Neva Goodwin. A New Direction for Economics Education.

Neva Goodwin. A New Direction for Economics Education.

How many people here have ever taken an economics course? More than one economics courses? How many have majored in economics?

Those of you who took only one course probably got the best the profession has to offer. There are some true and valuable things to be learned in standard economics—like some of the basic concepts of supply and demand intersecting to create wages and prices—but you may have since discovered that a lot of other things also affect prices, such as advertising, or consumers’ lack of information. And wages involve even more complicated human interactions, habits and expectations. These complexities and exceptions don’t get much hearing in introductory courses—and, surprisingly, they get even less at the upper levels, where progressively more mathematics are imposed on a progressively more abstract picture of an economy.

Meanwhile the students are also being taught a lot that is dangerous. Here are some of the take-aways from standard economics course:

We don’t need to worry about material resources—the price system and human ingenuity ensures that all resources are directed to their most valuable uses Concentrations of economic power is not much of a problem. Its entanglement with political power doesn’t merit any attention at all.

Increased consumption is the primary measure of well-being
About 40% of college students in the United States take at least one economics course. Students who, two years later, have forgotten the diagrams and equations, are likely to still retain an impression that only selfishness is rational, that limitless greed is a universal human characteristic, and that economic success can be assessed strictly in terms of the dollar value of consumption.

• One is the business sphere, composed of profit-oriented firms.
• The public purpose sphere is composed of governments and NGOs. They have an announced goal of advancing the well-being of some defined portion of society, and do not have shareholders or owners to whom they must return a profit.
• The core sphere is composed of households and communities. The motive for economic behavior in the core is the survival and well-being of individuals—self, family, other community members. Well-researched estimates of the market value of work done in homes and communities, without pay, range from 20-35% of GDP. This is not, of course, represented in GDP statistics.

We also believe that if you’re going to teach economics, you need to understand where your subject—the economy—is located. The standard texts don’t raise this question: they deal with an economy so abstract that it has no apparent connection with its ecological or social setting. We have used the term, contextual economics, for the theory that I and my colleagues have been developing, to indicate that any economic system operate within a social/psychological context that includes ethics, norms, human motivations, culture, politics, institutions, and history. It also operates within a physical context which includes the built environment, as well as the natural world. And, in addition to the standard economic activities of production, distribution and consumption, we emphasize the economic activity of resource maintenance. This is critical with regard to natural resources, but also in social settings, where parents and others do the essential work of maintaining health, socializing children, and so on. As Alvin Toffler once asked a group of CEOs, “how productive would your workers be if they were not toilet-trained?”

The development of contextual economics has made solid progress. There are Italian, Russian, Vietnamese, Croatian and Chinese translations of some of these texts. We have tracked thirty-five thousand print copies and web downloads of our full texts in English, along with another thirty-five thousand plus downloads of our other major web-based teaching materials.

However we’re still really in the middle of the large project of creating an economic theory that, it turns out, is composed about 40% of material that can be found in the standard theory, and about 50% of material we’ve woven together from the different strands of ecological, radical, feminist and other kinds of alternative approaches to understanding the economy.

Mathematicians among you may have noticed that this accounts for 90% of the material we’ve developed. The remaining 10%, in our Micro-Economics textbook, we more or less made up, using common sense, and looking at other disciplines, like philosophy, psychology and history. The results have held up pretty well, though with all that has happened recently the text should be updated, for continued realism, and to keep the numbers of users growing.

But the textbook, MacroEconomics in Context, was a different kettle of fish. The 60% of standard theory that either has no relation to the real world, or is factually wrong, is more seriously off-base in macro economics than in micro. And the missing pieces are much harder to find in the work of other thinkers. There is a big part of the macro economy—probably more like a quarter or a third of the whole concept—that is still insufficiently understood or explained in our textbook, let alone in others. Here are some examples of what I believe is lacking from any coherent, teachable description of a modern economy:

Macroeconomics has traditionally been oriented to enhancing the economy of a single nation—even if that was to come at the expense of other nations. How can macro theory accommodate the realities and the ethics of a globalized humanity? How can it incorporate the collective action issues that arise from, for example, global environmental threats?
Is it possible for a single macroeconomic theory to be relevant to both very poor and very rich countries? If we need several distinct theories, how can they be connected?

What is the relation of the financial sector to the parts of the economy that produce real goods.
Why is there such widespread belief in the imperative for financial growth? Given that perpetual economic growth is probably not possible in a finite world, how can economies get off the growth treadmill without incurring great hardship on individuals?
There’s exciting news on the last of these points: Peter Victor, who is on the board of the New Economics Institute, is the first person to have created a model of a macro-economy that shows how it can get off the growth treadmill, without diminishing the quality of life. This is an enormous break-through; if those folks in Sweden know which way the wind is blowing, at some point Peter will get a Nobel prize for this.

The New Economics Foundation, our partner in England, has done terrific work in pointing up the need for this kind of new thinking, and in whetting the appetite of students and citizens for economic theory that can both explain contemporary realities and support an economy whose goal is sustainable well-being.

My great hope is that the New Economics Institute will attract financial support that will make it possible to bring together the resources required to produce the critically needed new educational materials. The human resources are here—in nef, the Schumacher library, my research group at Tufts, and other thinkers—several of them on the board of NEI—who are pushing outward the frontiers of economic thought.

That very large number of students who take economics courses need to understand the economic, as well as the social, value of activities that go on outside of the market, from volunteering in communities or non-profit institutions to home care of children, the sick and the elderly. They need to learn to inquire how business can serve human well-being, rather than how to turn children and adult citizens into consumers.

They need to be learning economic theory in the context of a different goal for the economy—sustainable human well-being, in a healthy environment—rather than maximizing the money value of what is bought and sold in a year.

I believe that the New Economics Institute is the organization that can inject new realism and a new sense of purpose into economics education, so that it can play its critical role in the move to more humane and sustainable economic systems.

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Keywords: Economics of education

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