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Thoughts on Economics Education in America

For my sins, I wound up on the Institute for New Economic Thinking's panel on economics education...

I found myself with no strong conclusions, for I found myself gnawing the same four questions over and over again. They are:

  1. What is wrong with the undergraduate curriculum and how could we fix it?

  2. What is the graduate program supposed to train people to do?

  3. Why do so many of our professors know so little of what we collectively know?

  4. Why doesn't more of the undergraduate program stick or stick more?

The problems with the undergraduate curriculum qua curriculum seem to me to be largely problems with the history and context of the discipline--rather, the absence of same. Otherwise, the trot through market equilibrium, market optimality, market failure, and simple macroeconomics seems to work well. I might wish for more behavioral psychology in the market equilibrium part and a much better look at government failure in the market failure part, but those may come. I do think that warning labels should inform right-wing students that economics will encourage their bad intellectual habits just as labels should inform left-wing students that sociology will encourage theirs. The mix of words, algebraic equations, and analytic-geometric graphs and the requirement that students move back and forth among all three seems to me to turn a subject that ought to be conceptually rather easy into one that is, for the bulk of American students, relatively difficult.

All in all, however, Perry Mehrling's judgment that the best thing INET can do to add value would be to make it really easy for teachers to add Interdisciplinary and historical context to their classes seems sound. And the situation does not seem dire enough to call for a scorched-earth low-odds-of-success forlorn hope.

Rather, the educational problems appear to be concentrated at the graduate level. They ramify: we appear to have produced a professoriate--trained in graduate school--that appears remarkably ill-equipped to survive in the wild, and remarkably ignorant of the utilitarian and emergent foundations of the discipline. Judgments of economic welfare rest on utilitarian foundations. Equilibrium methods rest on equilibrium as an emergent property growing out of individual disequilibrium transactions. Yet a lot of the time professors get these wrong--an elementary mistake of the same order as solving the first-order maximization conditions without bothering to check the second-order conditions.

And the question is why. And the question is how to fix it.

I suppose that I am still astonished at the failure of the financial crisis and the Great Recession to bring about a sea-change in the teaching of graduate macro. I expected people to say: we need to train our stunts to know--we need to learn--what Reinhart and Rogoff know. There is no point in turning out students who know the models of Prescott who do not know the models of Say, Mill, Bagehot, Wicksell, Fisher, Hicks, Metzler, Friedman, Tobin--Keynes. There has been only one road-to-Damascus conversion among those who previously darkeneth counsel without wisdom: Richard Posner--who admits to never having read Keynes in the past-- finally did so, and says that he is now a Keynesian. But why am I astonished? I just as firmly expected that the 25% crash in the stock market on one Monday in 1987 without a fundamental cause would produce a consensus among economists that the efficient markets hypothesis badly needed to be supplemented by behavioral and institutional finance. And it did not.

Rethinking, I conclude that there is something subtle wrong with the undergraduate curriculum after all. What is taught in the classroom seems, largely, not bad. But what is retained after college seems to me, at least, to be horrible. What fraction of college-educated Americans have taken Econ 1? And what do they remember from it well enough to use? Tracking little--much less than I would hope or expect.

And the question is why?

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