Many economists will claim no one saw the 2008 recession coming. The housing bubble grew and grew right before their eyes and few expected it to pop when it did. Maybe it was because their noses were too deep in their books on theory and ideal worlds to realize that if they weren’t critical of their surroundings, thousands of families would end up in bank-owned homes and would be forced out of them. Including mine.
Because of economists’ understanding of a field that affects so many people’s lives, they have a responsibility to keep an eye on the market and help the public understand its workings and its changes. Economists’ education sets the foundation for the ways in which they interpret the economy. So, if economists fail to predict an economic crisis because their priorities are in studying old theories, it may be because teaching theories alongside practical evidence was not part of their professors’ lesson plans.
As an undergraduate economics and literature double major, I cannot possibly explain how the recession, a complex catastrophe involving dozens of different factors, could have been avoided, but I have seen where the practice of prioritizing theory may have stemmed from — it’s in the classroom. Through my experience at UC Santa Cruz, I’ve found that students aren’t given a well-rounded view of economics. Rather, economics students are conditioned to make decisions in imaginary worlds, holding “all things equal,” when in reality, this is definitely not the case.
UCSC’s economics department requires its students to take fundamental classes such as micro and macroeconomics and five electives, such as Auditing and Attestation and Corporate Finance. However, it does not require students to take classes that show real world applications of economic theory, or how theories are used to deal with issues our society faces today. Considering that economics is part of the social science division, along with psychology, sociology and politics, UCSC’s department doesn’t take on a very social perspective. There is a very strong emphasis on numbers. Not so much on people.
Don’t get me wrong — students have the option to take classes with a more social focus like Health Care and Medical Economics and Poverty and Public Policy, but that’s just it. They’re options. A student could, theoretically, slide by until graduation without having learned anything about the social implications of economic policy.
While the more quantitative electives cater to a demographic of students with interests in those subsets of the field, more socially-minded students are left with options they don’t really care for. One way UCSC’s economics department can take incremental steps in giving its students an education more in-tune with the real world is if it added one more class to the list of requirements — a class on alternate economic theories, or on the U.S. welfare state or how the North American Free Trade Agreement (NAFTA) extinguished thousands of Mexican farmworkers’ livelihoods on its way to benefiting countries with already developed economies.
Up until a few weeks ago, I thought my grievances about my economics classes and their relation to U.S. economics were limited to after-dinner conversations with my housemate. But after a bit of research, I discovered this same issue is going on in lecture halls around the globe.
Students at various universities in the U.K. also felt that economics as it was taught was seriously disconnected from real-world events and policies, so they founded the group Rethinking Economics (RE). It garnered support from people ages 18-34 in 19 countries, with the London chapter being only one of 42 RE chapters formed around the world in the last year, according to the RE website.
RE asserts that academic institutions do not recognize pluralism, or different schools of thought, in economics. It argues that economic questions cannot be answered adequately from a single theoretical standpoint or from solely a mathematical approach. It demands that college curricula stay grounded in applying lessons to current, real-world events, and that instructors mention the limitations of available approaches.
Made up almost entirely of students, RE received much criticism from older economists claiming that the group is too idealistic. The group calls for mass reform in the way economics is taught and whether its members are taken seriously or not. It addresses a serious issue in education today.
Unfortunately, the sad reality is that RE’s demands may not be widely implemented for several more decades. This is a problem of how economics is learned and applied worldwide. As economists, professionals and those aspiring to be one, we need to change the way we teach these lessons, so that other economists and people everywhere are better prepared to deal with our world.
I chose to be an economics major because I care about the economic issues of today. I’m not interested in corporate finance or business strategy. I’m interested in people. As the system stands, real-life consequences to economic policies get lost in the educational process. It’s okay to study theories that have been tried-and-true, but we must ensure we use them with the current climate in mind and that we don’t forget that those affected by economics are not imaginary people in a textbook. They’re real. And no matter how many elaborate theories can back up market movement, a line on a graph and a point on a plot will never quantify a human life.
