Art Carden  

The Economic Illiteracy of School History

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This morning, I skimmed through a textbook on Alabama history that I picked up at Goodwill earlier this semester so I can bring myself up to speed on some of the major facts, themes, names, and dates in Alabama history (The Alabama Story by Robert J. Norrell, if you're curious). I assume it's for sixth graders, but I could be wrong. I just came across this passage under the section titled "President Roosevelt Offers a New Deal;" it reminds me of co-blogger Bryan's recent post on "The Economic Illiteracy of High School History":

President Roosevelt developed a plan to pay farmers to grow less cotton. If less cotton was grown, he believed, then the price farmers got when they sold their crops would go up. President Roosevelt was using an idea called supply and demand. When a lot of one product is available--supply--the call for that product--demand--goes down. When the demand goes down, the price of that product falls too. But the opposite is also true. When the supply of a product goes down, then the demand for it--and its price--goes up.

You might argue with me because it's a textbook aimed at preteens, but how often have you seen similar economic illiteracy masquerading as analysis in the popular press or in the professional/scholarly literature on labor history?


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COMMENTS (18 to date)
Tracy W writes:

The quoted section is so nearly close to right that I find myself wondering if it was a typo.
(Obviously there are a bunch of problems with paying farmers not to grow cotton but they seem beyond the scope of the quote).

Nick writes:

@Tracy

Can you explain what you mean by 'nearly close to right'? It seems so flabbergastingly wrong to me that I can't even begin to imagine what typos could have produced it.

Silas Barta writes:

Agree with Tracy_W. The economic analysis shown is correct. Note that the excerpt does not say, "And therefore, it's a good idea on social welfare grounds"! That may be the *subtext*, but that doesn't make the economic analysis wrong.

I would agree that, for pedagogical purposes, this is rather bad example to use, because it makes it seem like a *good* use of knowledge of S/D effects, but it never actually says that, so I don't get the complaint about it being "extremely" wrong.

RohanV writes:

I thought supply and demand were independent. The second half of the text strongly implies that they are dependent. For example, the last sentence:


"When the supply of a product goes down, then the demand for it--and its price--goes up."

Should be:

"When the supply of a product goes down--and the demand for it stays constant--then its price goes up."

Harold Cockerill writes:

How is it an abundance of supply drives down demand? I understand the price falling but why should people want less of something simply because there is a lot of it. This is nonsense.

This really wasn't in a school book was it?

Robert Nielsen writes:

I'm not sure why you're that shocked. As a very simple explanation for very young children who would be unfamiliar with economics, this is roughly right. In fairness what were you expecting?

I'm sure you consider the lack of mention of equilibrium the "illiteracy" of your title, but you're expecting far too much. Government purchases would merely shift it to a higher equilibrium. Now this is saying nothing about whether the purchases are worth the price or the most efficient response, but again its a children's book.

MikeP writes:

The illiteracy is not the lack of mention of equilibrium. It is, as others have noted, that when supply goes up, demand usually goes up, not down.

It could have been written like this:

When a lot of one product is available--supply--the call for that product--demand--goes up as well, but not by as much. When the demand does not rise as much as supply, the price of that product falls. But the opposite is also true. When the supply of a product goes down, then its price goes up.
Chris writes:

I thought the quote was scary, but then I read the comments!

MikeP writes:

How about avoiding the "demand" versus "quantity demanded" mushiness entirely and focusing on the marginal consumer:

When a lot of one product is available--supply--the call for that product--demand--can be satisfied for more consumers. But the new consumers will pay less than the price before, or they would have already bought it before. So the price of that product falls. But the opposite is also true. When the supply of a product goes down, then its price goes up.
Kevin Driscoll writes:

@Robert Nielsen
Simplifying for a younger audience is the premiere challenge in writing grade school textbooks, but you can't sacrifice truth for clarity.

@MikeP
My experience suggests that counterfactual arguments are difficult to grok, even for college freshmen.

Just to be clear, the problem here is that the text implies that 'Supply' and 'Demand' are somehow functions of each other. In a classical analysis, consumers have cost/benefit functions that set the demand for products and producers have cost/benefit functions that set the supply of products. The two are only indirectly related by the fact that the price must be set so that the market clears.

Daniel Kuehn writes:

I disagree with Tracy - it's all rubbish. Substituting in "quantity demanded" (often necessary in editing writing on this stuff) doesn't help. What would help is substituting in "price demanded" - which is awkward to an economist's ear. But it's also clearly not what the author has in mind because they write "When the demand goes down, the price of that product falls too."

So they're clearly just confused as far as I can tell.

Art Carden writes:

The writer asserts that "Roosevelt was using an idea called supply and demand." I can read between the lines and grasp what I think the author is trying to say, but I don't think this can be salvaged by even the most charitable reading.

It isn't just the usual "supply/quantity supplied" "demand/quantity demanded" confusion that is the bane of introductory economics instructors. It looks like the author is conflating "demand" with "willingness to pay," but even then I'm not sure.

The author asserts that demand is a function of supply; that's false as the two are distinct. It's true that prices fall when demand falls and prices rise when supply falls, but the author arrives at these conclusions fortuitously.

Tracy W writes:

I agree with Rohan, it's the linking of demand to supply somehow. It's the sort of error I've had produced by copy editors on my work. Though it could also be outright confusion on the author's part.

JohnB writes:

Just because there seems to be some confusion here, this quote is wrong, "When the supply of a product goes down, then the demand for it--and its price--goes up."

The decrease in supply has nothing to do with demand. The two are independent and not inversely related as the author thinks.

If the supply decreases and the demand stays the same then the price increases and the quantity demanded goes down. There is a difference between demand and quantity demanded! This was the first thing I learned in Econ 101!!

Hazel Meade writes:

The big problem here is that the paragraph is written by someone who obviously does not have an intuitive grasp of the underlying concepts.

There is no way that someone could write something like this:
"When a lot of one product is available--supply--the call for that product--demand--goes down. "

... if they had the slightest grasp of how the price mechanism works. The missing piece here is this person don't grasp that prices will fall due to oversupply, that consequently, people will consumer MORE (not less) of the product.

Hazel Meade writes:

Here is my rewriting of this paragraph:

"President Roosevelt was using an idea called supply and demand. When a lot of one product is available--supply--the price of that product falls. Because the price is lower, the call for that product--demand--goes up. When the demand goes down, the price of that product falls too. But the opposite is also true. When the supply of a product goes down, the price rises. Because it is more expensive, the demand for it goes down. "


Of course, there's some papering over the difference between demand and quantity demanded, but her, it's for sixth graders. A particularly smart sixth grader might figure out from this that eventually prices would reach an equilibrium.

MikeP writes:

There is no way that someone could write something like this:
"When a lot of one product is available--supply--the call for that product--demand--goes down. "

There is if they get their answer from wiki.answers.com!

http://wiki.answers.com/Q/When_supply_goes_up_what_does_demand_do

Khanh T writes:

Supply and demand are among the first things that every college kid who takes an Econ class learns, and I am surprised that this History textbook writer knows little about them. Supply and demand depend on prices and other factors, but definitely not on each other!

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