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.