Why Is Econ 101 So Bad?
When I was 15, I was probably a little too obsessed with the Turkish conquest of Constantinople. In my teenage mind, that was the moment when the world became modern -- when cannons knocked down the great curtain walls that had kept the world's greatest fortress impregnable for a thousand years. It was the triumph of science and engineering over medieval brute force.
So Constantinople was on my mind when our intro physics teacher took us to the lab to test the theory of projectile motion. It involved lobbing metal balls at a piece of tape and recording where the balls hit. When we looked at the tape, it was like magic -- the math had predicted just where the ball would hit. Physics theory really worked. "So that's how they did it!," I exclaimed to myself, thinking of the Turkish cannon pounding away at the Byzantine walls. (Little did I know that 15th century gunners found their range by trial and error; mathematical firing solutions would come centuries later.)
So that's how I learned Physics 101. But a decade or so later, when I sat down with Greg Mankiw's ``Principles of Economics'' to teach myself Econ 101, I found myself wondering what kind of equally convincing tests I'd be doing if I were taking the course for real. Fast forward another four years, and I was teaching Econ 101 (actually, Econ 102, but let's stick with the jargon), right out of Mankiw's book. And guess what -- there were no demonstrations. There was basically nothing but theory -- all the pretty little theories of comparative advantage and monopoly pricing and loanable funds, and not a whiff of evidence to back them up. Oh, I tried showing my undergrad students a couple of empirical papers, and drew pictures of what a simple regression would look like, but they mostly ignored these, and with good reason -- nothing empirical was on the tests.
Fast forward to the present. Economics students are rebelling. John Kay has the story:
Students of economics are in revolt - again. A few years ago, even before the crisis, they established an 'autistic economics' network. After the crisis, in 2011, a Harvard class staged a walkout from Gregory Mankiw's introductory course. That course forms the basis of textbooks prescribed in universities around the world. This year, 65 groups of students from 30 countries established an International Student Initiative for Pluralism in Economics. In no other subject do students express such organised dissatisfaction with their teaching.
Students' dissatisfaction is mostly about politics -- they perceive mainstream economics as thinly disguised shilling for unrestrained free-market capitalism (also called "neoliberalism"). But that criticism is extremely out of date. Any Econ 101 course not taught by a total ideologue will contain plenty of theories that support the need for government intervention. Mankiw's book certainly does. These include externalities, asymmetric information, strategic behavior (game theory), welfare economics, monetarist and Keynesian macroeconomics, and more. I could teach you an Econ 101 course straight out of Mankiw that did nothing but give reasons for more government. The fact is, if your Econ 101 course is a front for neoliberal propaganda, it's only because your professor wanted it to be.
Kay is right when he says that "heterodox economics" isn't a real alternative to what they teach in Econ 101. To understand why, you will have to spend a month or so immersed in the writings of the "heterodox," but the basic reason is that all the interesting heterodox ideas quickly get incorporated into the mainstream in some slightly bastardized form.
Kay advocates that we shift from "paradigm" to "pragmatism" in Econ 101. I would put it a bit more concretely: What we need is to teach empirics. We need to teach undergrads how to tell if theories are right or wrong.
That would be in keeping with the broader shift in academic econ, which has seen empirics flourish even as theory occupies a smaller role. It would also work against the perception of economics as ideological. The truth is, sometimes it's easy to use data to tell good theories from bad...and sometimes it's impossible. Good data work involves not just running regressions but critiquing them -- identifying faulty assumptions, finding sources of bias, and recognizing when cause and effect can't be disentangled.
Teaching Econ 101 students theory after theory after theory leaves them with the impression that they could have just been fed a line of bull. And in fact, they're right -- they could have. Instead, teach them to be skeptical, look at the evidence, and think for themselves.
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