views on the importance of product differentiation. The books loudly and proudly proclaim their achievements in this regard. But frankly the differences between them are very small. The similarities are overwhelming. They share a broadly common view of economics and public policy.

This is mainstream, consensus economics, the dominant paradigm. Markets are great things. There is proper regard for their limitations and failings. There is a balanced appraisal of the role of public policy. There is discussion of the environment and the gains and losses of globalisation. The macro-economic stance is broadly New Keynesian. The economy adjusts slowly to shocks that disturb it. Wage and price stickiness is rationalised in terms of optimising behaviour. There is a useful role for monetary and fiscal policy to stabilise the economy. All the books try to be explicit about the uncertainties of economic knowledge. There is more variety of position among academic economists than is represented among these seven books. But their uniformity is indicative of the state of the academic discipline and the prevalence of the dominant paradigm.

A new pedagogical orthodoxy has emerged. A set of key concepts is identified, broadly the same ones in each book. Mankiw has boiled them down to ten principles of economics. Baumol and Blinder have "12 ideas for beyond the final exam", identified by yellow sticky labels in the margins. Mankiw uses a building-block icon. Colander and Frank and Bernanke use something similar. Books are being made to look more like computer screens.

A section called "Thinking like an economist" makes a prominent appearance at an early stage in four of the books. The same content is present in the others but not identified quite so boldly. The aim is to emphasise the value of applying the key economic principles to whatever issue is under discussion, conducting a dispassionate analysis. But "thinking like an economist" has pejorative overtones. It might be an accusation of narrow-minded, circumscribed analysis, omitting important non-economic considerations. In the same way, "thinking like a politician" suggests spin without substance. It is interesting, and slightly disturbing, that some economists want to differentiate "thinking like an economist" as if it constituted a special kind of thinking. Superior perhaps? This may be unimportant, but it gives pause for thought. The material is organised by theory. First micro, then macro. Demand, supply, markets, the consumer, the firm, public policy and so on. The basic ideas are fleshed out with illustrative examples set out in boxes ("In the news", "For your information", "Issue", "Policy debate", "The economic naturalist", "Worked examples", "Beyond the tools" and so on). Boxes break up the page layout and draw attention to the examples. But of course they emphasise the relative status of their contents. The facts and policy debates are decorative and disposable. All authors stress the durability and wide applicability of economic principles. By contrast, facts and details are endless and ephemeral. Mankiw's passing remark "economics is a subject in which a little knowledge goes a long way", reveals a general attitude and does, or should, ring warning bells. These books are not really about issues that one might be interested in, such as the environment, globalisation, healthcare, education, redistribution and poverty.

The growth in the use of boxes is part of a wider process of making the content more highly structured. Text is split into many small sections. Learning objectives are set out for each chapter. There are key words and concepts, review topics and problems. There is rapid growth in the inclusion of references to websites for data sources, information on public policy and further reading. There also appear to be increasing numbers of references to results of original research to back up, qualify or refute sweeping textbook assertions (Begg, for example, on effects of union membership on wages). The greater use of facts and empirical analysis, less unsupported assertion, greater use of articles from newspapers and magazines such as The Economist , The Financial Times and The Wall Street Journal as a basis for examples and issues, is to be welcomed.

So much for the similarities among these books. What about differences? Conspicuously, five are aimed at a US readership; only Begg, Stanley Fischer and Rudiger Dornbusch's Economics and Foundations of Economics at a British one. This must be a decisive advantage for teaching in Britain. And possibly other readerships would value the slightly more Euro-centric perspective. Begg, Fischer and Dornbusch cover as much and broadly the same conceptual ground as the others, though in fewer pages. Indeed, they alone include the IS/LM model, albeit briefly, and a usefully demystifying chapter on e-commerce. Comparing length is confounded by Begg et al's very small font size with slightly more space between lines. The writing style is distinctly brisker than the others. Their Foundations becomes breathless at times (IS/LM in three pages). But the summaries are entertaining. ("The 1923 hyperinflation changed German history. Now Germans hate inflation.") A common criticism of US principles texts used to be that they betrayed a closed-economy mindset, with a section of international economics tacked on the end. That is less true now. While the final section on international economics remains, the books reviewed here introduce comparative advantage early as one of the key principles. That leads to varying amounts of material on international trade. Colander, for example, includes material on globalisation and trade policy midway through the book. Baumol and Blinder make frequent use of international comparisons. Colander is distinguished by a conversational writing style. It involves fireside chats with the author, advising on questions such as how to make career choices. His research interests in economic thought and history emerge, for example, in discussions of the history of economic systems and quotes from such figures as Dennis Robertson and G. L. S. Shackle. His stance is more Keynesian than the others, and he makes fewer demands in conceptual understanding on his readers. His views on monetary policy in the United Kingdom might charitably be described as quaint.

Frank and Bernanke made the loudest claims for having taken a fresh approach, making use of "repeated application of a set of core principles", with icons, and offering "an active student-centred approach to learning", with many worked examples, exercises, anecdotes and illustrations. Despite this, theirs does not strike this reader as greatly different. Mankiw's ten principles of economics aside, the strong points of his books are his treatment of public policy, taxation, poverty, and inequality. His layout of macroeconomics goes from long-run (growth, equilibrium unemployment, money and long-run inflation) to short run. He gives lots of questions at the ends of chapters and an array of boxes.

I doubt whether the developments embodied in these textbooks, splendid as they are, will attract more students to economics. The pedagogical improvements give the game away. They project more clearly economics as theory driven and disdainful of facts and issues. I suspect that the prospect of "thinking like an economist" will not attract those interested in issues and looking for broader perspectives.

John Driffill is professor of economics, Birkbeck College, University of London.

Economics. Sixth edition

Author - David Begg, Stanley Fischer and Rudiger Dornbusch
ISBN - 0 07 709615 0
Publisher - McGraw-Hill
Price - £30.99
Pages - 634

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