What Can Be Done to Improve the Episteme of Economics?

I think this is needed:

INET: Education Initiative: “We are thrilled that you are joining us at the Berkeley Spring 2017 Education Convening, Friday, April 28th 9am-5pm Blum Hall, B100 #5570, Berkeley, CA 94720-5570… https://www.ineteconomics.org/education/curricula-modules/education-initiative

…Sign up here: https://fs24.formsite.com/inet/form97/index.html or email aoe@ineteconomics.org…

I strongly share INET’s view that things have gone horribly wrong, and that it is important to listen, learn, and brainstorm about how to improve economics education.

Let me just not six straws in the wind:

1. The macro-modeling discussion is wrong: The brilliant Olivier Blanchard https://piie.com/blogs/realtime-economic-issues-watch/need-least-five-classes-macro-models: “The current core… RBC (real business cycle) structure [model] with one main distortion, nominal rigidities, seems too much at odds with reality…. Both the Euler equation for consumers and the pricing equation for price-setters seem to imply, in combination with rational expectations, much too forward-lookingness…. The core model must have nominal rigidities, bounded rationality and limited horizons, incomplete markets and the role of debt…”

2. The macro-finance discussion is wrong: The efficient market hypothesis (EMH) claimed that movements in stock indexes were driven either by (a) changing rational expectations of future cash flows or by (b) changing rational expectations of interest rates on investment-grade bonds, so that expected returns were either (a) unchanged or (b) moved roughly one-for-one with returns on investment grade bonds. That claim lies in total shreds. Movements in stock indexes have either no utility-theoretic rationale at all or must be ascribed to huge and rapid changes in the curvature of investors’ utility functions. Yet Robert Lucas claims that the EMH is perfect, perfect he tells us http://www.economist.com/node/14165405: “Fama tested the predictions of the EMH…. These tests could have come out either way, but they came out very favourably…. A flood of criticism which has served mainly to confirm the accuracy of the hypothesis…. Exceptions and ‘anomalies’ [are]… for the purposes of macroeconomic analysis and forecasting… too small to matter…”

3. The challenge posed by the 2007-9 financial crisis is too-often ignored: Tom Sargent https://www.minneapolisfed.org/publications/the-region/interview-with-thomas-sargent: “I was at Princeton then…. There were interesting discussions of many aspects of the financial crisis. But the sense was surely not that modern macro needed to be reconstructed…. Seminar participants were in the business of using the tools of modern macro, especially rational expectations theorizing, to shed light on the financial crisis…”

4. What smart economists have to say about policy is too-oftendismissed: Then-Treasury Secretary Tim Geithner, according to Zach Goldfarb https://www.washingtonpost.com/blogs/wonkblog/post/geithner-stimulus-is-sugar-for-the-economy/2011/05/19/AGz9JvLH_blog.html: “The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as [Christina] Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was ‘sugar’, and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt…. In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration…”

5. The competitive model has too great a hold: “Brad, you’re the only person I’ve ever heard say that Card-Krueger changed their mind on how much market power there is in the labor market…”

6. The problem is of very long standing indeed: John Maynard Keynes (1926) https://www.panarchy.org/keynes/laissezfaire.1926.html: “Some of the most important work of Alfred Marshall-to take one instance-was directed to the elucidation of the leading cases in which private interest and social interest are not harmonious. Nevertheless, the guarded and undogmatic attitude of the best economists has not prevailed against the general opinion that an individualistic laissez-faire is both what they ought to teach and what in fact they do teach…”

So:

INET: Education Initiative: “We are thrilled that you are joining us at the Berkeley Spring 2017 Education Convening, Friday, April 28th 9am-5pm Blum Hall, B100 #5570, Berkeley, CA 94720-5570… https://www.ineteconomics.org/education/curricula-modules/education-initiative

…Sign up here: https://fs24.formsite.com/inet/form97/index.html or email aoe@ineteconomics.org…

We are convening students and professors who are interested in broadening economics education…. Our goals are to learn more about prevailing needs, pool and share existing pluralist curriculums, and brainstorm the architecture and direction of concrete future endeavors in post-secondary economics education. The economics discipline is in disrepair: publicly discredited, theoretically narrow, and academically constrained. Economics education reflects these flaws…. INET is gathering people in the academic economics community in convenings across the U.S. to better understand the challenges and resources faced by those working to reinvigorate the economics discipline.

Invitations are extended to: pre- and non-tenure faculty, including adjuncts; undergraduate and graduate students; experienced faculty actively engaged in pluralist education…. The convenings will be group-led, facilitated, full-day workshops…. These convenings are an exploratory process for INET. We have not made any funding commitments in this field beyond this series of convenings…. We do not view these meetings primarily as places to present funding proposals, but… to share experiences and ideas.

Next steps for INET in education will be announced following these convenings in May 2017….

As the day is long and the goal is ambitious, we will devote part of our morning to building a community agreement together. In anticipation of this, we invite you all to consider what makes a conversation comfortable and supportive for you (bonus points if you can frame it affirmatively…. This is not a suitable gathering for funding proposals. Chatham House Rules….

• 9–10am: Breakfast & Coming Together
• 10–11am: Constraints: Barriers to Economic Education
• 11am–12pm: Resources: Existing Tools for Economics Education
• 12–1pm: Lunch
• 1–2pm: Matching: Fitting Resources to Constraints
• 2–3pm: Gaps: Identifying Remaining Needs
• 3-3:30pm: Coffee Break
• 3:30–5pm: Future: Identifying Avenues of Change
• 5-6pm: Dinner