If Harvard has a most famous course, it’s Economics 10.
The introductory economics class is reliably one of the most popular courses offered to undergraduates. It’s usually taught in a massive Hogwartsian auditorium, where hundreds of students either dutifully take notes or mess around on laptops as one of the school’s star economists leads them through the basics of supply and demand.
Because Harvard has a tendency to set the pattern for other universities, Ec 10’s textbook is a massive best-seller, used at dozens of other schools, earning its author, professor Greg Mankiw, an estimated $42 million in royalties since it was first released in 1998. Mankiw’s introduction to economics has set the tone not just at Harvard but for how Econ 101 is taught across the country.
Mankiw’s textbook covers the abstract theory that underpins economics as it has been understood for decades. It is about supply and demand, about how prices can be used to match production of a good to its consumption, and about the power of markets as a tool for allocating scarce resources. Students in Ec 10 are asked to plot supply and demand curves, to solve simple word problems about what happens when the mayor of Smalltown, USA, imposes a tax on hotel rooms.
The idea is to impart a basic theory, to lay a foundation for understanding how society works. And that theory strongly implies that markets tend to work without much intervention, and that things like minimum wages might hurt more than help.
But another Harvard economist has a different idea of how to introduce students to economics.
Raj Chetty, a prominent faculty member whom Harvard recently poached back from Stanford, this spring unveiled “Economics 1152: Using Big Data to Solve Economic and Social Problems.” Taught with the help of lecturer Greg Bruich, the class garnered 375 students, including 363 undergrads, in its first term. That’s still behind the 461 in Ec 10 — but not by much.
The courses could hardly be more different. Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he’s focused on the roots and consequences of economic and racial inequality. He used huge amounts of IRS tax data to map inequality of opportunity in the US down to the neighborhood, and to show that black boys in particular enjoy less upward mobility than white boys.
Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.
And while most economics courses at Harvard require Ec 10 as a prerequisite, Ec 1152 does not. Freshmen can take it as their first economics course.
“I felt increasingly what we’re doing in our offices and our research is just totally detached from what we’re teaching in the intro classes,” Chetty says. “I think for many students, it’s like, ‘Why do I want to learn about this? What’s the point?’”
“It’s very different from the sciences, where as a kid you have a sense, it may not be very precise, but that people try to cure cancer,” he continues. He wants to give students a sense of the kind of economics that cures: that cures inequality, that identifies and fixes bad schools.
If this were just a pedagogical shift at Harvard, that would be one thing. But Chetty is aiming to make the course a model for other schools. After the financial crisis, many economists have concluded that Econ 101 is broken across the university system and is not preparing students for a world where markets frequently fail. Chetty’s class offers a new way to teach an introductory course, yet at the same time is more closely aligned with what contemporary economic research looks like. The course’s lecture videos are already available online, for students at other institutions to use.
That shift could change economics itself, by attracting a new breed of students who are intrigued by the field’s new empiricism, not put off by its mathiness and high theory. It could make economics departments more diverse, and more open to new perspectives from women and students of color.
It could change broader society as well. Economics 101 courses are often the only exposure to economic thinking many college students receive — and especially at a place like Harvard, those students grow up to run major cultural, political, and financial institutions. If their introduction to economics eschews the dry theory of supply and demand and instead emphasizes the importance of economic and racial inequality, that could have lasting ripples across academia, government, and business.
Meet Raj Chetty
Raj Chetty is a lanky, reserved, and bookish figure. He works out of a small office on Massachusetts Avenue, away from the main economics department building. His whiteboard is littered with stray equations from a forthcoming paper.
He didn’t have much experience with introductory economics before the course. He already had a leg up upon entering Harvard in 1997 thanks to his father, V.K. Chetty, an Indian American economist who advised the government of Indira Gandhi.
“[He] did a bunch of stuff deregulating as India moved from a socialist economy to more of a capitalist economy,” the younger Chetty recalls. “Whenever I see [Nobel economist] Jim Heckman, he’ll say, ‘I’ve known you since you were 2 years old,’ and then start criticizing my paper.”
Chetty didn’t take Ec 10 when he was an undergraduate at Harvard. He skipped to the intermediate curriculum, and spent the rest of his time as an undergrad taking graduate-level coursework. He graduated in three years, got his PhD from Harvard in another three (at the ripe old age of 23), and got tenure at UC Berkeley at 27. He moved to Harvard at 29, joining the likes of Larry Summers as a rare Harvard professor to make tenure before turning 30. He won the John Bates Clark Medal, awarded annually to the best American economist under the age of 40, at only 33.
He became a true public figure with the publication of a pair of papers in 2014 mapping economic mobility — measured as the correlation between people’s incomes and that of their parents — across the United States, down to the neighborhood level. The papers received rapturous write-ups in the New York Times and the Washington Post.
Because Chetty and his co-authors (Harvard’s Nathaniel Hendren and Berkeley’s Emmanuel Saez and Patrick Kline) posted all their data online — thus enabling others to run their own analysis and see what factors predict economic mobility — it quickly reoriented the debate about equality of opportunity in think tanks on both the right and left. Conservatives argued it showed that single parents hurt mobility; the Center for American Progress used the data to argue that unions improve mobility.
From then on, the release of a Chetty paper — or another paper from Opportunity Insights, the Harvard research group where he serves as director — became in and of itself a news event. The New York Times usually makes an interactive out of the big ones, including wildly viral pieces that let you see how much people from your childhood neighborhood earn, how black boys are left out of economic growth, and how many people from the top 1 and bottom 20 percent attend your college alma mater.
Chetty has thus become a strange kind of public-facing economist. He has become a prominent figure outside the field without really trying to become a public commentator the way Paul Krugman, Milton Friedman, or John Kenneth Galbraith before him did. His reputation, among laypeople and economists alike, rests almost entirely on his corpus of research, not his pronouncements on policy or op-eds.
His work has political implications, but he shies away from making firm policy recommendations himself. While Hillary Clinton and Jeb Bush informally consulted with him during the 2016 race, he has never taken a government advisory job.
The credibility revolutionary
If Chetty is an advocate for anything, it’s for the notion that economics is an empirical discipline, a science just as much as, say, medicine is. In a rare op-ed in the New York Times in 2013, he insisted that controversies between economists are little different from disagreements among doctors about whether, for instance, coffee is bad for you — and that the discipline was becoming more and more evidence-based. While it had traditionally been a highly theoretical discipline, without much checking theories against evidence, that status quo was shifting.
“In previous decades, the most prominent economists were typically theorists like Paul Krugman and Janet L. Yellen, whose models continue to guide economic thinking,” he wrote.
That’s changed, he observed. The hotshots now are “empiricists like David Card of the University of California, Berkeley, and Esther Duflo of the Massachusetts Institute of Technology,” who made their names with careful empirical studies of labor markets and developing economies, respectively.
The transition he’s describing is known as the “credibility revolution” in economics. The 2010 paper that popularized the term quotes the economist Edward Leamer as stating in 1983, “Hardly anyone takes data analysis seriously. Or perhaps more accurately, hardly anyone takes anyone else’s data analysis seriously.”
Data analysis was so subjective, so easily pliable to one’s own pre-chosen conclusions, as to feel almost useless. Then a new generation of economists — like Card, the late Alan Krueger, MIT’s Joshua Angrist, and many others — took it upon themselves to change that status quo, by carefully adopting research designs better able to determine causation (not just correlation), and focusing heavily on actual experiments and quasi-experiments where it’s clearer what factor is causing what phenomenon.
Economists like Duflo and Abhijit Banerjee took the revolution to development economics by insisting on the use of randomized experiments. More recently, economists like Emi Nakamura (the most recent Clark Medal winner) have brought it to macroeconomics, traditionally the most theoretical and least empirical branch of economics, and one whose limitations became humiliatingly well-known in the wake of the Great Recession.
The revolution has not been without its critics. Russ Roberts, an economist at the Hoover Institution and host of the popular EconTalk podcast, wrote an influential piece in 2017 rejecting the move toward empirical research as doomed to mire the discipline in intractable disputes over reading data. “Numbers don’t speak on their own,” he warned. “There are too many of them. We need some kind of theory to help us decide which numbers [to] listen to. Inevitably, our biases and incentives influence which numbers we think speak the loudest.” He denounced most empirical economists as mere “applied statisticians.”
But people like Roberts are on the defensive. His George Mason colleague, fellow traditionalist Tyler Cowen, told me he’s excited about the class. “I am for experimentation, and more of it in academia, and for that reason I approve,” he writes. “Of course it was not what I do, which is more traditional micro, more theory, less overlap with sociology. If the instructor is great, that is really what matters.”
And Chetty has done more than just about anyone to reframe the public conception of economics as the kind of economics the credibility revolution created: an economics of careful, incremental empirical research, not sweeping theories.
The fight over Econ 101
And now the credibility revolution has come for Econ 101.
For decades now, Harvard’s intro econ course has been taught by one of two veterans of Republican presidencies: Martin Feldstein, Chetty’s undergraduate mentor, or Greg Mankiw, George W. Bush’s chief economist.
Feldstein, long rumored to be one of the inspirations for Mr. Burns on The Simpsons, helmed the course from 1984 to 2005, when he handed it off to Mankiw; both started leading the course upon returning to Harvard from a period as chair of the White House Council of Economic Advisers.
Feldstein and Mankiw were perfect leaders for the course. They both write frequently for popular audiences and are somewhat heterodox for Republicans. Feldstein became an irritant in the Reagan White House by bemoaning soaring budget deficits and demanding that tax increases kick in if Reagan’s cuts continued to add to the debt. Mankiw is a prominent advocate for a carbon tax and signed on to a Supreme Court brief supporting same-sex marriage.
So they weren’t totally alien influences for their largely center-left students, many headed toward finance and consulting careers. They could meet their classes in the middle, and present introductory economics in a way that reflected their worldviews but was nonetheless accessible to a left-leaning student body.
Mankiw’s iteration of the course relies on his own textbook (most recently the online version, which runs a cool $132), which itself has provoked some consternation. It’s a very traditional curriculum. The focus is the idea that consumer spending and business production shift until you reach a kind of equilibrium, where the needs of both sides are efficiently provided for. The book does discuss uncompetitive markets, where monopoly and employer power move outcomes away from the “natural” equilibrium and toward outcomes more favorable to firms, but they’re an exception to the unstated norm of competitive, clearing markets.
A natural implication, then, is that interfering with the competitive functioning of the market often does more harm than good. Mankiw’s discussion of the minimum wage, for instance, heavily emphasizes the idea that the minimum wage causes unemployment. “If the government doesn’t intervene, the wage normally adjusts to balance labor supply and labor demand,” he writes, introducing the below graphic, which concludes, “The result [of the minimum wage] is unemployment.”
That’s a small example, but there are many others throughout the text, and thus throughout the class. Chapter eight of Mankiw’s textbook is a lengthy exploration of the economic costs of taxation.
Over the years, Ec 10 has prompted considerable dissension from the left. From 2003 to 2010, Stephen Marglin taught an alternative, heterodox, lefty introduction to economics at Harvard. Marglin had once been a solidly mainstream economic theorist, and a bit of a prodigy. But shortly after getting tenure, in one of the truly great pranks in the history of academia, he came out as a radical supporting the abolition of capitalism. In an influential couple of papers shortly thereafter titled “What Do Bosses Do?” his answer was, basically, “steal from workers.”
Marglin’s class offered a simultaneous introduction to and critique of the basic assumptions of mainstream economics. Required readings mixed classic texts like Thorstein Veblen’s Theory of the Leisure Class and Joseph Schumpeter’s Capitalism, Socialism, and Democracy with more qualitative fare like Zen and the Art of Motorcycle Maintenance and an article on the importance of community in Amish culture. Unsurprisingly, the class lacked any buy-in from the rest of the economics department. Marglin was joined by only one colleague in voting for the course to be listed in the economics department; in the end, it didn’t even count toward an economics major.
The Chetty version of Econ 101
Chetty is not the departmental pariah that Marglin was; he is, indeed, one of the department’s most beloved members. But Economics 1152 is a no less ambitious departure from standard introductory economics than Marglin’s course was.
Reading through Mankiw’s introductory textbook, one gets a sense that economics is the study of supply and demand. Reading through the syllabus for Chetty’s Economics 1152, one gets a very different sense of the field. The economics he describes is, essentially, a kind of applied statistics, an attempt to use quantitative data to answer social questions.
Chetty isn’t averse to theory. Much of his work is motivated by a desire to poke at and test widespread theories; his work on sales tax visibility challenged the assumption that consumers rationally incorporate the cost of all taxes, and his work on retirement savings challenged the idea that subsidizing savings necessarily increases it. Some of his early work, like a paper on the effect of interest rates on corporate investment, involved more model-building than evidence-gathering.
“One view of economics is that it is the study of prices and markets, and incentives. That’s fundamentally what economics is,” Chetty told me in his office. “I understand that perspective. I view it as constraining. It depends upon if you want to define a field based on the questions or based on its tools.”
Economics 1152 is fundamentally about tools — learning to use them, learning when to use which, and learning what they can and cannot do for you. And it trains students to use those tools to study inequality, specifically: in their own neighborhoods, in housing, in education, and more. Rather than having weekly problem sets (the standard pedagogy in most introductory econ classes), Ec 1152 asks students to complete four major projects in which students directly analyze data.
One project asks them to examine the mobility data that Chetty and his co-authors collected, and see how mobility varies in and around their hometown. Another asks students to analyze an ongoing experiment offering housing vouchers to encourage poor families to move to higher-opportunity areas.
I was taken aback by the level of rigor these projects demanded. It required not just knowledge of methods but knowledge of why to use particular methods and not others. If Ec 10 teaches students economic concepts, Ec 1152 aims to teach students to do economics — or, at least, the kind of economics that Chetty and his colleagues do.
And the concepts it does impart are mostly concepts from the credibility revolution: about how to know what causes what from the data, not how to predict the effects of a government policy from a simple supply/demand model.
The week I visited the class (and, full disclosure, gave a talk to Chetty’s research center on campus), a big chunk of Chetty’s lecture focused on his paper with Adam Looney and Kory Kroft on sales tax salience, the one for which they plastered new sales tax-inclusive price tags on hairbrushes and makeup at a number of California grocery stores.
The paper concluded — unsurprisingly to laypeople but perhaps surprisingly to more orthodox economists — that including sales tax in prices made people less likely to purchase items. Chetty briefly explained the substantive importance of this finding (it suggests that consumers aren’t purely rational and don’t always factor in hidden costs when they’re shopping).
But most of Chetty’s discussion of the paper was about his methodology, what’s known in economics as a “differences in differences” approach. The key was to compare how sales of unaffected products in the stores changed from the start (26.48 sold per week) to the end (27.32 sold per week) of the experiment to how sales of affected products with the new label changed: from 25.17 per week to 23.87 per week.
The discussion sections for the class, run by Chetty’s graduate student teaching fellows, hammered home the point further. Michael Droste and John Macke, the grad students whose sections I attended, emphasized that differences-in-differences is a general technique that can be used in cases even when an actual experiment hasn’t been conducted.
They were teaching their students big ideas. But they were ideas about what causes what — not about supply and demand.
And the class attempts to be clear about what economics can, and cannot, tell students about public policy. If Ec 10 tells students that minimum wages are inefficient, that taxes harm growth, that free trade lifts all boats, and so on, Ec 1152 tries to draw a sharp distinction between empirical fact and moral values.
Chetty mentioned that he once polled his students on what the top tax rate should be. “The median was 50 percent; lots of the students were 60 to 70 percent,” Chetty recalls. “I [said], you shouldn’t put any particular weight on my preferences on that issue. Let’s be clear: That’s a value judgment.”
He says that a student came up to him after that lecture and said, “I just really appreciate that you did that, to be very clear about what’s values and what can we say is right.”
An economics for everyone
The odds are reasonably high that the kids in this class will grow up to exercise power over your life.
There are six Harvard undergrad alums in the Senate, including Minority Leader Chuck Schumer, and 11 in the US House. The chief justice of the Supreme Court was a Harvard undergrad. Mark Zuckerberg has joked about sleeping through Ec 10 lecture. According to a campus survey by the student newspaper, 18 percent of Harvard graduates go into consulting, where they could broker restructuring plans that cost you your job, and another 18 percent go into finance, where they could cost a lot of people their jobs.
That makes a radical change in the college’s economic instruction important not just at Harvard but in the world that, under the rules of American oligarchy, Harvard graduates are entrusted to manage. Indeed, it might change which Harvard students are sent down paths to power.
When Chetty first offered a shrunken-down version during a brief sojourn as a professor at Stanford, he noticed a big change in the kind of students he was attracting. “I remember vividly at Stanford, and it’s happened here as well, having three African American women in my office hours, for instance, in this class,” he recalled. “Generally in econ classes, you just don’t have that.”
The numbers bear that out. Forty-nine percent of students are women, compared to 38 percent for econ classes as a whole (and 40.5 percent for the second semester of Ec 10). “On other dimensions we examined — e.g., race and parental income — the course looks fairly similar to other classes in Econ and in the college,” Chetty clarified in an email. But students of color, and with lower parental incomes, found much to connect with in the curriculum.
Naomi Vickers, a sophomore, traced her family’s experience with segregation in Richmond, Virginia, in her first project for the class.
She found the data had immediate relevance to her personal history. She noted that Chetty’s geographical work has found that many poor families move between low-opportunity neighborhoods, not from low- to high-opportunity ones.
“When I was looking at the places that I had moved to, I saw that my family fit this trend pretty well,” she recalled. “We would move to other, similarly low-mobility areas.”
“I grew up hearing about my grandmother being one of the first black people to be able to buy a house in the East End because federal redlining — followed by private sector segregation — forced the town to split along racial lines,” she writes in her project, showing the split using maps drawing on a database of redlining policies.
She shows how a similar split between inner-city and near-suburb childhoods reveals itself when you dig into Chetty’s data: “regardless of race or income, children who grow up in the surrounding counties have much higher upward mobility than children who grow up in the city on average.”
Vickers is an economics concentrator but hadn’t been able to connect her personal history to her coursework like this before — even though she and some of her black classmates got into economics specifically to explore issues around inequality, racial justice, and mobility.
Kayley Elizabeth Miller, who took the early version of the course at Stanford, also found herself using the material to learn about her roots. “I’m from West Virginia — here at Stanford, there are not many students from West Virginia,” she says. “And in a lot of these studies, we realized that rural students just have a lot less access to higher education.”
So following the course, Miller started a group called Project KEY that aims to provide college counseling for students in West Virginia. And, just as she learned to do in Chetty’s class, she’s randomizing which classrooms receive the counseling, surveying the students, and hoping to use the data to get a true experimental measure of her program’s impact.
She has a control school and treatment schools, and control and treatment classrooms within the schools. “I look for spillover effects between the schools, just if students are talking about it. And then through the year, I’ve looked at past years of administrative data in the schools.”
With a hint of pride, she tells me, “It’s become quite robust.”
Vickers and Miller are just two students out of literally hundreds — including many who might never have taken economics without the class. Chetty emphasizes that his class isn’t a pure replacement for Ec 10. He argues that students are taking his class in addition to Ec 10.
Ec 10 has also itself evolved, and will continue to evolve. Jason Furman, the former Obama chief economist who will, along with colleague David Laibson, take over Ec 10 from Mankiw this fall, says a priority is to show students that “economists study income inequality, economists study gender, economists study race, and bringing all of those topics into the classroom.” He also gives Mankiw credit for moving the curve of Ec 10 to match the curves of other large Harvard classes, based on research showing that unnecessarily tough grading of economics classes disproportionately discourages women from taking them.
But Ec 1152 has clearly reached a portion of the student body that Ec 10 hasn’t been reaching in the same way. And it’s showing how to teach introductory economics as an introduction to doing economics — not just observing it from afar.
CORRECTION: This piece originally stated that Russ Roberts teaches at George Mason; in 2012 he moved to the Hoover Institution. We regret the error.