Monday, March 26, 2012

The perpetual lag of macroeconomics teaching

When it comes to teaching, nobody likes revamping lecture notes and reforming a curriculum. This is especially true when one is oneself not really conversant in the new material. While I think a Economics PhD should be able to teach almost any undergraduate Economics class, one is still drawn to the path of least resistance and teach only what one knows, even when this is outdated. One consequence of this is that undergraduates get to learn what the profession discredited sometimes decades ago. Nowhere is that more true than in Macroeconomics, which went through a transformation in 1970's and 1980's that to a large extend shelved IS/LM, yet the latter is still the core of undergraduate teaching. The fact that those teaching this today were taught IS/LM is the prime reason, and the textbook writers accommodate this.

Some have called current macroeconomic theory wrong with the current crisis and thus there would be the need to a change in research paradigm and thus also teaching. I am not sure about this claim, I would rather call macroeconomic research before the crisis incomplete rather than wrong. As to the teaching reform, that will take ages. One way to the someway fix the broken IS/LM model to make it more amenable to current events, like Peter Bofinger tries by introducing involuntary unemployment that does not necessarily come from wage rigidity. There have been other such attempts, but frankly, they just make the model even less believable and impossible to teach. The true reform should be to drop IS/LM entirely from the undergraduate classroom, except for History of Economics classes.


Anonymous said...

I am so glad I am teaching Microeconomics. All pure theory that has not changed for decades, any empirical evidence be damned. And no one is complaining.

Anonymous said...

EL, why don't you comment:

Report of the Committee on Honors and Awards (Bernheim). Bernheim explained that
nominations for the Clark Medal were solicited from economics department heads of major
research universities, from the Executive Committee, and from former Clark Medal winners.
The Honors and Awards Committee (Bernheim (chair), Banerjee, Card, ..... Electoral College,
VOTED to award the 2010 John Bates Clark Medal to Esther Duflo.

This takes me by surprise. They have been colleagues since her arrival at MIT – he was one of her PhD supervisors before she became a professor. In 2003 they founded (and still co-head) the Abdul Latif Jameel Poverty Action Lab (J-Pal), the MIT centre where anti-poverty initiatives are studied. They have lived together for 18 months.

Economic Logician said...

I have: Do we need awards in Economics?, although at the time it was not yet confirmed they were dating.

Anonymous said...

I agree that there are problems with all of the Macro textbooks I have seen -- for example, regarding growth -- but what is your beef here with IS/LM, exactly?

You are arguing that prices aren't sticky? If so, go have a look at Japan's real exchange rate before and after the Plaza Accord... you might have a surprise in store. I'll give you a hint -- Japan's nominal exchange rate appreciated, and the price level barely budged.

DSGE with nominal rigidities/New Keynesian is basically IS/LM, and there is plenty of this the past few decades.

My beef is rather that many undergrad textbooks teach IS/LM divorced from the Great Depression, and barely mention liquidity traps or omit them altogether.

Anonymous said...

I do not think the issue is price stickiness. One can think very well about price stickiness without resorting to IS/LM.

While EL seem to say IS/LM is easy to teach, I thoroughly disagree. For students who are used to micro, seeing IS/LM and its lack off rigor clearly puts them off, and they are not wrong in thinking macroeconomics is some bizarre magic. I struggle myself teaching it, so I may have to blame myself (textbook is imposed by the department). I, for one, wish I could teach less antique macro.

Anonymous said...

Well, then teach them this if you think they'd have an easier time with the math:

Alternatively, you could teach them the RBC model, in which the prescription for government is to let the economy burn in a depression.

I'm being flippant -- I think you are correct that what is taught in textbooks could be improved. However, there's been a push to burn IS/LM ever since Keynes wrote it that has little to do with it's performance as a theory.

Anonymous said...

Teaching the IS-LM model has been the worst teaching experience I ever had (I am a macroeconomist). I feel much hapier teaching micro theory, econometrics or dynamic macroeconomis.

Anonymous said...

Try using Steve Williamson's textbook. At least this one is not taking the students for a ride.

Anonymous said...

Teaching the IS/LM model is unethical.

Anonymous said...

Commenters-- Which part of IS/LM do you object to specifically?

And, would the framework you guys prefer have led you to cut government spending in 2009?