Another post about economics.

Economics blogger N. Gregory Mankiw passes along the tale of students walking out of his introductory economics course, in solidarity with the “Occupy” movement. He also links to two letters in the Harvard Political Review, one against his class, the other in defense of it.

Of particular note is this passage from the defense, by Jeremy Patashnik:

“One would presume that, in this letter, students would lay out precisely what biases they find objectionable in Ec 10, but the closest they come to doing so is when they say, ‘There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.’

Incidentally, the authors of this letter are in for a treat: there’s plenty of Keynesian theory to come in the second semester of Ec 10… The only reason that these students have not yet studied the father of modern macroeconomics in Ec 10, of course, is that the first semester of the class is devoted to microeconomics.”

Now, I have no way of knowing the facts of this case, but this does sound quite plausible to me. Adam Smith’s laissez-faire theories–particularly the well-known “invisible hand”–are all reasonably valid when applied to microeconomics, but don’t hold up so well at the macro level.

The interesting thing is that this might be a case where proponents of Keynes are confused by the works of Smith. Usually, it’s the other way around. In my experience, at least, it’s more common for people with a thorough understanding of micro get confused when they try to claim their theories also hold at the macro level.

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