Economics is premised on the assumption that people will act solely in their best interest. Morality is one of the few remaining realms in which individuals are occasionally expected to act for another's benefit.It's easier to tell stories about human behavior if you start with the premise that people act in what they perceive to be their best interest. The value of economics is in distinguishing situations in which the incentives bring that self-interest in line with the interest of others (we call that "mutually beneficial" and the business guru speaks of "win-win") from those where the benefits are not mutual.
The movement's decision to frame the debate in moral terms is also refreshingly honest. The core strength of Occupy lies in the implicit admission that perhaps the top 1% will never derive government benefits equal to the tax bill they are asked to foot. Nonetheless, the movement contends, the ultrarich have a moral responsibility to help rebuild the middle class, to help put people back to work, to help shore up the health of our economy.There's material for any number of senior honors theses in that sentence, e.g. is government the most effective facilitator of rising living standards; are the ultrarich able to prosper only by trading among themselves? (Hint: there are limits to how many default swaps a hedge fund can write, and the Black Friday crowds are bigger at Wal-Mart than at Tiffany.) There's also room for greater economic understanding, both among practitioners and critics.
In our judgement, Business Schools, MBAs, and top Economics programmes have failed in three distinct ways.On the one hand, in the political economy of public policy, efficiency is a goal, but not the only goal. On the other hand, there is a potted version of the Welfare Economics Paradigm that equates market failure with a case for government intervention. Short form: any failure of a market to allocate resources efficiently produces incentives to harvest the efficiency gains. That requires adaptation, something that subsumes values and spiritual dimensions as special cases, not as rhetorical trumps. It also requires more systematic thinking on the part of economists.
They have failed to adequately address questions of values, ethics, social customs, traditions, and spiritual dimensions and their role in under girding a healthy economic system.
They have failed to inculcate in students a sufficient appreciation of market failure in the cases of a lack of competition, asymmetrical knowledge, public goods, and externalities.
Finally they have failed to adequately instil in students the understanding that even when markets are efficient, that they will likely lack social and ecological justice and that these extra-efficiency standards are worthy social goals.
Overtaking a Keynesianism that many found inadequate to the task of tackling the stagflation of the 1970s, this vision fueled neoliberal and free-market conservative agendas of governments around the world.Perhaps that's a good thing: the way forward from the current crisis might be in the distributed tacit knowledge of a lot of economists, something made possible by the internets in ways not available to Keynes or Friedman. And as a Harvard Political Review essayist notes,
THAT vision has in turn been undermined by the current crisis. It took extensive government action to prevent another Great Depression, while the enormous rewards received by bankers at the heart of the meltdown have led many to ask whether unfettered capitalism produced an equitable distribution of wealth. We clearly need a new, alternative vision of capitalism. But thanks to decades of academic training in the “dentistry” approach to economics, today’s Keynes or Friedman is nowhere to be found.
One lesson from the first day of Ec 10 that will stick with me for the rest of my life is learning to separate positive questions from normative ones. Most of the economics that we read about in the news involves normative questions (eg. Should Congress raise the marginal tax rate on the highest income bracket?) whereas most of what economists actually study involves positive questions (eg. What would happen if the marginal tax rate on the highest income bracket were raised?). Ec 10 is an introduction to the academic discipline of economics, and the vast majority of the course focuses on teaching students how to answer positive economics questions.In short, the controversies are often about how to get somewhere, not necessarily about where to go. (There is, to my knowledge, no course in economics or political economy on how to get rich selling shoddy goods to the masses, or on how best to seek rents.) Viewed from that perspective, a Robin Wells (Mrs Paul Krugman, to be Old School) essay about the supposed biases of economics is correct in part, and in error in part.
[P]erceptive instructors know that sometimes a stupid question is more than a stupid question. And a really perceptive instructor will take a seemingly stupid question and turn it into the insightful question that the student should have asked.Go read the article. The message is TEACH THE CONTROVERSIES. But first, understand the nine major ideas that structure all of economics, including the principles class. And if you can find me either an economics professor who is either unabashedly a cheerleader for free markets in the way Ms Wells describes, or an expert in financial markets with a clear story about the effect of regulatory constraints on asset allocation (the wall between investment and commercial banking had to come down for a reason), why, leave me a note in the comments section.
Right now the general public views the economics profession with a large measure of distrust and in some cases outright contempt. Students are entering the worst job market in well over a generation, without much prospect of improvement. Many of them have seen their parents’ lives turned upside down by financial troubles. They face being members of the first generation in American history with a lower standard of living than their parents. Income inequality has reached levels not seen since the Gilded Age. There are over 4 million long-term unemployed.
In this environment, instructors who lecture on the superiority of free markets without acknowledging the dysfunction in the wider economy are at risk of appearing out of touch and exacerbating antipathy towards economics.
But how does an instructor do this in an introductory economics?