For U.S. universities, a failing grade in economics

Original Reporting | By Mike Alberti |

Feb. 8, 2012 — In early November of last year, several dozen students walked out of an introductory microeconomics course at Harvard University taught by N. Gregory Mankiw, a former economic adviser to President George W. Bush and a current advisor to Republican Presidential candidate Mitt Romney. In an open letter to the professor, whose Principles of Economics is the most widely used economics textbook in the country, the students wrote that they were walking out “in order to express [their] discontent with the bias inherent in this introductory economics course.”

WHY so narrow?

Remapping Debate begins a four-part series on the consequences of how economics is and is not taught to undergraduates in the United States. One school of thought — neoclassical ecomomics — has continued its long dominance, a status quo unchanged by its failure to predict or account for the current financial crisis. Here in Part 1 of the series, we look at some basic precepts of neoclassical economics, the divergent perspectives that are ignored, and the charge that the current system fails to foster critical thinking in economics students.

In Part 2 of the series, also published today, we examine the way that neoclassical economics presents itself as a neutral and fact-based discipline, despite ample evidence that it is committed to promoting a specific set of values.

In Part 3, we will look closely at the curriculum that exists at most schools; the wide-ranging impacts on students (including who is attracted to and repelled by the field in terms ranging from deciding to take introductory courses, to majoring as an undergraduate, to going on to graduate work in the field); and at what would be involved in adopting more pluralistic curricula.

Finally, in Part 4, we will investigate the obstacles that stand in the way of changing how economics is taught to undergraduates, and ask supporters of the status quo to explain why they believe that both students and society at large would not benefit from a more open, inclusive curriculum.


 “We were getting a very narrow, one-sided view of economics,” said Rachel Sandalow-Ash, a freshman at Harvard who helped to organize the walkout.

That Harvard students — like their counterparts at virtually every other college and university in the U.S. — study almost exclusively “mainstream” or “neoclassical” economics may seem especially surprising in light of a Great Recession that was neither predicted nor accounted for by neoclassical models, a downturn that many critics say was an outgrowth of the U.S. having pursued the policy prescriptions of neoclassical economists so religiously.

“The possibility that a crisis might occur is just outside of the neoclassical framework, so of course they were singularly unequipped to handle it when it did” said David Ruccio, a professor of economics at the University of Notre Dame. “The possibility, or even the inevitability, of crisis is far more central to other schools of thought. If we want students to have a understanding of what has actually happened, they need to be exposed to that.”

But the longstanding dominance of neoclassical economics is especially entrenched in the academy. Most students are rarely, if ever, given an opportunity to study any of a number of other perspectives — such as post-Keynesian, behavioral, Marxian, institutionalist, feminist, or  ecological economics — each of which presents a different picture of society. Without a more diverse education, many economists and educators say, students are not encouraged to think critically about, or question the assumptions underlying, what they are learning. Even more disturbingly, students are effectively encouraged to internalize a narrow set of values and principles that have been sold to them as being purely factual or “neutral,” not recognizing that they have been presented with a limited perspective on how the world operates.

“These students are adults,” said Frederic Lee, a professor of economics at the University of Missouri-Kansas City. “They can fight wars for us, have children, vote, but they’re not allowed to be introduced to alternative viewpoints.”

According to Lee, the narrowness of economics education can have profound implications, for both students and society at large.

Sandalow-Ash agreed. Education should not been seen “only as a means to an economic end, but as a means to a political end,” she said. “We’re not just training workers but also citizens, and we want to teach students to criticize the institutions around them,” she added, saying that doing so is the way to ensure that “democracy works.”


A narrow education

Prime among the fundamental principles and assumptions of neoclassical economics is the premise of Homo Economicus, or “rational economic man.” Students are taught that human beings will always act “rationally” to pursue their own interests. Consumers will always try to maximize their “utility” — or satisfaction — while businesses will always seek to maximize their profits.

Neoclassical economics also places a heavy emphasis on markets as representing the best way to organize economic activity. In models of well-functioning markets, all the participants have equivalent access to the information needed make informed decisions in order to pursue their own self-interest, or “perfect information.” (See box below.)

Perfect information? Perfect competition?

Neoclassical economics proceeds on the assumption that, in most markets, all participants will have full and equal information. As a result, consumers are said to be able to make the best possible decisions about what they are buying and producers who make the best products will therefore be rewarded. The validity of the assumption and the predicted results have come under a barrage of criticism from many heterodox schools of thought.

In connection with health care, for example, different players know more about different elements of information (and can exert varying levels of power). Patients know more about their actual health than do insurance companies, but the insurance providers know more about costs. Physicians tend to have most information about treatment options appropriate for a particular patient.

“If you take the time to think about it, it becomes clear that we’re actually a very information poor society,” said Robert Prasch of Middlebury. “People make economic decisions everyday without knowing very much. We buy computers and cars without knowing anything about how they work or how they were made. How often do we know when the business that makes your car is polluting a river? If you’re renting an apartment, how much do you actually know about the property and its history?”

Similarly, the concept of perfect competition, which depends on perfect information, has also been heavily criticized for ignoring the role that power plays in a market. Perfect competition assumes that all producers have no power — and, thus, equal power — to influence the price at which goods are sold to consumers. According to David Ruccio of Notre Dame, some schools of economic thought reject the concept of perfect competition as being inapplicable to nearly every market.

“It’s a fantasy,” he said. “Most markets you can think of don’t follow those rules. You might get close to perfect competition if the market is for mom-and-pop grocery stores and there are a lot of them and they’re all very small. But we live in a world of gigantic national and multinational corporations that have a tremendous amount of power to set prices above what the market would otherwise bear.”

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