What is really strange is the contrast between the strength of the arguments against conventional economics, and difficulties involved in teaching common sense. It is like someone who has been convinced that day is night, and great effort is involved in pointing out the sun to him. I sometimes give the following example.

Look at that old lady purchasing tomatoes. You know what she is doing? She is differentiating a multivariate utility function and setting up a simultaneous equations system of first order conditions. Now she is solving the nonlinear system. Fantastic, she just solved it to find the utility maximizing purchase under budget constraints is exactly 12.8 oz of tomatoes. Alas, she cannot slice them with such precision, and does not know the integer programming techniques required to solve the more complex optimization problems. OOPS, she miscounted the money she paid, and did not notice the change in the budget constraint when the greengrocer shortchanged her.

While this is usually good for a few laughs, especially from deeply indoctrinated students, because we are poking fun at the sacred principle of utility maximization, there is a serious point involved. Our personal experience, observations of others behavior, and general knowledge of how markets and shopping works, provide overwhelming evidence against microeconomic theory of consumer behavior. Yet we set it all aside when we read Samuelson. If a Nobel prize winner said so, it must be right. My sruvey which provides a summary of this evidence is linked below:
The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature” [with Mehmet Karacuka] International Journal for Pluralism and Economics Education Vol. 3 (4) 2012, p 366-414

As a group, why are we such complete failures at persuading the public of something which is plain as the sun? I have the following hypotheses

  1. There is no consensus on an alternative — every dissenter has his own private views on how to do things right. As Kuhn noted, paradigms do not change because they are contradicted by facts; they change when a better alternative emerges.
  2. Lukewarm heterodoxy — that is, majority of dissenters believe that small amount of tinkering with core will fix the problems. In fact, if we take a collective view of all the problems, then it becomes clear that the entire structure needs to be replaced.  But like the blind men and the elephant, everyone sees only one small part of the problem, and does not have the big picture. Tinkering only strengthens orthodoxy, because it proves that it is flexible enough to assimilate a lot of contrary views.
  3. Internal disagreements — different small groups have different ideas about what is wrong with economics and how it can be fixed. More time is spent on fighting each other, than on the main front.

I am not sure if this accounts for it, or if there are other important relevant factors that I have missed. In order to overcome these problems, we need to build a rainbow coalition (as in the Battle for Seattle) which bridges differences across diverse groups to work together for a common goal.  I propose the following goal, as starting points:

  • Economics is about improving human lives, especially those of the bottom billion.

We must realize that we have the potential to change things — a scientific deterministic view militates against this idea. Wrong theories cause a huge amount of damage, leading to famines, and death by interest payments on loans by the poorest countries. Correct theories and actions guided by these theories can help feed the hungry, and bring hope and happiness to thousands if not millions or billions. Given that this is possible (which most people do not realize) we cannot choose to be bystanders. We must learn how to act together in ways that will help change things for the better.

I edit a journal with the title International Econometric Review, which was launched in 2009.

The first issue has an Editor’s Introduction which is reproduced below. Basically, it is plea to contributors to try to do meaningful research. I think this is an essential component of good pedagogy. It so happened that David Freedman had died recently — so  the article mentions him and is framed in the context of his work and contribution. I also wrote an obituary about him which can be accessed from this link: http://www.era.org.tr/april2009.htm 

Editor’s Introduction:

Welcome to this first issue of International Econometrics Review. We aim to make this journal unique in many different ways, and hope to fill the many gaps between real world applications and theoretical econometrics that continue to exist and widen. Of course,
achieving high goals depends on readers and contributors and we encourage the participation of all in this project.

We would like to dedicate this issue to the memory of David Freedman, an outstanding  statistician whose legacy is closely related to the goals we would like to pursue in this journal. One element of this legacy is the importance of undergraduate teaching; attempts to do justice to this transformed the thinking and research of David. Increasing fragmentation of knowledge has led to a situation where specialists have no idea of how their patch of expertise relates to other portions of econometrics, how the whole body of econometrics ties into economics, and how this body of knowledge relates to achieving broader human goals such as eliminating oppression, injustice, poverty and misery, and bringing happiness, joy, wonder and enlightenment into our lives. Teaching undergraduates is a useful antidote to this fragmentation. When we ask them to invest time and effort in learning difficult materials, we must justify this claim by showing them why it is useful in the context of real world examples. When we attempt to do this we will discover that, contrary to the impression created by our specialized education, no one has been there before us. That is, everyone in the
knowledge field is a specialist and no one has a broad overview ranging from details of the theory to how these theories are applied in the context of serious real world applications which make a difference to the lives of people.

In his pathbreaking undergraduate text Statistics, David documented the disastrous consequences of this disconnect via many real world examples. A little exploration reveals how often bad theory with faulty assumptions using wrong types of data is used to guide
policy. As a consequence, people who acquire the all round knowledge required to bridge the gap between theoretical knowledge and real world applications can make a big difference in changing the world for the better. David’s involvement in consulting and litigation testifies to his deep concern with using his knowledge to improve the lives of people. His more recent textbook Statistical Models explores how models work in the context of real world applications. Richard Berk, one of the commentators on David Freedman’s article in this issue, has provided a similar examination of regression models in his text: Regression Analysis: A Constructive Critique.

We would like to close with some advice to readers and contributors. John Hey summed up his experience of ten years of editorship of the Economic Journal as follows: “Many of the submissions do not appear to be written in order to further economic knowledge. … few economists ask themselves what are the crucial economic problems facing society. If they did so, they might well produce more relevant material.”

Our brief moments on this earth are too precious to waste on pursuit of meaningless publications to add to our vitas. It will add meaning to our lives, depth to our knowledge, and create innovative and pathbreaking research, if we make a serious attempt to serve humanity by solving the numerous real economic problems facing us globally.

The recent Great Financial crisis has restated the menace of deep depressions among the current economic challenges while the livelihoods turned out to be subordinated to speculation, financial instability and the bailout of domestic financial systems. Looking backward, in the context of the 1930 Great Depression, John Maynard Keynes pointed out that the evolution of capital markets increases the risk of speculation and instability since these markets are mostly based upon conventions whose precariousness affects the rhythm of investment and increases pressures on the political sphere.

Keynes called attention to the fact that the capitalist system has endogenous mechanisms capable of destabilizing the levels of spending, income and employment. At the heart of his theory, he suggested a reconsideration of the understanding of the relations among individuals, society and governments within the markets where institutions and conventions could shape human behavior. Aware of the need to overcome the concept of rationality that overwhelms the Homo economicus, his contribution enhances a more extended understanding of entrepreneurs’ decisions or, more in general, firms’ decisions. Besides, his approach enhanced a more fruitful apprehension of the real-world where the outcomes of firms’ decisions are not submitted to stochastic behavior, that is to say, they are not predictable.

As a matter of fact, firms’ decisions are based on conventions. As uncertainty is inherent to the capitalist decision making process, Keynes relied on the concepts of credibility and degree of confidence on a conventional judgment, that is historically built within the markets, to promote changes in the international economy.  In his attempt to re-shape the world order in the 1940s, Keynes pointed out the need of a wide measure of agreement, that is to say, the need to create new conventions based on trust.  Indeed, trust turns out to be a conventional concept related to the level of confidence built in a society around the future business environment, that is to say, around the legal, regulatory, macroeconomic and political setting that would impact the evolution of the markets. Under his perspective, trust has a historical and social nature. Indeed, trust deeply impacts economic and social development. It’s high time for explicitly introducing this discussion in the economics curriculum.

Methodological Mistakes and Econometric Consequences

published in International Econometric Review, Sep. 2012, Vol. 4, Issue 2, p.99-122.

ABSTRACT: Econometric Methodology is based on logical positivist principles. Since logical positivism has collapsed, it is necessary to re-think these foundations. We show that positivist methodology has led econometricians to a meaningless search for patterns in the data. An alternative methodology which relates observed patterns to real causal structures is proposed
Basically the paper says that looking for patterns in data (which is what econometrics is about) cannot lead to knowledge about the real world. This is a methodological mistake of the “nominalist” approach to science. A realist approach must go beyond the data to look at real world issues. The paper, and an associated video-taped talk, are available from the link attached to the title of the paper above.

A more extensive description of the paper and comments are available on RWER BLOG.

In preparing a policy and planning for development in Pakistan, it was considered necessary to take into account the role of values and ethics. In this context, I was asked to prepare a chapter for the Vision 2025, which is a ten year plan for the future of Pakistan. I am attaching a draft which I prepared upon this topic:


How do ethics and values relate to development? Our goal in this note is to demonstrate the central importance of these subjective and normative concepts to design of suitable development policies. Although these ideas are now gaining currency, for the most part mainstream economists have not taken them on board. Resistance to change is due to many reasons, one of which is the idea that science is concerned purely with the objective and the positive. Even though it was widely believed throughout the twentieth century, the idea that the positive and the normative can be clearly and sharply separated has been decisively rejected. For instance, Hilary Putnam has shown that facts and values can be inextricably entangled. Thus, theories which consider only the positive are seriously deficient. The first section below shows how a single minded focus on economic growth has led to our ignoring many other vital dimensions of development. Subsequently we arguing that evaluating costs and benefits of growth requires the introduction of values and ethics into the development discourse. An explicit consideration of values leads to many types of policies not currently within the ambit of development planners. This creates out-of-the-box solutions, which are desperately needed in current times.

The above is the first paragaph. The whole paper can be downloaded from HERE.

In 2001 French economics students petitioned their professors for a more realistic and pluralist teaching of economics. Since then, several books have been written on how to teach pluralist economics, including John Groenewegen’s Teaching Pluralism in Economics (Edward Elgar, 2007); Edward Fullbrook’s Pluralist Economics (Zed, 2009) and Jack Reardon’s Handbook of Pluralist Economics Education (Routledge, 2009). A new journal exclusively devoted to discussing how to implement pluralism in the classroom – the International Journal of Pluralism and Economics Education – was founded by Jack Reardon. And several global organizations- the World Economic Association, the Association of Heterodox Economics, besides the International Confederation of Associations for Pluralism in Economics, for example – have emphasized the need for changes in economics curriculum.

Considering this background, this blog welcomes all the attempts that emphasize the need for further changes in teaching economics.  

The 2014 new title New Developments In Economic Education, edited by Franklin G. Mixon and Richard J. Cebula, offers the opportunity of reflecting on strategies for effectively and efficiently teaching economics at both undergraduate and post-graduate levels. Among the suggestions, the reading of the book provides various techniques to retain the interest of students while engaging them to apply both theoretical and methodological tools to a range of real-world problems. The editors aim to gather contributions related to a wide set of insights and ideas for improving the overall quality of economic education to future generations of scholars. Each essay addresses a specific topic in the teaching of economics with discussions in classroom techniques and strategies, from effective classroom demonstrations to the use of literature and film in illustrating economic principles.


1. A Spoonful of Sugar Helps the Medicine Go Down: Why Good Content is Never Enough
Wayne Geerling and G. Dirk Mateer

2. A Classroom Federal Funds Market Experiment
Denise Hazlett

3. An Improved In-Class Bargaining Demonstration
Calvin Blackwell

4. Bo Knows Property Rights and Futures Markets:
Economics in Trading Places
Michael R. Hammock and Art Carden

5. Crony Capitalism in The Gilded Age by Twain and Dudley and its Relevance for Today
Michelle Albert Vachris

6. Including Short Stories in Economics Courses
Philip J. Ruder

7. Some Brief Syllabus Advice for the Young Economist
Emily Chamlee-Wright and Joshua C. Hall

8. Using Literature to Teach the Economics of the Soviet-Type and Centrally-Planned Economies
Zenon X. Zygmont

9. Not So Bleak House: Business and Entrepreneurship in Dickens
Sarah E. Skwire

10. Beyond the Can Opener: A Top Ten List of Economics Humor
Yoram Bauman

11. Can’t See the Tacking for the Trees? Try a Coasian Solution
Scott A Beaulier, Franklin G. Mixon, Jr. and Richard J. Cebula

12. Teaching the Economics of Income Tax Evasion
Richard J. Cebula and Maggie Foley

13. The Black Market and the Silver Screen: Economics in The Third Man
Michael R. Hammock and Art Carden

14. Assessing the Economic and Financial Knowledge of Adults
Kenneth C. Rebeck and William B. Walstad

15. Success in the Economics Major: Is it Path Dependent?
Carlos J. Asarta, Roger B. Butters and Andrew Perumal

16. Economic Literacy and Policy Perceptions during the Financial Crisis
Paul W. Grimes, Kevin E. Rogers and William D. Bosshardt

17. The Effects of Legalized Cheating in the Economics Classroom
Joel M. Potter and John L. Scott

18. Instructor Attractiveness and Institutional Choice in Economics: A Decomposition Approach.

Trellis G. Green, Franklin G. Mixon, Jr. and Len J. Treviño

19. Do Clickers Enhance Student Performance in Economics?.

Joel M. Potter and John L. Scott

Source: https://www.e-elgar.com/bookentry_main.lasso?id=15538&sub_values=

In the contemporary context of finance-led capitalism, the performance of  investment and market growth rates has been subordinated  to short-term expectations and to the management practices of investors. Besides, the complexity of global and speculative financial markets has not only increased pressures on the political sphere but also has systematically influenced consumer preferences.

In addition to multiple financial innovations, the interactions among central banks, financial institutions and investors have revealed the search for the enlargement of financial access to credit and capital markets. In this historical setting, Post Keynesian economics emphasizes the endogenous fragility of the capitalist economies, the random behavior of investors,  the current narrow interconnections between credit and capital markets, besides the theoretical links between finance, aggregate demand, income and employment.

Considering this background, the book Teaching Post Keynesian Economics contends that the realistic analysis of Post Keynesian economics is much-needed to apprehend the main features and understand the dynamics of the recent economic and financial crisis that started in 2008.

Taking into account that the original works of Keynes, such as The General Theory, are no longer presented in most university syllabuses, this book fosters the opportunity to get in contact with Keynes’ ideas against a backdrop in which neo-classical textbooks prevail in economics education.

Edited by Jesper Jespersen and Mogens Ove Madsen, the content of the book covers topics such as open system theorizing, pluralism in teaching, rhetoric in the spirit of Keynes, uncertainty, expectations and money. In addition, a critique of mainstream and traditional economic textbooks is also provided.  Indeed, the book turns out to be an outstanding reference tool for teachers and researchers in Post Keynesian economics, as well as for students.


Jesper Jespersen and Mogens Ove Madsen

1. Teaching Post-Keynesian Economics in a Mainstream Department
Marc Lavoie

2. The Economist who Mistook his Model for a Market
Roy J. Rotheim

3. The Future is Open: On Open-system Theorising in Economics
Victoria Chick

4. Teaching Open-System Economics
Sheila Dow

5. Pluralism in Economics Education
Andy Denis

6. Truth and Beauty in Macroeconomics
Allin Cottrell

7. Rhetoric in the Spirit of Keynes: Metaphors to Persuade Economists, Students and the Public about Fiscal Policy
Bruce Littleboy

8. Teaching Macroeconomics: Seeking Inspiration from Paul Davidson
Finn Olesen

9. What About the Mainstream Critique of American Principles of Economics Textbooks?
Poul Thøis Madsen

10. Teaching Keynes’s Theory to Neoclassically Formed Minds
Angel Asensio

11. Neoclassical and Keynesian Macro Models: Thinking About the ‘Special Case’
Marco Missaglia

12. Economists on the 2008 Financial Crisis: Genuine Reflection; or Constructing Narratives to Reaffirm the Profession’s Authority?
Michael J. Salvagno

Source: http://www.e-elgar.co.uk/bookentry_main.lasso?id=15414





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