Teaching Economics

Students at the University of Manchester in England are unhappy with the way they are being taught and they are not alone. In a widely publicized, and highly articulate report, the Post-Crash Economics Society, a group of Manchester Univesity students, is highly critical of "business as usual" in the economics curriculum in the wake of the crisis.

There is much to agree with in their arguments.


Among the criticisms that the students level at the curriculum are these

1. The absence of classes on the history of thought
2. No classes on ethics
3. A narrow focus on neoclassical economics to the exclusion of alternative perspectives
4. Little or no economic history

I agree with much of this and there is wide agreement amongst teachers of economics that change is needed as reflected in the published  Bank of England Conference volume, organized and edited by Diane Coyle. As I argued at that conference, it is a mistake to neglect the teaching of economic history and the history of thought.  But; beware of what you wish for.

Economics is a science. Our data comes from the natural experiments thrown at us by large disruptive events like the Great Depression, the 1970s stagflation and, most recently, the Great Recession.  It is the task of economic historians to familiarize their students with the facts.  It is the task of historians of thought to illuminate their students with the insights from the economists who preceded us.

What of eclecticism in the choice of topics? Should we teach a neoclassical approach to the exclusion of all else?  Probably not. But the core approach to modern economics, both macro and micro, is the culmination of a process of intellectual argument in which ideas have been sifted, debated and compared with facts. Some have survived; others have not.

When Marx wrote Capital, his economics incorporated Ricardo's labor theory of value, a centerpiece of the mainstream economics of his day. The labor theory of value was jettisoned by mainstream economics when the theory of marginal utility was introduced by, among others, the Manchester based economist Stanley Jevons. Marginal utility was an advance over the labor theory of value, which is no longer taught in mainstream courses. 

In the 1980s, there was tremendous interest in the idea that the mathematics of chaos theory could help us to understand business cycles. Chaos theory, had already proven successful in the natural sciences where it is used to explain fluid dynamics. At a conference in Paris in the early 1980's, Buz Brock, an economist who teaches at the University of Wisconsin, convinced many of us that there is just not enough data for that idea to help explain business cycles.  Chaos theory never did become part of the mainstream curriculum in economics.

In a twenty year period following the Great Depression,  Keynesian economics dominated the teaching of macroeconomics.  The central idea in The General Theory is that capitalist economies are not self-stabilizing. That idea was lost to mainstream economics when Franco Modigliani and Paul Samuelson synthesized Keynesian ideas with neoclassical thought.  The idea that capitalist economies are not self-stabilizing survived in Post-Keynesian economics and is now being reintegrated into the mainstream in my own recent work.

There is a reason why economic thought moves slowly. It is our inability to conduct experiments. If every new idea led to the creation of a new school of thought, the proliferation of ideas would overwhelm our ability to absorb and synthesize existing ones.

On Page 23 of their report, the Manchester students cite John Stuart Mill

"He who knows only his own side of the case doesn’t know much about it. His reasons may be good, and no-one may have been able to refute them; but if he is equally unable to refute the reasons on the opposite side, and doesn’t even know what they are, he has no ground for preferring either opinion.” 

John Stuart Mill, On Liberty

My advice to students is this. Continue to question everything you are taught. Lobby for classes on alternative approaches: But also take the time to absorb those ideas that are in the mainstream. The very best mainstream economists were the radical students who questioned authority when they were undergraduates. It is those economists who you must engage if you are to make meaningful changes that will advance our understanding. That takes hard work, perseverance, and patience.