How we lost economics and how to reclaim it?

There have been several pieces written on State of economics and more keep coming.

This one by Jeff Deist of Mises Institute does a good job of putting the debate in order. He says we teach and understand economics based on all wrong ideas:

A few weeks ago at our event in Asheville, North Carolina, I spoke about how economics has become a broken profession.

My point was that we now have an entire generation of supposedly mainstream economists who fundamentally:

  • Don’t understand economics as a social science, rather than a physical science that requires testing of hypotheses;
  • Don’t understand money as a market commodity;
  • Don’t understand inflation as a monetary phenomenon;
  • Don’t understand interest rates as prices rather than policy tools;
  • Don’t understand inflation and interest rates and can’t explain booms and busts;
  • And perhaps worst of all, they often know nothing about the history of economic thought. They’ve simply accepted, without context, a host of assumptions that make up modern mainstream economics.

Think about that! It’s as though bloodletting had become the consensus mainstream medical approach to treating disease — and 80 years later doctors simply focused on the rate of bloodletting, or the timing of bloodletting, or the least painful approach to bloodletting.

By “broken,” I don’t mean that the profession of economics doesn’t provide benefits for those working within it. It provides these benefits in spades. I mean it is broken in the same way universities are broken — that it no longer serves truth or society or humanity, but instead serves an agenda.

It starts with the wrong premises, asks the wrong questions, applies the wrong methods, and not surprisingly arrives at the wrong conclusions.

Strong words but are so true.We have just reduced economics to a few equations which keep getting complex as you move up the ladder from a BA to a PhD.He says much of economics has become an agenda in the hands of a few technocrats.

How to get economics back? Simple. Go back to basics:

I think first and foremost we need to accept that academia is captured. The Mises Institute continues to produce Fellows who go on to careers at universities around the world, and establish Austrian-friendly economics departments. We may not like it, but reclaiming academia professor by professor is an enormous task. The return on investment is far greater when we focus on young people and intelligent laypersons.

Second, we need to understand that it’s up to us to create the economics education the world needs. Thanks to the digital revolution, new structures and new platforms can be built far faster and far cheaper than we ever imagined. We can invert the classroom, do away with make-work curricula, and align economics education with the marketplace by teaching people only what they want and need. We can reject the one-way lecture production model that universities still cling to 2,000 years after Aristotle.

Mises Academy, for example, makes a core group of Austrian economics courses available to anyone, anywhere, free of charge.

Finally, we must return to Mises’s more visceral approach and make economics real again. Like progressives, we shouldn’t be afraid to appeal to the heart as well as the head.

When we view economics as the stuff of life, we energize and humanize the subject. When we approach economics more like philosophy, as the study of general and fundamental human problems involving knowledge and reason, we create a whole new perspective. When we introduce logic and metaphysics into the discussion of economics, we make it a more vital subject. Economics is not an equation to be balanced, or a model to be filled with statistics. By restoring its role as a theoretical social science, we can restore its popularity among bright young people who really do want to change the world.

One may not agree that you need to just look at the Austrian way. However, there is little doubt that economics has become way too narrow a field. We need to teach history of economic thought and economic history in a big way. The subject should be made more interdisciplinary as well as economic analysis is at best a partial explanation of the society. The subject needs to be less imperial for  sure.


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