THE ECONOMIC CONVERSATION

by Arjo Klamer, Deirdre McCloskey, and Stephen Ziliak

December 2006

© Arjo Klamer, Deirdre McCloskey, Stephen Ziliakforthcoming Palgrave/Macmillan, 2007

From Arjo to Renée, Lucas, Alexandra, Anna, and Rosa

from Deirdre to Dan and Meg

from Steve to Flora, Jude, and Suzette

And from the three of us in memory of a friend and adopted teacher,

Wayne C. Booth (1921-2005), whose influence on our thinking is we hope evident.

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ACKNOWLEDGMENTS

[ TBA]

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PREFACE TO STUDENTS: HEY, WHAT’S UP?

Economics has many definitions. One definition describes economics as the "worldly philosophy,” which is to say a philosophy about the world of things and our human ways of getting along, materially speaking. “Philosophy” is usually thought of as being about impractical things, the metaphysical stuff, things so far out of this world it’s a wonder that the philosophy major living down the hall can pay his bills. But philosophy can also address practical concerns such as work, consumption, profit, and poverty. And then it is called economics. As our late friend the economist Robert Heilbroner points out in a book The Worldly Philosophers, a book which has greatly influenced the life-choices of some of your teachers, the leading economists can hold their own in the company of pure philosophers. In fact, some of the leading economists are pure philosophers.

Economics has also been defined as “social engineering.” Page through our book and you'll see numbers and charts in abundance, certainly in more abundance than in typical books of philosophy or history. Economics is quantitative, as is engineering, and in its higher reaches is heavily mathematical and statistical, as is engineering. It has the problem-solving, let’s-build-that-bridge attitude of engineering, too. The difference is that the economic “bridges” are cigarette taxes, the Federal Reserve policy, or ideas for increasing the prosperity of poor countries. Actual bridges – such as the London Bridge –are obviously of human concern. But economic bridges appear, reconfigure, and even disappear depending on the actions of the humans interacting with them. Thus "social" engineering. The "social" part means that the economy is not easily mechanized or made into something with a simple on/off switch, even if you want it so.

Economists who favor the social engineering definition are taking their cue partly from a philosopher of economics, Lionel Robbins, who said in the 1930s that economists should focus on the “means”—the how-to—of economic questions, allowing citizens, politicians, or philosophers to determine what the “ends” of the economy should be. Many economists have taken Robbins’s means and ends philosophy to heart. Figuring the best way to do a job is an engineer’s approach; but the job itself, Robbins was saying, is typically defined by others. “Just tell us the ends you have in

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mind,” economists after Robbins have said to a Bush or Blair or Berlusconi, “and we’ll tell you the efficient means to achieve them.”

You can imagine that not every economist is thrilled with the “means and ends” definition of economics. On ethical or political or scientific grounds they object to a science that yields all of the important decisions and interpretations to a politician or philosopher or man on the street. Some economists prefer a definition of economics that focuses more on the social systems or circumstances in which economic decisions are made—or forced—a reflexive style of economics that also acknowledges the social role of the economist-observer in the interpretation of “means” and “ends.” For example, Samuel Bowles, Richard Edwards, and Frank Roosevelt (the economist-grandson of President Franklin D. Roosevelt) define economics as “the study of how people interact with one another and with their natural surroundings to produce their livelihoods.”1 Such economists want to understand how socio-cultural systems like power, class, kinship, religion, ethnicity, and gender affect the production and distribution of goods, and vice versa. These economists do not entirely reject the methods used in engineering or philosophical approaches. But they believe that economics ought to have a wider historical and sociological perspective and, to repeat, that it ought to acknowledge the observational and interpretative role of the economists themselves.

And economics, finally, has been defined as “the study of humankind in the ordinary business of life.” It's then like a human biology, a social physics, or a current history, a factual account of how people earn their living and a mathematical or experimental interpretation of why it matters. It answers great historical questions, such as "Has capitalism been good for us?" and “What caused the Industrial Revolution?” Or great current questions, such as "Why are South Asians at present poorer than the Japanese?" and “Why is the welfare state being dismantled?” Or little puzzles about the ordinary business of life, such as "Why are cable companies large and pizza places small?"

The difference between economics and, say, history is that economics is also philosophical and quantitative. And like biology and especially physics, it uses “models” to explain behavior and data to estimate relationships. In short, you see, economics reflects all of the above—it is speculative like philosophy,

1. Bowles, Edwards, and Roosevelt, Understanding Capitalism, 3rd edition, 2003.

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quantitative like engineering, model-oriented like biology and physics, factual like history.

Unless you had economics in high school you'll probably find economics a little weird. And your economics in high school was probably different from what you are about to experience. Each of us—the three authors—were stunned by our first economics courses, at the University of Amsterdam (in the early 1970s), at Harvard (in the early 1960s), and at Indiana University (in the early 1980s). No wonder: in some ways a course in economics is like an English or math course, in others like a science course, in still others like a history or journalism course.

Considering that it's about the ordinary business of life, economic theory is unexpectedly foreign. For example, economists use diagrams and mathematical equations to talk about the decision to buy a house or attend graduate school. Did you use equations or diagrams to decide whether to go to college? One of the authors did as have numerous other economists. Math may not be your cup of tea. We keep the math to a minimum, and try to make the diagrams as lively as possible. But you can’t do economics entirely without math and diagrams. In 1946 the famous American economist Alvin Hansen taught advanced-level economics to the father of one of the authors. Because the eager grad student was hopeless at mathematical thinking, he skipped all the diagrams and every equation. By focusing on just the words and meanings he got an A+ in the course. So it was in 1946 economics, your great grandmother's time, when clocks had hands and radios had legs. Today the techie stuff is not entirely skippable. Since the 1940s economists have spotted more and more ways of picturing the economy in diagrams. Be thankful. Diagramming is one of their efficient languages, math another. So get ready. But remember: you can get a lot from a close study of the words, too, as that student did in 1946.

The economic way of inquiring about the facts of the world is also unexpectedly foreign. You live in an economy, so you'd think the economists would talk about what you know in straightforward ways. Nope. Not straightforward. Economics has been since its invention in the 1700s strangely, well, ironic. The irony emerges from an economic phenomenon called “unintended consequences,” which you’ll see a lot of in this book. “If Jamaica is so hot, why can’t you find any ice?” Or: “Why do government welfare programs produce more poor people?” Or: “Why does the drive-through ATM put Braille on the keyboard?” As you can imagine, the irony of

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economics does not always entail humor or consensus, though it sometimes achieves both. Economists have developed a special language, too, with terms that may sound familiar but turn out to have special, even highly technical meanings. “Investment” may make you think of the stock market but economists use the word investment to think about the effect, for example, of a new robot on new automobile production. Even the word “production” has a technical meaning in economics, different from ordinary language. Think of economics as a foreign language with an ironic perspective and you will be at a good starting point for learning this glorious subject. The Economic Conversation will introduce you to the peculiar and often powerful ways in which economists talk.

Economic dialogues

When in the 4th century B.C. the philosopher Plato (427?-347? B.C.) claimed to be writing down the ideas of his teacher, Socrates (470?-399 B.C.), he chose to do so by way of dialogues. The implicit argument in Plato’s dialogues is that knowledge—such as knowledge about beauty and love, as in his dialogue Phaedrus (FAY-drus), or knowledge about virtue and good government, as in his dialogue Gorgias (GORE-ghee-us)—comes from the give and take of conversation. We learn from conversation, even if only an internal conversation within ourselves.

That seems right, and many other great teachers have followed Plato’s example. For instance, two thousand years after Plato the Italian physicist Galileo (1564-1642 A.D.), from whom most of modern physics flows, presented his scientific ideas as dialogues between imaginary characters:

Sagredo: Will you not then, Salviati, remove these difficulties and clear away these obscurities if possible: for I imagine that this problem of resistance opens up a field of beautiful and useful ideas; and if you are pleased to make this the subject of to-day’s discourse you will place Simplicio and me under many obligations.

Salviati: I am at your service if only I can call to mind what I learned from our Academician [that’s Galileo referring to himself] who had thought much upon this subject and according to his custom had demonstrated everything by geometrical methods so that one might fairly call this a new science.

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Galileo Galilei, Dialogues Concerning Two New Sciences

(New York: Dover, 1638 [1954]), p. 6, trans. by H. Crew and A. de Salvio.

By the nineteenth century the dialogical form had fallen out of favor as a method of scientific persuasion, replaced by so-called objective and neutral “observation,” “testing,” and “writing up the results” in the now-standard format you learned in high-school science. The formal "method of science" now follows a rigid outline from scientific question to scientific answer.

The suppression of dialogue is most unfortunate, we think. After all, you and we-- everyone -- learns by means of conversations with others. Sometimes, to repeat, the conversation is taking place only in our heads. At this moment a stream of words may be running through your frontal lobes seemingly spoken by a parent or friend or teacher and you are silently responding to them. You will master a language such as Greek or Chinese only when you speak it in conversation with others, preferably native speakers. That is how we want you to learn economics: learning to speak economics by engaging in dialogues.

Throughout the text you will encounter students and professors talking, even quarreling. They are commenting on the claims of the economic arguments and even on the form of the arguments themselves—that is, on the arguments about the arguments. Such argument about argument is called "rhetoric." By "rhetoric" we do not mean merely "deceptive speech" or “flowery language.” We mean essentially the art of having a real conversation, a real argument with real human beings. Why do you believe what you believe?

The dialogues show economics, in other words, to be a controversial and conversational subject, thoroughly "rhetorical," where people disagree with one another, and quarrel over the arguments about the arguments.

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Students are more attuned than most are to the communicative and social failures of blabber mouth television shows and agree-to-disagree blog encounters. And, as students, you know better than most professors do what it’s like to be forced into silence. Our book offers, we are happy to say, an alternative that students around the globe have been asking for. It makes student voices central to the classroom, a fact we hope to see more of in actual classrooms. We've named the students in the dialogues Paul, Bayla, Maria, and Rodney. They're modeled on actual students.

Paul is (as he puts it) “a middle class suburban kid,” and a business major. He seeks the middle of the road for just about everything. He’s pretty self-confident but he doesn’t like to ruffle feathers. A Republican, he’s in college strictly to further his goals in business.

Bayla comes from a modest background in Eastern Europe. She's an older student who wants after college to work in the fashion industry. She's a fervent believer in capitalism, coming from a part of the world damaged by Communism. She celebrates the entrepreneur and other go-getters in society. Radiohead dominates her iPod.

Maria is the only child of a single mother. Her mom is a Hispanic immigrant who owns an organic foods restaurant in a working-class Latino neighborhood of Chicago. Perhaps because of her upbringing she's especially troubled by the injustices of the current economic system. She repeatedly calls attention to the plight of minorities, especially of women. She is religious.

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Rodney is more radical in temperament than the others. A leader of the debate club in college, in love with anything British (he plays the English game of cricket, of all things: he learned it young from a doting Jamaican uncle), he’s also a budding intellectual. He loves the argumentative character of economics. But according to Rodney, an African American who sees himself as a future politician, the capitalist system as a whole is wrong, and radical changes are needed to bring about economic justice.

We think you will see yourself, or a friend, in one or another of them. At every turn in the book we found ourselves asking, “What would Rodney say?” or “Would Bayla find this persuasive?” See if you do, too.

Studying economics

How to study this dialogical economics is a question. You learned how to study in high school, right? Just read the chapter, highlight the important points, memorize the night before, and you’re finished. Clang!!! Wrong. College studying has to go beyond mere memorizing, to understanding. There’s vastly too much to memorize in most college courses, and in most cases memory is not what's being tested. (We said “in most cases”.) One of us tried to learn calculus in college by putting the equations on flashcards and memorizing them. Save that method, please, for Kindercare and the lunatic asylum.

Try instead to understand the argument. We introduce a formal definition of “argument” and “understanding” in Chapter 1. But intuitively speaking you can get our meaning now. We want you to get inside of an argument about free trade or the living wage; identify with it, make it the master of your mind for a moment. Let the argument run through your veins. By “argument” we do not mean shouting and kicking or giving-of-the-old-silent-treatment. We mean the opposite of all that: by “argument” we mean the give-and-take of civil discourse, as in Galileo’s introduction to the new physics, that lead us to reveal why we believe what we believe. Like our students in this book, in argument it’s best to involve others. Try out on friends some economic ideas and see whether you have the logic and evidence to back them up. Try today using the terms and concepts you encounter in this course, even though brand-new to you. Recall that when learning a foreign language you always learn faster and

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better by speaking it out loud. Do the same here. Who knows, you might discover a true economist in yourself!

For the best results in studying economics:

Embrace the Maxim of Presumed Seriousness. We presume our reader (that's you) to be a serious thinker whose intuitions and values gives her the right to a voice in the economic conversation. You should presume the same about others, actual and virtual, in your classroom. No Fox-News shouting, please.

Reading a chapter two times through quickly is better than getting stuck on every little detail in the argument. You’ll often find that once you see the design of the argument, the details fall into place. Collectively speaking your authors have published over 30 scholarly books and 350 journal articles on subjects ranging from ancient rhetoric and art to public welfare and the gold standard. When pertinent we bring some of this learning to the book. But again, don’t get stuck on details. The design or architecture of each argument is the proper object of your concentration.

Pay special attention to the graphs and the technical workshops. Graphs, we have said, are important tools in economic analysis. It will help if you are comfortable with them as explained in high-school algebra and physics. If you are not, look at the Technical Workshop in Chapter 2, which reviews the basics.

The Technical Workshops are essential. They present the basic mathematics needed in the course. Don’t overlook them unless specifically told to do so by your instructor. You need them to do many of the problems at the end of the chapters.

And take seriously the Heterodox Boxes. If they are not assigned, consider them mandatory bedtime reading! They present alternative points of view (that is, “heterodox,” non-orthodox, points of view: the Greek words mean "many-opinion" vs. "upright opinion") on everything from the role of mathematics in economic theory to the visions of libertarianism after Ayn Rand. Think of the Heterodox Boxes as an introduction to the wider culture of economics.

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Talk with fellow students. This may be the most important advice of all, and it applies to many of your other courses, too. Students who never talk about their homework, never edit each other’s homework, and never argue about the politics of economics will have to work harder to get the same results. In a professional job at Ford Motor Company or the United Nations or the Environmental Defense Fund you're asked to do more than sweat in isolation over the meaning of a legal or business document. You are asked to persuade other people to see and act upon it in one way or another. Talking with fellow students about ideas is a good way to begin practicing your persuasion skills. In the end---believe the old professors of economics---it's more fulfilling than chitchat during rush week!

Consider getting and using a supplementary book on how to be a critical thinker in college, such as Asking the Right Questions or Striving for Excellence in College, both written by the economist Neil Browne and his collaborator Stuart Keeley, a psychologist. We also recommend a book by colleagues of ours in English at the University of Illinois at Chicago, Gerald Graff and Cathy Birkenstein, “They Say/I Say”: The Moves That Matter in Academic Writing, New York: Norton, 2006; ISBN: 0-393-92409-2. The market is flooded with self-help books on critical thinking, eager to claim your dollars. But you could do well to check out these three books.

Economics, then, is rhetoric, and rhetoric is persuasion. The word “persuasion” comes from Latin, itself from the same root word that leads by way of Old Germanic to our English “sweet.” It’s sweet stuff, this philosophical, engineering, model-making history of the economy, with all its persuasive conversations. Or so we hope to persuade you.

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PREFACE TO TEACHERS

The book began years ago, in 1985, after a conference in Amsterdam. Two of us, Klamer and McCloskey, found ourselves in a Jugendstill café discussing economics, teaching, and economics textbooks. For the price of four hot chocolates, European style, we talked right through a rainy afternoon. Our differences should have kept us apart. McCloskey was and is a Chicago School economist, enthusiastic about free markets and down on government intervention, while Klamer combines cultural conservatism with a Northern-European skepticism about the fairness and efficacy of market processes. We concurred, however, in our concerns about economics as a discipline (which we love), especially with regard to teaching it.

We worried about how our students at Wellesley, the University of Chicago, and the University of Iowa had reacted to economics. A professor of economics does not have to read the reports of William Becker or Michael Watts or Michael Salemi to know that too many students are bored stiff by a subject about which we economists care passionately. You know from your own experience and from the reports of Becker and others that even the students who stick with it forget much of what they learned the day after the exam.

One problem, we concluded, is the strangeness of economics. Economists speak a language that is foreign to students, as foreign as, say, French. Like taking a French course without visiting France or Quebec, most students cannot relate economic reasoning to their everyday world, or vice versa. We decided that it was a rhetorical problem – a lack of attention to one’s audience, in this case to the students – and that economic education could benefit from a rhetorical perspective. Eureka.

Another problem was that most textbooks present economics as a series of answers, often without making clear what the questions are – or could be. It contradicts what is promised by the same textbooks, that economics is an “approach” and not a body of settled conclusions. The over-boiled quotation of Keynes on “what an economist is” (namely, what an economist does) has been betrayed. Textbooks tell us that “markets are efficient” or that “cash welfare is better than food subsidies.” But what is the question? Too often the textbooks don’t say. So students fail to see economics for what it is, a living body of knowledge, full of evolving arguments in its research, teaching, policy, and ethical arguments.

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Students fail to see that asking the right question is fundamental to economic persuasion. And the style of most textbooks (to mention another troubling part of their rhetoric) is usually so single-voiced and authoritarian that students are left without a voice. Little wonder they’re bored. Being economists, we searched for a solution – initially, at the bargain price of another cup of hot chocolate.

Klamer and McCloskey came out of the Dutch café wanting to write a textbook that would be considerate to novices and yet fair and interesting to the discipline. We would write it as if we were in a real classroom, in conversation with real students and professors, acknowledging them for what they already know, and inviting them to become central participants in the economic ways of thinking.

We got started in the late 1980s, and thanks to Kenneth King and Alan Venable, two exceptional editors of books, drafted a lot of the book in the early 1990s. After a delay of quite a few years---professors as you well know are often distracted by multiple projects!---we were pleased, and relieved, when Steve Ziliak, a long-time collaborator of McCloskey’s, agreed to join our team. Steve is an imaginative scholar and a prize-winning teacher. Like Klamer and McCloskey he is a "rhetorician" as well as an economist. McCloskey is a professor of communication; Ziliak holds a degree in rhetoric and has been offered a professorship in it; Klamer is an internationally recognized scholar in rhetoric, too.

The present team, by the way, has real ideological range, which is pretty unusual in this market. McCloskey is a Chicago School free-marketeer, though recently also a progressive Christian and a postmodern literary type, too. Klamer is an evolving European social democrat. Ziliak is actively committed to racial and social justice, leaning towards the market for some solutions and towards the state for others.

Economics is argument

We present economics as an ongoing argument rather than as a body of settled facts and laws. Above all we try to teach the art of arguing as an economist. We want to draw students into the economic conversation. Such an approach has a better chance of leaving students with economic understandings they can actually use. And anyway it has a better chance of getting them to think.

We are not interested in showing the scientific status of economics. It doesn't need it. We are uninterested in impressing

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the students with how Very Scientific our field is. But we are very interested in bringing students into the scientific conversation. By “conversation,” we say again, we don’t of course mean empty chatter. We mean serious arguments, the sort you and we just experienced at the meeting of the ASSA in January. It’s a serious matter to decide, say, whether you believe markets work quickly or sluggishly in this or that circumstance. That particular conversation is at the heart of the disagreement in macroeconomics and of course adjustment costs matter in micro, too.

We don’t pretend that students know as much as we do about our discipline and its disagreements. But neither do we speak down to them, regarding them as know-nothing novices. We embrace the Maxim of Presumed Seriousness, presuming that our reader is a serious thinker whose intuitions and values give her a voice in the economic conversation.

With contrasting viewpoints

We highlight free-market arguments, Chicago’s strength, but also present coherent ways of criticizing Chicago, from Austrian libertarian to empirical Post Keynesian. The alternative perspectives emerge through a series of dialogues. Arguing, we show, is a mode of higher learning. Says Klamer, “Yes, I’ve learned from our arguments about the difficulties in regulating such a thing as an economy.” McCloskey: “And I’ve learned that economics needs to be seen from a wider social point of view, in conversation with other disciplines.” Ziliak: “And I’ve learned that empirical evidence does not easily change the minds of economists committed to a certain theory or ideology.” We carry these arguments right into the text, in the style of team teaching (incidentally, we’ve periodically team-taught in actual classrooms—in Iowa City, Chicago, Rotterdam, and Hilversum, The Netherlands—for some twenty years.)

But still makes progress

We present economics as a progressive research project. Students are shown that the economics they learn now, no less than the physics they learn now, will certainly evolve; that economics entails research, much of it quantitative and mathematical; that there are unresolved empirical questions, many

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of an exceptionally subtle character; and that by means of critical inquiry our subject economics progresses towards ever better knowledge of the economy.

We teach economics by making it speak (and listen) to students

The book, we hope you find, is personally and engagingly written. We draw on our collective 85 years of university economics instruction and research. But we also draw on our experience in journalism and literature, poetry and rhetoric, history and politics, statistics and government, too. Klamer wrote for many years a weekly column for a major Dutch newspaper, and is well known in Dutch politics. Ziliak has published poetry, “haiku economics,” for example (he was a friend and student of the great African American poet Etheridge Knight [1931-1991]), and has been employed as a social worker and labor market analyst. McCloskey has held faculty positions in fields as disparate as economics, English, philosophy, history, communication studies, and art and cultural studies, and has authored or coauthored (with Klamer and Ziliak, for example) articles and books on economic history, ethics, statistics, and rhetoric. Two of the authors are economic historians in their scientific work, so we also include historical illustrations and examples to enliven the text. And in other non-academic regards we offer experience of life. Ziliak, for example, has significant work experience in more than nine different occupations, from Cajun cook to professor. Each of us has lived in a variety of places and circumstances: city and country, glitz and slum, with family and alone. And each of us works and travels internationally, and has significant experience of living outside the United States---Ziliak in Italy, and McCloskey for six years in England and Holland, for example; Klamer is Dutch, though he spent 18 years studying and teaching in the United States. A globalizing team for a globalizing economy, you might say.

Yet core concepts are kept prominent: for example, micro is unified by choice

Mainstream devotion to “rational choice” motivates the central microeconomic arguments. But even here constrained maximization and the Chicago School do not rule exclusively. The

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dialogues ensure it. We explore exceptions and alternatives to the free-market-cum-rational-choice perspective, including for example a novel treatment of externalities and the Coase Theorem in which we highlight the Coase’s little-understood “second theorem”: the idea that the assignment of property rights is critically important when high transactions costs make it hard to strike deals among the interested parties. It's one case of many showing students that the best policy combines markets and government.

Throughout the text we honor a venerable and still strikingly important, but almost forgotten, tradition in economic pedagogy by using basic principles of accounting to define the constraints facing various decision makers. This allows students to learn something they see as practical---accounting certainly is---while also mastering key economic concepts such as the differences between stocks and flows, wealth and income, consumption and savings.

Macro is not “one darned model after another”

Our treatment of macroeconomic topics is current yet connected to the major traditions of economic thought. The backdrop is the classical model of the economy, in which all markets are perfect, in a sense to be defined. We build up the aggregate demand and supply model and use it to interpret six major macroeconomic issues: inflation, unemployment, domestic instability, international economic relations, growth, and macroeconomic policy. Free markets, institutions, and fiscal and monetary policy are presented as the steering mechanisms.

And all reasoning revolves around the circular flow

Another unifying analytical device is the circular flow diagram. Every macroeconomic chapter orients the student as to where we are in the circular flow. The diagram, which is after all a piece of social accounting fundamental to all economic thinking, reminds students of the interconnectedness of an economy.

With frequent Concept Checks and Technical Workshops

As in engineering, the economic way of thinking entails the identification and solving of problems. In addition to the usual end-of-chapter questions and problems we introduce Concept Checks at

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strategic points. The Concept Checks ask the student to apply the ideas just explained. Answers are found at the end of each chapter.

We also provide Technical Workshops to explain certain mathematical or graphical points, such as how to calculate percentage changes or how to shift demand and supply curves. They help students to focus more effectively on the technical points, and to realize that economics is more than a pile of numbers and graphs.

And conversation throughout

The text is interspersed with conversations among students, other economists, and the authors. The conversations show right on the page that economic knowledge, like all knowledge, is constructed and contested. Students come to think of themselves as participants in the conversation. The practice follows the liberatory educational philosophies of John Dewey, Paolo Freire, bell hooks, and others (McCloskey is amazed that she, a devout Chicago Schooler, has come to agree on educational philosophy with radicals like these; but the radicals this time are making common sense). The conversations serve to simulate a well-functioning classroom, by anticipating, for example, common misunderstandings and by acknowledging that some of the "misunderstandings" of students suggest in fact worthwhile critiques of economics.

The book does all of this--plus what the other textbooks do

Our introduction to The Economic Conversation is:

comprehensive, but more concise than most;

well organized, but more effectively so, employing various unifying devices, such as the diagram of the circular flow;

balanced, but more explicitly so, in its a fair presentation of contrasting viewpoints, exemplified by our unusual Heterodox Boxes;

internationally oriented but, given our international backgrounds, more obviously so;

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well written but, since we have a reputation to defend on this count, more so---we hope---than most.

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A TRILOGUE FOR TEACHERS:

HOW WE GOT HERE, WHERE WE ARE HEADED

"Madam, we guarantee results—or we return the boy!"

Francis L. Patton (1843-1932), 12th President of Princeton University.

READ THIS CHAPTER IF YOU ARE CURIOUS ABOUT:

Why one might teach in the aisles “The demand for students” versus “the demand for student

development” Sixties protest songs and why McCloskey became an

economist “Education as the practice of freedom,” student success, and

this book

We think the open-handed approach of our book is unusual enough to warrant a brief justification. Who are the authors? How did we get here? Where are we going?

Klamer: For example, it may help to know that we represent three different generations of economics education, and that we

each bring a different theoretical and philosophical perspective to the world. Deirdre, you should explain

how you turned out to be such a prominent champion of free markets.

McCloskey: I started on the left of politics. A lot of economists have. As a teenager I wanted to help the poor, and took the simplest view of how to do it. Folksong economics, I call it. "You gotta go down and join the union,” you know, that kind of stuff. The great American folksingers of the 1960s, Pete Seeger and Joan Baez, were my big influences. Reading Steinbeck's novel about the migration of poor farmers from Oklahoma to California, The Grapes of Wrath (1939), made me a socialist.

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Klamer: And Steve, you’ve taught economics principles—this course—with The Grapes of Wrath, folk songs, and other popular economics-oriented media.

Ziliak: Yes. But my motive is not to produce socialists! I use The Grapes of Wrath in my classes. It’s a great aid, raising all the issues, micro and macro, in a gripping story. Steinbeck doesn’t resolve the issues the way an economist would, naturally. But I disagree with you, Deirdre: there’s nothing “simple” about the kinds of questions Steinbeck raises. How should a citizen of the United States make the trade-off between self-reliance and compassion, for example? Even Jesus would have considered this a difficult question. I for example want my students to understand what happens to the most poor and disadvantaged in an economy that is characterized by a lack of compassion. Most economics textbooks lack such perspective.

McCloskey: But I’ve come to learn that folksong economics and socialism don't actually help the poor. Good markets do. And that is a big difference. We both care about injustice but whereas you consider the market economy part of the cause of injustice, I consider it the major part of the solution.

Ziliak: You make me sound like a socialist. I’m not. I favor markets, too. But when the wages of farm workers amount to a stale biscuit I don’t see why an economist would find reason to ignore the injustice and instead celebrate “the market.”

Klamer: Hear, hear! Deirdre, when you first told me your story twenty years ago I was startled---from my European social-democrat perspective it seemed strange that a right-wing economist like you actually seemed to care about the poor. And it seemed even stranger that you actually seemed to believe that free markets, of all things, were good for them.

McCloskey: Still do. But as I said, I only very slowly changed my mind. I noticed, for example, what a bad job the American government did at running the war in Vietnam.

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After I finished my study at Harvard I moved to the University of Chicago where I had countless conversations with free-market thinkers like Milton Friedman (1912-2006). In my research I discovered how well markets had worked over time, what free trade and free enterprise has brought to people all over the world, and how governments often stood in the way of development. They still do, by the way. Of course, the conversations with these free market economists made me see this clearly. So I shed my socialist feathers and became a free market economist.

[Arjo Klamer: Unrepentant Keynesian]

Klamer: Deirdre, you have persuaded me that markets work better than I once thought. I became an economist when most of my fellow students were protesting the Vietnam war. We drew conclusions quite different from those of the U.S. establishment—we saw the U.S. as a capitalist-ideological country trying to overpower people in poor countries. But I believed in good government. I came to this country in 1977 a passionate Keynesian. Like all Keynesians I continue to see good reasons for governments to intervene, to design and watch over

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effective rules of the game, and to support people who lose their job, fall ill, or grow old and feeble. We need effective governments to counterbalance the excesses of markets.

Ziliak: Agreed. I was a student of undergraduate economics in the generation after you. I too was on the margin of the establishment. When my classmates were campaigning for President Reagan I was in the middle of campus in a makeshift shantytown protesting U.S. investment in South Africa (the books of Nietzsche, Friedman, and Marx in my backpack). By that time, the early 1980s, a typical department of economics was staffed by neoclassical economists hostile or indifferent to any talk of social justice and alternative perspectives.

McCloskey: Absolutely. So how did those books wind up in your backpack?

Ziliak: I was dissatisfied with the conventional curriculum, and sought enlightenment in philosophy and history departments. In my indignation I more identify now as then with Arjo’s position. I might even be more radical than he is in my passion for social justice and equal chances for everyone, men and women, whites and blacks, poor countries and rich countries. For example, I think that Post Keynesians are among the few talking sense about what is just and fair in global finance and stability. Yet I also identify with you, Deirdre, when thinking about the issue of freedom and its lack in neoclassical economics after Samuelson. I’m for small government and social justice, which is a tension. Governments do a bad job when their actions stifle our freedom to act, to trade, and to determine our lives as we see fit. I saw plenty of that when I worked for the welfare and labor departments. I see value in Amartya Sen’s notion of “freedom to achieve”: a person is unlikely to vote or save or even complete an education if her market pay is too low to cover housing costs. Why does an African American woman in the U.S. not own her house? Sometimes the government needs to give her a boost. I am in other words a “left-libertarian”: liberty, dignity, and racial and social justice are my chief values.

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When it comes to economics as a profession, I am bothered by the single-minded focus on neoclassical economics and mathematical methods. Let’s teach those subjects, and teach them well. But economics should not be indoctrination, with students learning only one set of questions, one set of answers, and one abstract method for justifying them. Philosophers and physicists don’t teach that way and neither do historians. Economists shouldn’t, either. It goes against the grain of who we are as economists. As the three of us illustrate, economists do not speak with one voice. Often enough we ask different questions. And we use a number of different methods to answer those questions: Deirdre and I use a little bit of math, sure. But all three of us draw on methods found in statistics, history, philosophy, literature, rhetoric, and other social and natural sciences. I am committed, therefore, to teach the different voices and methods in the conversation of economists. I want students to know Deirdre’s position as much as I want them to know the positions of Arjo and myself. Students need the freedom and the tools to make up their own mind.

Klamer: Here we agree, don’t we, Deirdre? McCloskey: Yes. Now we do. But I must admit that I’m responsible

for indoctrination into the one voice—a fact I’m not happy about. For twelve years I was the teacher of the basic graduate price-theory course at Chicago, and was for almost six years the director of graduate studies there. The teaching was all about free market economics and the one voice. Since then I’ve changed my teaching, partly thanks to both of you. This textbook will underscore my change.

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[Deirdre McCloskey: Free market feminist and virtue ethicist]

Ziliak: Education as the practice of freedom is what it’s about for me. In the classroom I lean against what Paulo Freire and bell hooks call the “banking system” of education—a good though sarcastic description of many college courses (Freire 1970; hooks 1994). Students in the banking system are like interest free bank loans. The professor lectures to them, depositing knowledge in the “accounts.” Students sit on the deposited knowledge for a while. Then, later on, they get to “spend them” on exams or essays or jobs in an actual bank. If they give back what was loaned out, and maybe even a little more by, let’s say, answering a tricky extra-credit question, the transaction is completed satisfactorily. Higher education has been achieved.

Klamer: Have a look at the 2004 Handbook for students of economics at Harvard University, written by the Director of Undergraduate Studies in Economics, as an example of the banking system. The first sentence reads, “Economists believe that a wide variety of social issues can best be understood by using the tools of constrained optimization” (p. 1, Chap. 3, on-line Student Handbook/Economics). So there it is, at Harvard: economics is declared to be a single tool of mathematics—constrained maximization—and not what it really is: a variety of arguments.

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Ziliak: It’s unfortunate and I believe socially damaging that constrained optimization is considered to be a scientifically, politically, and ethically complete economics—polished and finished. You don’t have to be a rhetorician or historian or folksinger to agree with that. Our friends the Nobel laureates Ronald Coase and Thomas Schelling, for example, agree with us.

McCloskey: I admit I taught in the banking way for decades. It was an easy way to deliver my free market conclusions. I haven’t changed my conclusions about the goodness of free markets. But I have changed the way I present them, and I now believe that something more is needed beyond prudence and limited government—such as love and solidarity—to achieve good markets. In my classes a Steinbeck or Dickens, a Marx or Keynes, a Aristotle or Simmel, now gets a fair hearing. Students do a lot more of the talking and I do a lot more listening. We argue. Studying classical rhetoric in the 1980s showed me the ethical limits of having only one story to deliver.

Klamer: That’s crucial what you say, Deirdre, and bears repeating: teaching one story, as many neoclassical economists do, is probably impossible to defend on moral grounds. Therefore we should seek to teach multiple stories.

Ziliak: When it comes to livelihood, economists turn out to be pro Big Government: we protect our own livelihood by levying taxes and embargos on people representing other schools of thought. We need an Emersonian economics, so to speak. Freer markets and freer minds. To build the virtues of independence of thought and of self-reliance in the economic conversation, our students need to know how to make their way around the economic conversation in its broadest sense. Just as the best economists do.

Klamer: Yes. But we don’t argue that mainstream or neoclassical economists created the banking system of education.

Ziliak: No, we don’t. One voice/one method is not at all limited to neoclassical economics or to schooling in the United States. Galileo complained about it in Italy at the University of Padua in the 17th century. The Brazilian philosopher Paolo Freire found the banking approach to be rife in 20th century South America, and South Korean

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students come to the U.S. today expecting nothing else. A particular nasty form of the banking system was routine under communism. A Chinese friend of mine from grad school, now a game theorist in San Francisco, is the son of a Chinese economist who taught Adam Smith prior to the so-called Cultural Revolution in the China of the 1960s. During the Revolution the economist-father was paraded down the street with other intellectuals, to be mocked by a crowd before arriving at a labor camp. The exact crime the professors and intellectuals were accused of was painted on heavy wooden boards, one hanging from each of them: “Bourgeois,” the signs said.

McCloskey: It makes my skin crawl.Ziliak: As recently as the 1980s a similar thing happened in

Hungary. A professor of philosophy was literally executed by the state. His crime? He told his students about German Idealism, the philosophy of Immanuel Kant. It could happen again.

Klamer: These are extreme cases but I see your point. A dialogical or conversational model of teaching does most justice to the idea of economics as argumentation. It certainly beats any the execution squad! Still I find that many teachers are afraid to try it.

McCloskey: I was hesitant. I actually learned to teach dialogically from you, Arjo, when we co-taught elementary economics at the University of Iowa in the 1980s. I didn’t want to give up control.

Ziliak: I plunged in to dialogue, nearly blind. I had had some superb lecturers at Indiana University, such as H. Scott Gordon (b. 1924) and the historians of science Richard Westfall and Edward Grant. But at the end of the day I realized even in those classes that my arguments hadn't mattered. Essentially no student voices were fundamental to the arguments in play. So as a new professor in the 1990s I thought, “How am I going to break through what the theatre professors call the ‘fourth wall’”—the real or implied curtain that separates the audience from the actor on stage? How do I help the students see me as a real human, in dialogue with live and dead economists and them?

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[Stephen Ziliak: Optimistic left-libertarian]McCloskey: By the end of a five-course semester monopolized

by the banking system, a lot of students begin to think that they have nothing to say.

Klamer: Yes. I find that an "open" classroom reduces that problem: getting out in front of the lectern and walking the aisles, engaging the students, stimulating and facilitating student discussion. This is one way to sustain a dialogical classroom—and student self-esteem—even in a large lecture hall.

McCloskey: At first the movement around the aisles will intimidate students. You have to remember that they come to you in the first year of college used to something like the banking approach. The prof is supposed to be far, far away from them—in more ways than one.

Ziliak: True. So on the first few days of class I go easy. I try to wear softer colors, a pair of Dockers, and a light scent.

McCloskey: You’re crazy, Steve! But seriously, walking the aisles and speaking directly with students is highly effective.

Ziliak: Can be. Walking-around type classes do not entail chaos, but neither do they guarantee results. For example, some students fall silent on grounds that they “can’t keep up with the conversation.”

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Klamer: Absolutely. I’ve found that most students need a third voice, a third audience, so to speak, to help keep them on track. I speak with them about philosophers of liberatory education—the great commitment of a John Dewey, for example—so they don’t think I’m just one professor making this stuff up.

Ziliak: Me too. For years I’ve assigned on the first day of class “Building a Teaching Community,” a dialogue between hooks and a colleague of hers in philosophy.2 The hooks dialogue emphasizes to students the need for their daily preparation and personal responsibility. hooks talks about the importance of students “coming into their own voice,” and explains why gender, race, and class differences need to be freely but respectfully acknowledged (international students also feel empowered by this). It’s the kind of teaching we’re talking about here. Later in the term, if students show up unprepared or passive or whatever, hoping that I’ll do all the talking, we can point to the hooks dialogue and ask, “what would a banking approach suggest we do?” or “how can we turn this moment into a teaching moment?”

Klamer: And then? Ziliak: And then students get embarrassed. But trust and mutual

respect have been formed by our previous conversations. So by the next day, we’re back on track. Witnesses describe my classes as loud, argumentative, and fun, yet rigorous. But this is just one way of running a dialogical classroom.

Klamer: Our approach is consistent with what Deirdre and I have been saying about the rhetoric of economics since the 1980s, joined by you, Steve, in the 1990s. Rhetorical awareness is a precondition for economic conversation. And economic conversation is obviously carried out in dialogue. Our book will help students become rhetorically aware, and much more dialogical. At least, so we may hope.

2 The dialogue is in Chapter 10 of hooks’ Teaching to Transgress: Education as the Practice of Freedom (Routledge, 1994).

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Ziliak: Our book combines a common technique in economics and biology (an approach to thinking) with a common technique in history, culture studies, and English (relating the self to a profound historical, economic, or political event).

McCloskey: It creates a space for personal exploration, scientific invention, and discussions of social justice.

Ziliak: And a way to argue reasonably and scientifically, as we show in Chapter 1 in the introduction to the Toulmin Model of Argument.

Klamer: All right. Let's get started. As we say in Dutch, Een goed begin is een daalder waard, literally, "A good beginning goes further.”

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