Real world economics
We’ve ripped up those bad old textbooks, and rewritten from first principles
Wendy Carlin
Could they both be right, the “rip it up” critics, who—like Howard Reed in last month’s Prospect—claim that Econ 101 is broken, and the economists fighting back—such as Diane Coyle—who point to the solid research the profession is doing to address pressing social problems?
The textbook model is definitely broken. In it, economic actors are amoral and self-interested, perfectly competitive markets implement “optimal” outcomes, while environmental degradation, instability, and inequality are afterthoughts. Nobody believes it. Yet it continues as the backbone of much undergraduate teaching. However remote it might be from what economists really do and think, this is the “economics” imprinted on the public’s mind. The harbinger of change in any discipline is when its top researchers have for the most part abandoned the benchmark models taught to undergraduates.