Normally when I read, write, or even think about economics, my mind is full of nothing but glee. To illustrate: I have, on more than one occasion, stayed up past 3 AM to discuss monetary policy with friends – for fun. Economics 1 is a prerequisite for all subsequent economics courses (although it is possible to take the “Econ 2” and “Econ 3” variants of essentially the same course), and was taught last semester by Martha Olney. It is one of the few regrettable exceptions to my opinion of the subject. Professor Olney sets the standard, not only for gross incompetence and dereliction of duty, but for corruption of young minds with misinformation and political indoctrination.

To put it bluntly, Professor Olney does not teach good economics: her lectures regularly contradict the research and theories of even Nobel Laureates, without offering any justification or qualifications. As an example, she has asserted that spending, as such, stimulates the economy. The professor seems to be confusing cause and effect: fundamentally, the economy is shaped by production; it is self-evident that production must come before consumption. People spend because there is wealth (something to buy); wealth does not exist by virtue of someone spending. If it did, many African and Latin American countries would be wealthier than the US. Such a claim is the logical equivalent of saying “eating your cake causes you to have it”. She goes on to make such nonsensical assertions as “rising corn prices causes inflation”, to which Nobel Laureate Milton Friedman would retort, “Inflation is always and everywhere a monetary phenomenon” (in short, inflation causes rising corn prices, not the other way around). She has also claimed that “Inflation and unemployment are correlated in the long term”, a view that directly led to the “stagflation” of the 1970s and one specifically contested by many Nobel Laureates for decades. Edmund Phelps won the Prize in 2006 for demonstrating conclusively that the two are not correlated. And let’s not forget this little gem: “Key assumption of Keynesian Model: GDP changes ONLY WHEN there are unplanned changes in inventory holdings”. In other words, economic growth occurs more or less randomly – producers don’t make more of anything or sell things faster, they just have unexpected inventory changes. The Industrial Revolution? The productivity boom of the 90s? Just “unplanned changes in inventory”. Even her definitions are patently false: she asks the difference between a normative statement (an opinion) and a positive (factual) one, with this example: Government spending is always better for the economy than tax cuts (Her answer: positive).

Apart from simply being bad economics, her pronouncements are leading students to support policies that will have disastrous consequences. Her advocacy of simply printing and distributing more money will no doubt lead to inflation, which tends to paralyze economic activity and encourage poor, even wasteful, investments. At the same time, she admits in her lectures that she is unfamiliar with monetary policy; rather than becoming familiar with it, she simply states that “Greenspan had his way” and that a “fiscal solution is needed, not a monetary solution” (indicating her ignorance of the connection between the two, as well as Mr. Greenspan’s role in the problem). Furthermore, she expresses no support for the rule of law and sanctity of contracts that form a fundamental basis for free markets and prosperous economies.

As if misinforming the students who pay her salary were not enough, she takes class time to politically indoctrinate students, even forcing them to agree with her political views for the sake of a grade. Case in point: her final exam, which she has kindly uploaded to the Internet for your benefit. From the beginning of the exam, she presumes that the students in her class support Barbara Boxer. In her third and fourth point, her questions are phrased in such a way that presumes a particular answer. “Why should the government subsidize business and consumer purchases of green technology?” and “How will that spur an economic recovery?” presume that it is both practical and economically sound to distort markets, and morally appropriate to force individuals to adopt some third-party’s values in their decisions. The idea that forcing people to pay for something that is not economically viable – a fact that is demonstrated by the “need” for subsidies for products to hit the market – will somehow help the economy is nonsensical. Points five and six are loaded questions, written so that students cannot assert a view opposing hers. She implicitly dismisses the summary destruction of large corporations with tremendous economic influence and the reduction of consumer choice and competition in the marketplace as potential reasons not to support subsidies, while indicating that there are long term benefits to “green technology” (with the implication that the costs are less than the benefits, which is possible but by no means certain). Accepting these implicit premises makes it logically impossible to oppose, or even express neutrality toward the subsidies she proposes.

From there, she asks what defines recession and recovery, and how the housing bubble and credit crisis contributed to the recession. At this point her questions’ intent is deniable and arguably innocent. From her lectures, she expects an answer reflecting her view that the housing bubble was caused by “corporate greed”, rather than policies in Congress and the Federal Reserve that created perverse incentives to grow an already overlarge housing bubble. She specifically dismisses tax policies (such as the deductibility of mortgage payments from taxation) and regulations such as Sarbanes-Oxley (which economists have criticized for causing an amount of economic damage on the order of $1 trillion) and the Community Reinvestment Act (which mandated subprime mortgages) as “Republican talking points”, dismissing as “partisanship” the numerous critiques of these policies even when many of those critiques were from all corners of the political spectrum. She even dismisses any concern about the moral hazard caused by Fannie Mae and Freddie Mac’s implicit government guarantee, and the de facto monopoly in mortgage lending made possible by it, which magnified a market correction into a market collapse. At the same time, she admits that her knowledge is largely limited to “what she reads in the papers”, particularly the San Francisco Chronicle, a newspaper for which she is a writer.

Martha Olney’s control over students’ introduction to economics, combined with her deliberate misinformation to advance her political agenda, colors their political views and renders them incompetent to assess even elementary economic problems. She presents these views as gospel, without any discussion of alternative (and sounder) theories, nor even a pretense at objectivity.

The tenure system exists for the purpose of protecting academics with unconventional views from censure by vindictive administrators, and thus redeems its many faults by protecting academic freedom. But academic freedom and academic standards are not in conflict, regardless of whatever Professor Olney’s abandonment of her contractual obligation to properly educate those students in her classes might suggest.

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