Reforming economics

25 Oct, 2020 at 13:43 | Posted in Economics | 1 Comment

Robert Heilbroner Quote: “Before economics can progress, it must abandon  its suicidal formalism.” (7 wallpapers) - QuotefancyThe 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. …

Economics should not be taught as if it were about the discovery of timeless laws. Those who champion the discipline must remember that, at its core, it is about human behaviour, with all the messiness and disorder that this implies.

Financial Times

1 Comment

  1. In addition to history and the great thinkers, there are several other issues that the field of economics should address. The field of economics is one among many so the relations between economics and other fields must be considered even if economics predominates. Namely, the disciplines of sociology, anthropology, political science, history, philosophy, psychology, aesthetics and literary criticism. The character of an economist must also be considered – the use of history, mathematics, philosophy and politics, as a statesman, must be integrated. The glaring problem that does not seem to get attention is the relation of economics to politics, namely, to political-trade cycles. This problem takes different forms at different times, today it involves techniques like tariffs and military coercion, but there is no doubt that employment and wage deflation are topics that are avoided by the supply side worldview and the expectation that investment drives full employment. Full employment at what household income levels? It is disingenuous that socialism as planning gets obviated when “planning” is clearly what is happening. What would Piketty say?


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