Some thoughts on economics education

Sinclair Davidson, RMIT University

It seems economics as an educational choice is in decline. Enrollments beyond first and second year are said to be falling. Academic economists regale each other with horror stories, competing to tell of smaller classes, redundancies and reduced rigour. Simultaneously, economists—as a profession—are scorned in the popular psyche. Economists are portrayed as mean, uncaring, otherworldly, narrow-minded and the like.

The profession has reacted with panic. The American Economic Association commissioned research into the education of economists and David Colander (with various co-authors) has written extensively on the matter. Here in Australia, the matter is discussed ad nauseam at the Teaching Economics Conference and at the Annual Conference of Economists. The latest proposal is for the Economics Society to approach the federal government to establish more economics cadetships: rent seeking at its finest. Professional certification cannot be far behind.

Despite the angst, however, the data supporting the decline is scarce. Alex Millmow (2000), for example, argues that student numbers are falling, but his data show that undergraduate enrollments across Australia have risen between 1989 and 1999. What is occurring is that numbers are falling in some states and not others (New South Wales and Victoria). Apparently there has been relative but not absolute. It is not obvious, however, that declining enrollment is a problem for all universities or even for the profession.

Economists have failed to apply simple supply and demand analysis to the problem.

This issue highlights an interesting anomaly. Economists have not been applying economic analysis to themselves. It is hardly surprising that these same economists complain that their students cannot apply economic theory. An obvious economic argument would be that the Australian education system has too many economics departments. Barriers to exit, however, caused by government distortion in the university sector imply that overcapacity will persist in the long run, at the expense of the taxpayer. In addition this overcapacity is not limited to economics departments.

More generally, however, economists have failed to apply simple supply and demand analysis to the problem. Demand for economics may have fallen for many reasons. A simple demand explanation could be that rigour is unfashionable. Economics relies on some definitions and ‘conventions’ (what Deirdre McCloskey (1985) would call rhetoric) as organising principles. Post-modernism is currently fashionable and argues that as all definitions and conventions are part of a power hegemony no objective truths can be established beyond the self-interest of the speaker. Without commenting on the relative demerits of this approach, a popular and vulgar post-modernism becomes a cynical search for motive. As a first cut, motivism leads to sloppy thinking. Students may have become used to discussing how they ‘feel’ about issues. In economics, it is irrelevant how you feel about (say) gross domestic product; students need to know how it is calculated.

An alternative, or perhaps complimentary, argument could be that demand for economics has mostly been derived from the demand for ‘business’ studies. To the extent that this is true, and more universities now offer business studies, students have more and ‘better’ choices leading to a decline in demand for economics. This is often called the ‘substitution’ argument, but should be recognised as the conscription that it is. Economists—who extol choice—should welcome improved student choice and should value the competition that comes with that improved choice. After all choice and competition is what economists advocate for others.

Relying on this type of argument, however, is bad economics. Blaming the consumer for failure is a sure path to extinction in the product market and also in the ideas market. Problems with economics education lie in the supply-side. There are, probably, many supply-side factors contributing to economics’ relative decline. Here I concentrate (perhaps superficially) on just two: What is taught and how it is taught.

Economists need to take a hard look at introductory subjects. At present most of these subjects build into the next level subject. Principles taught in first year are needed for second and second year principles are needed for third and so on. The first year macro subject will crucify students on the Keynesian cross or worse, IS-LM. Early micro courses are little better. Pareto optimality as a practical concept ended with expulsion from the Garden of Eden. The argument may be made, however, that these are important mind exercises. This is all very well, if and only if, students proceed to Honours and beyond. But most do not and never have. Most students only take one or two years of economics. Students are often conscripts and economics departments and staff have treated them as such.

It is unlikely that the average, if not the brilliant, student could read an economic article in The Australian or The Australian Financial Review and form an opinion based upon what they have learnt in the first or second year of study. Students might have a mish-mash idea that there are Keynesians and Monetarists who disagree on everything, but now we’re all Keynesians, or Monetarists, or something. Small wonder they do not come back for more. To the extent that economics allows one to say something intelligent about the world, there is little that can be said.

Blaming the consumer for failure is a sure path to extinction in the product market.

Students are not dumb. There is no point telling them that workers are paid their marginal revenue product when youth wages operate as a price ceiling. The credibility of early economics training is suspect as it often ignores institutional arrangements. Economics educators should reduce theoretical and technical content and increase the institutional and historical content (see more generally Colander 1992). Ronald Coase has long spoken about ‘blackboard economics’. It is easy, cheap and irrelevant. Students, our consumers, realise this and in an environment where alternatives exist choose those alternatives.

Adding insult to injury economists not only teach ‘blackboard economics’ they do so badly. One need only attend the occasional conference or seminar to see how badly, on average, economists present their own research. One can only imagine their teaching. Taught material, after all, is the research output of others. It probably does not matter if teachers use PowerPoint, or acetate overheads or just the chalkboard. Economists do need to explain themselves more clearly. Many conference and seminar presentations, for example, are technically competent but less so on why and how their work is important. Too often (academic) economists seem to believe that good ideas survive in the market simply because they are good, or even correct. If the history of our discipline were better known the absurdity of this notion would soon be placed to rest.

If blackboard economics is going to be taught, the first chapter in introductory textbooks that explains the need for, and usage of, assumptions, models and data should be emphasised and not ignored. The implications and applications of economics to real world problems should be highlighted if not emphasised. Terms and concepts should be carefully defined. For example, the Macquarie Dictionary defines rational being ‘agreeable to reason; reasonable; sensible’. This is how most people understand the term. Economists define rational as being consistent with objectives irrespective of whether those objectives are sensible. As with any producer, economists need to teach consumers how best to use the product. Teaching is the equivalent of an operator’s manual and as consumers we are all familiar with the frustration of a poor operator’s manual.

Economics in principle is not difficult. There are, at most, only three important ideas—each a well-known cliché. There are no zero-price lunches, you cannot have your cake and eat it too, and no point crying over spilt milk. The rest is detail and application. With some hard thinking and those three ideas everyone could be an economist, or at least understand economics.


Coase, R. (1988) The firm, the market, and the law. Chicago: University of Chicago Press.

Colander, D. (1992) Reform of undergraduate economics education. In Colander, D. and R. Brenner (eds). Educating economists. Ann Arbor: University of Michigan Press.

McCloskey, D. (1985) The rhetoric of economics. Madison: University of Wisconsin Press.

Millmow, A. (2000) The state we’re in: University economics 1989/1999. Economic Papers. 19(4): 43–52.

Sinclair Davidson is an associate professor in the School of Economics and Finance at RMIT. Although writing in the third person, Sinclair does not exclude himself from any criticism he makes against economists.

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