Changes in Teaching Economics?

October 1, 2010

by Mario Rizzo  

The Economist asked how the teaching of economics might change in the wake of the financial crisis and the recession.  

Predictably, some economists said they would teach more about the (shadow) banking system and economic history. That is good. But most will simply tweak their courses. 

The vast majority of economists know what they have been taught. The active researchers also know the models or frameworks that have governed their research. Most are not about to shake up the world of ideas that has been good to them.  

The following comment from Alberto Alesina of Harvard University sums up what I think will be the dominant reaction in practice:    

“The “how” hasn’t changed but the “what” has”

I do not think that the crisis has changed “how” economics is taught but has influenced “what” is taught and the research agenda of many economists. With regard to the financial crisis, many macroeconomists are working on how this type of collapse and contagion can happen and how to better incorporate finance in macroeconomic models; experts in finance are talking more about issues of financial regulation. As far as the recession is concerned, I see a renewed interest in the Great Depression, more generally toward looking back in history and considering other periods of disasters. Also an interest in discussing the pros and cons of activism in fiscal policy, and the institutional role of central banks amongst many other themes.

As for the methods of teaching and research nothing has changed. We kept all that is good about methods in economics: theoretical and empirical rigor. But one may say we kept also what is bad: a tendency to be too fond of technical elegance and empirical perfection at the expense of enlarging the scope of analysis and its realism. Those who found our methodology good should not worry about changes. Those who did not like it should not hold their breath for any sudden change due to the crisis.”  

The second paragraph above (italics added) is, I believe, key. This means that essentially no concessions to the fundamental critics of contemporary economics. Those who dominated the profession before will be in charge of making whatever topical changes are necessary.  

It is actually quite depressing because Alesina is one of the better “top” economists around. And yet he is tied to a way of thinking that seems intolerant of other methods.  

I do not expect economists to give up their own predilections But is it too much to ask that in a time of policy disarray and questioning among the wider intellectual community that there be a little more self-examination among  mainstream economists?

Admittedly, the teaching of economics changes very slowly. But with so much irrelevant and self-indulgent “stuff” being taught, it might help if there were a kick from the outside. One thing that could really make an important difference is the drying up of NSF funding.

I do not think there is much chance that better research can be funded with the same cast of establishment characters continuing to evaluate the proposals. But if Congress turns off the funds less social “bad” will be produced. And that would be to the good.

13 Responses to “Changes in Teaching Economics?”

  1. Pietro M. Says:

    I have a tentative theory, I was thinking about it yesterday.

    Changing one’s own mind is costly.

    When evidence is abundant, however, it is also costly to keep bad ideas, at the risk of being falsified quite conclusively.

    The less the employed method gives strong objective results, the less significant are the facts, the more falsification is difficult, the more people will stick to their ideas only because of path dependence.

    In engineering there is no hope to uphold a bad idea for long: designs would simply be outperformed, or even wouldn’t work.

    In natural sciences there is often a lot of compelling evidence, although not in all fields and for all theories.

    In social sciences, fads and fashions are likely to have a much higher impact, however.

    In philosophical issues such as methodology, there may be almost no feedback between ideas and results.

    Economists will be more likely to change their economic theories than their methodological tenets, because, if not immediately at least after a decade or two, bad economic ideas give bad results.

  2. chidemkurdas Says:

    It’s an instance of path dependence, I think. Economics evolved this way in the post-war era, when using math to look like pseudo-physics really paid off in terms of government support. Optimization-based models go with the math. This is what economists learned & taught for several decades and, as Pietro says, it is very costly to change one’s mind, as well as one’s skill set. So both the methodology & the theory are locked in.

  3. Rebecca Burlingame Says:

    Part of what is so intriguing to me about economics is that it is such a young science. I believe it is only a matter of time before people begin to understand that economics is something that belongs to everyone, and eventually it will likely be incorporated into what people learn at a young age.

    At the age of 50, I started studying economics in earnest. Last year I wanted to go back to school for a degree in economics, but discovered that I was too far behind in math to catch up. Nevertheless I kept studying on my own. Now, after 6 1/2 years, I am glad to be “outside” the field because I am free to develop ideas about the “whys” and what can be done.

  4. Mathieu Bédard Says:

    “The vast majority of economists know what they have been taught. The active researchers also know the models or frameworks that have governed their research. Most are not about to shake up the world of ideas that has been good to them.”

    You could easily tell which year the professor got his PhD for a lot of the classes I’ve attended: the year of publication of the latest article/book studied in class.

  5. Roger Koppl Says:

    The NSF could fund a program in, say, “macroeconomic complexity” or something. That would help to tilt proposals away from DSGE. You point to a cost of the decentralized NSF system. Right on. But overall, I think it is a strength of the NSF that is has no dictator. I think I’m just channeling Butos & McQuade when I say that. I think the problem of oligopsonistic demand for macroeconomics is more a problem about central banks than national science-funding agencies. In saying that, I think I’m just channeling Larry White.

  6. Troy Camplin Says:

    A few general thoughts on economic education:

    Students should be explicitly taught about folk economics and its evolutionary psychological origins and functions.

    Students should be taught about conceptual integration — which means that the laws of physics apply to chemistry, but that there are rules of chemistry that do not apply to physics; the rules of physics and chemistry apply to biology, but there are rules of biology which do not apply to chemistry, let alone physics; the rules of physics, chemistry, and biology apply to psychology, but there are rules of psychology which do not apply to those hierarchically below it; and the rules of the social sciences, including economics, have to abide by the rules of physics, chemistry, biology, and psychology, but also have their own rules.

    There are simple sciences and complex sciences; physics is a simple science, and economics is a complex science (indeed, are at opposite ends of the spectrum). Math grossly oversimplifies even physics. For complex processes, it can create a general map, but do little else.

    Complex networks like economies are far-from-equilibrium processes/spontaneous orders.

    A complex process/system cannot fully understand a process/system as complex or of greater complexity than itself — thus, humans cannot fully understand the mind or those processes which emerge out of the interactions of humans, such as economies. Physics, chemistry, and biology are all able to be understood only because they are less complex than the human mind.

    Unless students understand these basic facts, they cannot understand economics at all. They will only think they do.


  7. For me, the problem is much larger than economic education and goes to education generally. Education, especially higher education, is on an unsutainable cost trajectory. The industry doesn’t generally use technology to reduce costs.

    I’ve been amazed at how suddenly support for higher education is evaporating on both the political left and right. Tenure has come into play. Maybe we’re at a tipping point. If so, economic education will be just a piece of what changes.

  8. Troy Camplin Says:

    No question that there is an education-wide problem. The humanities and social sciences should all be based on a solid psychology — and they aren’t — while psychology should be based on evolutionary theory (which , thankfully, it increasingly is). Universities need conceptual integration. Right now education is a scattered mess, and little education is actually taking place.

  9. Rebecca Burlingame Says:

    There will not be a breakthrough in how people view education in general until healthcare is completely redefined. Why? For many people this is the most important “product” of our times and only a limited few are allowed to present this product to the public. When people are allowed to take part in the incredible multitude of potential health based services, it will become more apparent that education (including healthcare) is actually an ongoing process of redefining and transforming each community, no matter how large or small.

  10. Greg Ransom Says:

    We can’t blame the economists enough for wrecking the economy.

    Tell everyone you know — the scientific incompetence of the economists wrecked the economy.

    It’s the truth — and people deserve to know.


  11. There is a quote from the 1970s, which I attribute to Hayek in my mind, that economists needed to do penance in sackcloth and ashes. Do you know it, Greg?

    It is interesting how highbrow economics and finance has served the interests of financial engineering. We are constantly assured of the Great Efficiencies it brings us. No one quantifies them, but we can certainly quantify their cost in terms of the Great Recession.

    Gretchen Morgenson’s column in today’s NYT Business section deals with some of the issues.

  12. Greg Ransom Says:

    Doesn’t ring a bell, Jerry.

    “There is a quote from the 1970s, which I attribute to Hayek in my mind, that economists needed to do penance in sackcloth and ashes. Do you know it, Greg?”

    Hayek’s most direct calling out of the academic economics and economics profession came in talks given in the early 1980s.

    Hayek in his late 70s and early 80s stopped hedging and stopped trimming his sails, and began saying what he really thought.

    You can see this as became more and more direct in confessing what he really thought of Keynes and his economics.

  13. Niko Says:

    There wont be any change in teaching economics, as there wont be any change in teaching period. Today we have a general crises in every science, covered up by the progress in technology, which is passed as scientific achievement, but it isn’t, just like math covers the idiocy in today’s economics.

    There is too much invested in the current system, many of today’s demigods, and each professor, especially in the academia, sees himself as such, would be out of work and, more painful, ignored by everybody.

    The idea that if a generation will die and the new will be different is nonsense, a clever twist to quote, but nonsense non the less. When a crises happens, one that wipes out orthodoxies, it doesn’t look at age, IQ, social status and so on, it washes everything because the stupidity was driven such heights it is beyond any measure of repulsion.


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