The most important thing you can learn from an economics course – Quartz

Two extraordinary things have happened to the economics profession in the past 20 years. Economics has become the most popular course at many universities, and the financial crisis has seriously damaged the credibility of the field.

No wonder there is a major overhaul underway on the way economics is taught. But the traditional economics taught to undergraduates has held up better than many people think. In order to help today’s students understand the new economic order, we don’t need to throw away existing models. Instead, we need to teach more economic history. One of the best parts of my education in economics was the two years of economic history I took as an undergraduate. These prices always influence my understanding of the evolution of the markets. Most importantly, they gave me a long-term perspective and an awareness that understanding economics requires both a strong intellectual framework and an openness to new ideas.

A few years ago, a few British students called for the economy to be redefined in its scope and methods. An account of their requests contains a foreword by eminent Bank of England economist Andrew Haldane and this has sparked serious discussion among educators. Now, a recent BBC report claims the cause is finding allies all over the world.

UK students claim they want to be taught a more diverse perspective. But it seems they already understand this, they just don’t know enough to realize it. For example, Diane Coyle notes that they seem to think that all theories that are not Marxist are neoclassical (a traditional school of thought). This is simply false and totally ignorant of all the competing schools of economic thought generally taught in most departments of economics.

Although the students have valid critiques, their sloppy and inaccurate portrayal of mainstream economic theory (they also call the leading “Chicago Journal” which is not an economics journal) suggests that they hardly studied. the subject they think needs a radical change.

Before we tear up economics teaching, let’s take a step back and clarify what economics aims to do. The economy offers a series of parables to help us understand how the economy works. Parables are abstractions that make many simplifying assumptions because the world is too complicated to capture in a simple model. Economists can discuss the appropriate assumptions or the best framework for describing a problem, but that doesn’t mean that an approach is totally wrong. Often times, it’s not that a template is wrong, it is just being applied to the wrong problem.

For example, most undergraduates are introduced to Keynesian ideas through the IS / LM model. The model describes a snapshot of an economy in recession. But it is less useful to understand how an economy develops over the long term or how risk and uncertainty matter. It’s a great model for answering some questions, but terrible for others. But it is not always easy, even for the best economists, to know when to use which model. This is where the divisions arise.

As the economy evolves, it demands new models, modifications of old ones and more creative applications. Behavioral economics gained momentum after the crisis, as it explores how human decision-making is not always as rational as traditional models predict. But that doesn’t require throwing out the old models; economists are often content to modify existing ones to accommodate a range of human behaviors. The influential work of Harvard economist David Laibson combines behavioral knowledge and traditional models. It is impossible to understand behavioral economics without first learning how it changes and does not change the basics.

The teaching of economics at all levels aims to provide an overview of the different models and how to apply them. But understanding patterns takes hard work and often math, which can be abstract and unpleasant. This is precisely why an education in economics is so invaluable. Life requires the ability to balance different narratives, to determine which assumptions are important, and how to build on existing knowledge. Often times, good problem solving in any field requires skill, expertise, discipline, openness to different points of view, and sometimes a little discomfort.

US economist Noah Smith also believes economics education needs an overhaul. He believes statistics, rather than theory, should be at the heart of economics education. Right now, statistics are important, but as a tool to help understand and validate theory. It is only taught when students are more advanced in their economic studies. Smith thinks it should be the other way around in order to avoid students giving too much weight to a theory.

But for the same reasons that British students get it wrong, Smith misses the point. Statistics without theory are pure data science. It doesn’t tell you much about the importance of certain relationships, for example inflation and unemployment. It also does not allow us to understand how different economic factors influence each other. Statistics are a useful way to validate theories and deduce which one is the right one to use. The data allows researchers to understand how and why different theories sometimes fail. But without a solid theoretical basis, pure statistics lack meaning.

An education in economics aims to provide a framework for better understanding how the world works. It’s not fortune telling, moral philosophy, or pure statistics, and it never has been. The teaching of economics can support some improvement, but first we must understand what it is and aims to do and build on existing knowledge as the economy evolves.