Reading a recent column by Jessica Irvine in the SMH leads me to the conclusion that economics in Sydney University (her alma mater) has not progressed beyond high school.
The first task of a university economics faculty is to dispel the notions gained at high school. Learning economics at high school is likely to reduce one’s capacity to understand economics. It is all about Marxism and capitalism with a little on supply and demand and not much else. Having assisted some high school students with their ‘economics’ I found that crucial concepts such as opportunity cost were ignored.
Economics textbooks are hefty objects. Many a kinked neck and curved spine have resulted from children being forced to lug such weighty tomes between school and home.
Whether many students manage to read and absorb the often turgid contents of such books remains an open question.
But the Prime Minister, Julia Gillard, and the Treasurer, Wayne Swan, have proven diligent students. Many of the hallmark economic policies of this Labor government – pricing carbon, the mining tax, fiscal stimulus and even efforts to cap middle-class welfare – could be torn straight from the pages of your typical HSC economics textbook.Forcing big polluters to pay for the pollution they emit is economics 101.
which makes me worry that she, along with Julia Gillard and Wayne Swan, have not progressed beyond high school economics. All of the measures cited involve opportunity cost and it is quite arguable whether they are sensible or otherwise.
Take the case of externalities “economics 101”. While in high school one might learn that “big polluters” should pay, in university one is likely to find a more nuanced approach, with questions such as:
- what are the costs and benefits of the Government intervening in this market?
- will making “big polluters” pay make any difference to global warming? If so, how much?
- will the benefits of intervening outweigh the costs (using an appropriate discount rate)?
- what are the likely effects (such as through incentives and behavioral change) of such intervention to market participants?
- what are the risks of the intervention?
- what is the most efficient and effective way to intervene?