Towards a better economics curriculum
Paul Samuelson, the Nobel Laureate in economics, once said, “I don’t care who writes a nation’s laws, or crafts its advanced treatises, if I can write its economics textbooks”. He was right about the greater impact. Samuelson’s famous textbook, Economics, created a paradigm which formed the cornerstone of millions of people’s understanding of economics across the world for decades. To simplify greatly, Samuelson brought together in one frame the insights of Marshallian microeconomics and Keynesian aggregate demand. It helped consolidate the view of the market economy as a self-equilibrating system with some failures—externalities, insufficient public goods and occasional demand shortfalls, all of which could be addressed by appropriate intervention. Modern best-selling textbooks such as Gregory Mankiw’s Principles Of Economics stick to this formula, adding updates from more modern research as an afterthought.
Such an approach always had the limitations of ignoring or burying the concerns of classical economists such as the use of power, control, conflict between groups, distribution and value. But by now it also fails to reflect many advances in economics over the last few decades, which taken together create a much more complex vision of the functioning of the economy than the paradigmatic Samuelsonian approach. These include the centrality of imperfect contracts and imperfect information in limiting the ability of markets to allocate resources efficiently, the understanding that self-interested strategic interactions among agents can lead to socially undesirable outcomes, as well as the comprehension that endogenous money, feedback effects and leverage can lead to dramatic volatility and financial crashes. We know that unfettered markets may lead to poor outcomes as a general matter of course. Similarly, insights absorbed from other fields such as biology, psychology and anthropology suggest a complex and nuanced understanding of economic behaviour, in which human interactions involve bounded rationality, reciprocity, adherence to norms and a concern for justice; a far cry from the “rational economic man” of standard textbooks. The vast gulf between what economics and social science more broadly know as true of the world and what is taught at the undergraduate level is a minor scandal.
A recently released textbook, simply called The Economy, seeks to redress this gap. Written by 20 economists from all over the world and directed by Wendy Carlin from the University College London, Sam Bowles from Santa Fe Institute and Margaret Stevens from Oxford University, it seeks to create a new paradigm for introductory economics (full disclosure: I am one of the group of collaborators and Azim Premji University, where I teach, has supported the project; we have also taught from beta versions of the book to our undergraduates).
The e-book (which is free) is available at Core-econ.org and provides a broad introduction to economics that brings in these new insights. It also re-engages (in modern terms) with classical concerns surrounding distribution, conflict and social order that has motivated economics from its beginning.
The curriculum focuses on pressing economic problems such as unemployment, instability, inequality, environmental sustainability and develops modern analytical tools required to understand these. It does this while paying enormous attention to history, institutions, and experiments that illuminate these topics and place them in context. Throughout, it incorporates relevant insights from other disciplines, including psychology, sociology, history, legal studies, anthropology, biology and ecology and philosophy.
Economics is often taught as being a context-less, ahistorical discipline in which the basic parameters through which to analyse economic life are universally given. In practice, this often means that texts reflect the reality of the US or UK economy rather than that of any other place in the world. The Economy is more international and its digital format allows greater flexibility and adaptability. Efforts are currently underway to create a South Asian version that more fully engages with the lived realities of the economy here. The aim is that Indian students should be deeply conversant and analytically at ease with issues such as informality, structural transformation, planning, liberalization, dual economies, caste and gender inequalities and urbanization that pervade their own lived experience from the outset rather than as special topics for a third-year course in economic development.
Our experience with the curriculum is overwhelmingly positive. In the two years we have taught The Economy (with supplements), our students have been deeply engaged and gained sophistication. They can produce graduate-level work and have published in journals such as the Economic And Political Weekly. There is no reason other Indian students would not also benefit greatly. The current introductory economics curriculum is dated and continues to be taught only because of habit and inertia. It short-changes our students. The purpose of an economics education is to create better-informed polity that can effectively engage in the economic world. It is time for a better paradigm—our students deserve no less.
Arjun Jayadev is an associate professor at Azim Premji University.