Teaching Economics After the Crisis

Five years after the onset of the global financial crisis many people in the economics community are debating the future for our subject and in particular how we might reform teaching to equip students with the skills and knowledge appropriate to a complex inter-connected world. A new book of short essays on the teaching of economics edited by Diane Coyle from Enlightenment Economics is a superb contribution to the debate. I recommend it whole-heartedly to my teaching friends and colleagues. With exam boards charging silly money for online and face-to-face CPD, a modest investment in this book will pay rich dividends!

Two chapters in particular have given me much to ponder and question.

Old Wine, New Bottles

In a brilliant short discussion entitled "Old Wine, New Bottles" Andy Haldane from the Bank of England dissects the failures of policy-making ahead of the financial crisis and argues that credit cycles have a duration and amplitude roughly double that of the business cycle. He makes the case for an active macro-prudential policy and for increased human capital investment in the economics profession to better understand social dynamics and how they impact on financial market behaviour.

Haldane points to the potential value of real-time macroeconomic and credit data to help guide policy-makers to the changing contours of risk. And he points out that many of the top names in the economics world are now turning away from an out-dated obsession with academic papers published in journals towards new forms of social media to float ideas and exchange views.

Andy Haldane delivers the 2011 Sir Thomas Gresham Docklands lecture

Back to the Drawing Board for Macroeconomics

My second chapter of choice comes from Paul Ormerod, an economist and partner at Volterra Partners LLP, and author of Positive Linking: How Networks Can Revolutionise the World. In a chapter written with Dirk Helbing, Paul Ormerod examines how mainstream macroeconomic theory has singularly failed to respond to new theories of the behaviour of businesses and consumers in networked systems. In this new world the idea of the independent optimising representative agent is largely redundant. Instead we live with cognitive complexities, agent decisions are influenced strongly by emotions, social learning, herd behaviour and satisficing behaviour. This is a world where incentives still matter but policy interventions that focus mainly on changing prices are often ineffective.

Paul is writing a weekly article for our economics blog - you can find his articles here