Vol. VIII, Bulletin No.4. April 10, 2003
Harvard Students Pressing Faculty for a Broader Perspective
Rejecting Dogmatism in Economics
"Neoclassical economics as now taught -- I do not exaggerate -- comes perilously close to being a design for concealing the reality of political and social life from successive generations of students." -- John Kenneth Galbraith.
That quotation introduces a student petition to reform the
traditional way that Harvard University teaches economics. "Harvard has
a responsibility to provide its 800 introductory economics students
with a more balanced perspective than is currently offered," says the petition addressed
to
the economics department by the newly organized Students for Humane and
Responsible Economics. At latest count, more than 700 students
and
faculty members have signed the petition.
Occasionally students in the class have distributed handouts with
perspectives differing from those of its longtime lecturer, Professor
Martin
S. Feldstein, his guests, and the class textbook. Now students are
doing
much more -- they are campaigning for a proposal by another professor
of
economics, Stephen A. Marglin, to add a new dimension to the
curriculum.
Trying To Open Up a Monolithic Program
Marglin has offered to teach an alternative to the first half of the two-semester introductory course, with the second half staying as is. In the first part, according to Marglin's plan, students would benefit from a wider range of discussions and readings that would, for example, challenge some of the assumptions of standard economics and introduce students to behavioral economics, which explores why people often do not follow the conventional economic model of "rational man."
"I would be delighted," Marglin told the New York Times, "if there
was a single [year-long] course with more balance and more critique,
but that's not in the cards."
His limited proposal may not be in the cards either. He
needs
the approval of the tradition-bound economics faculty, whose approach
has
more than theoretical support from Harvard President Lawrence H.
Summers,
a former U.S. Secretary of the Treasury. The initial reaction in
one
departmental committee "was more positive than I expected," Marglin
writes
in an email. The departmental vote is scheduled for later in April.
Harvard is feeling the effects of a movement that often calls
itself "post-autistic economics," which diagnoses standard economics as
afflicted with institutional autism, or seriously out touch with
reality. The
movement sprang up in France two years ago, and has spread to England
and, more recently, to the United States, usually minus the
"post-autistic"
label.
"Most mainstream economists are too proud of their profession to
even notice those puny insurgents," an article in a January issue of
the Chronicle of Higher Education points out. But that
lengthy feature, "Taking on
'Rational Man'," gave international notice to the insurgents
-- "dissident economists fight[ing] for a niche in the
discipline," as the article's subtitle puts it. The movement's Web
journal, the Post-Autistic
Economics Review, shows that the movement has deep intellectual
roots and expanding geographical resonance.
Classroom Ideas Have Consequences in the World Outside
But isn't this just a tempest in an academic teapot? After all,
the
controversy seems distant from what happens in corporate boardrooms and
on factory floors. Not at all, says a mission
statement of the Harvard students. And they are right. They point
out that
- "the field of economics plays a critical role in shaping the basic organizational structure of society and informing policies (both domestic and international) that strongly affect individual welfare..."
- "by falsely presenting economics as a positive science devoid of ethical values," and by limiting its teaching to just one model of economics, Harvard ill prepares students for the choices they will have to make in their careers.
Broaden your horizons, they're telling the economics department.
It is advice that economists in public life, too, ought to heed.
The economy matters greatly, and economics does too. Appreciating that more keenly than most people do, economists usually hold on to their beliefs with fervor and conviction. But why must the ideas of the elite among them be transformed into a religion, a One True Universal Faith having the dominant claim on the thoughts and behavior of humankind?
U.S. Comes to the Aid of Rich Drug Firms
The World Trade Organization's
plans for a new round of global trade talks are in deep trouble.
So says a fervent supporter of international trade and investment, the
London-based Economist. Don't blame repercussions from the war
in Iraq. Explosive internal conflicts are an inevitable consequence of
the WTO's trying to manage a global economy of 145 countries with
governments that reflect many sharply conflicting interests.
Take the crucial conflict over the desperate need that poor
countries have for affordable medicine. Standing in the way of those
needs are WTO rules, written by Western governments under the influence
of Western companies. Those rules strongly protect "intellectual
property rights," notably the government-granted right of
pharmaceutical companies to sell their medicines world-wide at
substantial profit. Developing countries and their NGO allies in the
West at the WTO Ministerial
conference in Doha, Qatar, in November 2001, sought a relaxation of the
rules, but failed.
U.S. Trade Representative's Veto Provokes Discontent in
Developing World
Fearing a breakdown in launching the new, "Doha" round of global
trade talks, WTO negotiators did agree in principle on the need for
flexibility, and charged a senior WTO council to find a specific
solution by
the end of 2002 -- a move then promoted as a significant victory for
the developing world. It did not turn out that way. In November
2002 the Council proposed an exemption that served the needs of most
developing countries but not the interests of the U.S. pharmaceutical
industry. The U.S. Trade Representative, standing alone, vetoed the
plan.
Because of the Iraq crisis, the bad news was muffled in the United
States, but not in the developing world. Because of this and other
setbacks in the WTO, "the sense of disgruntlement among most developing
countries has increased," says a new report, "Whither the
WTO?", by the Center for Trade Policy Studies of the Cato Institute.
The powerful weapon that the U.S. and other Western pharmaceutical
giants have on their side is a global legal document crafted by trade
lawyers and rubber-stamped by governments. Officially called the
Agreement on Trade-Related Intellectual Property Right, or TRIPS
for short, it lays down the law protecting patents, trademarks, and
copyrights for all WTO members, present and future, no matter how rich
or poor or they may be. In fact, according to the Cato report,
TRIPS is "perhaps the strongest agreement coming out of the [1994]
Uruguay [trade] round" -- strongest, that is, in enforcement
procedures, including strong sanctions against violators.
Leading WTO Down a New Path -- 'Akin to Protectionism'
TRIPS is of major significance for another reason. It moves
beyond the traditional area of trade policy, as carried out for half a
century by the WTO's predecessor, the General Agreement on Tariffs and
Trade (GATT), with its focus on reducing tariff and non-tariff
barriers to goods and (more recently) to services. The Cato report sees
this focus as the WTO's "ideal constitutional function."
Agreements such as TRIPS move the WTO in a new direction "akin to
classic protectionism," says the report's author, Razeen Sally of the
London school of Economics. Briefly, here is his critique of
TRIPS:
"It differs fundamentally from classic GATT-type market access rules, for its short-term effect is to close, not open markets: strong patent protection in particular increases prices and transfers rents [profits] from poorer developing countries to multinational enterprises headquartered in the West, especially in the pharmaceuticals sector....
"The main point to bear in mind is that TRIPS takes WTO rules in a new direction -- not further in the direction of market access, but elsewhere, toward a complex, regulation-heavy standards harmonization agenda.....Let us be clear: these are not negative, proscriptive, classical liberal -type general rules of conduct to protect property rights in international transactions, that is, rules that tell actors what not to do but otherwise leave them free to do as they wish....
"In stark contrast, TRIPS contains harmonized regulations, with detailed prescriptions on how they should be enforced within domestic. jurisdictions. The actual and potential effect is to hinder, not promote, market access....The effect is the same as classic protectionism."
In Sally's analysis, "the WTO suffers from creeping standards
harmonization" [his italics]. TRIPS is its "Trojan Horse," in that
it "sets the precedent for artificially raising developing-country
standards in a range of other areas, such as labor, environmental, food
safety, product labeling, and other technical standards, armed
with...trade sanctions in case of noncompliance."
Labor Rights Rules Would Be Minimal, Unlike Those on Property
Rights
So Sally sees a connection that most other free trade enthusiasts
miss or dismiss. After all, since WTO sets enforceable global
rules to protect capital, it reasonably could also do so for labor. But
is the WTO-imposed burden the same in the two cases? Would labor
require the same "complex, regulation-heavy" standards that
multinational commerce has gained for capital? The clear evidence is
that it does not. The need is only for the minimal rules
that Sally praises: "rules that tell actors what not to do but
otherwise leave them free to do as they wish." Here's a real-life
example.
By law Bangladesh suppresses the rights that workers in its Export
Processing Zones (EPZs) have to freedom of association and collective
bargaining. This action not only suspends Bangladesh's own laws and
violates
agreements it has signed with the UN International Labor Organization.
The suppression should also, under U.S. law, disqualify Bangladesh from
receiving certain duty-free trade benefits from the United States.
Thirteen years ago the AFL-CIO first petitioned the U.S. Trade
Representative to withdraw those benefits, unless Bangladesh failed to
restore
the rights of the EPZ workers, most of them poor women producing goods
for the U.S. and other Western countries. In another words, the AFL-CIO
was not asking for the adoption of the complex rules that TRIPS imposes
on poor countries. Rather, it was pressuring Bangladesh leaders on
"what not to do, but otherwise leaving them free to do as they
wish."
Over the years since 1990, Bangladesh government has repeatedly
promised to cancel those restrictive laws, but has repeatedly not done
so. For its part, the AFL-CIO has filed a series of petitions -- the
latest in December 2002 -- asking the U.S. Trade Representative
to restrict those tax-free benefits, but the U.S. government agency has
not done so.
This is the same Office of the U.S. Trade Representative that,
prodded by rich pharmaceutical companies, vetoed a WTO plan to give
poor countries greater access to the affordable drugs they desperately
need. Fortunately, Bangladesh is one of the few developing countries
with the capacity to produce its own medicines without paying huge
licensing fees to foreign multinationals.
As a result, according to a friend of mine who lives there, the same medicines cost far less in Bangladesh than they do in the United States -- from a tenth to a hundredth less. People in most other poor countries aren't that fortunate.
Misplaced Faith in Free Trade
Under the headline "Trade
Brings Riches, but Not to Mexico's Poor," a Washington Post
article on
March 22 laid out grim facts such as these:
A Stalemate Caused by a Bad Case of Myopia"Despite the assurances of four presidents that Mexico was moving up from its Third World status, and a landmark free trade agreement with the United States [the North American Free Trade Agreement, or NAFTA] that was to have enriched the country, the number of people living in poverty has soared over the past two decades....About 19 million more Mexicans are living in poverty than 20 years ago, according to the Mexican government and international organizations.....
"While a boon to the maquiladoras, or factory workers [in export industries], and a blessing to certain bigger farmers, NAFTA has inflicted more pain on already ailing small farmers, most economists and analysts here agree."
"Faith in global integration as inevitable and beneficial is eroding." That assessment was not in the article but in an editorial, "United by Free Trade," that appeared two days later. Much concerned about the "stalemate" in the World Trade Organization as it nears a top-level meeting in Cancun, Mexico, September 10-14, the Post called on the United States, Europe, and Japan "to press forward with the trade liberalization that has been proven to increase prosperity." Prosperity, yes, but for whom? There was no mention on how the fate of Mexico might have helped erode faith in free trade.
Faith is a great virtue, but perhaps nurturing the two other virtues -- hope and love -- would be more useful to solving the complex trade issues facing policymakers before, during, and after Cancun.