His main target is macroeconomists, particularly those of the new classical persuasion. Robert Lucas readily concedes to Cassidy that the evidence supporting some implications of rational expectations is weak. And Joe Stiglitz says, "it’s very clear that the new classical economics is irrelevant." Yet rational expectations, according to Cassidy, still exerts a pervasive influence on macroeconomists. For example, even though "dozens of empirical studies have concluded that real-business-cycle models cannot explain economic fluctuations any better than Lucas’s original effort, [real-business-cycle] theory has survived and prospered, its users apparently oblivious to the practical irrelevance."

Cassidy notes that the large-scale Keynesian models that Lucas criticized have done pretty well in tracking the economy since the mid-1970s, when they were modified to address his concerns. The Fed, the White House, and most foreign governments still use these models. But most young economists have given up trying to build macro models of the economy. Fresh macroeconomists, he says, are trained to do only two things: teach graduate macroeconomics, and publish in the journals. According to Cassidy, the problem of irrelevance has gotten so had that economic-forecasting firms are having difficulty finding young economists who can analyze the world in a non-Lucas framework.

As further evidence that academic economists have little to offer, he notes the recent decline in the number of undergraduate economics majors and the drop in the number of Americans pursuing a Ph.D. in economics. What’s more, major corporations, such as IBM, GE, and Kodak, have shut down their economics departments, while companies in the newer technologies, such as Microsoft and Intel, seem to be thriving with few economists. One Morgan Stanley economist told Cassidy that his firm will not hire economics Ph.D.s without substantial work experience outside academe. "We insist on at least a three-to-four-year cleansing experience to neutralize the brainwashing that takes place in these graduate programs."

One way of getting economists back to reality, Cassidy says, would be to abolish the Nobel Prize for economics, "Deprived of the publicity surrounding the annual Stockholm ceremony, economists would actually have to do something useful to get noticed."

At the January meeting of the American Economics Association in New Orleans, I attended the roundtable session entitled, "Is There a Core of Practical Macroeconomics That We Should All Believe?" chaired by Robert Solow. During the question and answer period, I asked the panel if anybody had read Cassidy’s article and, if so, what was the reaction. Martin Eichenbaum said his wife could not wait to show it to him. The general consensus was that the piece was misleading and unfair. Solow posed the following parable. Suppose the cat world appoints one of its own to observe humans and report back. Such a cat would report to feline colleagues the activities of humans – that they eat, sleep, walk, talk, and so on – but the cat would miss the whole point of being human. Likewise, Solow things that Cassidy observed what economists do, but he missed the whole purpose of pursuing economic research.

Yet Cassidy did not develop his critique in a vacuum. Several well-known economists were interviewed for the story. For example, Anne Kreuger notes that five years ago the Commission on Graduate Education in Economics reported how graduate programs were churning out technique-laden economists with little knowledge of real economic issues. Although that report, developed by a dozen eminent economists, raised red flags about producing "idiot savants," Krueger laments that, "if only the report and a pin had dropped at the same time, the pin would have sounded noisy." And Greg Mankiw inquires in the Cassidy piece, "Is economics making enough progress to justify the millions of dollars a year that the taxpayer spends to subsidize economic research?" His answer: "I think economists are probably overfunded, given the rate at which we make progress." He goes on to say that, "Economists are like dairy farmers. We think we deserve every penny we get."

I might revise Solow’s parable a bit. The cat not only observes humans but asks them what they are about. Some humans complain about the human condition in general and about how some other humans think. Mostly this is constructive self-criticism, but problems get exaggerated because some humans resort to satiric hyperbole and a few are just – well – catty. Given the chorus of complaints, what’s a cat to think? Cassidy confuses school-of-thought battles with more fundamental questions about how economic research should be carried out and evaluated.

Although incoming freshmen appear less engaged and less willing to study, more freshmen than ever (six out of ten) assess their academic ability as at least "above average" (the Lake Wobegon effect?). This confidence probably has been inspired by grade inflation in high schools. 32% of freshmen reported earning 'A' averages in high school, up from 28% in 1995 and just 12% in 1969. Conversely, the number reporting 'C' averages in high school dropped from 33% in 1969 to 15% in 1996.

Interest in a business career hit a 20-year low of 14% in 1998; the all-time high was 25% in 1987. Incidentally, the widely reported decline in economics enrollments is likely linked to the declining interest in business. The demand for eonomics courses is, after all, derived in part from the demand for business courses more generally. Although students seem less interested in business, the percentage of freshmen expecting to work part time while going to school increased from 35% in 1989 to 40% in 1996; those expecting to work full time increased from 3% in 1982, when the question was first asked, to 6% in 1996. Studies show that working off-campus inreases a student's chances of dropping out of college. Yet, a record 66% of incoming freshmen expect to go on to graduate school.

Like any encyclopedia, Encarta 97's coverage of economics is spotty. There are short biographies of some economists, and some entries have been written by economists, such as articles on "economics," "money," and "capital." But many fundamental ideas such as opportunity cost, marginal cost, and sunk cost get no mention. And some key ideas are confusing. For example, here's an explanation of comparative advantage: "the comparative advantage comes if each trading partner has a product that will bring a better price in another country than it will at home." Demand is defined as "the willingness of consumers to buy a product at a certain price, or the aggregate demand of all consumers for all products and services. " Marginal utility is defined as the "worth to a consumer of the last unit in a series of similar units of a good that the consumer believes is worth acquiring." Aggregate demand is identified as "total spending in the economy." Aggregate supply is not mentioned. Another source of confusion is the use of the term supply to mean both supply and quantity supplied, and demand to mean both demand and quantity demanded.

Many of the 31,100 so-called "articles" in Encarta 97 come from Funk & Wagnall's New Encyclopedia. Some are as short as a sentence, mere definitions. About one-third involve multimedia -- that is, they involve one or more media beyond the electronic word. In 80% of the cases, the multi of the media is a picture. In terms of economics, the multimedia aspect of Encarta 97 is largely useless. For example, there were no sound clips that relate to economics and no videos or animations that developed any economic ideas. When economics is pictured, the focus is often one of pathology, such as pictures from the Great Depression. Grainy black-and-white portraits of long-dead economists make economics seem irrelavant. Most tables and charts are dated. There are a few graphs with captions (such as the market for -- what else -- widgets), but students wishing to make a copy must print graph and caption on separate pages.

So students won't find much here they can't find in any encyclopedia. What students do get with Encarta 97, however, is an improved electronic index. By entering a word or words, students can identify all the articles in Encarta 97 where the word or words appear. Encarta 97 can find adjacent word strings (Encarta 95 could find only individual words located within a few lines of one another), so students can look up terms such as division of labor (which appears in 21 articles), supply-side economics (four articles), absolute advantage (two articles), and rational expectations (a no-show). Adam Smith shows up in 27 articles, John Maynard Keynes in 15, and Alfred Marshall, Milton Friedman, and John Kenneth Galbraith in three articles.

The Teaching Economist is now in its seventh year. During that time, "The Grapevine" has published nearly one hundred teaching ideas from colleagues around the country. Here, listed alphabetically by author, are my choices for the best grapevine ideas published since 1990.

Burton Abrams Paul C. Clement Brad Hobbs Ivan Kelly

Stuart Lynn Ted Scheinman Art Welch Robert Withington, Jr.