Considering the current global scenario, the search for financial stability is one of the main contemporary policy issues. In this context, teaching finance presupposes great heterogeneity among national economic structures, institutions and social outcomes and its target is to enlarge the comprehension of the real- world in its economic dimensions.
What we should teach in undergraduate courses in order to deal with finance from a real-world perspective- both in microeconomics and macroeconomics curriculum?. The understanding of the current financial challenges requires the adoption of new perspectives in a significant learning process where the pillars should be a solid theoretical background in economics and a critical attitude towards the political, economic and social reality where the students live.
Finance is not just related to management techniques, procedures or product phenomena, but involves institutions, behaviours and policies. The existence of a monetary economy of production is founded on credit relations, organized markets of financial assets, speculation and uncertainty. Indeed, in a framework of uncertainty and speculation, a set of interrelated portfolios and cash flows between banks, income-producing firms and households may influence the evolution of credit, the pace of investment, and the valuation of capital assets.
The monetary and financial systems not only expand the access to finance, but also leans on the appropriation of social wealth. Finance fosters the capital accumulation process that develops through time and involves credit contracts. In this setting, financial innovations impact upon banks’ assets and liabilities, and they could provoke sudden changes in market dynamics. In a monetary economy, credit relations, speculation and uncertainty are decisive to affect the investment path, leading to financial fragility and credit crunch crises. In the context of a liquidity crisis, the Central Banks must restate the public nature of money.
In short, this approach to finance highlights the need to emphasize in the Economics Curriculum the “institutions-history-social structure” nexus instead of the “rationality-individualism-equilibrium” nexus. As a result, the study of the financial phenomenon will support an emphasis on the historical dimensions of economic dynamics. In this context, the economists are – recalling Marshall- able to deal with “mankind and the ordinary events” of business life so as to face the social and economic challenges of their generations.
The rejection of the “rationality-individualism-equilibrium” nexus is crucial to promote a change in Economics education. The main target should be the understanding of the ideas and practices that support the reproduction of material life for further policy interventions towards economic growth, financial stability and social justice.