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

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C S

EC

ON

DA

RY

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ON

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TE

XT

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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

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RY

EC

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ICS

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XT

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VIE

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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

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ICS

TE

XT

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OK

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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

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C S

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ON

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RY

EC

ON

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ICS

TE

XT

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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