Thursday, September 22, 2005

Economics & Economic Literacy

Russell Roberts:
"Too many economics classes at the undergraduate level are a dumbed-down version of graduate economics, which in turn is often a dumbed-down version of physics. Kidding about the physics, but I do think economics over the last 25 years has added what is thought to be rigor, in hopes of being more like the respected physical sciences, with little gain in understanding of the real world.

Rather than being like physics, economics is more like biology, or better, ecology. Too often the economy is viewed as an engine or some other linear set of relationships, where it is presumed that by pushing lever A, I can move object B. I would argue that the economy is better understood as an ecosystem, a complex system of interactions where order emerges rather than being imposed from above."
The models we teach as economics to undergraduates do indeed encourage students and even other economists to see the economy as a machine with controls that government can manage if only we economists provide the necessary information. Indeed, I agree the economy would be better understood as a dynamic system with spontaneous order and emergent novelty. Unfortunately, none of our textbooks look like this.

"The other problem I think we have in reaching people is that some special interests have a vested interest in spreading economic misinformation. So labor unions, for example, encourage people to believe that Wal-Mart is driving down wages or that manufacturing is the key to economic growth in America. I find it interesting that people don't view these arguments more skeptically, the same way they would view any self-interested argument. I don't know whether people presume that unions are altruistic or whether such arguments successfully tap into the reader's or listener's already-existing worldview. The proliferation of bad economics from folks who profit from ignorance is a big challenge."
Very well put. I'm not optimistic since I have good reasons to assume that voters are rationally ignorant.

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