John Conroy yesterday wrote of the decline in economics studies at Australian high schools and universities. For example, 35% of high school student took economics in NSW in 1991, while on 8% currently feel compelled to submit to the torture.
But Conroy’s concern over the quality of economic debate due to the decline in formal economics education in high school is misplaced. If anything, fewer people with a one or two year indoctrination in the bizarre models of neo-classical economists is a benefit for real debate on economic and social policies.
From my perspective the solution proposed by the NSW Economics and Business Educators president Joe Alvaro does not sit well.
There is a great potential to improve the economic literacy of the Australian population through economics lessons in our schools. We have a syllabus conducive to this and experienced teachers with the knowledge and skills to implement this syllabus
For those loyal readers who noticed my absence that past few months, you might a be little curious about what I’ve been doing. I have started a PhD in economics at the University of Queensland. Why? To learn more about what’s wrong with economics, what’s right with it, and how I might help improve the discipline.
As part of the course there are two major indoctrination classes in macro and micro economics, which are representative of the content being taught in most economics PhD courses around the world, particularly in the US.
But there are two things you will notice.
- There is a religious aspect to economic theory. Each model generates a congregation of believers, who stand by their assumptions, despite all the evidence to the contrary.
- The teaching of economics usually follows a single neo-classical religion, rather than demonstrating the selection of religions, the reasons for each of their beliefs, and the outcomes of those beliefs.
At a high school level, most students will be introduced to the most simple assumptions of neo-classical economics – that there exists some kind of downward sloping demand curve, and some kind of upwards sloping supply curve. I can guarantee that Alvaro’s syllabus contains, almost exclusively, this model. Yet the very existence of such curves is a construct of a model assumption, since we can only ever observe the price and quantity (the intersection) in real life.
It is not until you peak into other economic churches, and follow some of the applied research that almost never makes it into introductory textbooks, that these assumptions about the shape of the curves don’t hold. In fact the common result is to find that if a supply curve exists for the labour market, basically one of the largest markets in the economy, it is downward sloping.
More than this, the theory has been shown to be false, even simply relying on its own assumptions. These curves, if they exist, can be any shape at all.
More insights would be gained from people experienced in the actual business negotiations that really occur in markets. At least they have an understanding of the why and how of business investment decisions.
It has also been shown that neo-classical theory cannot explain why exactly markets will tend towards equilibrium should they not be in equilibrium at any point. In fact, it can be shown that in many instances, the existence of markets in futures contracts an credit markets can exacerbate shifts away from any theoretical equilibrium.
Never will you hear in an introductory economics class that private property markets and resulting prices are just one of many allocation mechanisms that have been tried in civilisations throughout history. Nor do you hear much about the assumptions of perfect legal institutions required for markets to deliver on their theoretical promises. Nor will you hear about definitions of property rights, contract laws – regulations that are required for markets to function.
All of this simply means that a lack of economic education in high schools is not a concern, and is unlikely to be to blame for a deterioration in the quality of public debate in economics. As long as students are learning to think critically, in whatever subjects they choose, they will be equipped to participate in discussions surrounding government economic and social policy. Indeed, for economics to stay relevant it must educate with more than than the beliefs of a single church, but with the many of the rigorous insights from each of their churches, and a coherent message of how and why each type of analysis might apply to a particular policy question. Because there are many areas of economics with great insights, that contradict the neo-classical theory. But that never make it to any introductory course curriculum. This needs to change.
For those who want to know about the insanely narrow neo-classical assumptions I can recommend the recent book The Assumptions Economists Make, which covers many of these arguments.