Do Harvard’s Econ Students Have a Point?

By Stephanie Kelton

Two days ago, a group of students at Harvard University submitted the following letter to their econ prof -- Greg Mankiw – just before they got up and walked out of his introductory econ class.  In the letter,  Professor Mankiw's students say, "If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this."

These students are clearly aware of the harm that economists can do when they're employing faulty models that rest on faith-based (theoclassical) assumptions to dispense policy advice in the real world.  See, for example:

The students who drafted this letter understand that many of their cohorts will go on to hold influential positions as a policy advisors, and they're asking for the kind of training that will help them avoid these kinds of harmful errors.  

The global financial crisis -- which almost no mainstream economist was able to predict -- dealt an embarrassing blow to the profession.  It also exposed the incestuous and unethical relationship that exists between the corporate world and some of our most noted academics.  See, for example:

What about Professor Mankiw?  Let me just quote from something he wrote in 1993:

"[I]t would be irrational for operators of the savings and loans not to loot .... an owner of a savings and loan who is taking excess risks, hoping that they pay off and make him rich. It is only prudent for him to loot as much as he can, because he knows that his gambles might not pay off." 

And so, according to Professor Mankiw, if you have an incentive to defraud and you resist doing so you are not moral, but crazed.

Perhaps this is what has some students so concerned.