This post was written by Carmelo Ferlito. He is a senior fellow at the Institute for Democracy and Economic Affairs (IDEAS)
I taught economics in Malaysia for seven years. My students were mainly second and third year university students who attended my economics classes (microeconomic theory and policy and history of economic thought) after having already learnt the basic notions of macro and microeconomics.
Most of my students were double majoring in economics and finance. My impression is that, in general, they could see the relevance of finance in their daily lives (it can help in making or saving money) while they struggled to get enthusiastic about economics, which instead was perceived as a set of abstract graphs and formulas, somehow alien from real people’s lives.
Students’ cold relationship with the subject goes hand in hand with the growing disillusionment with the discipline that followed the global financial crisis in 2007 and the apparent inability of economists to see it coming and to deal with it afterwards.
I cannot deny that when I was a student, I was caught in the same trap. While it was not difficult to grasp the general meaning of the basic economics concepts, the development of the discipline appeared to me to be unrealistic, too abstract and, therefore, useless for understanding reality and not interesting enough to build a career on. This is probably one of the reasons why I chose economic history and the history of economic thought as the subjects for my postgraduate studies, rather than economics itself.
A turning point in my scepticism toward the discipline was when I read The Economics of Time and Ignorance by Mario J Rizzo and Gerald O’Driscoll. The book did not reduce my scepticism about economics as it was taught in class, quite the contrary. But the authors showed me that a different economics is possible, with regard to both the contents and to the way it is presented.
The lessons I learnt from Time and Ignorance, together with a deepening of the knowledge of the history of economics, helped me to relativise and contextualise the contents taught during the traditional economics courses. I realised that economics is not simply an evolving discipline, it is subject to a non-linear evolution and different streams of thought coexist like karst river patterns.
The two key words on which I would rebuild the teaching of economics, with the aim of making it relevant and fascinating for students, are realism and pluralism. Realism means, first of all, to help students to understand how economics can say something about most of the aspects of human life, for example, to woo a girl or boy and the patterns of traffic jams can both be explained by sound economics. This does not mean to renounce abstraction, but to choose that level of abstraction that is functional, a powerful explanation of reality rather than the one that tries to subjugate reality to its unrealistic assumptions.
Pluralism in also key. It is important to realise that textbook economics is not the only one. Economics is a rich discipline and to know that a variety of economic schools is not simply a heritage of the past but a living reality is important to confront our own need for an explanation with a variety of paradigms at our disposal. The discipline is not a monolith. An unsatisfactory textbook explanation or assumption does not mean the absolute nonexistence of more satisfactory ones. Students need to be introduced to different paradigms, to be trained to look for contending explanations and to develop a judgment about them.
What went wrong with economics, therefore, is not simply economics itself, but a certain way to develop and present textbook economics. The main flaws of such development are its unrealistic assumptions (for example, to ignore the role of time or the absence of a dynamic explanation for entrepreneurship) and its pretence of being a monolithic truth.
A growing interest in reforming economics education is emerging and I believe that a sound reform needs to be grounded in realism and pluralism, in order to make economics relevant again, interesting, stimulating and vibrant for future generations of scholars.
Here is the link of the op-ed: https://www.theedgemarkets.com/article/ideas-making-economics-relevant.