After the global financial crisis in 2008, economics was in disarray. Even the Queen was moved to chide economists for failing to warn about the build-up of debt in households and banks in the major economies and the threat this posed to the global economy. She might have added that few economists provided convincing accounts of why the meltdown had happened. And some advocated policies in its wake that made things worse.
She is not the only one left wondering. One important legacy the financial crisis has left us with is a new generation which is no longer satisfied with learning the economics which got this so wrong. No young person who has witnessed or participated in the #Occupy protests around the world -- such as the one taking place in Hong Kong now -- can remain wedded to a curriculum which fails to evolve in their wake.
Demands for change
There have been loud calls for economists to face up to the failures of their discipline and embrace new ways of thinking. Students in universities from Manchester to Santiago, Chile were fed up with a curriculum that simply ignored the upsurge in economic disparities and the threat of global climate change. They were among the first to channel the discontent and demand that the teaching of economics respond to the shortcomings of the discipline.
For decades students around the world have experienced economics as a kind of endless boot camp that never quite engages with reality. Nataly Grisales, writing in a student newspaper in Bogota about her decision to study economics said:
A professor mentioned that economics would give me a way to describe and predict human behaviour through mathematical tools, which seemed fantastic to me. Now, after many semesters, I have the mathematical tools; but all the people I wanted to study have disappeared from the scene.
One response has been the CORE project, which has brought together economists – including me – from around the world to change the old way of doing things. Funded by the Institute for New Economic Thinking in New York and based at Oxford Martin School we have developed an ebook, The Economy, which is designed to give students a set of economic concepts, many of which are missing from conventional teaching, and which they can use to address central economic problems of our day.
New theories in economics make it possible to situate the economy within its historical, social and environmental context. Elinor Ostrom showed how communities can reverse the tragedy of the commons -- in which individuals acting out of self-interest will inevitably deplete shared resources. Labour economists have showed that because workers determine the quality of their effort, higher wages are often better not only for workers but also for their employers. Economists of finance and money have showed why bubbles such as the housing boom and bust occur.
Though students have been kept in the dark about these new developments, economics has actually made huge progress in the past three decades in understanding how real human beings in real situations behave and why this sometimes leads to the problems facing us today. One of the key jobs of the CORE project is to make students aware of new empirical results as well as novel ideas in economics that have not yet made their way into the core of the introductory curriculum.
Among the new results that are changing economics today is a series of experiments showing that people are not the unmitigated selfish, so-called economic man of the textbooks. Computer simulations have revealed the inherent instability of capitalist economies. New theories of labour and credit markets show that an unregulated market economy often produces inefficient results. And particularly since the financial crisis of 2008, economists have turned their attention to problems of finance, banking and money that were previously ignored in the introductory curriculum.
The new curriculum is still in beta testing and a year and a half from its official release. But since we posted our beta version on the web just 3 weeks ago, some 4,000 people have registered to have a look and testing will continue at universities in Latin America, France, India, Australia and Italy in the months to come. The financial crisis, growing inequality, and looming environmental catastrophe have inspired a new generation of economists to help build a new learning infrastructure, and perhaps a brighter future for the dismal science. A new generation of economists is demanding nothing less.
Wendy Carlin receives funding from the Institute for New Economic Thinking.