- Inflation is the devaluation of money, not increases in the prices of goods and services. Prices may rise for anything that shifts the demand curve right and the supply curve left. However, we spend a lot of time then teaching about the Consumer Price Index, which measures the price of goods and services because it is testable in multiple choice form.
- The source of a nation's wealth is its ability to produce goods and services. We measure that production in goods and services and call it GDP (GNP). For convenience we measure that production in dollars, but money nor gold is wealth. However, to write tests we make students figure out how to calculate GDP and it comes out looking like imports leave us poorer.
- Fiscal Keynesian Economics in its principles textbook form is dead, and the monetary side is still much debated. This doesn't stop us from devoting a chapter to fiscal stimulus logic in class. Leave it out, or else make it a chapter on economic folly.
Tuesday, May 20, 2008
Arnold Kling at EconLog discusses the problems with the teachings of macroeconomics, and in doing so his quibbles with the field in general. I agree, especially given the nature of the way classes are taught to undergraduates, which is that they are based on tests. Some examples: