ISI Faculty Resource Center

A college or university classroom should be understood in at least two ways: as a privileged place and as a sacred place.  It is privileged because the professor comes to it to offer what he can of the gift of knowledge, and it is privileged because all who enter are students, that is to say, persons who seek to know the true, the good, and the beautiful and so to become wise.  At Villanova, the classroom is also a form of sacred place.  Because any university or college seeks to elevate the human reason to its fulfillment, it is charged with helping in the raising of that reason above itself, to its finality, its entelechy, its end. 

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At the recent meetings of the American Economic Association four famous economists addressed the topic of whether and how the financial crisis should change the way we teach.  In this professor's opinion, where the standard presentation of introductory macroeconomics fails students most is in its treatment of finance.

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In 2009, the Canadian embassy in Washington estimated that 10,000 Americans would head north to get a university education in Canada. The reasons? Canada's top universities, including McGill and the University of Toronto, charge less tuition than top flagship state schools in the U.S.

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We often assign our students writings by the American Founders, men like Thomas Jefferson, George Washington, James Madison, James Wilson, and Alexander Hamilton.  Curiously, though, we rarely assign most of the works that shaped and influenced their own minds.  This is a pity, because these works shed so much light on what they were trying to do when they initiated the American experiment in self-government.

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Forms, attitudes, habits; ways of being. On why the half-Windsor might save education.

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How should the economics curriculum change after the 2008 Panic?  It would seem obvious that every econ department should add a course in the “hardy perennial”, financial crises, now that we are freed from the convenient myth that economic crises are things of the past (eliminated by a rationalistic FDIC).  One such class can be found here. 

Inevitably, such courses would remain electives.  How should the “core” of macroeconomics change?  I don’t mean (here) the Principles of Macroeconomics course, in which we give a wide variety of students (who may or may not care much about economics) a taste of what macroeconomics cares about.  I don’t mean, either, the macroeconomics that professional economists do research on.  I mean the undergraduate curriculum for committed economics majors, principally the Intermediate Macro course.

New macroeconomics texts should have a separate chapter for the financial sector.  Economists know a lot about how banks and markets work, how and why they fail, what policies or workarounds can be used, and what the consequences of well- and ill-functioning financial systems are.  We can teach this stuff.  A nice model is this (ridiculously expensive) book.

Students should learn why financial intermediation is deemed necessary (and who can take advantage of direct finance), and what are different ways in which financial intermediation can be more costly or break down.  

A fairly easy topic here is fractional reserve banking: reasons and consequences.   Deposit insurance, moral hazard, too-big-to-fail, and too-interconnected-to-fail are topics that suggest themselves pretty easily.

A separate, harder topic is that of risk.  Risk needs to be introduced to explain why there are different “types” of borrowers (which brings us back to the usefulness of financial intermediaries and forward to the use of diversification), why we charge higher rates to the risky types, and why (after a point) we wouldn’t keep raising interest rates in response to risk, but rather just ration credit (and possibly engender a credit crunch).

When put in the context of macroeconomics, we are led to ask whether there are cases in which “riskiness” is not just “determined” outside of the economic system by, say, a person’s genes, but that it is rather a consequence of the workings of the system itself.  One example is the idea of the financial accelerator: an economic prosperity increases borrowers’ wealth, makes them more likely to pay back, and more creditworthy.  Similarly, a recession or crisis makes borrowers less creditworthy and produces a credit crunch … which worsens the recession.

This discussion leads to the discussion of bubbles, euphorias, panics, and Minsky moments (stepping slightly outside of the mainstream).  Riveting stuff, but somewhat complicated. 

A final topic is the workings of finance itself, which must include a clear discussion of leverage and the distinction between illiquidity and insolvency.  And the ways in which one leads into the other.  (One might talk about securitization, but this topic is either very simple (and quickly passé) or very complicated and arcane.)

My understanding of the freedom ensured by a liberal education was deeply shaped by Allan Bloom’s The Closing of the American Mind (1987).  Bloom provided a compelling meditation, as he termed it, on the soul of the contemporary student and how the modern university responded to the student’s search for knowledge.

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I realize that not all monographs can or should be geared toward the general public.  We, as academics, are not simply popularisers of ideas and information.  But it seems to me that too few scholars ever try to reach a larger audience, which is unfortunate.

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“Ann Coulter” and “Higher Education” are two terms usually not associated with one another.  Even so, universities serve as venues for public personalities, and Coulter is one of them. Americans have made passing note of a recent controversy involving Coulter’s speaking event at the University of Ottawa.  It’s all over the news in Canada.

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Like many conservatives I think that the idea of civil society provides the key to solving many problems of contemporary political life.  The intermediary institutions of family, church, school, club and business, along with the local neighborhood, town or village,  are (or should be) the loci of genuine politics.  The orchestrated, sentimentalized and distant stage-play of electoral ‘politics’ in today’s centralized democratic nation-state has nothing to do with the necessary human practice that Aristotle called politikê.  It’s not that national politics is inconsequential.  On the contrary, the fever pitch and high stakes of national political debate is part of problem, because it masks from our sight the absence of genuine political self-governance in everyday life.   

There is a problem with the idea of civil society, however, that few of its proponents ever address.  It doesn’t appear in influential scholarly discussions (such as MacIntyre’s After Virtue or Dependent Rational Animals: Why Human Beings Need the Virtues) or popular ones (such as the Front Porch Republic blog).  This problem is about the legitimate use of violence and coercion.  In every culture where the institutions of civil society have flourished, those institutions have had and exercised the right to use violence and coercion against their wayward members.  To advocate a re-empowerment of civil society, therefore, seems to entail advocating a certain ‘rearmament’ of civil society as well. 

When universities acted in loco parentis they had jails for rowdy students; when the Church was free and culturally autonomous it had ecclesiastical courts and penitential monasteries for wayward clerics and inquisitorial courts for heresy; when craft and merchant guilds had authority they policed the morals of their members and could collectively be vassals to nobles.  In the 18^th and 19^th centuries when these institutions lost the ability and the right to use physical and moral coercion, they quickly lost their identities as well.  The individuals who used to be subject to such coercion in a very limited sense became freer once it dissolved, because their freedom from the now-denuded school, church, and guild made them free to be subjected to the coercion of the market and the state.  Previously civil society's institutions had mediated those forces.  The important question is not, therefore, which arrangement promoted 'freedom' -- as if freedom were a monolthic and univocal notion.  Rather, the important question is: which complex of authoritative relations and spheres of freedom better promoted the human good?

Civil society’s institutions ceded coercive authority and the nation state acquired it to such an extent that Max Weber would come to define the state simply as that institution which had a monopoly on the legitimate use of violence in a territory.  According to Weber, only the state or those parties delegated by the state could claim a right to use violence and coercion.  Weber gave this definition as a sociological characterization of what the modern nation state had become; liberal political theorists offered philosophical justifications for why it should be that way.

There is no evidence which suggests that civil society could flourish without its institutions regaining the right to use some measure of violence and coercion.  Therefore, any real argument for civil society will have to go beyond pointing out the defects of the nation state and the virtues of robust civic life.  It will have to show how ‘re-armed’ institutions of civil society, as it were, are possible given the circumstances of modern life, how this could be brought about in practice, and why the pitfalls associated with such an arrangement would be better than the pitfalls associated with our present state-centric arrangement.  I don’t want to suggest that this argument is impossible—I hope it is not.  But the partisans of civil society, among whom I am one, need to work harder to develop it.