Behind scientific façade, economics depts serve heavy dose of laissez faire

Original Reporting | By Mike Alberti |

Feb. 8, 2012 — In Part 1 of Remapping Debate’s series on undergraduate economics education, we reported on how the discipline has been dominated by neoclassical economics, a school of thought that is presented to students without giving them the opportunity to study other, more “heterodox” perspectives or to develop the ability to think critically about the foundational assumptions that undergird neoclassical thinking.


This article is part of Remapping Debate’s 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. In Part 1 of the series, also published today, we looked 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.

Here, 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.


A separate but related vein of criticism of the current educational model argues that it strongly influences students to unthinkingly adopt the values generally held by their professors. As a practical matter, critics say, they will generally reflect a belief in free markets and laissez faire economic policies.

In economics, a distinction is often made between positive statements (what is) and normative statements (what ought to be). When neoclassical economics is presented as a science, its axioms and assumptions are presented as being completely positive, neutral and devoid of any specific values.

But many heterodox economists reject this description.

“Neoclassical economics is full of normative judgments,” said Neva Goodwin, co-director of the Global Development and Environment Institute at Tufts University. “Once you think about them for ten minutes you can see that they are strongly biased.”

According to David Ruccio, a professor of economics at the University of Notre Dame, if neoclassical assumptions are presented to students without explaining to them that they are assumptions, and without presenting other perspectives, “students are encouraged to believe that it’s all been figured out. They don’t need to make any of their own value-based judgments about the economy, because the big decisions have already been made.”

When students are not given the tools necessary to recognize theories and to question them, he went on, their education becomes closer to “indoctrination.”

For example, one of the most basic concepts in neoclassical economics concerns the question of whether a market will find and retain “equilibrium” — a situation where the amount of goods or services sought by buyers (demand) has come to be equal to the amount that are produced (supply). Neoclassical economics maintains that markets tend to reach and maintain equilibrium if not interfered with.

Many heterodox economists question the theory of market equilibrium on the grounds that there will always be disparities in information and power among buyers and sellers. And some circumstances exist in which the market price of an asset does not actually reflect its value. This phenomenon was strikingly apparent in the run up to the financial crisis, in which the financial markets priced many securities far above their actual value.

According to Geoffrey Schneider of Bucknell University, undergraduate students “are taught that markets are always self-correcting, which is another way of saying that the government has no business in them.”

“It might be that in many, even most, cases the market will find equilibrium,” said Steve Cohn, a professor of economics at Knox College said. “But we know empirically that it doesn’t always happen.”

According to Geoffrey Schneider, professor of economics and director of the Teaching and Learning Center at Bucknell University, the theory of equilibrium is taught to students as a positive description of what is, while in reality it is often a normative description of what neoclassicists believe should be. “They’re taught that markets are always self-correcting, which is another way of saying that the government has no business in them,” he said.

The concept of an “externality” is another example. Neoclassical economics uses the word externality to encompass any costs or benefits to society that occur outside of the basic supply and demand model. Some heterodox economists argue that the very concept of a negative externality is biased, implying that undesirable effects of economic processes are somehow outside of the frame of reference of analysis.

Take, for example, the “externality” of pollution. A Marxian or ecological economist, in contrast to a neoclassical economist, might view the environmental degradation, health costs and impacts, and societal stresses that result from pollution as inherent or “internal” to at least some economies.  Heterodox economists stress that the ways in which different schools of thought decide to include or exclude certain costs and benefits is an important factor in how one assesses the merits of that particular school. (See box below.)

A classless society?

According to David Ruccio of Notre Dame, one of the major omissions of neoclassical economics is a nuanced discussion of class. “Neoclassical economics typically ignores class,” he said. “It doesn’t fit into the framework.”

But after the financial crisis, in part because of the Occupy movement, inequality had become “too glaring to ignore,” he said. “So the next stage, after denial, was to say, ‘Okay, it exists, but don’t worry about it because we still have mobility. So, yes, there is inequality and class, but don’t worry about it because anybody can still make it.’” However, when it is pointed out that mobility has declined significantly in the United States and is now below most other industrialized countries, Ruccio said, “then they will try to get around it by saying that it ‘reflects things over which we have no control, like technology. People just need to get more education and they’ll get paid more, end of story.’”

“The way that neoclassical economics treats class is essentially to say that, because markets are fair and democratic, class is irrelevant,” Ruccio said.

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