A flawed model of production

Alittle more than 20 years ago, David Colander, a professor of economics at Middlebury College in Vermont, collaborated with Arjo Klamer, now of Erasmus University in Rotterdam, on a survey of economics graduate students. The students were at the elite US departments of the University of Chicago, Harvard University, Massachusetts Institute of Technology, Princeton University and Stanford University. A now classic article drew some dismal conclusions about the state of the subject from the attitudes of the brightest of the next generation of ­economists.

Economics as taught in these institutions, which set the benchmark for all other economics departments in the English-speaking world and beyond, was extremely mathematical and theoretical, with little relevance to the jobs that most students would go on to in the worlds of policy, finance and business.

The paper, published as “The Making of an Economist” in the Journal of Econ­omic Perspectives in 1987, caused a stir. Such was the dissatisfaction expressed by students that Robert Eisner, who was then president of the American Economic Association, set up a Commission on Graduate Education in Economics. It recommended a number of sweeping curriculum reforms. Economics departments greeted the commission’s report with — silence. Nothing much changed.
Critics of economics — and they are legion — will not be surprised by anything I have written so far. The notion that economics is mathematical, abstruse and unreal is firmly embedded in the popular and even the academic mind. Is there anything new in Colander’s update of his 1983 survey, and follow-up interviews, conducted in 2003-04 and reported in this book?
Yes and no — and the reasons that both answers apply make this book an essential read for anyone interested in the education of economists and the health of the subject (although I should add that Colander is a true economist in his devotion to the empirical evidence and his dry writing style, so it is not a rip-roaring read).

What has changed, and dramatically so, since the 1980s, is the nature of economics itself. As Colander writes: “What were taken as requirements of research in the 1980s are no longer requirements in the 2000s; the holy trinity of greed, equilibrium and rationality has been replaced by a looser trilogy of purposeful behaviour, sustainability and enlightened self-interest.”
He finds refracted in the interests and attitudes of today’s young economists the shift in the character of the subject, one that has been little noticed by anyone outside the profession. Economics has, after a long detour into mathematical reductionism, rediscovered its soul. According to Colander, the shift is not earth-shattering, as measured, say, by the proportions of survey respondents who see empirical knowledge of the economy or historical knowledge as important, rather than skill at mathematics. Never­the­less, he sees a definite evolution.

“My critique of economics now is not about economics but is about pedagogy —specifically about the structure of the core in graduate economics,” he says. The central point of this book is that what graduate students of economics are taught in their core micro, macro and econometrics courses remains theoretical, abstruse and of no interest or use to them.

The core courses are not even preparing students well for careers as academic economists, never mind for other types of career. That preparation comes in special field papers, after two years of graduate study, when all but the most determined will have been driven away by the peculiar madness of general equilibrium theory or the dynamic stochastic version of it that has colonised theoretical macroeconomics. Even those who stick with a PhD programme and then transfer out of the academic world to a job in finance or policy-making will find they need substantial on-the-job training in applied economics and econometrics.

The teaching of graduate economics is, Colander concludes, dreadfully flawed. It was flawed 20 years ago, as he documents with a follow-up survey of his original 1983 respondents, who are working now in a wide variety of jobs. They are clear that most of what they learnt happened once they had started work. The pedagogical flaws are greater now, as a graduate education in economics is no longer even a good preparation for the kind of research that academic economists themselves conduct.

Although his survey work covers only a few American institutions, their core curriculum has shaped that taught to economics students almost everywhere. Will economics departments and bodies such as our own Royal Economic Society step up to the challenge Colander sets them with this book, and reshape the graduate curriculum?

I hope so, or we will find ourselves with even fewer graduate students in economics than we have now.

Diane Coyle runs the consultancy Enlightenment Economics, is a BBC trustee and a visiting professor at Manchester University’s Institute of Political and Economic Governance.