How Should the Financial Crisis Change How We Teach Economics?

Abstract

Student dissatisfaction with teaching of economics—particularly with macroeconomics—during the current financial crisis mirrors dissatisfaction that was expressed during the last big crisis, the Great Depression. Then and now, a good number of students have felt that their lectures bear little relation to the economic crisis raging outside the halls of academe. The economics profession seems unusual, when compared with some other professions, in complaints that the teaching is irrelevant to practical lives. There appear to be few complaints among physics students that their education does not prepare them for practical pursuits, such as engineering. But economics, particularly macroeconomics, is different from physics not because of the mode of teaching but because the subject matter is harder to conceptualize. Models have to be frequently discarded and fundamentally new ones have to be brought to bear to make them relevant to changed circumstances. Student dissatisfaction with economics, however, is, despite some vocal complaints, not intense overall, and enrollments are growing. Students mostly recognize that their teachers are struggling with the conceptual difficulties that are inherent in the field. Teachers can encourage such recognition and best serve their students if they refer regularly and respectfully to the history of economic thought, conveying the reasons for the theoretical constructs of other times and the tentativeness of current theories.

Keywords:

• financial crisis
• teaching macroeconomics

JEL codes:

• A22
• G01

Notes

1. Three years later, the Times remarked that “In hundreds of filing cases and desks of Washington officialdom lies the evidence of a new American indoor sport—evolution of plans ‘to end the depression.’…. The submission of such plans by unidentified citizens reached fair proportions in the years 1933 to 1935, but the mass of them which poured into Washington in that time apparently has been dwarfed by the new barrage, which began to arrive as soon as the recession started last fall” (The Nation Takes Its Pen in Hand 1938, 69).

2. In May 1930, 1,038 economists signed a petition against the proposed new tariff, a measure that tried to export unemployment to other countries in the Great Depression, against all received wisdom about the importance of free trade. They were unsuccessful in stopping this legislation, and a wave of retaliatory tariffs from other countries was the result, just as they had predicted.

3. The text was quoted from a recollection of a conversation.