Many economics students are unhappy with what they are being taught. A network of 62 groups from around the world has drawn up a petition calling for more “pluralism” in instruction. The malcontents find the dominant neoclassical model too narrow and want to know why so few experts predicted the 2008 financial crisis. They also want less abstract theory and more study of actual economies. The reproaches are just, but the students’ reform agenda is insufficiently radical.
They underestimate the scale of the intellectual scandal. The profession’s ignoble tradition started in the 19th century, when most political economists, as they were then known, failed to notice that industry was leading to massive improvements in the standard of living. Today’s practitioners know much more, but they still struggle to explain the most basic phenomena – prices, wages, money, credit, unemployment and development.
Pluralism, the study of alternative schools of economic thought, would help, but not much. With the partial exception of the still underdeveloped study of institutional economics, the available alternatives to the neoclassical synthesis largely rely on the same erroneous assumptions that humans are rational and that market forces almost exclusively shape economies.
The demand to study intellectual history and other social sciences is more promising. Add in philosophy, and a new curriculum could lead the next generation of economists to undertake a profound re-evaluation of some basic concepts.
The role of markets is a good place to start. Economists generally refer to “market economies”, but they are not talking about supermarkets. They are referring to a theoretical model of economic activity. What they call perfect markets are a sort of eternal war of all against all with no durable winners. Most professionals assume that such markets are the best form of economic organisation: the closer to market perfection, the better.