Teaching economics

Margaret Stevens1 reflects on the debate over curriculum reform that we have featured in recent issues of the Newsletter.2 Her article is followed by a brief note from Diane Coyle and Simon Wren-Lewis.

A conversation with one of my students in 2011 crystallized the unease I felt as a university teacher of economics. She had come to study PPE in Oxford three years earlier as the financial crisis began, with many questions about the economic world, about the international financial system, about inequality, and social policy. She specialised in economics, worked hard, and learnt a lot; now she had graduated with a top first class degree. But she still had no idea what the answers were – so was thinking of continuing to graduate study of economics. I couldn’t help feeling less optimistic than she did about a master’s degree providing the answers.

Of course, we were not alone; many academic and professional economists and students were expressing similar dismay. The Post-Crash Economics Society at Manchester, founded that year, was just one of the student-led calls for change nationally and internationally, subsequently brought together under the umbrellas of Rethinking Economics and the International Student Initiative for Pluralism in Economics. Academic economists as diverse as Edward Glaeser, Paul Seabright, and Ha-Joon Chang entered the debate.

The CORE Project (Curriculum Open-access Resources in Economics), an international collaboration of 25 economists led by Wendy Carlin at UCL, took on the challenge of producing new teaching resources for a broader economics curriculum. The materials are already being tested in universities in Europe (UCL, Bristol, SciencesPo in Paris, and Siena) the US, Australia and India. The CORE approach is to start from evidence – of economies across the world, and the history of their development – and give students tools they can use to analyse and explain what they see. It encourages them to consider economic questions in social, political, ethical and behavioural context, and not to dismiss (as PPE students sometimes do) questions of power or justice as “beyond the scope of economics”.

In the last RES Newsletter, the Post-Crash Economics Society criticised the CORE initiative: 'CORE remains firmly within the methodological and theoretical bounds of mainstream economics.' For PCES, CORE is insufficiently pluralist or heterodox.

I am at one with PCES in seeing the most widely-taught economics curriculum as stuck in a narrow and uninspiring rut. Almost every microeconomics course, at any level, begins with consumer and producer theory, and proceeds to competitive markets and general equilibrium, treating monopoly and oligopoly as special cases, finally reaching public goods, externalities and information problems as an afterthought. While many of those who teach such a course would not characterise themselves as 'free-market' economists, there is certainly a danger that students – especially those who switch off before the final units – take away a message that the world is (or should be) a collection of competitive markets.

But those of us who perceive a problem will not necessarily agree on the solution. And for me, the solution to the problem of an established orthodoxy3 is not heterodoxy, or pluralism. Right opinions – whether one or many - get in the way of thinking. Students used to write in macroeconomics essays: 'Monetarists believe… and on the other hand Keynesians believe…' Lacking the skills to discriminate for themselves amongst arguments presented to them as equally valid, they could only resort to signing up on one side or the other, and concluding 'I believe…'

Economics is not a religion, and we should not be looking for a doctrine or a prophet to tell us what to believe, still less a crowd of squabbling prophets. Pluralism is defined by PCES as multiple perspectives that give “different, valid answers” amongst which students are encouraged “to come to reasoned judgements about the best answer”. While open-mindedness and reasoned judgements are of course desirable, I want to teach my students to be economists, not adherents of one or more schools of thought.

PCES is scathing about the failure of 'mainstream' economics to predict the financial crisis, arguably with some justification. But the crisis also illustrates a problem with teaching economics as a backward-looking collection of different approaches and theories.4 The world in which this crisis happened was different – in terms of technology, communications, and financial institutions – from that analysed by economists of the past, whatever their approach. We can learn from them, but we need more: an outward-looking interest in the economic world of the present, and an ability to develop new models to understand it. To equip our students to predict and avert the next crisis, we should give them the tools and skills to do economics for themselves.

'Economics is what economists do' is usually interpreted as an answer avoiding a question. But what almost all economists do, whatever their methodological or political perspective, is build models to help them understand the economy and the behaviour of economic agents. Economies are complicated; a model is a simplified description that provides insight and explanation, and perhaps predictions, or guidance on policy. Models are not necessarily mathematical or statistical: they may be verbal, graphical, pictorial, or physical. Technology has expanded the range of modelling techniques to include simulation and agent-based modelling. Becoming an economist means learning the art and science of modelling, based on evidence and knowledge of the economy.

An important lesson is that the test of a model is not whether it is right – it can never be a perfectly accurate representation of all aspects of reality. Both the power and the limitations of a model come from simplification. Nor is a model the same as a theory; theories are based on models, but usually entail a claim about applicability. A model is valuable if it helps us to understand and explain evidence.

A model can only be judged in relation to the question to which it is applied. Since the art of modelling involves decisions about which factors are important and which may be ignored, a particular model may do an excellent job in answering some questions, and be useless or misleading for others. The standard model of consumer demand may provide a satisfactory explanation of how a change in the price of meat affects the consumption of eggs, despite unrealistic assumptions such as 'full information'. But if we are studying the market for healthcare, or addictive drugs, the standard model may be inadequate: we need to look more closely at what information consumers have and how they use it when making their decisions.

The PCES representation of CORE as 'mainstream' criticises the use of 'such staple tools as indifference curves, marginal products and opportunity costs…. without reference to alternative perspectives which criticise them or theorise differently.' But these are merely tools: the question is not whether they are good or bad in themselves, but whether the model that they have been used to construct captures the essence of the problem we are studying. This is for the students – as apprentice economists – to judge for themselves, rather than relying on 'alternative perspectives'.

CORE aims to give students a range of modelling tools, and uses them to address a much broader range of questions than conventional economics courses. Early in the course, for example, they are introduced to social dilemmas and experimental evidence on how people solve them. In the next unit, indifference curves and marginal products are amongst the tools and concepts used to analyse the implications of institutions and the distribution of economic power. The approach is very different from the standard micro course summarised above, but it would be perverse to throw away useful tools just because they were used in the previous regime – a bit like the smashing of classroom tables and chairs in the Chinese cultural revolution.

The common fate of revolutions that begin on a wave of optimism and unity is to degenerate into factionalism and accusations of betrayal and counter-revolutionary sympathies. It would be sad if the opportunity we now have to introduce real change, and diversity, into university economics curricula were to be wasted in in-fighting. CORE is already a remarkable achievement: an innovative and ambitious introductory course is being adopted in universities around the world. I prefer CORE’s model-based, back-to-first-principles approach to the idea of a course structured around pluralism and heterodoxy. But I also recognise that I share many of the objectives of PCES: particularly that students of economics should be encouraged to open-minded and critical, and to understand that economic judgements cannot be separated from the social, political and ethical context. PCES is a remarkable achievement too: not just a protest movement, but a project that has taken on the challenge of building something better. I think that it is more likely to succeed if it acknowledges that there may be more than one way to do that.


1. Dept of Economics, University of Oxford

2. 'New teaching for economics: the INET-CORE project', no. 166, July 2014; 'Necessary pluralism in the economic curriculum', no. 167, October 2014; 'Economics as a pluralist, liberal education', no. 168, January 2015.

3. Derived from Greek: 'right opinion'.

4.Even if, as emphasized by Jamie Morgan in the October 2014 Newsletter in defence of pluralism, it includes 'new bodies of theory.'

From Issue no. 169, April 2015, pp.13-14

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