Teaching Macro Principles after the Financial Crisis

Abstract

Recent events should force everyone who teaches macroeconomics (or finance, for that matter) to reconsider their curriculums. In this short article, the author shares his thoughts about what should and should not be changed in the way economists teach macro principles to beginning students. Two tradeoffs are paramount and must be faced by every instructor: (1) how much additional complexity must be and can be introduced in a principles course in which the students are relatively unsophisticated; and (2) although it is easy to think of new topics that recent events “demand” instructors add, it is much harder to think of topics to delete. Yet economists should understand the necessity of choice forced by (time) budget constraints.

Keywords:

• financial crisis
• teaching macroeconomics

JEL codes:

• A22
• G01

Notes

1. The first edition was published in 1979, and the publisher's name has changed many times due to mergers, acquisitions, and so on.

2. Often there is nothing more than demand and supply functions for money.

3. The 11th-edition update will be published shortly, with an entirely new chapter on the crisis. Leverage is taught in that chapter.