All entries for Thursday 09 October 2014

Economics books are quite the opposite of what the FT thinks they teach

Writing about web page http://www.ft.com/cms/s/0/60feaa0c-47d0-11e4-ac9f-00144feab7de.html

On 25 September the Financial Times published an editorial "Economics needs to reflect a post-crisis world":

The typical economics course starts with the study of how rational agents interact in frictionless markets, producing an outcome that is best for everyone. Only later does it cover those wrinkles and perversities that characterise real economic behaviour, such as anti-competitive practices or unstable financial markets. As students advance, there is a growing bias towards mathematical elegance. When the uglier real world intrudes, it only prompts the question: this is all very well in practice but how does it work in theory?

... Fortunately, the steps needed to bring economics teaching into the real world do not require the invention of anything new or exotic. The curriculum should embrace economic history and pay more attention to unorthodox thinkers such as Joseph Schumpeter, Friedrich Hayek and – yes – even Karl Marx. Faculties need to restore links with other fields such as psychology and anthropology, whose insights can explain phenomena that economics cannot. Economics professors should make the study of imperfect competition – and of how people act in conditions of uncertainty – the starting point of courses, not an afterthought.

My response was published on 1 October under the heading "Economics books are quite the opposite of what the FT thinks it teaches" (what the FT thinks they teach, surely):

Sir,

You write (editorial, September 26) that economics courses too often begin with “how rational agents interact in frictionless markets”, and only later proceed to “anti-competitive practices or unstable financial markets”. This is not so: the problem is quite the opposite. All introductory textbooks quickly cover imperfect markets and the government interventions required to correct them. Thus, the belief that free markets are always for the best is quickly punctured. Replacing it you will too often find the idea of the government regulator as a Victorian civil servant: high-minded, well educated and perfectly equipped to make decisions for society. At the same time, the wealth of research on power-building, corruption, and incompetence in high places around the world is treated as an “advanced” special subject that only a few will ever follow.

Mark Harrison, Professor, Dept of Economics, University of Warwick, UK

Mark Harrison : 09 Oct 2014 12:24 |  Tags: Economics |  Comments (3) |  Close comments |  Report a problem