By Ingrid Harvold Kvangraven
Being an Economics PhD student in a heterodox department gives me the privilege of taking courses in a range of different schools of thought within the discipline. In the Economics department, most of us take the stance that it is imperative to understand the mainstream in order to criticize them effectively. We go to great lengths to learn about the nuances of Neo-classical Economics, general equilibrium theory, and New-Keynesian Economics. Meanwhile, we also have full courses devoted to non-mainstream approaches, such as Post-Keynesian and Marxian Economics. We are aware of the ideological underpinnings of a lot of mainstream theory, and many of us see this as a motivation to challenge the discipline.
Now, the difficulty arises when we are to teach one introductory course in ‘Economics’ to non-economists and we know that this is likely to shape their outlook on Economics as a discipline. How much time do you then devote to mainstream models, the criticism of mainstream models, and alternative models? I myself teach the lab of the course ‘Development Economics’ to graduate students studying Development Studies. Each week there is a new topic, and each topic covers mainstream models and their critics. In some topics, alternative theories are also discussed. The students are usually either inherently critical of Economics as a discipline or intimidated by its quantitative nature, or both. We spend a lot of time learning about growth models and economic theories that have been heavily criticized. Understandably, a common question among students is ‘…but why are we learning this if it’s all wrong?’ I sympathize with their disillusionment with Economics, but I want to convince the students that what they are learning can, in fact, be very useful in order to challenge the dominant development paradigm.
In my experience, the most captivating justification for why we are learning these outdated and flawed theories is that they are, in fact, incredibly influential. In order to justify the time we spend on the traditional growth models and endogenous growth theory in class, I refer to policy approaches and institutional reports that the students are likely to be familiar with, where the arguments presented are founded on theories we are covering in the course. I want to show students that they can use their knowledge of mainstream theory and its flaws to criticize modern development policies. For example, both the well-known and influential Poverty Reduction Strategy Papers (as pointed out by Ben Fine), and the theories underlying the Better than Cash Alliance’s strategy to roll out finance for all, build on endogenous growth theory. Moreover, a lot of contemporary writing and policy recommendations concerning international trade build on Ricardo’s theory of comparative advantage (e.g. Justin Lin, former Chief Economist of the World Bank). The fact that institutions that fund huge development projects and shape the development debate often build their arguments on unrealistic assumptions captures the students’ attention.
Furthermore, I find that students are less likely to be disillusioned with Economics when they are provided with an alternative approach to the ‘flawed mainstream’. For example, after going through the details of the theory of comparative advantage, we spend the same amount of time on going through the theory of competitive advantage, and discuss to what extent the two theories relate to reality.
Another justification is to improve economic literacy. As the students are studying international development, they are likely to have to deal with economists in their future careers. In their meetings with economists, it will be a strength that they can speak the language of the discipline, especially if they intend to seriously challenge economists’ policy proposals. This justification holds for discussing basic economic concepts such as balance of payments, terms of trade, and interest rates, but also for dealing with simple economic models and basic theories of supply/demand. In this sense, teaching mainstream approaches can help students feel empowered around economists, rather than intimidated.
A final justification that I appreciate, but that I have not found to resonate as much with students, is the importance of understanding the history of thought in your field and understanding why certain models and theories came about in the first place (e.g. Keynes observed persistent unemployment and lack of aggregate demand during the Great Depression ). To understand where modern theories are coming from, it is useful to trace them back through history, to see how they developed through time.
We are privileged as Economics PhD students at The New School, as we can take 20 classes in both mainstream and heterodox topics. But how do we balance mainstream, criticism of mainstream, and alternative theories in one course, knowing that these students may never take an econ class ever again? And how do we justify spending so much time on models we do not agree with? Any feedback is welcome!
This article was initially written for a Pedagogy class I am taking this semester. I am grateful for useful comments from my fellow editors at NSER as well as encouraging feedback from editor of Lady Economist, Katherine Moos.
Photo: Copyright © 2015 by Sidney Harris
The article was originally published on The New School Economic Review blog (April 28th, 2015).
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Why should any one even one class of erroneous material? Learning a negative is a waste of precious youth!
It seems much better to learn an accounting or bookkeeping. As it is much more valuable. And, they are involved in the measurement (empirical) part of almost every ordinations’, entities’, or persons’ economics. If one omits this from their learning, they are missing some thing very crucial to understanding how much of the world works.
The hurdle in the learning curve of double entry bookkeeping is how to use debit and credit. Learn Debit and Credit and the rest is easy.
(Accounting and Hindu-Arabic numerals probably arrived in Venice from India or through traders of Indian goods and ideas. India once had the larges GDP in the world.)
Here are links about two books that explain the above and might be motivation for taking learning double entry book keeping or accounting. The second one was mentioned in a reviewers discussion of the first book.
1st book
https://janegleesonwhite.com/double-entry/
Double Entry: How the Merchants of Venice Shaped the Modern World and How their
Invention could Make or Break thePlanet,
Reviewed by: Alan Sangster, Griffith University,
http://www98.griffith.edu.au/dspace/bitstream/handle/10072/50684/84323_1.pdf;jsessionid=8175E8D60FEC6491EBCB3209F0C34F47?sequence=1
“The Bookkeeper Of Venice
When it first emerged, double-entry accounting was greeted like a great scientific discovery.”
http://www.wsj.com/articles/SB10001424052970203707604578092813119816922
The Venetian roots of modern finance
By the numbers
The beginning of savvy accounting
http://www.economist.com/node/21560846
http://www.goodreads.com/book/show/13136518-double-entry
2nd book
https://books.google.com/books?id=WwYBAwAAQBAJ&printsec=frontcover&dq=the+reckoning&hl=en&sa=X&ved=0ahUKEwjuy7W8ifDQAhUFl1QKHXiaB0cQ6AEIHzAA#v=onepage&q=the%20reckoning&f=false
https://www.goodreads.com/book/show/18210762-the-reckoning
“Whether building a road or fighting a war, leaders from ancient Mesopotamia to the present have relied on financial accounting to track their state’s assets and guide its policies. Basic accounting tools such as auditing and double-entry bookkeeping form the basis of modern capitalism and the nation-state. Yet our appreciation for accounting and its formative role throughout history remains minimal at best—and we remain ignorant at our peril. The 2008 financial crisis is only the most recent example of how poor or risky practices can shake, and even bring down, entire societies.”
“In The Reckoning, historian and MacArthur “Genius” Award-winner Jacob Soll presents a sweeping history of accounting, drawing on a wealth of examples from over a millennia of human history to reveal how accounting has shaped kingdoms, empires, and entire civilizations. The Medici family of 15th century Florence used the double-entry method to win the loyalty of their clients, but eventually began to misrepresent their accounts, ultimately contributing to the economic decline of the Florentine state itself. In the 17th and 18th centuries, European rulers shunned honest accounting, understanding that accurate bookkeeping would constrain their spending and throw their legitimacy into question. And in fact, when King Louis XVI’s director of finances published the crown’s accounts in 1781, his revelations provoked a public outcry that helped to fuel the French Revolution. When transparent accounting finally took hold in the 19th Century, the practice helped England establish a global empire. But both inept and willfully misused accounting persist, as the catastrophic Stock Market Crash of 1929 and the Great Recession of 2008 have made all too clear.
A masterwork of economic and political history, and a radically new perspective on the recent past, The Reckoning compels us to see how accounting is an essential instrument of great institutions and nations—and one that, in our increasingly transparent and interconnected world, has never been more vital.”
A quote from the book,
“Amsterdam also became the world center of accounting expertise. One poet later wrote that double-entry bookkeping was the secret to Dutch wealth:
This was the fam’d and quick invention, which
Made Venice, Genoa, and Florence rich:
The Low-Countries (in all senses such)
By this Art now speaks high and mighty Dutch.“
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Corrections:
Why should any one take even one class of erroneous material? Learning a negative is a waste of precious youth!
It seems much better to learn accounting or bookkeeping. As it is much more valuable.
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I once decided to learn the basics of accounting and bookkeeping before reading any more economics (as tempting as it was.) I would encourage any one to do the same.
I found it quite interesting, useful, and profitable. It also is a great way to learn something of economics. I consider double entry bookkeeping or accounting an important part of a good education.and a basic per-requisit to economics. It is a very enlightening way to look at things.
It inoculates people from false economic assumptions such as equilibrium and the exclusion of levels or stocks, like wealth, and debt. Have you noticed most of the variables in the theories of beginning macroeconomics are flows or change in flows? It is hard to find a level from accumulated flows. Levels are important and exclusion their is incorrect. Even Q, on the horizontal axis of the supply and demand, curve graphs is a flow, not a stock of supply or demand quantity. It is [quantity]/[time period] not a quantity sitting around in various places. Yet if a huge quantity (inventory) was sitting around it would matter.
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I am not an economics student or a practitioner. So pardon me for my lack of knowledge in understanding some of the terms mentioned here. But as an ever-learning professional, I am pretty curious to learn them, search for them, and find them and understand how they are used in practical terms. Basically because I want to understand how the world keeps working around them. And if I use my always-on-the-learning-curve skill, I might one day come up with a theory that really overwrites all the old theories in place. But then from a learning perspective, as well as a teaching perspective, and with so much history to go after and learn from, there’s only so much one can teach and one can learn. Perhaps, the instructors can do constant questioning to students in a very friendly way to understand their opinions, and come up with solutions and answers that not only helps them design the course better for future batches, but also helps current students appreciate the merit of learning economics history. Perhaps, they can divide the time between theory and practical cases, in a balanced way to really drive the point that some theories still do work and some now don’t. Perhaps, also drive the point in students, unconsciously, that when they graduate, it isn’t that the learning stops. What they learnt in class was only to equip them with tools so they can play around with them in their work life and real life. Pretty much like therapy.
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