by From Junaid Jahangir and RWER issue 104 In terms of reviewing textbooks to teach economic inequality, three options are considered. First, the Mankiw, Kneebone, and McKenzie (2020) textbook, as I used it to teach microeconomics at the ECON 101 level. Second, the Ragan (2020) textbook, as it seems to be a bridge between neoclassical economics and perspectives found in options like the CORE text. Finally, the CORE textbook, which introduced a new module on teaching economic inequality in June 2021. Mankiw, Kneebone, and McKenzie (2020) The Mankiw, Kneebone, and McKenzie (2020) textbook does not address economic inequality until Chapter 20 of the textbook. This chapter lacks a discussion on the impact of globalization and technological change on economic inequality. Starkly missing are
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from Junaid Jahangir and RWER issue 104
In terms of reviewing textbooks to teach economic inequality, three options are considered. First, the Mankiw, Kneebone, and McKenzie (2020) textbook, as I used it to teach microeconomics at the ECON 101 level. Second, the Ragan (2020) textbook, as it seems to be a bridge between neoclassical economics and perspectives found in options like the CORE text. Finally, the CORE textbook, which introduced a new module on teaching economic inequality in June 2021.
Mankiw, Kneebone, and McKenzie (2020)
The Mankiw, Kneebone, and McKenzie (2020) textbook does not address economic inequality until Chapter 20 of the textbook. This chapter lacks a discussion on the impact of globalization and technological change on economic inequality. Starkly missing are the real word issues of the outsourcing of companies, offshoring of jobs, the impact of automation on jobs, and the role of taxes, minimum wage, and unions in combating inequality. Instead, the chapter introduces inequality data through average market income by quintiles and the before and after-tax Gini coefficients, which is a technical way to introduce ECON 101 students to the topic. However, both Osberg (2018) and Piketty (2022) critique the use of Gini coefficients, as the former argues that the rise of the Top 1% is not captured by the Gini index (pp. 9-10) and the latter advises against its use instead favouring measures like the income proportion that goes to the Bottom 50% or the Top 1% (p. 29). Moreover, the chapter introduces a dense discussion on the problems in measuring inequality. It emphasizes that inequality measures do not account for in kind transfers like food vouchers and highlight concerns on measuring inequality including the distinction on lifetime versus annual income and permanent versus current income. However, instead of issues in measuring inequality that could be relegated to higher classes, ECON 101 students are better engaged by visual stories. Overall, this textbook provides data based on Gini coefficients instead of the income share of the Top 1%, and highlights measurement issues instead of discussing issues around globalization, technological change, outsourcing, offshoring, automation, and the role of taxes in combating inequality.
Ragan (2020)
The Ragan (2020) textbook does not have a separate chapter on inequality. However, it provides a discussion on the causes of inequality along with the policies to tackle it. The author presents data on the income share of the Top 1% (comprised of CEOs, senior executives, professional entertainers, and athletes) and the ratio of the 90th to the 10th percentile income. He mentions that in 2016 the average CEO compensation of the 100 highest paid CEOs in Canada was 209 times greater than the pay of the average Canadian worker, compared to only 40 in the 1980s (p. 345). He highlights the role of globalization, outsourcing of jobs and the role of declining unions, which negatively impact middle class workers, reduce their wages, and contribute to inequality. Likewise, he mentions that technological change and automation exacerbate inequality, as they increase the demand for high skilled workers and reduce the demand for middle skilled workers, who are unable to upgrade their education and skills and therefore compete for low skilled jobs that lowers their wages even further.
Ragan does not deflect from inequality to poverty, arguing that the former itself matters for it reduces social cohesion, intergenerational social mobility and is harmful to democracy, as the wealthy influence government policy. He mentions that some economists argue that high corporate profits are due to market power that arises from patents for pharmaceutical companies and network effects for firms like Amazon, Facebook, Google, Microsoft, and Apple in the technology sector (pp. 290-291). However, he cautions against corporate taxes, stating that the burden usually falls on consumers and workers through higher prices, layoffs, and lower wages. This shifting of the corporate tax burden to workers is especially important in the context of the gig economy based on contract workers without pension and health benefits (p. 345), which means that instead of reducing inequality, such taxes may exacerbate it. Overall, he provides information on the income share of the Top 1%, highlights the issues of globalization, technological change, outsourcing, declining unions, and corporate power, but cautions against corporate taxes to tackle inequality. Another issue is that the topics of inequality and taxation are found in separate chapters 14 and 18 instead of being connected in one place. Finally, the discussion on wealth taxes is starkly missing.
The CORE textbook – Modules on Inequality
The CORE textbook has been promoted by Bowles and Carlin (2020) to change the way economics students are taught ECON 101. It is not without its share of criticism, as Earle, Moran, and Ward-Perkins (2017) write that it undermines “more fundamental calls for change”, maintains the validity of only one perspective, and therefore retains the status quo (pp. 111, 112). Bowles and Carlin (2020) have also conceded the complexity of language in the CORE textbook in contrast to the simpler language found in Mankiw, Kneebone, and McKenzie (2020). Thus, the capstone module 19 in the CORE textbook, which addresses economic inequality, does not seem appropriate for students at the ECON 101 level, as it is fraught with information overload especially through graphs with multiple inter linkages, use of intermediate concepts like intergenerational elasticity of income and wealth, feasible sets, and marginal rate of transformation. Moreover, with such an approach, students get overwhelmed by information overload and technical details instead of retaining the key lessons.
Nonetheless, on June 1, 2021, a new module on inequality was introduced on the CORE website (Naidu, Sethi, and Thomas, 2021). This module distinguishes inequality of opportunity based on factors including income, wealth, education, and neighbourhood, from inequality of outcomes based on talent and effort. It highlights that the latter is deemed acceptable for incentivizing productivity but adds that extreme inequality of outcome should be reduced. This is because the rich can influence policies in their favour and hence economic inequality can be amplified from one generation to the next. Additionally, it delves into data issues and technical details of constructing the Lorenz curve and the Gini coefficient. Finally, it distinguishes policies that focus on equality of opportunity, which include the minimum wage, supporting unions, and educational access, from policies that focus on taxes and transfers to address inequality. Overall, the new CORE module focuses more on distinguishing inequality of opportunity from inequality of outcomes, and on technical details of the Lorenz curve and the Gini coefficient and less on policies that address economic inequality. As such, even the new module, despite its shorter length, does not overcome the issues of information overload and unnecessary technical details.
To recapitulate, Mankiw, Kneebone, and McKenzie (2020) focus on poverty instead of inequality, and measurement issues and Gini coefficients instead of factors that affect inequality and policies that combat inequality. Moreover, a comprehensive discussion on inequality has to be patched from various chapters of the textbook, which is also true for Ragan (2020). However, the latter sidelines the role of corporate taxes and wealth taxes to address economic inequality. Thus, neither textbook provides a comprehensive discussion on economic inequality in one place. Finally, the CORE modules are rife with issues of information overload, advanced concepts, technical details, and do not delve into the comparison between the policies to combat inequality. Overall, none of the options delve into a comparative look at various policies to combat inequality. Moreover, a better way to broach economic inequality is through visual media for introductory students and popular books for the relatively advanced students. This is because the use of visual media and popular books, which will be showcased in Sections 4 and 5 respectively, better facilitate student interest and retention. read more