Thanks for tuning in. You're listening to our first episode of Class Analysis, a
podcast where we're going to be discussing what it means to be a student
living through this very strange and interesting moment in our economy's
performance. Unpaid internships, student debt, inequality, and a growing population
of people that are becoming more and more interested in bringing about
serious change to how our economy works. I'm your host Caio Brentar. I'm a student
of Economics studying at New York University and a friend of everyone here
at Democracy at Work. This first episode I just want to talk a little bit about
what it means to be an economics student. Why are people studying economics? What
are they learning when they decide to study economics? And why are so many
students whether, they're studying economics or otherwise, becoming more and
more interested in people like Professor Richard Wolff and Bernie Sanders? And
topics like Marxism and socialism? So first let me just start by saying,
despite what a lot of people might think, a lot of people study economics because
they're genuinely curious and genuinely interested in learning more about how
our economy works. Whenever I go to a party or something and I am talking to
people and they ask "what do you study?" I tell them: economics. A lot of the time
they don't really know what that means. They think it might be the same as
studying business, or finance, and they think it's just all about learning how
to make as much money as possible. Well, in reality, that's not really the case.
A lot of people decide to study economics because they want to learn more about
our economy. They know our economy plays a very important function in our society
and they want to ask big questions like "why are some countries rich, and other
countries poor?" or "what was the 2008 financial crisis?" You have to remember that
everybody who's studying economics right now they lived through the 2008
financial crisis and it had a big impact on their lives. So they're genuinely curious
and they really wanted to get these questions answered. And I remember when I
first decided to study economics I talked to my friends who were older than
me and I said "you know, I just wanted to get some advice about what I could
expect from studying. What can I do to get good grades?" And all that type of
stuff. And they told me: "well, yeah, if you want to study economics that's totally
cool, but it's important that you know a lot of math and you're good at math
because when you study economics you're gonna need to do a lot of math." And I
said, "okay, that's cool, you know, I like math, I'm fine with it. I bet with any
science that you might study, it's important to have a strong math
background." But what I didn't understand was that by making the decision to study
economics, a lot of these big questions that I have, and that a lot of other
economics students have, they're not going to get answered. Because studying
economics, unfortunately, is a lot like studying applied mathematics - or applied
statistics - and you're not going to get a lot of these big questions you have
answered. Let me just play quick a quick clip from the latest episode of Economic
Update with Richard D. Wolff and his discussion that he has with
economist Michael Hudson and I'll talk a little bit more about this in just one second.
[WOLFF] Every University, or almost every University in the United States, has a Department of Economics where students
are told they can go and learn about how the economy works and therefore find a
good place for themselves in it, but there has been a criticism over the
years that the Economics departments don't teach how an economy works, but
rather provide an elaborate mathematically elegant justification for
the status quo. What do you think? [HUDSON] Well, when I went to school, it's true that the
universities did not teach how the economy worked - I went to NYU because all
they wanted was my money, not my brains - but I was working my way through on Wall
Street and there's a difference between the undergraduate economics and graduate
economics. My BA was from the University of Chicago in Germanic Philology and
History, and when I registered for the MA I was told by the department chairman
"that's very good, people who study economics as undergraduates usually
don't do very well in the field. They're just not very imaginative. It's good you didn't have a background."
[BRENTAR] I really enjoyed this clip because as a
student studying economics at NYU, I see exactly what these two are talking about
just about every day I go to class. Professor Wolff brings up this idea that
the modern economics curriculum is just a mathematical justification which is
supposed to celebrate the status quo, and I found this to be a very interesting
way of putting it because that's just about exactly what's happening. I want to
give an example. So, in my course - and this course I HAD to take, in this course that
EVERY economics student has to take, called Introduction to Microeconomics - we
have this one chapter which is in every single introductory economics textbook
that every economics student has to learn about. And it's on price controls
which are stuff like rent control, and the minimum wage,
there are laws passed by the government that says people can't raise prices too high
and too low on certain stuff. And this is a very basic concept. And we were
covering the minimum wage and we went over this one math problem which every
economics student has to do, which goes a little bit like this: you have a graph,
you have two lines that go through it that make an X, one that's
supply and the other, that's demand. Then you draw a horizontal line right through
this graph, and you label that horizontal line the "minimum wage," and after doing a
little bit of math you'll find that raising that horizontal line - which is
the equivalent to raising the minimum wage - will result in an increase in
unemployment. That's the lesson - every economics student has to learn that - and
we go over it a million times so we can memorize it, and be able to draw that
graph perfectly when we have to take the test. So, that's what we did for a couple
weeks, going over this chapter, and at the end of the chapter I remember
our professor says, "all right class, does raising the minimum wage increase
unemployment?" And I remember when he asked this, the class was silent for
a couple seconds - because the answer seemed pretty obvious since we just went
over this problem a million times, which shows that raising the minimum wage
increases unemployment - and then someone raises their hand and they say: "yes, it does."
And our professor asks "why?" And I found this very interesting because they
couldn't really answer, they just said "uh, well, that's just how it is. We
just went over this, that's just how it is." That's all they could say: "That's just how it is."
And the professor says: "Well, actually no, raising the
minimum wage does not necessarily increase unemployment. Because if you
look at studies where they have actually raised the minimum wage in cities all
across the country, you'll see sometimes raising the minimum wage does increase
unemployment. A lot of the time it'll have virtually no effect on unemployment,
and sometimes you might even find that raising the raising the minimum wage
will go along with a decrease in unemployment." And I found this to be so interesting
because we had just gone over the same problem over and over again for two
weeks that said raising the minimum wage increases unemployment, and now he's
telling us that when you actually look at data, that's not the case. And what was
even more interesting was the fact that this student who was answering this
professor - and I'm sure many other students in the class, too, who didn't
want to raise their hand - had this idea that raising the minimum wage increases
unemployment, obviously because this is what they were just taught over and over
and over again for two weeks. And if this professor hadn't said that - this is not
in the textbook, by the way, this is just what a professor wanted to teach us
because he's a good person and he's interested in making sure that we
learned more - if our professor hadn't said that,
all these students would have left the class and graduated with a completely
wrong misunderstanding about how our economy works. So this is exactly what
Professor Wolff was talking about. We're doing this math problem over and over
again, which was teaching this, reaching this conclusion on the minimum
wage which actually doesn't really line up with reality. It doesn't actually fit
with, necessarily, how the economy functions. And I found this very
interesting because this is a very, very basic model we're going over.
Like I said, it's in one of the first chapters and the most basic economics
course that we all have to take. And I was thinking to myself, "okay,
so, if the mathematical models are getting it wrong here in the very, very
basic chapters, how am I supposed to expect them to get it right
when I'm learning a lot more advanced economics? When I'm doing much more
advanced math problems? If it can't get it right in the basics, why should I
believe it when I get further on in my classes?" And this kind of instilled a
little criticism that I had towards the economic curriculum that we're
learning. I'm gonna play another clip real quick and then I'll continue talking.
[HUDSON] There wasn't much mathematics then. There
was that Money in Banking course and I was working as Chase Manhattan's
Balance-of-Payments Analyst, and I found that everything that was in the textbook
was exactly the opposite of what happened. Now they had the idea that
banks lend out savings, and that's how everybody gets rich. And I pointed out:
banks create credit. There was a whole series of Mythology about money.
They don't realize that savings just grow by compound interest. There's an
accumulation, and the whole economy is getting more and more debt ridden, even
in the 60s. I got a C+ in the course because that he said that I
didn't understand the how the banking system works. That it went to industry,
and industry employs workers carrying their lunch pails in and out of the
factories, and everybody gains, and I said "no, no. The larger most bank loans - 80% - are
all mortgage loans to the real estate sector, and after that to the oil and gas
industry, and the mining industries. And what these industries get: they get rent.
Land rent, economic rent, monopoly rent, really much more than profits. And
they're not after profit, so that's not good enough."
And there was no discussion at all of the concept of economic rent and unearned income in the curriculum.
[BRENTAR] I was really excited when I first heard this
clip because Michael Hudson talks about his experience taking the Money in
Banking course at NYU and I had literally just taken that course last
year, so I was really excited since we took the same course. And what I found
super cool was the fact that his experience taking this course seemed to
have really matched up with my own experience taking this course. Let me
start by saying: I was actually really excited to take this course because I
wanted to learn more about the financial system and you had a very big role in
how our economy works and how our society works.
I knew that, for instance the 2008 financial crisis, that had a HUGE impact
that impacted the entire planet. And I really wanted to learn more about
that. So I was really excited to take this course. But I remember a few weeks
into the course, I found that the course we were just basically doing more of
same old math. We would be answering questions that sound like this: if you
have this much money, if you lend it at this interest rate, and how much time
will you have this much amount of money, or in a year how much money will you get
back? So basically, just more of those math problems that do relate to banks,
but don't actually teach you very much about how the economy works. So I
was pretty disappointed. And when we did actually learn about the financial
system, and we did learn about how the financial system plays its role in our
economy, it just felt so off. It taught us something that sounds a little bit like
this - and this is what Michael Hudson says as well, this is basically
how we were taught it: the banking system is awesome, because banks have a lot of
money, and they'll lend this money to business people, and business people will
take this money and use that money to create jobs, and then this business that
they'll start will just explode and be successful, and then they'll be able to
take this money that they earn from this business and pay back the banks, and it's
a win-win-win because banks make money off giving a loan that's paid back by
their business people. Business people make money because they took a loan and
turned it into this huge, successful business, and you win because now there
are more jobs on the market, now there's more products on the market, so it's a
win-win-win and that's why the banking system is so important in our economy.
And that's basically what we're taught. I you know that's just a way of
paraphrasing it, and obviously as someone who lived through the 2008 financial
crisis and the Occupy Wall Street movement which was very critical of
banks, I couldn't help but feel like this description of the banking system we
just learned was a little bit too optimistic. And as Michael Hudson points
out: yes, this description that we've learned in a textbook is total nonsense.
Banks aren't interested in giving loans out to new businesses, because those are
very risky investments. There's a very good chance that that new business is
not going to pan out, so they're not going to get their money back.
They're more interested in things like mortgages,
or giving to the gas and oil industry. Things that
are very safe investments that are gonna make a lot of money, and when you really
think about it, aren't actually resulting in any innovation or creation in our
economy. It's just as Michael Hudson describes it: as rent.
It's just areas where banks are able to put their loans in order to - as Michael
Hudson describes - leach out wealth from our economy without creating anything.
And you know this is very very different from what we learned in our textbooks.
So, I didn't really feel like I could entirely get behind what we were
learning in our textbook. Would have been nice if they had at least a few chapters
in that book that were a little bit more critical, and a little bit more
thought-provoking. So, I was disappointed with this course,
but I'm very thankful that there are people like Michael Hudson who are
pointing out how this stuff is nonsense. I have one more point I want to make
before I wrap this up, and I think it's a very important one, and it's on how
students are responding to this curriculum. How students are interpreting
what they're being taught. And you may feel pessimistic about the fact that a
lot of students are receiving this education on economics which
is very conservative and very misleading, very outdated, and completely
detached from how our economy is actually functioning. But I don't want
you to be pessimistic, because I I want you to understand if you actually
analyze this situation as a whole, there's a lot to be optimistic about.
Because a lot of economic students - they feel just the same way that I do.
They feel like the education that they're receiving is not satisfying them.
It's not answering the big questions that they have. And despite the fact that
we're being taught the same stuff over and over again, every class which is
completely void of any ideas of socialism or Marxism, or completely empty
of anything that Richard Wolff talks about, we're still seeing more and more
and more and more college students that see the appeal in this. That actually prefer
socialism over capitalism. That are doing
their own research and turning to people like Professor Richard Wolff.
That's a very interesting thing. If the curriculum that we're being taught, class
after class, is being resisted by so many students, I think that's a great sign.
I think that is something that everybody should be aware of and we're going to be
having people in future episodes that I'm going to be interviewing. Other
students - whether they're studying economics, or whatever - or maybe other
people who aren't even students. I'm going to be talking about this exact
phenomenon because it's massive. Everywhere I see, it's happening.
And I think is very exciting. And I'm very excited to document this in future
episodes. Thanks again for listening, you've been listening to Class Analysis.
I'm your host Caio Brentar, and I'll see you next time.