tL
FT
::: Li .t.J
EC
ON
OM
ICS
ED
UC
AT
ION
RE
SO
UR
CE
CE
NT
RE
Seco
nd
ary
Eco
no
mic
s
Textb
ook R
evie
ws
TH
E C
EN
TR
E F
OR
EP
EN
DE
NT
ST
UD
I E
S
CO
NT
EN
TS
1 IntroductionT
im R
iley
2 R
oss G
ittins,
Gittins' G
uide to Econom
icsand
Garry B
ell (ed.)T
he A
ustralian
Eco
no
my
-A
Student's G
uide to Current E
conomic C
onditionsR
eviewed by
Dr R
obert A
lbon
3 R.J. &
E.J. B
rown,
Student E
conomics
Review
edb
y Professor G
eoffrey Bren
nan
4 R.E
. Gallagher &
G.A
. Burkhardt,
Our E
conomic E
nvironment:
An Introduction to the A
ustralian Econom
yR
eviewed
by Professor W
olfgang Kasper
R.J.M
iller & E
.D. Shade,
Foundations of E
conomics
Review
ed byD
r Fran
k M
ilne
15
6 E.D
. Shade, G
.C. L
atty, & P
.M. S
cott,F
undamentals of E
conomics
Revie
wed b
yP
ro
fesso
r J
oh
n P
incu
s
22
7 'Peter Joyce and G
eoffrey Head,
Our K
ind ofEconom
icsR
eviewed
by Professor C
lem T
isdell
25
8 Richard M
orris,S
peak
ing o
f Eco
nom
ics - The A
ustralian
System
Review
ed byD
r Ian W
ills
30 1369
V
INT
RO
DU
CT
ION
TH
ESE
seven reviews of m
ajor high school economics textbooks w
ere comm
issioned by the Centre
For Independent Studies in 1989. A prim
e function of The E
conomics E
ducation Resource C
entreis to critically review
the major books and other resources being used in the teaching of high school
economics in A
ustralia. Concern is w
idespread over the coverage and accuracy in the presentation ofm
icro and macro econom
ics as well as the degree to w
hich current textbooks motivate students to apply
their theoretical skills to current issues in the Australian econom
y.T
he textbooks represent a sample of those currently used in a num
ber of mainland S
tates. Since
economics syllabuses vary from
State to S
tate, the demand for textbooks and their content tend to reflect
the particular State's syllabus requirem
ents. How
ever there are exceptions to this rule, as syllabus contentsconverge on com
mon topics. In this case, a textbook w
ritten in and for one State m
ay appeal to teachersand students in other S
tates, even if only for reference and supplementary reading purposes.
Many of the texts such as G
allagher & B
urkhardt'sO
ur Econom
ic Environm
entand R
.J. Brow
n'sS
tudent Econom
icshave been used in schools for over ten years and are now
in their fifth and seventheditions respectively, w
hereas Miller &
Shade's
Foundations of E
conomics
broadly follows the W
estA
ustralian syllabus, Joyce & H
eads'O
urKind of E
conomics
and Morris' S
peaking of Econom
icsare m
oretailored to the V
ictorian Syllabus. With the advent of the new
NSW
Econom
ics Syllabus (introduced in Year
11 in 1989) a host of new textbooks w
as ushered into the market (including updated versions of older
texts). These w
ere written according to the core and option approach adopted in Y
ear 12 as well as the
sectoral Circular F
low M
odel theme used in Y
ear 11.S
hade; Latty, and S
cott'sF
undamentals of E
conomics V
ol. 1is an update of S
hade'sF
undam
entals
ofEconom
ics. Gittins' G
uide to Econom
icsby R
oss Gittins has the new
spaper articles ordered to reflectthe new
topic headings of the NS
W S
yllabus. There is a national trend tow
ards the adoption of this core-option approach by syllabus com
mittees and this has led to textbooks being w
ritten that have a very wide
coverage of topics.E
ach of these reviews assesses:
1.T
he book's coverage of topics in breadth and in depth; of balance between m
icro and macro;
and between descriptive and analytic content.
2.T
he accuracy of the exposition of traditional areas and new developm
ents.3.
The particular position taken by the book on controversial m
atters.4.
The degree of em
phasis placed on Australian institutions and the use of current statistics.
5.T
he book's suitability as an aid to the achievement of econom
ic literacy, interest in economics,
and as a basis for further study of the subject.
The review
ers are all academic econom
ists who tend to reflect the rigour of their teaching, particularly
of undergraduates who m
ay or may not have studied econom
ics at high school. The review
s are not allfav
ourab
le, though in
man
y cases it is th
e course p
lanners w
ho are h
eld resp
onsib
le for d
esignin
gsyllabuses that are out of date in term
s of micro and m
acro theory, and fail to stress the application ofgeneral econom
ic principles to current Australian econom
ic issues. Many of the texts are w
ritten for thestudent w
ho may sim
ply mem
orise and rote learn information w
ithout necessarily grasping and applyingbasic econom
ic concepts. This is perhaps a reflection of the em
phasis placed on examination success at
senior school level.T
here is perhaps a trade off between the w
ide and generally superficial coverage of topics in a courseand the im
portance placed by the reviewers on the developm
ent of analytical and critical thinking skills.Suggested references like A
lchian & A
llen'sC
ompetition and E
xchangeand H
eyne'sT
he Econom
ic Way
of Thinking
equip students with a theoretical base and present various interesting avenues for the
application of this theory.T
he fin
al com
mon criticism
seems to
be th
e stubborn
retentio
n o
f Key
nesian
macro
econom
ic
orth
odoxy in
the face o
f new
dev
elopm
ents in
micro
and m
acro th
eory
. The M
onetarist, R
ational
Expectations and S
upply Side schools are not given the prom
inence afforded them in the academ
icliterature.
This retards high school econom
ics and makes the transition from
high school to tertiary
1
TH
E E
ER
C S
EC
ON
DA
RY
EC
ON
OM
ICS
TE
XT
BO
OK
RE
VIE
WS
economics a rather difficult one for students.
This volum
e is the first in a continuing series of economics textbook review
s. The next volum
e will
review eight recently published textbooks, six of w
hich were w
ritten for the new N
SW
Syllabus. R
.J.B
rown has w
ritten an updated version ofS
tudent Econom
icsentitled
The A
ustralian Econom
y(w
ith aw
orkbook) and Terry and L
eonie Dow
ning with T
revor Taylor have produced
Econom
ics Tow
ards 2000(an update ofE
conomicsfor the E
ightiesB
ooks1 &
2).Other titles to be review
ed include Jill Tuffley's
Our
Econom
yand the associated series of option books for the N
SW
2 and 3 Unit courses; B
arry Collier's
Introducing Econom
ics Books 1
& 2 ; John P
aine et alE
conomics for A
ustralians Books 1, 2 &
3 ;H
umphreys et al
The E
conomy. A
n Australian F
ocus Books 1
& 2, P
arry & K
emp's tw
o books,E
xploringM
acroeconomics and P
athways in E
conomics ;
and finally the very popular and widely used series by
Bulm
er and Chapm
an calledU
pdated Econom
icsW
here applicable, workbooks are included in review
s.T
hese texts represent the revolution in writing that has occurred since the advent of the new
NS
WSyllabus.
The approaches differ m
arkedly. Som
e are large and detailed volumes w
hilst others avoidundue w
ordiness by stressing basic principles and skills. The collection is com
petitive and offers teachersand students a w
elcome degree of choice in treatm
ent, price and quality.E
conomics should live and be taught in such a w
ay as to excite and motivate young m
inds to grapplew
ith contemporary problem
s by acquiring sophisticated analytical skills from w
ell written textbooks.
Tim
Riley
Series Editor
Director, E
ER
CJune, 1990.
2
Ross
GIT
TIN
s
Gittin
s' Gu
ide to
Eco
no
mics
First E
dition
,V
CT
AP
ub
lishin
g, Syd
ney, 1988.
GA
RR
Y B
EL
L (ed
.)
Th
e A
ustra
lian
Eco
no
my
-A
Stu
den
t's Gu
ide to
Cu
rrent E
con
om
ic Co
nd
ition
sW
arringal Publications, M
elbourne, 1988.
Rev
iew
ed
by D
r Robert A
lton
Sen
ior L
ecturer in
Eco
no
mics
Au
stralian N
ation
al Un
iversity
, Can
berra
TH
EG
ittins' Guide to E
conomics
(GG
) and the collection edited by Garry B
ell,T
he Australian
Econom
y: A S
tudent's Guide to C
urrent Econom
ic Conditions 1988(S
G)
comprise an interesting
set of journalistic economic w
ritings, principally by Ross G
ittins ofT
he Sydney M
orning Herald.
The first volum
e (published by the VC
TA
Publishing in 1988) is w
ork totally by Gittins, w
hile the secondcollection (from
Warringal P
ublications) contains, in addition to three items by G
ittins, pieces by Peter
O'H
anlon and Barry S
treete.T
hese collections are explicitly not `textbooks', but they are both intended for, in particular, secondaryschool students, w
ith the intention of `bridging the gap between theory oriented and rapidly dating texts,
and the ever changing world of econom
ics as applied to the Australian econom
y'(G
ittins' Guide, A
uthor'snote).
Scope, Balance and Style
The
Gittins' G
uideitself is broad ranging in scope w
ith articles `arranged to fit with the E
conomics
Syllabuses in several states'.
The particular syllabus follow
ed is not stated, but implicitly is a rather
lopsid
ed o
ne. In
ord
er of ap
pearan
ce the 4
5 item
s are gro
uped
under th
e follo
win
g h
eadin
gs: th
ehousehold sector, the firm
s sector, the financial sector, the government sector, the overseas sector,
macroeconom
ic managem
ent; budgetary policy; monetarypolicy; incom
es policy; external policy; laboureconom
ics; international economics; and the distribution of incom
e and wealth. T
he bias is strongly infavour of m
acroeconomic topics; only six or seven of the papers are clearly m
icroeconomic in flavour.
The other collection is also predom
inantly about macroeconom
ics with one of the five articles being
solely about microeconom
ics and the other, four being almost exclusively about m
acroeconomics. T
hedearth of m
icroeconomics m
ay reflect Gittins's training in the 1960s w
hen macroeconom
ics was all the go
in Australian universities.T
he articles are all written in a journalistic style - m
ost of them com
e directly fromT
he Sydney
Morning H
erald,w
hile others were w
ritten for, or modified for, inclusion in these collections. T
heapproach is perhaps a bit too `chatty' in places, but this approach is the one that R
oss Gittins has rather
successfully taken inT
he Herald
over many years. Its appropriateness is, perhaps, a m
atter of taste, butI
would prefer a m
ore serious manner for use in high schools.
Analytical C
ontent
The content of these volum
es ranges from descriptive and institutional to theoretical. W
here there is some
analysis, there is an emphasis on attem
pting to expound on difficult economic argum
ents in a clearcom
monsense m
anner. The argum
ent in Ross G
ittins's articles is verbal throughout, except for one paper
3
TH
E E
ER
C S
EC
ON
DA
RY
EC
ON
OM
ICS
TE
XT
BO
OK
RE
VIE
WS
(GG
-20 on therelationship betw
een budget and current account deficits) where som
e symbols are used.
Ross G
ittins p
roves him
self overall to be a p
retty good 'b
ush
econom
ist' bu
t this level of an
alyticalcom
petence is not always enough. B
arry Streete (writing on the 'A
ccord') does not really chance his handat any analysis, and P
eter O'H
anlon's article on interest rates, monetary policy and exchange rates is largely
descriptive, although it does have a small im
plicit theoretical content.Instances w
here theoretical arguments are particularly w
ell handled include the analysis of takeovers(G
G-4); floating the dollar
(GG
-15) and the effect of asset sales on the budget deficit (GG
-24).C
ases where
there is some fuzziness in the analysis include the articles on business investm
ent (GG
-6),the aim
s ofm
acro policy (GG
-17)and tax disincentives and the supply of labour (G
G-38). In other cases (discussed
below) ideology and analysis seem
to. get too closely entwined.
Institu
tional an
d D
escriptive C
onten
t
Som
e of the articles are purely institutional or descriptive (i.e. not analytical) in nature, while others report
on published work. L
ike a good economic journalist should, R
oss Gittins keeps abreast of publications
from a variety of sources - official publications from
government departm
ents and bureaus, interestgroups (e.g. the A
CT
U) and academ
ics. Many articles revolve around recent publications and these are
usually well synthesised for the reader. M
ore explicit references to these publications would be a useful
innovation in the guides, even if not in the newspaper articles.
The descriptive and institutional m
aterial in many articles - particularly those in the
Student's G
uideto
Curren
t Eco
nom
ic Conditio
ns-
is very useful and up to date. Statistics from
a wide variety of sources
are presented in a clear and competent m
anner, usually with the aid of graphs and tables. Institutional
details on matters such as w
age fixing arrangements and the role of governm
ent in the determination of
exchange rates are accurate and clear.
Ideological C
onten
t
Turning now
to the `ideological' content of these guides, one finds a rather mixed picture. T
he use of labelscan be m
isleading, but there are elements of m
any'isms' in these publications. P
erhaps the strongest ofthese is `pragm
atism', particularly as it m
ight be applied to the policies of the Federal L
abor Governm
ent.R
oss Gittins w
ould appear to be a fairly strong supporter of the approaches to economic policies of the
senior economic m
inisters - Keating, W
alsh, Button, K
erin and Willis - all of w
hom have developed
reputations for 'pragmatism
' rather than adherence to principle.A
nother'ism' of prom
inence is that of Keynesianism
in macroeconom
ic thinking. Gittins tells us that
'I belong to the Order of P
ump prim
ers myself (G
G-63) and this is clear from
a number of the pieces w
hichextol the virtues of a rather crude brand of K
eynesianism and/or are critical of an excessively crude straw
man version of 'm
onetarism'. T
he synthesis of Keynesianism
and Classicist thinking com
mon to virtually
all modern texts seem
s to have had a very limited influence on the sole/principal author of these guides.
The support for K
eynesian policies appears to be based on instinct (or enslavement to the ideas of a long
dead academic?) rather than theoretical considerations.
Corporatism
is also featured in these guides. Australia R
econstructedgets a very good run in a num
berof these articles. It is described as the A
CT
U's 'm
agnum opus' (p.115) and is asserted to contain 'm
anysensible things' (p.109). T
he Accord is discussed m
ost approvingly as an attempt'to change our econom
y... from
the conflict model to the cooperation m
odel' (p.89). The 'neo-corporatist' approaches in the
Nordic countries are reported w
ith unabashed enthusiasm. B
arry Streete's article in
A S
tudent's Guide
isalso a very glow
ing account of the success of the corporatist approach encapsulated in the Accord. M
yow
n view is that both K
eynesianism and 'corporatism
' are dangerous as guiding principles for government
intervention.A
pproval for both of these approaches is obvious in these guides. Unfortunately, these
rather extreme policy directions are endorsed w
ithout sufficient attention to alternative policies or anyunderlying argum
ent for them. A
teacher using these guides would find it difficult to give a balanced view
on macroeconom
ic, industry and wage fixing policies w
ithout recourse to supplementary m
aterial.
Overall A
ssessmen
t
In contrast to the approach in thesecases, the guides contain m
uch that is sensible and balanced. Much
of the material on institutional and descriptive m
attersis, as
already noted, very useful. Som
e of the more
4
DR
RO
BE
RT
AL
BO
N
analytical pieces have already been praised and this list could be extended. For exam
ple, GG
-5 is a fineaccount of w
hy we cannot blam
e (as some do) business borrow
ing for the foreign debt that has amassed.
GG
-39, on the effects of technological change on unemploym
ent, provides an excellent account of why
the Luddites had (and have) it all w
rong. In these and other cases the articles contain good and competent
debunkings of some rather dangerous m
yths.It is w
orth repeating that theG
ittins' Guide
and theS
tudent's Guide to C
urrent Econom
ic Conditions
were never intended as textbooks. R
ather, they are intended as a supplementary resource and as an aid
to the achievement of elem
entary economic literacy. In this respect they are not an unqualified success.
We are told that'com
plex economic issues are reduced to sim
ple terms', but this is not alw
ays a good thing.T
he attempt to sim
plify can sometim
es lead to superficiality and confusion. It is not always, as claim
ed,`a nice blend of getting it right and keeping it sim
ple'. Further, theory and ideology can be m
ixed up ratherthan clearly distinguished. It is a fault in som
e of the articles (such as GG
-45 on taxation of wealth) in these
guides that the latter course has, perhaps unwittingly, been taken.
The style of w
riting of these articles is rather informal or chatty in places. A
s a means of aw
akeningan interest in econom
ics this is not an undesirable trait. How
ever, the caveats to this endorsement are the
same as those above - sim
plicity must not becom
e superficiality and ideology must not be confused w
ithpositive analysis.
Con
clusion
Finally, w
hile these guides will not form
a strong basis for further study in economics, they w
ill serve agood purpose if they stim
ulate a student's initial interest in the subject. But there are considerable dangers
in ex
posin
g y
oung m
inds to
this ty
pe o
f material. In
my v
iew stu
den
ts should
first be ex
posed
toinstitutional and descriptive m
aterial and then be fostered through the teaching of rigorous economic
theory with carefully specified m
odels, rather than through exposure to articles of this kind. These guides
might give the w
rong push and possibly should be used in teaching of people who already know
some
economics.
5
R.J. &
E.J.
BR
OW
N
Stu
dent E
conom
ics
Part O
ne 7th
Ed
n, rep
. 1986; Part T
wo 7th
Ed
n, rep
. 1982, William
Brook
s, Syd
ney
Rev
iewed
by
Pro
fesso
r Geoffre
yB
renn
an
Dep
artmen
t of Econ
omics
Au
stralian N
ational U
niversity, C
anb
erra
IT
takes a measure of presum
ption for someone w
ho has never taught below second-year university
level to offer advice to school-teachers as to what, or how
, they ought to teach and/or what kinds of
textb
ooks th
ey are lik
ely to
find m
ost u
seful. T
hat's all rig
ht, b
ecause I am
by n
ature a fairly
presumptuous person-but m
y lack of experience in classroom m
atters should be noted and can be used,w
here necessary, in evidence against me. M
oreover, some of the rem
arks I shall make about B
rown's
textbook(s) may be better directed at those w
ho set the economics syllabuses. In the highly centralised
secondary education systems that prevail in m
ost Australian states (or have prevailed until recently), the
textbook-writers are as m
uch followers as they are designers of the system
: the scope to write a highly
innovative (or even distinctive) textbook may be quite lim
ited. The w
eaknesses of Mr B
rown's book m
aytherefore not be entirely B
rown's fault. N
or are the weaknesses that I identify by any m
eans unique toB
rown's book - som
e of those weaknesses are characteristic features of the vast bulk of `P
rinciples' textsthat inhabit the E
nglish-speaking world m
arket. But it is B
rown's book I have been asked to appraise, and
in my critique of its content and approach I shall sim
ply have to let the chips fall where they w
ill.In
keep
ing w
ith th
e spirit o
f the d
ismal scien
ce, most o
f my co
mm
ents are n
egativ
e.W
eeconom
ists are a fairly miserable lot.' B
ut let me begin at least w
ith some positive rem
arks. This book (or
these books actually - because there are two volum
es to the text, and a workbook for each volum
e)represents, on the w
hole, a fairly workm
anlike overview of the core of conventional econom
ics as it stoodabout 25 or 30 years ago. T
here is very little - piece by piece - that is deeply misleading: a student w
hohad m
astered this book would not have m
uch to unlearn, and would com
e to future study (if any) with
a tolerable familiarity w
ith the main bits of econom
ic theory and language. And perhaps that is as m
uchas one can reasonably hope for. B
ut I should like to think we m
ight hope for something m
ore. And in
particular three things.F
irst, a sense of the basic conceptual unity of economics as an intellectual
enterprise. Second, a sense of excitem
ent and enthusiasm about the subject-m
atter. And third, a feel for
the difficulty of the problems econom
ists deal with and the tentative nature of our conclusions. L
et me
talk about each of these hopes in turn.O
ne thing that is striking about Brow
n's book(s) is the extent of its coverage - a feature it sharesw
ith most first-year university texts. T
he whole has a slightly encyclopaedic air. A
nd if one were to criticise
Brow
n for leaving something out (be it public choice or rational expectations or m
ention of methodologi-
cal individualism, or the prisoners' dilem
ma), I'm
sure that the first instinct would be to stick it in: add
a chapter or two. B
ut that is precisely the problem. T
hat is, the Brow
n approach is to provide a largecatalogue of independent `concepts' (or rather, term
s thatstan
dfor concepts) m
uch like one might give
a student a list of `facts' under one view of the content of history. F
or example, in chapter 1, B
rown
discusses the general nature of economics (like m
ost text books do in chapter 1) - something that in itself
is rather extraordinary since the student has no independent knowledge of w
hat economics is like.' A
ndin a few
pages (six to be precise), he discusses whether econom
ics is a science or not, the nature ofeconom
ic thought or language, the role of logical reasoning (including a few V
enn diagrams), a catalogue
of co
mm
on fallacies in
econom
ic (social?) reaso
nin
g, an
d also
man
ages to
squeeze in
a couple o
fparagraphs on `social goals', `value judgem
ents' and the positive-normative distinction. A
ll that is in itselffairly m
ainstream stuff. A
nd I do not want to argue that such issues are all too hard for students at this level:
the issues may be too difficult, and yet be good for stim
ulating general discussion. But I do argue that
if such issues are going to be raised, they have to be referred to again and again as they crop up in specific
6
PR
OF
ES
SO
R G
EO
FF
RE
Y B
RE
NN
AN
instances: they can't be allowed to hang there as unconnected ideas of the `been-there, done-that' kind,
because all that does is to provide a formula for inocculating the student against thought. A
nd where the
issue raised (such as the positive-normative distinction, or the role of `authority' in econom
ic argument),
is a difficult and/or controversialon
e, some
confession of the difficulties and/or controversies seems
highly desirable.I reckon that econom
ics is more to be regarded as a w
ayof th
ink
ing
than as a subject-matter. T
he
object of a course at this level should be to give the student a feel for what this w
ay of thinking is, and for
the few core concepts that m
ake up the economist's stock in trade. In m
y view those core concepts
(exchange; the role of relative prices; fungibility; the average-marginal distinction; etc) becom
e obliter-
ated in Brow
n's book in a welter of apparently unrelated bits and pieces of fact, technique, and analysis.
It is not that the `financial sector' or `population' or 'international trade' and so on do not make w
orthy
chapters - but what connects them
up? Is the student supposed to recognise the connections for herself/
himself? A
re those connections so obvious? Is it, after all, transparent that these are all instances of the
same range of ideas and concepts, differently applied? Is there no role for the text-book in m
aking such
connectionssalient?
Undoubtedly, econom
ics as taught in most places in the W
estern world is taught on the 'spiral'
principle: that is, we go over the sam
e material again and again, absorbing a little m
ore each time, so that
with luck after the fourth or fifth circuit w
e begin to internalise (and thereby understand) what is really
at stake. It is a not uncomm
on experience to discover that you don't really understand something until
you have toteach
it, which is w
hy we, at A
NU
, recomm
end to our best students that they do a semester
or so's tutoring in first year economics before they proceed to graduate school overseas. A
s Herbert
Spencer rem
arks: 'only by varied reiteration can alien concepts be forced upon reluctant minds'. A
nd Mr
Spencer is right so far as he goes. T
he problem is that not all our students w
ill spiral over this agenda four
or five times: strange to tell, som
e high school economics students w
ill be studying economics for the last
time. It therefore has to be a m
atter of concern whether w
hat studentslearn
at that level is the most
important m
aterial they might learn.
When one tries to teach
too mu
chm
aterial, one can't be sure that
what sticks w
ill be the most significant. A
nd this is particularly so if what is taught is portrayed as being
disjoint, with the separate parts rather like pages in the telephone directory. I reckon it's harder to learn
the telephone directory than a logical sequence of ideas - and harder still to 'understand', if indeed
understanding is a relevant category to apply to the telephone directory. For m
y taste, the Brow
n book
is composed too m
uch along telephone directory lines.M
y second criticismis, I think, distinct. It is that B
rown's treatm
ent is too dull. I thinkthis criticism
is distinct because I also find the telephone directory dull reading. I findid
easexciting, and because I
relish the explanatory power that the few
simple notions of m
ainstream econom
ics displays, I enjoy a
conceptually elegant treatment. B
ut there is more involved than this. B
rown's
app
roachis unexciting.
There are a few
examples, no cartoons
(as some
of the livelier Am
erican principles texts have);2 there is
no chapter on the economics of sex, w
hich for all its absurdities sold large numbers of the M
cKenzie
Tullock
New
Wo
rlds o
fEco
no
mics, and can be guaranteed to capture a m
odicum of interestin
econom
ics
if the topic can be used to good pedagogic purposes; there is no parable, no funny story, no one-liners
from P
aul Keating (or m
ore limited econom
ists like Robert S
olow or M
ilton Friedm
an.) More to the point
really, there is not much sense of enthusiasm
or vigour. This is a book for students w
ho are a captive
audience, who m
ust do well in exam
s to proceed, and for teachers who are rather tired and w
ant it all
carefully and competently laid out. T
his is not a book to lure students to a love of learning, orto a sense
of fun and excitement in discovery. W
e are all of course under the heady influence of Peter W
eir'sD
ead
Po
et's Society
, and no doubt desks in many schools w
ill get a fair scraping from students' shoes over the
next few m
onths. But desk-standing w
ill mainly take place in poetry
classes:w
e expect a little eccentricity
and emotional vigour in teaching
En
glish. B
ut econ
omics?
I am confident that econom
ics can be taught
in an exciting and mind-changing w
ay. But M
r Brow
n's book hardly encourages such -or indeed, even
the idea that such teaching might be possible.
Third, and again perhaps related, this is a
did
acticbook - stronger on giving the answ
ers than
setting out the questions. This
isa m
atterof style.
There are econom
ists who like to preface their
speculations and conjectures with the phrase 'W
e now know
that...'. I do not much care for this kind of
professional hubris: I think that the economics profession know
s a good bit less than we usually pretend.
But w
e dohave a widely shared
'gramm
ar' of arg
um
ent -
a largem
easure ofagreement
as to what kinds
of co
nsid
eration
s are relevan
t to th
e analy
sis of p
articular to
pics an
d/o
r the d
rawin
g o
f particu
lar
conclusions. The U
niversity of Chicago used to have a rule of thum
b that there should always be on the
7
TH
E E
ER
C S
EC
ON
DA
RY
EC
ON
OM
ICS
TE
XT
BO
OK
RE
VIE
WS
PhD
. prelim exam
s a question or puzzle to which none of the exam
iners had a satisfactory answer. T
he
economic w
orld is full of puzzles of this type, and these and the kind of spirit of enquiry that goes with
isolating them, do have their analogue at the high-school level. T
he interestingq
uestion
is no less
significant than the clearan
swer, at all levels of intellectual endeavour. S
ome readier recognition of that
factwould m
ake Brow
n'sS
tudentEconom
icsabetter book. A
nd while w
e are on the subject of interesting
qu
estions,
I have to say that I found Brow
n's `student workbooks' decidedly ho hum
. Getting good
questions is at least half the task of writing a textbook. O
ne reason I so much like D
on McC
loskey' price
theory text(T
he Applied T
heory of Price
(Colliery/M
acmillan, 2nd edn, 1985, $29.95) is that M
cCloskey
writes from
a problem-solving view
point. This feature is an enorm
ous strength and makes M
cCloskey's
book a fine one, even though students tend at times to find his expositions unclear. I do not of course
recomm
end McC
loskey's book for high school students.A
t (almost) the level under consideration,
Iwo
uld
recomm
end Paul H
eyne'sT
he Econom
ic Way
of Thinking
(Science R
esearch Association, 1983). If this turns out to be too difficult (or too conceptual),
there m
ay b
e a gap
in th
e mark
et for a slig
htly
low
er level an
d p
op
ular v
ersion
of th
at book, w
ith
appropriately Australian content. M
r Brow
n's book is not that book. The B
rown book does not, for m
y
taste, emphasise enough the intellectual coherence of the econom
ist's vision of the social order. It does
not seek to excite the student or lure her/him to a love of the subject. A
nd it does not so much seek to
engage the student in an intellectual enterpriseas to in
form.
These are, in m
y view, fundam
ental
inadequacies. It is these considerations rather than the omission of particular topics or questions of
ideological orientation that cause me anxieties about this book and the kind of education in high school
economics that it connotes.
Notes
For exam
ple the first question for discussion at the end of the chapter is: `What do you [the student]
consider to be the best definition of economics?' S
urely the only conscientiousansw
eris: `H
ow the
hell should I [the student] know - I've never done any econom
ics.'
zD
emand-supply diagram
s are not the only pictures that can be worth a thousand w
ords (or so):
8
R.E
. GA
LL
AG
HE
R &
O.A
.B
UR
KH
AR
DT
Our E
conom
ic E
nviro
nm
ent:
An
Intro
du
ction
to th
e Au
stralia
n E
con
om
y(5th
ed.), M
cGraw
Hill, S
ydn
ey, 1980 (rep. 1988)
Rev
iewed
by
Wolfg
ang K
asp
er
Professor of E
conom
ics, Dep
artmen
t of Econ
omics an
d M
anagem
ent
Univ
ersityC
ollege(D
efence A
cadem
y), U
niv
ersity o
f New
So
uth
Wales
Cam
pbell, AC
T
0 BJE
CT
IVIT
Y and rationality suggest that the criteria for evaluation of a product should be stated
explicitly at the outset. As a long-tim
e teacher of introductions to economics, both of full-year
university courses at first-year undergraduate level and of more com
pact courses and lecture seriesto all sorts of m
ature, professional audiences, I would list the follow
ing criteria (with per cent w
eights thatI w
ould apply in the case of full-year undergraduate subjects in brackets):C
overage (bread
th an
d d
epth
):D
oes the text serve as a self-contained introduction to the subjectof econom
ics, familiarising the reader w
ith all those phenomena that I consider essential know
ledge forundergraduate students, senior high school students, or m
ature professionals who w
ant to familiarise
themselves w
ith the discipline? [20 per cent]A
pp
roach
to the d
isciplin
e:Is the personal view
of economics that I have developed in 25 years
of teach
ing, research
and p
olicy
advice reflected
in th
e presen
tation? A
nd is it b
alanced
by o
ther,
competing ideological approaches to the m
ajor economic paradigm
s? Are controversial issues clearly
identified as such, and are aspects of positive and normative econom
ics held clearly separate? [15 per cent]R
elevance to A
ustralian
prob
lems:
Does the text cover the theories, as w
ell as the empirical and
institutional knowledge necessary to inform
a budding `economic citizen' of A
ustralia? Does the text
engage the reader with em
erging economic
issues, or simply echo the controversies of yesteryear? [15 per
cent]Presen
tation, clarity, read
ability:
Is the style of presentation (text, mathem
atics, graphs, statistics)clear and appropriate for the prospective students' m
aturity, so that an uninitiated reader can read the textw
ithout much prim
ing and tutoring? Is the presentation economical in the sense that relevant know
ledgecan be grasped quickly, w
ithout wasting effort on redundant m
aterial? [20 per cent]C
onsisten
cy:Is the reader likely to be educated in a consistent m
ode of thinking about issues, sothat he or she can apply w
hat is learnt in the more basic chapters to applied issues later on? A
re thereunexplained contradictions in approach betw
een various chapters? [15 per cent]Interest:
Is the textbook written in a w
ay that is likely to arouse the enthusiasm of a beginner to start
`thinking as economists do'? [10 per cent; the relatively low
weight I attribute to this is a consequence of
my view
that one of the functions of the teacher is to convey enthusiasm for the discipline.]
is the b
ookvalu
e for mon
ey?[5 per cent] (A
lthough students and their families are often strapped
for funds, and prices of textbooks weigh heavily in student budgets, I do not rate price very highly as a
criterion, because the investment of tim
e and comm
itment by the student costs infinitely m
ore than thepurchase price. S
tudents who disagree w
ith me on this can, in any event, do a one-night a w
eek waiting
job and will then be able to afford even the m
ost expensive of first-year texts.')In addition, a m
inimum
requirement is that the text does not contain too m
any errors or misrepresen-
tations of facts or logic.I w
ould assume that these sam
e criteria are also applied by teachers at senior high schools.
9
TH
E E
ER
C S
EC
ON
DA
RY
EcoN
OM
ICs T
EK
IBO
OK
Coverag
e and O
rgan
isation
Gallagher-B
urkhardt (GB
) is a solid tome; 658 narrow
ly printed pages. It begins with introductory
chapters on the subject of economics, on A
ustralian economic resources (docum
ented essentially for them
id- to late 1970s, an unpardonable lag in a book reprinted in 1988!), and on economic reasoning (logical
approaches to economic analysis). C
hapters 4 and 5 deal with som
e rudimentary m
aterial on the macro
economy (the circular flow
with som
e mention of business cycles; then the A
ustralian monetary system
).T
hereafter, we are presented w
ith a chapter on the fine, in which som
e aspects on location (Gallagher-
Burkhardt call it `localisation'), entrepreneurship, innovation and technology are also treated. T
his isfollow
ed by a chapter on the 'Marshallian cross' of supply and dem
and (what is called here T
he perfectm
arket').T
hese two m
icroeconomic chapters are follow
ed by an essentially macroeconom
ic chapter on publicfinance and the role of the governm
ent, where fiscal policy is related to inflation and unem
ployment, but
wh
ere we also
read ab
out p
ublic en
terprises an
d `g
ov
ernm
ent assistan
ce to p
rivate en
terprises'
(subsidies,protection, etc) and social policies (health, education, social welfare etc).
Sim
ilarly, the `international sector' is treated in its micro- and m
acro-economic aspects, essentially as
an add-on to a closed economy. T
he following tw
o chapters deal with grow
th and development (in the
latter abandoning the title's promise of offering m
aterial on the Australian econom
y). After having dealt
with these outcom
es of the economic process, w
e are taken back to the input of labour (and population)and are given a detailed run-dow
n on the wages system
, or rather interventions in labour markets.
Thereafter, the reader is taken back to the circular flow
and is introduced to National A
ccounts data (upto
19
76
-7),
imm
ediately followed by a (non-em
pirically supported) treatment of the m
ultiplier and theaccelerator. F
iscal policy surfaces again. Then, w
e are taken again into microeconom
ics (market theory)
and matter.; behind the supply curve (cost theory), as w
ell as (again) innovation, product differentiation,trade practices, factor m
arkets, etc. Then it is back to m
acroeconomics, the business cycle and a discussion
of demand-stabilising interventions and selected supply-side policies, including a chapter on agricultural
marketing.
If readers gain the impression from
the above that a loose-leaf collection of lecture notes must have
fallen to the ground and was collected haphazardly, they share m
y feelings. Most of the topics one w
ouldw
ish covered are somew
here there, some several tim
es, but I was not able to detect a logical red thread
through the material or a logical progression from
simple, basic to m
ore complex ideas.
Th
ere is pro
bab
ly m
uch
merit in
gettin
g aw
ay fro
m th
e artificial textb
oo
k d
icho
tom
y b
etween
microeconom
ics and 'macrom
echanics' (as has, for example, been quite successfully attem
pted in thefirst-year text by C
raven, 1984). I would have appreciated an arrangem
ent that intersperses the treatment
of the big macroeconom
ic building blocks with the m
icroeconomic foundations and the em
pirical-institutional detail. B
ut such a logical approach is not perceivable in this book.
Mod
e of Presen
tation
The text appears to m
e very wordy. It often takes a long tim
e to come to the point. T
his impression begins
right on page 1, where the authors prom
ise to tell us what econom
ics is all about. Instead of beingpresented w
ith a definition, we are first bom
barded with a m
edley of quotes from other (and better)
textbooks. For m
y taste, the definition that GB
attribute to Lord R
obbins would have sufficed: `E
conomics
is the science which studies hum
an behaviour as a relationship between end and m
eans which have
alternative uses' (1948:16).2 The readers of G
B are told only in repetitive, ram
bling passages on pages 3to 5 w
hat the essence of economics is. Instead of a crisp functional definition, the text drifts into a long
enumeration of phenom
ena from production to regulation. P
roduction and distribution are repeatedlym
entioned, but there is no indication of whether these tw
o aspects are more or less im
portant than, e.g.reg
ulatio
n 'in
the in
terests of certain
gro
ups' o
r natu
ral resources.
Nor are w
e info
rmed
wh
ether
production and distribution are two separable activities - a highly relevant issue .3 N
o distinction is made
in GB
's enumerative definition betw
een different logical categories, like objectives and means, m
echa-nism
s and institutions.If I w
ere an uninitiated student who has read the 28 pages of chapter 1, I w
ould not be able to givea short answ
er to an exam question: 'W
hat.is economics?' S
tudents should therefore be referred to the onepage in S
amuelson-N
ordhaus which answ
ers that question, and they might as w
ell go on to read the first13 pages of that book to be presented w
ith didactically excellent material on a range of im
portant, basic
10
l'
PR
OF
ES
SO
R W
OL
FG
AN
G K
AS
PE
R
methodological ideas that are likely to recur in the discussion of introductory econom
ics4 ... Or, if one
dislik
es a 'half-lap
sed K
eynesian
' text lik
e Sam
uelso
n-N
ord
hau
s (1985) o
ne w
ill get co
ncise, an
dlearnable, instruction on the first pages of H
eyne (1983), Craven (1984) or A
lchian-Allen (1983) (the latter
is not a high school text).A
fter reading several chapters, the reader of GB
is, in my view
, likely to get the impression that
economics is not about the hopes, fears, aspirations and creativity of real-life people and about m
oral andpractical problem
s in society, but a matter of abstract relations betw
een variables; of levers being pulledin a m
achine; of a mechanical rather than a m
oral and social science.A
consequence of the wordiness and lack of clear 'red threads' is that the text often ram
bles offthe pre-announced track, for exam
ple, when w
e read in a chapter on Australian econom
ic resources that'the U
SS
R possesses one of the largest supplies of hum
an resources' (p. 31), or when the treatm
ent of thecapital stock is docum
ented by a breakup of the governments' com
position of investment flow
s. More
generally, the text is frequently overburdened with descriptive detail, m
uch of which I find irrelevant for
high-school or first-year tertiary students. Tw
o random exam
ples may illustrate this: O
n p. 602, we are
informed on the size of w
heat stabilisation pools since 1945-6. On p. 60 and then again on p. 554, w
e are
presented with a plethora of econom
ic policy objectives. The list of policy objectives given on p. 60
numbers no less than 12 'fairly com
monly accepted' objectives, and there is no indication of hierarchies.
Are 'stable prices'5 m
ore or less important than 'aid to developing countries'? Indeed, som
e of the goalsof econom
ic managem
ent are in reality (highly dubious) means of achieving them
, e.g. 'protection ofA
ustralian industry' or'greater government control over production'. M
any professional economists and
citizens would disagree w
ith GB
's glib assertion that these goals are'fairly comm
only accepted'. Not even
a super-human governm
ent could meet so m
any conflictinggoals.
We are not inform
ed whether the
Australian governm
ent pursues this long'wish list' of policy objectives ... S
tudents and teachers, who w
antto learn about the basic issue of objectives in econom
ic policy, are (imm
odestly) advised to read pp. 1-14 in m
y own introductory text (K
asper, 1982).W
hen I get student assignments that ram
ble on wordily and zig-zag ad hoc through facts that do not
lead to a conclusion, I tend to write in the evaluation: 'In your next essay, think before you w
rite and takem
ore time to w
rite shorter!' I felt like writing the sam
e under each chapter of GB
.G
B present num
erous statistical and other tabulations, but quite a fewseem
edto me m
ore coincidentalto the m
ain argument in the context in w
hich they were used. T
here are also numerous graphs. I strongly
believe in good, telling graphs as teaching and comm
unication aids, but I personally found the style ofthe graphs in this book not terribly attractive.
Where long tim
e series are plotted, professional standardsrequire in m
y opinion semi-log scales. O
therwise, w
e get the (misleading) im
pression of acceleratingexpansion (e.g. in the graph of exports and im
ports from 1956 to 1976-7 p.562).
There are tw
o approaches to teaching in most first-year courses and in m
ost texts, namely:
•
to begin with som
e empirical m
aterial or a moral issue and then to develop a theory that can assist
in structuring our thinking (deductive reasoning); or
•
to begin with a sim
ple theoretical proposition and then apply it to complex evidence (inductive
reasoning).
Frequently, neither of these approaches is taken. Indeed, there is no m
ethod in the presentation thatlets the student expect a certain pattern of treatm
ent of a new topic. T
his adds to the overwhelm
ingim
pressio
n I h
ad w
hen
readin
g G
B, th
at it is fairly m
uddled
. The co
nstan
t zig-zag
gin
g b
etween
description, models and references to authors (w
ho are unknown to the student and w
ho are often notproperly cited) greatly distracted m
e and detracts from clarity and readability.
The lack of clear, consistently applied theories serving as a backing for facts som
etimes leads to odd
results.F
or example, unem
ployment is taken as the m
easure for the business cycle(p
.55
5).
This is at
variance with w
idely accepted international practice, which takes as the reference cycle either the rate of
capacity utilisation in industrial production (OE
CD
's practice) or some basket of indicators (K
asper,1982:34-45).
Only populist opinion in A
ustralia looks at the rate of unemploym
ent, which is a lagging
indicator.U
sing unemploym
ent as a guide to anti-cyclical policy amounts to 'looking in the rear-vision
mirror to drive a car' - very accident prone! If one uses unem
ployment relative to unfilled vacancies as
GB
do (and neglects to distinguish between trend and cycle in tim
e series analysis), one arrives at thealtogether im
plausible and counter-factual result that there was one huge record recession from
1973-9
I
11
TH
E E
ER
C S
EC
ON
DA
RY
EC
ON
OM
ICS
TE
XT
BO
OK
RE
VIE
WS
(in Figure 18.2 on p.555), a period at w
hose end everyone was talking of a second m
ining boom!
The ad
hoc m
ode o
f presen
tation freq
uen
tly lead
s the read
er to p
opulist co
nclu
sions w
hich
pro
fessional eco
nom
ists would
not w
ish o
ur h
igh sch
ool stu
den
ts to m
ake. A
nd th
e shunnin
g o
f aconsistent thread of theory through the text creates the - unw
elcome - im
pression that economics is
an unsystematic collection of facts and a `not very scientific' discipline.
Ap
proach
to the D
isciplin
e
In the 1990s, matters of basic econom
ic and social philosophy and value judgements are high on the
agenda in our discipline. They surface every day in topical new
spaper articles and rightly excite theim
agin
ation o
f the y
oung (b
e it in th
e West o
r the U
SS
R an
d C
hin
a). One w
ould
therefo
re like an
introductory text to alert and inform the beginning student about the various ideologies w
hich determine
to a considerable extent `what econom
ists think'. I for one would like to see som
e explicit coverage ofthe great and exciting battles of ideas in the past and the present.
To check on aw
areness about ideologies, I began - as a quick, first test - to search the (lengthy)index for references to 'Sm
ith, A.' and `M
arx, K.' N
o reference to Karl M
arx! Tw
o to Adam
Smith! T
he firstw
as a casual, indirect quote from the solid 1963 (K
eynesian) textbook by Reynolds. It did not suggest to
the uninitiated why a certain A
dam S
mith should be m
entioned, and who he m
ight have been. The second
(p.315) informs us: 'In 1976 (sic, in a fifth, revised edition!!!) A
dam Sm
ith in his treatise entitledA
n Enquiry
into
the N
ature and Cau
se of the W
ealth of Nations
set out to seek the causes and consequences ofeconom
ic growth.' F
ull stop! Period! N
o reference to the book which m
ight have informed the reader of
Adam
Sm
ith's towering role and lasting influence in our discipline, or, at least, of the correct date of his
publication!M
ore generally, few of the great books or the m
ajor economists w
ho have shaped ourdiscipline are m
entioned, let alone properly cited.T
his quick check having failed, I started to read for implicit value judgem
ents and implicit norm
ativeinterpretations of the literature.
Once on the track of searching for im
plicit value judgements, I found
numerous im
plicit references to the value of collective action. We are, for exam
ple, informed that the trade
unions are 'important A
ustralian economic institutions'.
We learn
that th
e unio
ns w
ere crucial in
establishing the arbitration system, but also that the real w
age is determined by productivity. B
ut we do
not learn anything about the important question of how
the unions and the arbitration system have
affected productivity increases. Instead, the student is-presented with a detailed, descriptive, and good-
natured write-up ofunion and related organisations. T
he reader does not go away w
ith the understandingth
at'there is a m
arket fo
r labour, w
hat really
determ
ines su
pply
and d
eman
d in
it, and w
hy p
rofit-
maxim
ising firms dem
and labour, given a certain state of the production apparatus. We only learn how
the labour market is interfered w
ith. But interference is not critically analysed as to its positive and
normative consequences (e.g. unem
ployment; access to opportunities for skill form
ation; freedom of
choice). The only theoretical relationship given in the labour context is the (I thought by now
discredited)P
hillips curve (p.392): 'There is certainly evidence of the operation of the P
hillips theory during the lastdecade of A
ustralian economic history.' - If 'last' is to m
ean latest, then a book printed in 1988 must refer
to the 1980s, for which I see no trace of evidence that the P
hillips curve holds. The sam
e is true of most
of the 1970s (Kasper, 1985:14), the decade in w
hich empty-box K
eynesian 'macro m
echanics' (like theP
hillips curve) were largely discredited.6
Another area w
here one can normally get a good feel for im
plicit, unreflected and often unintendedideology in textbooks is the discussion of the m
arket mechanism
. In GB
, it takes no less than. 158 pagestill
we get to the 'price m
echanism' (after w
e have read much about production possibility frontiers,
circular flows and other, m
ore abstract, technical and less relevant concepts!). But w
hat we get is only the
single market w
ith supply and demand, nothing about the com
plex web of m
arkets, and prices as socialsignalling and co-ordination devices.'
Later, w
e read about the 'perfect market', w
hich is presented as being the opposite to monopoly and
imperfect com
petition.W
e read that our sympathies are w
ith the small firm
(p.201), but that we should
judge markets by perform
ance. We are not told, yet, how
monopolies or'im
perfect' competitors perform
.T
hree h
undred
pag
es later (p.5
07), th
ere is a section o
n o
ligopolistic co
mpetitio
n, w
hich
mak
es -am
ongst others - unqualified statements that such m
arkets are characterised by a. high incidence oftakeovers and m
ergers, by price leadership and by the fact that 'oligopolists refrain from price com
peti-tion'. In reality, som
e of the fiercest price battles are amongst the few
suppliers! No aw
areness is shown
of the interdependence of oligopolistic competition, innovation and/or regulation=
and-rent seeking (see
12
i
PR
OF
ES
SO
R W
OL
FG
AN
G K
AS
PE
R
for example K
asper, 1985:104-7), although Schum
peter is mentioned elsew
here in passing (e.g. p. 146).In
deed
, the so
cio-p
olitical d
imen
sion o
f com
petitio
n an
d th
e issue o
f public ch
oice are ig
nored
altogether." Instead, the student is invited (in the revision questions to Chapter 16) to adduce evidence
for the statement by W
heelwright and M
iskelly that `Australian m
anufacturing industry is known to be
heavily concentrated' (p.522). There is no cross connection to the im
portant Australian issue of tariff
protection (irritatingly called `assistance'), which is the crucial factor in m
aking Australian industrial
oligopolists into non-innovative and non-competitive, because their m
arkets are uncontestable (Kasper,
1985:108-11). And w
here tariffs are analysed, this is essentially done undercete
rrsparib
us
assumptions
with no regard for the overall system
effects of long-term protectionism
(poor innovation; rent-seeking;politicisation of allocation; slow
economic grow
th).O
ne could quote numerous other instances to support the conclusion that the book's vision of the
economics discipline is one of im
plicit collectivism/statism
which describes historically grow
n institutionsand unreflectingly quotes w
hat self-justification these institutions have offered. But G
B does not offer a
critical analysis of the impact of A
ustralian institutions on the country's economic perform
ance. As an
antidote to this impression, the reader w
ould be well served w
ith an up-to-date, easy-to-read analysis ofthe debate on policy reform
s in Australia (like a new
book edited by Ulyatt, 1989).
The student of the book by G
B w
ill not be taught critical thinking and alternative views but sim
ply toaccept the institutions as they are. I w
ould therefore recomm
end that a book like M. &
R. F
riedman (1980)
be prescribed as a supplementary text, both to sharpen the young intellect to the fact that econom
ics isrooted in m
oral philosphy and to raise the students' interest in our discipline. Or I w
ould put current copiesof
Eco
no
mic
Affa
irsinto the school library. A
lthough this is a British bi-m
onthly publication, the articlesby prom
inent academics on how
to study for 'A L
evels' in economics and how
to think critically aboutcurrent econom
ic issues would be a trem
endous supplement to any introductory textbook .9
Su
mm
ary
I enjoy reading and reviewing textbooks, as I enjoy teaching first-year students or conveying to courses
of adult engineers or managers som
e of the intellectual excitement of our discipline - w
ith its positiveand norm
ative approaches, with its relevance to our daily lives, and w
ith the fascinating complexities of
economic life w
here everything depends on everything else. I would have preferred to review
an excitingtext (of w
hich there are many) and to engage in nitpicking on m
arginal issues or enter into violentdisag
reemen
t on so
me cen
tral positio
n in
the tex
tbook. R
eadin
g th
is book g
ave m
e none o
f these
pleasures.W
hat I began to understand when reading this text w
as this: When teaching introductory econom
icsin the only A
ustralian tertiary institution with a representative intake of students from
right across thenation, I w
as puzzled that students, who had done econom
ics at high school, fared less well in E
conomics
1 than complete novices, irrespective of their S
tate of provenance. The answ
er must be - I now
presume
-that they have so much to un-learn and often have been educated in just accum
ulating much descriptive
know
ledge an
d u
nrelated
models w
ithout th
e ben
efit of an
ord
ering, co
hesiv
e theo
ry an
d w
ithout
instruction in normative values. T
hey may w
ell start with a handicap as com
pared to the novice.In an open m
arket for ideas, one has to measure a textbook against the international industry leaders.
If I take the thoroughly revised, new edition of S
amuelson-N
ordhaus (op. cit.) as a standard for didacticskill, clarity of presentation, and coverage of the subject (equal 100), I w
ould rate GB
on these attributesat 35. If I take H
eyne or Alchian-A
llen (op. cit.) as a standard (equal 100) for logical cohesion andsoundness, I have to rate G
B at 30. A
nd if I take Baum
ol & B
linder (1988) as a standard (of 100) for interestin controversial, topical policy issues and for getting students interested in the dram
a of economic debate,
Iw
ould rate GB
at 25. The only advantage over these texts (w
hich each take quite differing ideologicalapproaches) is that G
B saves the lecturer the effort of digging up A
ustralian data and relating issues toA
ustralian institutions.B
ut what is the point in getting outdated statistics w
hen so many trends have
changed over the past decade? And w
hat is the point in getting outdated institutional description when
economic policy has been going through a revolutionary re-evaluation?
GB
is an ill-organised, wordily w
ritten, out-of-date collection of lecture notes that do not make `a
book'. In large parts, it is boring. In many details it is inaccurate or one-sided, norm
ally not by intent, butby om
ission or insufficient reference to basic principles. Its price of $43.00 seems steep for w
hat it has tooffer.M
y recomm
endation to teachers and students: give it a miss!
13
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E E
ER
C S
EC
ON
DA
RY
EC
ON
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ICS
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XT
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WS
Notes
Price-anxious students m
ay also like to order their books by mail from
England or A
merica. M
anyoverseas bookshops allow
Australian custom
ers to open accounts and air freight books here -often 10-40 per cent cheaper than local prices, a decent m
argin for entrepreneurial teachers orstudents!
How
ever, it may be w
orth knowing that R
obbins cites here explicitly from M
enger and von Mises.
Every high-school and tertiary student ought to be m
ade familiar w
ith the notion that a separationof distribution from
production and exchange leads to distortions and disincentives. Every student
should be made to read early in his studies: M
. and R. F
riedman (1980:33-44), w
hich in my view
is still best value for money on all counts for educating econom
ic citizens!
P.A
. Samuelson &
W.D
. Nordhaus (1985) chapter 1 introduces in easily readable form
the definitionof the discipline, problem
s of measurem
ent, positive and normative aspects, subjectivity and
testing of ideas.
GB
probably mean `price level stability', since stable individual prices cannot be an objective in
a continually changing economy.
Every high school teacher w
ith a `paled-Keynesian education' can greatly update his understand-
ing by perusing a highly readable little book by leading economists: B
urton et al. (1986).
Users of G
B, w
ho want to m
ake good for this important deficiency, are referred to M
. & R
. Friedman
(1980:31-37), the excellent Chapter 4 in A
lchian and Allen (1983) or C
hapter 4 in Heyne (1983).
Teachers w
ho wish to update them
selves quickly in these topical areas might begin by reading
Giersch (1989) and P
incus (1989).
Econom
icA
ffairsis published six tim
esa year by the
Institute of Econom
ic Affairs,
2 Lord N
orthSt., L
ondon SW1P
3LB
, and costs individuals$45 p.a.
Referen
ces
Alchian, A
. & W
. Allen (1983),
Exchange and P
roduction: Com
petition, Coordination and C
ontrol,3rd
ed., Belm
ont, Wadw
orth.B
aumol, W
. & A
. Blinder (1988),
Econom
ics, Principles and P
olicy,4th ed., H
arcourt Brace, N
ew Y
ork.
Burton, J. et al. (1986),
Keynes's G
eneral Theory: F
ifty Years O
n,Institute of E
conomic A
ffairs, London.
Craven, J. (1984),
Introduction to Econom
ics: An Integrated A
pproach to Fundam
ental Principles,
Basil
Blackw
ell, Oxford.
Friedm
an, M. &
R. (1980),
Free to C
hoose,P
enguin, London.
Giersch, H
. (1989),T
he Ethics of E
conomic F
reedom,
Centre for Independent S
tudies, Sydney.
Heyne, P
. (1983),T
he Econom
ic Way of T
hinking,4th ed., S
cience Research A
ssociation, Chicago.
Kasper, W
. (1982),A
ustralian Political E
conomy,
Macm
illan, Melbourne.
(1985),T
he Destruction and C
reation ofJobs,A
ustralian Institute for Public P
olicy, Perth.
Pincus, J. (1989), `P
ublic Choice', pp. 193-209 in U
lyatt (1989).R
obbins, L. (1948),
An E
ssay on the Nature and S
ignificance of Econom
ic Science,
2nd ed., Macm
illan,L
ondon.S
amuelson, P
. & W
. Nordhaus (1985),
Econom
ics, 12thed., M
cGraw
Hill, N
ew Y
ork.U
lyatt, C. (ed.) (1989),
The G
ood F
ight. E
ssays in Honour of A
ustin Stew
art Holm
es (1924-1986),
Australian Institute for P
ublic Policy, P
erth.
Iz3456789
14
E.D
. SH
AD
E,
G.C
.lA
rrY, A
ND
P.M
. Score
Fu
nd
am
enta
ls of E
con
om
icsV
ol. 1,3rd edn., McG
raw H
ill, Sydney, 1989
Rev
iewed
by
Jo
hn
Pin
cu
sP
rofessor & H
ead of Econom
icH
istoryD
epartm
ent of E
conom
ics, Flin
ders
Un
iversity
, S.A
.
F
UIV
DA
MF
NT
AL
S,
Volum
e 1 has five somew
hat equal sized chapters after the Introduction, on five`sectors': household, firm
s, financial, government, and overseas. E
ssentially, the first half of the bookis
micro, and the second m
acro (although some m
icro appears in the chapter on the government
sector). In the first chapter, the student gets a bit of micro 1, a bit of com
parative economic system
s, anda bit of m
acro (Y=
C+
I+G
+X
-M; a circular flow
diagram w
ith tax, import, and saving leakages). T
hesu
bseq
uen
t chap
ters tend to
beg
in w
ith d
efinitio
ns an
d b
asic statistical facts, with
fresh an
alytical
categories introduced as the chapter develops. You'd find there m
any, if not most of the concepts in
introductory economic texts. F
or example, in `T
he household sector', SL
S define and illustrate the
population age pyramid; labour force participation rates; discrim
ination; the difference between A
BS
andC
ES
measures of unem
ployment; functional distribution of incom
e; Lorenz curve; real incom
e; CP
I;dem
and pull and cost push inflation; disposable income; effective dem
and; substitutes and complem
ents;law
of demand; incom
e and substitution effect; shift versus movem
ent along the demand curve; and
elasticity. Clearly, the book is designed to give the student access to the tools of econom
ic analysis, as well
as to the chief Australian institutional and statistical facts. It has few
photos, some cartoons and m
anygraphs, figures and tables.
Chapters O
ne and Three
SL
S very clearly state that econom
ics is a social science, dealing with people and their reactions (p.1).
Surely a social science w
ould deal mostly w
ith interactions, not reactions. In keeping with this opening,
SL
S define econom
ics as `the study of the way people react to the econom
ic problem, that is the choice
of what w
ants to satisfy'. So, econom
ics is about the choice between com
peting ends; about rationingscarce resources w
hen wants are unlim
ited; about opportunity cost; of course, opportunity cost existedfor R
obinson Crusoe in the tim
e before Man F
riday arrived, but there was then no social interaction, no
exchange. Because S
LS
adopt Lord R
obbins's definition of economics, there is very little in their book
about the gains from those social interactions that econom
ists call `exchange' or `trade'.I
am not here trying to m
ake an ideological point (e.g., that SL
S should have stressed the great
superiority of free enterprise and so on). Rather, the point is that by adopting a definitional approach to
economics, and one in w
hich the economic system
is evaluated in terms of its functions', S
LS
miss alm
ostentirely the excitem
ent of economics as analysis. T
hey reduce it to lists of definitions or of facts to belearned.
Take the fundam
ental notions of Adam
Sm
ith (who does not appear in the index; J.M
. Keynes does,
as the sole example of a person appearing in the index as an author). S
mith is credited w
ith seeing thatprofits are vital to the firm
and to the working of the econom
ic system (p.159). W
e are carefully told thatm
ost of what is com
monly called `profits' is really w
ages (of the proprietor) or interest or land rents, andthat `true' profits are returns over and above these (pp. 11, 78). H
owever, w
e are also told that `the profitsactually m
ade depend in large part on the extent to which firm
s can manipulate supply and dem
and inthe m
arket' (p.159). There is very little to indicate w
hat Sm
ith had in mind w
hen he wrote about profits.
The reader does not learn, from
SL
S, that S
mith believed that profits w
ere invested rather than consumed,
whereas rents tended to be spent on luxuries, display, etc. N
or is there any prominent discussion of the
role of profits as a signal to entry, as in Sm
ith's notions about how com
petition drives rates of profittowards
22
I
PR
OF
ES
SO
R JO
HN
PIN
CU
S
equality across fields: All I could find are tw
o sentences on p.228.Sm
ith reappears in the section about the changing role of government (p.235), w
here he is presentedas ad
vocating a lim
ited govern
men
t - law, ord
er, defen
ce, some p
ub
lic work
s - and
an `u
np
lann
ed'
econom
y of a kin
d w
hich
never existed
. Th
e rapid
rate of econom
ic and
ind
ustrial p
rogress wh
ichcoincided w
ith an era of limited governm
ent (`less government intervention ... than at any tim
e before orsince') gave credence to Sm
ith's belief in the invisible hand of the price mechanism
and the profit motive
to solve the economic problem
(p.235). Lest the unw
ary regard an era of rapid economic progress in too
favourable a light, SLS at once claim
that, during that era the less fortunate of Europe w
ere exploited toa large extent by those w
ith economic pow
er. But lo, along com
es the white knight, G
overnment, to
protect and educate workers, to regulate business and foreign trade,. and so on, in order to m
inimise the
suffering of the poor and to assist further with econom
ic growth. T
he distinct impression given is that gov-
ernment, not enterprise, raised living standards. W
hat would a student m
ake of the phrase'invisible hand',as used in SL
S?W
ould
he or sh
e get even a h
int th
at Sm
ith h
ad u
ncovered
surp
risingly d
esirable
characteristics of a social mechanism
, competition; for harnessing selfishness? O
r made to w
onder at theam
azing feats of social coordination achieved by the market m
echanism? N
o. For although SL
S'sF
un
da
-
men
tals
is byno m
eans stridently anti - market, it is w
eak or timid in its presentation of w
hat the market
mechanism
offers, and naive in its discussion of the alternatives.T
here is no chapter on market m
echanisms and little on gains from
trade(chiefly
pp.295- 9). P
reced-ing the traditional diagram
of supply, demand and a m
arket clearing price in perfect competition
(p.169),is a long w
arning that the model has unrealistic assum
ptions and applies only to a few w
holesale producem
arkets and the share market; and it is succeeded
quickly bya long discussion of m
onopoly and so on.B
ecause perfect competition does not exist in practice, 'G
overnments have to intervene in a m
arketeconom
y to achieve social goals'(p.176)
or 'to bring about the results that are "best" for the comm
unity'(p.177).
Ch
apters F
our to S
ix
In almost every discussion of governm
ent, it is beneficent and potent. it protects 'the whole com
munity',
consumers (e.g., by setting up public enterprises to com
pete with private ones), producers (farm
ers 'atthe m
ercy of the free market system
', p.261), and ameliorates, chiefly by redistribution, the'vast inequali-
ties' of income in A
ustralia (p.264; see also pp. 26,81 on'great inequality'). In all this it seems to do a good,
almost perfect job. Y
es, there are some unintended consequences of otherw
ise sensible actions - thefringe benefit taxes, designed to spread the tax burden m
ore evenly, hurt the car industry (pp. 259, 285).B
ut by and large all that stops government from
doing even more good are som
e federal constitutionalbarriers (e.g., on a prices and incom
es policy); some institutional lim
itations (e.g., BH
P is a m
onopoly; bigunions exist - no hint that either ow
es something to governm
ent); too small a budget for the B
ureau ofS
tatistics. Interestingly, half a page is devoted to'political limitations': A
ustralia has a'democratic' system
of government by w
hich citizens, through their elective representatives, 'share in the government of the
country' (p.286). I wondered about the quote m
arks around 'democratic'.
Tw
o substantial criticisms, of public policies follow
ed in Australia, concern financial regulation and
import protection. F
inancial regulation (pp.217-219) is presented as a consequence of the 1936 Royal
Com
mission and the collapse of several banks in the 1930s. B
riefly we are told that regulation spread to
non-banks, and that loan rationing harmed low
income earners both as lenders and as borrow
ers. A brief
history of financial deregulation is recounted. On tariffs etc., (pp.300-14), the student is firm
ly told thatfew
standard arguments for protection have any econom
ic validity (p.303: SL
S go so far as to claim
thatprotection cannot preserve jobs except tem
porarily, because of the rise in costs caused elsewhere -
Dixon defeats B
rain).
Typ
es of Econ
omic S
ystems
What are the alternatives to consum
er and voter sovereignty? These include central planning w
hich, we
are told, encourages high rates of economic grow
th, reduces waste of resources, generates a m
ore equaldistribution of incom
e, produces more essential goods (like heavy engineering) and few
er luxuries (e.g.cars: see p.30 if you doubt m
e!) and does not suffer the extreme trade cycles w
hich beset the market
economy (pp.29-30). T
his is a catalogue of nonsense (made only slightly less ridiculous by the list of
disadvantages of central planning in which w
e are told that'The planners som
etimes lose touch w
ith what
23
TH
E E
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C S
EC
ON
DA
RY
EC
ON
OM
ICS
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OK
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WS
consumers w
ant' (p. 31). By setting dow
n lists of advantages and disadvantages for both systems, and by
the `even handed' summ
ary (p.33) and by posing at the end of the section the question `Outline the w
aysin w
hich the market econom
ies and centrally planned economies are becom
ing morc'sim
ilar' (Q.7,
p.33),SL
S surely leave the studentwith the im
pression that central planning offers a real and attractive alternativeto the m
arket form of organisation.
Macroecon
omics
On m
acroeconomics, S
LS
take the standard Keynesian line; the book is innocent of m
onetarism, or of neo-
Keynesianism
, let alone of rational expectations. Inflation is cost-push or demand-pull. D
eficit spendingraises aggregate dem
and and income. P
ublic debt is not bad (except for some possible crow
ding out).In
fact, the in
terest liability
is not as b
ig a b
urd
en o
n g
overn
men
t as on o
ther b
orro
wers b
ecause
governments can borrow
cheaply (here they confuse the burden of $i in interest with the burden of
servicing $B of borrow
ing); because tax is paid by people who receive interest incom
e, so the net cost togovernm
ent is low (it is not clear over w
hom this gives governm
ent a comparative advantage in borrow
-ing) and that public debt is usually spent on infrastructure w
hich lifts taxable incomes and tax receipts in
the future (a sort of bootstraps theory). There is no discussion of the H
awke governm
ent's `accord' with
the A
=.
Conclu
sion
Som
e of the harm that this book could cause is that students w
ill get the impression that econom
ics isboring. V
olume 1 of
Fundam
enta
ls ofE
conom
icsis
like an extended dictionary of economic term
s, ratherthan an introduction to analysing econom
ic issues. For all I know
, many students m
ight find the book itselfinteresting, especially those w
ho like to learn lists of facts.W
hat it does not do is to use economic concepts
often enough to motivate the student beyond the desire to pass the exam
ination. Econom
ic ideas are made
to live. Let m
e illustrate with the concept of elasticity of dem
and (pp.102-7). With the exception of a single
sentence -'If they raise the price of their goods, and demand is elastic, it w
ill contract to such an extentthat revenue w
ill be less'- there seems to be no application using dem
and elasticity for which the notion
of slope would not have sufficed (i.e. of dg\ dp or its inverse). A
single sentence is scant reward for learn-
ing the concept of elasticity. (The m
inimal use m
ade of elasticity, as opposed to slope, may have caused
SL
S to m
ake the technical error in this section. After presenting perfectly inelastic and perfectly elastic
demand curves, and after show
ing in one diagram three parallel dem
and curves in order to indicate thatat any chosen price they have different elasticities, S
LS
illustrate (less than perfectly) inelastic and elasticdem
ands by means of a steeper and a flatter dem
and curve; unfortunately, for the latter ('elastic') they drawattention to a price quantity com
bination at which dem
and is in fact inelastic: Fig. 2.24(b), E
lastic demand,
... ination p.2 Q.2).
When elasticity could be used again, SL
S omit it: e.g., Fig 6.9, on tariffs, show
s the partialequilibrium
consumption effect and the production effect and so on. T
he text does not refer the readerto elasticities; and again, nothing in the discussion of F
ig. 6.11 shows the effects of a subsidy on dom
esticsupply of an im
portable good.
24
RIC
HA
RD
Moi is
Sp
eak
ing
of E
conom
ics
Th
e Au
stralia
n S
ystem
Seco
nd
Ed
ition
, Pren
tice Hall, S
yd
ney
, 1988
Revie
wed
by D
r Ian W
illsD
epartm
ent
of E
con
om
icsM
on
ash
Univ
ersity
, Vic
toria
SP
EA
KIN
G o
f Eco
nom
icsis specifically w
ritten to cover the core syllabus of the current Victorian
Certificate of E
ducation (VC
E) E
conomics course. T
hus, this review is as m
uch a review of the
Victorian core syllabus as of M
orris' text.A
bout 5000 candidates, of widely differing abilities, have sat the V
CE
Econom
ics exam in recent years.
With the state planning to increase retention rates at Y
ears 11 and 12, both numbers and the range of
abilities are likely to increase in the future. Many of these students are not capable of achieving academ
icresults close to university entrance standards.
Many w
ill go direct from Y
ear 12 to employm
ent incom
merce and industry. T
hese are the realities confronting Year 12 E
conomics course planners and
textbook authors. How
well do they convey the central ideas of econom
ics, its specialised vocabulary,and a m
odest understanding of the operation and problems of actual econom
ies to the body of studentsjust described?
The V
CE
Econom
ics course objectives are set out in the course description booklet published by theV
ictorian Institute of Secondary E
ducation in 1986. They are consistent w
ith the objectives suggestedabove, albeit m
ore ambitious.' T
he core syllabus covers economic system
s, in particular the Australian
economic system
, Australian econom
ic policy objectives, and macroeconom
ic policy in Australia. It om
itsm
icroeconomics, or at least substantive discussion of how
individuals, firms and governm
ents make
choices.T
he emphasis on m
acroeconomic policy is understandable, given its prom
inence in the media, and
the desire of course planners to make the course seem
interesting and relevant. (I am told that students
like the course for these reasons.) It is a disaster educationally. Studying m
acroeconomics w
ith noinform
ation about choice behaviour is roughly equivalent to studying the weather w
ith no knowledge of
mathem
atics or physics. A student could read
Speaking of E
conomics
cover to cover and never realiseth
at econom
ics is ultim
ately co
ncern
ed w
ith th
e choices o
f peo
ple o
f flesh an
d b
lood. In
terest and
apparent relevance are achieved at the cost of elementary econom
ic literacy.T
he strong criticism just m
ade will be am
plified below. B
efore proceeding to chapter and verse, Ireiterate that, w
hileS
peaking ofEconom
icsisthe im
mediate target of this review
, the VC
E course planners
are responsible for many of its deficiencies. T
he textbook writer m
ust adhere to the syllabus to achievecom
mercial success, and I w
ill argue that the chosen syllabus is seriously flawed.
Macroecon
omic P
olicy Versu
s Ch
oice Beh
aviour
Tertiary courses and texts in m
acroeconomics devote m
uch time and space to specifying the behaviour
of the individuals and groups who together determ
ine aggregates such as national output and employ-
ment. T
he VC
E course planners have decided, correctly, that m
acroeconomic analysis based on explicit
behavioural models is too abstract, com
plex, and time consum
ing for Year 12 students. N
evertheless, theyhave stuck to A
ustralian macroeconom
ic policy as the centrepiece of the course.In the case of
Speaking of E
conomics,
this has two serious consequences. F
irst, the discussion. ofm
acroeconomic policy, shorn of m
ost of its behavioural underpinnings, tends to degenerate into recipesw
hich list the levers to pull if the government w
ants a particular result. Second, the m
acroeconomic
discussion crowds out substantive discussion of individual choice and of m
arkets as signalling andincentive system
s.
30
TH
E E
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C S
EC
ON
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RY
EC
ON
OM
ICS
TE
XT
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OK
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VIE
WS
Econ
omic S
ystems
(Chapter 1, pp.9-21, C
h.2.)
Morris devotes considerable space to descriptions of econom
ic decision-making in centrally adm
inisteredsocialist econom
ies, in particular the Soviet U
nion, and market capitalist econom
ies, with A
ustralia as anexam
ple of a contemporary (m
ixed) market capitalist econom
y.3T
he descriptive material is doubtless interesting to m
any students, but Morris' classification of
economic system
s according to ownership (private or state) and locus of decision-m
aking ('market' or
govern
men
t) (pp.9
-il), doesn
't help
studen
ts understan
d h
ow
they
work
. Sig
nallin
g o
f wan
ts and
supplies and incentives to respond to those signals are the crucial elements of any econom
ic system!
Morris says nothing about signalling m
echanisms; he recognises the im
portance of incentives (e.g. p.12),but fails to note the dependence of incentives on ow
nership rights.T
he description of the functioning of the contemporary A
ustralian economy lacks perspective, in part
because there is no description of the overall structure of the economy, to indicate the econom
ic andpolitical im
portance of the various players consumer/taxpayers, sm
all business, big business, unions andgovernm
ents. Morris concentrates on the latter three, reinforcing the view
s of most politicians and m
edia,that only the big players m
atter.T
he lack
of p
erspectiv
e is most o
bvio
us in
the d
iscussio
n o
f the p
ow
er of larg
e corp
oratio
ns.
Concentration ratios are given w
ithout any information about possibilities of entry by other dom
estic oroverseas firm
s. Nor is there any m
ention of government-created barriers to entry as a source of m
arketpow
er.A
nother reason for the lack of perspective on the Australian econom
y is failure to consider theobjectiv
es and b
ehav
iour o
f indiv
iduals in
govern
men
t. Oth
er actors - u
nio
ns, co
rporatio
ns - are
assumed to pursue selfish interests, but governm
ent is assumed to be purely altruistic (pp.56-8). T
heinconsistency of these assum
ptions, and the incongruity of the second assumption in the face of daily
media coverage of goverm
ent actions, are ignored.
Macroecon
omic O
bjectives an
d P
erforman
ce Criteria
(Chapter 3)
Morris provides com
prehensive explanations of the generally accepted goals of macroeconom
ic policy-price stab
ility, fu
ll emplo
ym
ent, stab
ility o
f foreig
n ex
chan
ge reserv
es or th
e exch
ange rate, rap
ideconom
ic growth, and a relatively even incom
e distribution. He discusses definitions, m
easurement, the
effects of poor performance and A
ustralian trends in the years to 1987-88. Morris is at his best w
ith thism
ainly descriptive material. H
owever, as m
entioned above in respect of the balance of payments and the
exchange rate, nowhere in the book is there an adequate exposition of the econom
ic forces determining
any of the target variables. Morris is at pains to present argum
ents both for and against economic grow
th,presum
ably in the interests of 'balance' (pp.117-22). Such discussion w
ould be more appropriately
included in his earlier consideration of the limitations of G
DP
-based growth m
easures, thus avoiding theim
pression that zero or even negative growth m
ight be a sensible government objective. In discussing
the advantages and disadvantages of equality, he recognises the link between governm
ent redistributionand incentives, but states that the precise m
otivational impacts of redistributional m
easures are unknown.
The extent of tax evasion and avoidance in A
ustralia goes unremarked.
Macroecon
omic R
elationsh
ips
(Chapter 4)
Chapter 4 is devoted to explaining determ
inants of aggregate demand, the volum
e of money, w
ages andoth
er prices in
the A
ustralian
econom
y, an
d lik
ely in
fluen
ces of each
of th
ese on p
rice stability
,em
ployment and external stability. A
s in chapter 3, Morris docum
ents the recent Australian experience
and the descriptive material is w
ell presented. The gist of the K
eynesian and Monetarist theories of
aggregate demand determ
ination is presented, with m
inimal behavioural underpinnings. S
upply-sidetheory is m
entioned,* in connection with the determ
ination of wages and prices and hence production
32
DR
IAN
Wass
costs by the Arbitration C
omm
ission, unions, business and government, but w
ith no clear explanation of
producer behaviour, the determination of aggregate supply is obscure. M
orris presents a formal m
odeldepicting aggregate dem
and and aggregate supply and the determination of national output and the price
level in an appendix, but the behavioural basis for the model is so slim
that it will m
islead and confuse .5
Teachers using
Speaking ofEconom
icswould
be better advised to concentrate on the descriptive material
in chapters 3 and 4, and the goals and behaviour of the main actors involved.
Macroecon
omic P
olicies
(Chapters 5, 6, 7, 8.)
Parts of these
chaptersare devoted to descriptions of governm
entpolicy
instruments and determ
inants
of Australia' s
recent growth and distributional perform
ance, the remainder to describing
the likely effects
of policies.A
s before, the descriptivem
aterial is unexceptionable.H
owever, in
the ab
sence of
behavioural models w
hichenable students to trace causes and effects, the book is likely to
encourage rote
learning of the lists of outcomes
attributedto each policy instrum
ent.S
uch behaviour will be reinforced
by the academic
pressuresof Y
ear 12. To
make m
atters worse, policy instrum
ents are discussed one ata tim
e, and related toon
e econom
icobjective
at a time, so that the
student getsno feel for tradeoffs am
ong
policies andobjectives.
The last brief chapter does
discusstradeoffs betw
een objectives. This m
aterial should come before
or together with the
discussionof the effects of
policies.G
iven the difficulty of a genuinelyanalytical
approachto m
acroeconomic
policy, it would still be
possible to convey a feelfor its com
plexitiesand tradeoffs by giving a blow
-by-blow account of the
pro
blem
s and p
olicy
optio
ns
of recent years.
This w
ould
hav
eseveral advantages over M
orris'presentation.
It would
better integratethe recent
datadispersed through chapters
3 to 8.It could be tied
to a clear descriptionof the structure of the econom
y, the major players, and their behaviour,
since the
required descriptivem
aterial is readily accessible to students through statisticalpublications and the
media.
It would
also facilitate critical examination of the m
otivations of individuals in government. A
ndfinally, although
lackinga firm
analytical base, itwould
illuminate
the tradeoffsand uncertainties
inherent
in macroeconom
icpolicy
making.
Lacking a
firmbehavioural basis, M
orris's discussion of policy leaves some outcom
es unexplained,for exam
ple, political pressures on government
budgetarydecisions
(p.236)and the determ
ination ofinterest rates and exchange rates
by `market forces'
(p.248).H
e ignoresthe conflict betw
een wages and
incomes policies, as partially im
plemented
by the Arbitration
Com
mission and the P
rices SurveillanceA
uthority, and thesignalling role of prices in a m
arketeconom
y, and also the monitoring
difficulties faced
by su
ch p
ublic b
odies. A
nd th
roughout
he adheresto the view
of government
and publicbodies as
imp
ersonal an
d om
niscien
t decision
mak
ers: thu
s, on p
age 284, he su
ggeststhat governm
ent should
encouragefirm
sto specialise in areas
where A
ustralia hascost advantages, and m
ayhelp to prom
ote
efficiency by selectingindustries to be encouraged
by 'temporary' positive incentives - Senator B
utton'sand M
r. Daw
kins' 'pickingw
inners'policy to a T
.O
ne wonders w
hether Morris
appreciates the relationship between electors and governm
ent in adem
ocracy.O
n page 298, discussingw
hy nogovernm
enthas pursued
the goal of absoluteequality, he
states 'governments cannot afford
to upset theirelectors w
ho generally appear to tolerate a degree ofincom
einequality'.
There is
no recognition that governments in A
ustralia are supposed to representelectors.
Presen
tation
Morris w
rites clearly.T
he styleis
workm
anlike rather than inspired.Speaking of E
conomics
appears tobe purposely w
ritten to get the average student through the core examination under the current V
CE
syllabus; it is unlikely to arouse interest or excitement in students.
There
are no mem
orable quotes,anecdotes or interesting exam
ples of economic controversies or policy outcom
es to lighten students'w
eary way through Y
ear 12. Nor
is there any mention of the w
ork of prominent A
ustralian economists,
such as Colir3
Clark.
Morris does not cite any references for additional reading on the topics discussed,
so that thebook
provides no guidance for furtherstudy of
economics.
Morris provides com
prehensive summ
aries and lists of vocabulary at the end of each chapter, and a
33
23
TH
E E
ER
C S
EC
ON
DA
RY
EC
ON
OM
ICS
TE
XT
BO
OK
RE
VIE
WS
36-page economics dictionary at the end of the book. E
ach chapter is followed by lists of m
ultiple-choiceand essay questions representative of V
CE
exam questions in recent years. T
he questions test recall andbasic understanding of the m
aterial in the text, ratherthan application of general principles. The dictionary
provides a comprehensive listing of m
acroeconomic term
inology, but coverage of microeconom
ics terms
is less complete, and the definitions are not free of errors - for exam
ple, collective goods are defined as`output generally m
ade available to the comm
unity by the government'. N
otable omissions include
property rights, nominal versus real values, resource substitution, crow
ding out and nominal and effective
rates of protection. It would help the reader if all dictionary term
s were included in the index, enabling
quick location in the text.
Con
clusion
it would be difficult to w
rite a textbook of manageable size w
hich adequately covered the VC
E syllabus
and the economic w
ay of thinking about human behaviour. M
orris has not achieved this. Speaking of
Econom
ics does a reasonable job of describing Australia's m
acroeconomic environm
ent, of explainingeconom
ics terminology, and probably of helping students to pass V
CE
Econom
ics exams. It fails to
adequately explain the central ideas of economics, the operation of actual econom
ies and reasons why
economic policies succeed and fail. Its failure is substantially due to the orientation of the current V
CE
course, which requires the study of m
acroeconomics w
ithout examining the behaviour of the individuals
and groups (including government) w
ho together determine A
ustralia's economic perform
ance.A
s they stand, it is arguable that the course and Morris's text do econom
ic literacy more harm
thangood. Im
provements based on the current syllabus w
ill not greatly help matters; w
hat is required is a shiftin course and text focus tow
ards microeconom
ics.
Notes
The E
conomics course description lists the follow
ing specific course objectives:
•an introduction to various concepts and techniques used by econom
ists;
•a w
orking understanding of some of the im
portant economic institutions and behaviour in our
society; an understanding of the distinction between a governm
ent's aims and the policies it uses
to achieve those aims, as w
ell as the distinction between a criticism
of that government's aim
s anda criticism
of its policies;
•an understanding of the nature of abstractions, assum
ptions and analyses; and of our inability tocom
prehend the complex 'real w
orld' except through such abstractions;
•an attitude of enquiry tow
ards the nature of the real world, and an attitude of reserve or caution
towards econom
ic generalisations and predictions;
•an introduction to sources of econom
ic data, to statistical definitions, and to the interpretation ofstatistical inform
ation.
Of these, the objective of conveying an appreciation of abstract econom
ic models, and of the analytical
use of such models, seem
s ambitious, given the academ
ic abilities of most Y
ear 12 Econom
ics students.E
xplanations of the nature of scientific theories are given in Richard G
. Lipsey, P
aul C. L
angley, andD
ennis M. M
ahoney,Positive E
conomics forA
ustralian Students,
Weidenfeld and N
icolson, London,
1981, and Paul H
eyne,T
he Econom
ic Way of T
hinking,5th edn., S
cience Research A
ssociates,C
hicago, 1987, Chapter 1.
Short sections on Y
ugoslavia and Nazi G
ermany, as exam
ples of other economic system
s, are too briefto be of m
uch educational value.
34