Critics of the old model of economics teaching are right. But there’s an alternative: and it’s already being taught to undergraduates worldwideby Wendy Carlin / May 3, 2018 / Leave a comment
Could they both be right, the “rip it up” critics of economics, who—like Howard Reed in last month’s Prospect—claim that Econ. 101 is broken, and the economists fighting back—such as Diane Coyle on Prospect online—who point to the solid research the profession is doing to address pressing social problems?
The textbook model is definitely broken. In it, economic actors are amoral and self-interested, perfectly competitive market prices equate supply to demand implementing “optimal” outcomes, while environmental degradation, instability, and inequality are afterthoughts at best.
Nobody believes it. Yet it continues as the backbone of much undergraduate teaching. However remote from what economists really do and the way we think, this is the “economics” imprinted on the public’s mind. Most of the great research the defenders of economics point to is being carried out without reference to the outmoded textbook model.
But the valuable light they have shed on a warming planet, the China shock, and the dynamics of bubbles and crashes does not in itself constitute an over-arching alternative to the textbook model, one that provides an empirically-founded understanding of not just pieces of the economy but of the whole.
So maybe the critics and the defenders both have a point. And maybe, furthermore, they should equally welcome what has for the most part been missing from the “economics has failed” debate, namely an alternative.
Tom Clark and Chris Giles debate: Has economics failed?
The good news is that such a new model is now available. It sweeps away the old Econ. 101 and it is being successfully taught to undergraduates around the world.
The new model—like the Econ. 101 paradigm—provides a way of thinking about how the economy as a whole works. But this time, it is built on the solid foundations of contemporary research in economics and other social sciences. The panoply of greats are all brought in—Marx as well as Marshall, Hayek as well as Keynes, Coase and Simon, as well as Nash and Arrow—not as contrasting points of view, but as integral to forming a coherent picture of the economy as a whole.
The object of the study of economics is not a static equilibrium of a self-contained system, but an always-changing process that is part of the social…