Challenging the Samuelson paradigm in economics textbooks…

This blog had written about a new economics text called “The Economy” or the core textbook. The book is making inroads.

Samuel Bowles and Wendy Carlin explain how the book marks a shift from the Samuelson textbook (HT: CafeEconomics):

Things are radically different at the undergraduate level. The Samuelsonian paradigm is basically Marshall plus Keynes, and this remains the basic content of the dominant textbooks today. Asymmetric and local information, and strategic social interactions modelled by game theory are mentioned, if at all, at the end of the introductory course, or as special topics,. (Von Neumann had commented – surely ungenerously – about Samuelson that “…even in 30 years he won’t absorb game theory”.)

Understandably, students think information problems and strategic interaction are simply refinements of the standard model, rather than challenges to two of its foundations – price-taking as the benchmark for competitive behaviour, and complete contracts (and hence market clearing in competitive equilibrium) made possible by complete information.

CORE’s introductory text, The Economy, attempts to do for information economics and strategic social interaction what Samuelson did for aggregate demand. CORE has made these concepts part of the foundation of an economic paradigm that can be effectively taught to introductory students. This new open-access online text, simultaneously published as a conventional book, is now available (The CORE Team 2017).1

The Economy takes on board the fundamental innovations of Hayek and Nash used in contemporary economics research. But concerns about climate and other market failures as well as economic instability provide reasons to doubt Hayek’s argument that governments should limit their activities to enforcing property rights and other rules that permit markets to function.

Likewise, behavioural experiments and research on human cognitive capacities call for a more empirically grounded conception of human behaviour than is present in Nash’s work. Integrating both limited cognitive capacities with greater capacities for cooperation among individuals provides a more adequate foundation. Keynes’ contribution is similarly in need of modification. We provide both models and evidence to question his optimism that government demand-management policies could substantially eliminate involuntary unemployment in the long run.

In Table 1 we contrast the foundational tenets of the standard paradigm, as represented by Samuelson, with that represented by CORE. By the ‘benchmark model’ we mean the standard case presented to students, from which ‘deviations’ are studied. For example, competitive markets are treated as the standard case, with monopolistic competition as an extension.

Table 1 Samuelsonian and CORE paradigms

Hmm..

One keeps wondering why economics textbooks take so long to change? For a subject which talks so much about change, it is amazing how little its own textbooks change?

I mean our major macroeconomics textbooks continue to rely on IS-LM models which say central banks change money supply. Whereas central banks change interest rates.

Undercover Historian tweets on this new textbook as: “Using thin history of economics to manufacture a scapegoat”

🙂

 

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2 Responses to “Challenging the Samuelson paradigm in economics textbooks…”

  1. Anantha Nageswaran Says:

    This has been in the works for quite some time. It is not new. The effort started in 2009. It was triggered by the revolt/protests launched by the students at the University of Manchester in the UK when they launched a Post-Crash Economics Society and published a 60+ page report on the need for students to be exposed to multiple schools of economic thought including Marxian economics. Andrew Haldane, currently Chief Economist BoE and a voting member of the MPC, wrote a foreword for that report. That was one among many triggers for the Core Economics Curriculum. Initially, the effort was run out of the ‘Institute for New Economic Thinking’.

    I do share this background with M.Sc students in Wealth Management and Applied Finance in the macroeconomics course I teach at the Singapore Management University.

    Please see this blog post: https://thegoldstandardsite.wordpress.com/2014/05/01/teaching-real-economics/

    ‘The Gold Standard’ blog is also useful to follow, perhaps!

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