David R. Henderson  

My First Day of Class

Monetary Theory, Once Again... Intuitive Econ Challenge...

I started my Executive MBA economics class today that I teach in front of a camera to 3 remote locations: D.C., Norfolk, and Oceana. I've taught since 1975 with 4 years off to work at Cato or in the Reagan Administration, 1 year off for 2 half-year sabbaticals, and 1 year of leave without pay to work on the original Encyclopedia of economics. I keep expecting that I'll get bored teaching the same stuff over and over. I'm not. I'm as excited teaching it as I was my first year at the University of Rochester in the fall of 1975 when I was 24. (I remember walking across campus in my cut-off shorts in August 1975 and asking a young lady where I could find the bookstore. She told me to walk with her and, making conversation, she said, "Are you a freshman here?") And I'm way better at it.

When I give them my phone number so they can reach me (it ends with 1776), I ask them the significance. Invariably someone answers that it was the pub date of Adam Smith's Wealth of Nations (after the first typical answer that it was the date of the Declaration of Independence.) Then I show them The Wealth of Nations and tell them that many people dismiss it because it's "so 18th century." Then I read to them the famous quote about benevolence of butcher, brewer, and baker:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

and the famous quote about the invisible hand:

by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

Then I read to them Smith's prediction that the 13 colonies would win the war and that they would become the most powerful nation in the world. I still get goose bumps when I read those quotes. Later, when I lay out The Ten Pillars of Economic Wisdom and get to Pillar #10, "Information is costly and valuable, and is inherently decentralized," I read to them from one of my favorite books from the 1990s, Dismantling Utopia: How Information Ended the Soviet Union, by Scott Shane, then of the Baltimore Sun and now of the New York Times. When I read that passage about shoes, there go those goose bumps again. I e-mailed Scott a fan note a couple of years ago and asked him if had ever taken economics. He said no, and I told him that I thought he stated Hayek's insight better than Hayek had.

It's kind of amazing to be 58 years old, to have taught basic economics over half my life, and still to be excited about teaching it. I'll take it.

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CATEGORIES: Economic Education

COMMENTS (11 to date)
Scott Wentland writes:

I'm 25 years old and a visiting assistant professor...I get the question about being a student all the time. I suppose that'll fade when I start getting some greys.

RL writes:

Impressive that some in your class on the first day know something happened in 1776 besides the Declaration.

See what happens if you ask them, before reading the Smith quote, what profession is linked through a famous literary passage with "butcher" and "baker". I'm thinking more will say "candlestick maker" than "brewer"... :->

John Thacker writes:

When I was an undergraduate at Duke University, I discovered that they have a great historical collection of economics books, including a Wealth of Nations first edition. I was able to check it out to read in the Rare Book Room. Still in great shape, and easy to read except for the elongated s. Also interesting to see the back page with the "Also by this Publisher" list having "Hume, David."

simon... writes:

Passionate teacher is one of the greatest blessings you can have in your life. You've got some lucky students...

Nick writes:

I am certainly grateful that you still love teaching Economics -- your course at NPS from my Spring quarter remains my favorite yet!! Thanks, Dr. H, keep it up!

Bill writes:

What is the passage about shoes from the Scott Shane book? thanks in advance.

Mr. Econotarian writes:

Of course, in a rich economy, people will start to do things - often great things - out of benevolence.

The "butcher, the brewer, or the baker" quote does not apply to the "Wikipedia article author".

Some of this depends on what you mean by "self-interest", indeed I'd say many people are "self-interested" in being "benevolent".

That said, Wikipedia, open source software, blogs, and other "gift economies" while interesting, are unlikely to ever be a substantial portion of world GDP.

Brent writes:

I'd take Mr. Econotarian one step further and say that people cannot help but be self-interested. Some simply have interests that are broader, more expansive than others.

MCH writes:

Where does this quote appear that predicts America will win the war, etc? I don't remember it and can't find it.

Bekah S writes:

I am a first year college student taking MicroEconomics. I am amazed while listening to my professor that not only does history repeat itself, but so does economics. The supply and demand curve has not changed except for perhaps the products being produced. Prices always have and always will strive toward equilibrium. People will always want more than they can have, and the economy will always need help. There has never been a perfect economy. If there were there would be no need for money, payments, or economists which would put my professor out of work. I'd like to thank all teachers/professors who are excited about what they are teaching. As a student, knowing the teacher enjoys what they are teaching makes me enjoy it also.

Charlie O writes:

Professor Henderson,

I have just this year been introduced to and read Hayek (The Fatal Conceit and The Road to Serfdom), so based on your praise of Dismantling Utopia I purchased and read the book. It is a good example of the power of information.

As I read the book I kept wondering how communism and information in the Soviet Union is different from communism and information in China. I cannot help but wonder why the information age did not bring down communism in China as it did in the Soviet Union. I have some guesses but I was wondering if this question has come up in any of your class discussions or if you have an insight.

Thank you.

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