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5 things I would like economics majors to know before they graduate

I have been teaching microeconomics for more than four decades, and over the past months I have been seriously thinking about this question: “What are some of the most important things I would like economics majors to know before they graduate?” At first I was leaning to such important and well-known ideas as opportunity cost, marginal analysis, moral hazard, externalities, and the prisoners’ dilemma game. Now I am leaning to important ideas that are not well-covered in economic textbooks, and indeed are often omitted entirely. Five of the ideas that I would recommend are:

1. people are not solitary creatures but social animals;

2. tastes are malleable and particularly so among children and adolescents;

3. there are lots of children and adolescents in the world (though few in economic textbooks);

4. retail purchasers rarely have detailed information about the products they buy:

5. large corporations (and other economic institutions) often have a substantial social and political power.

I am not claiming that economists do not occasionally write about these ideas, for economists write about virtually everything, but that these important ideas have not sufficiently made it into most economic textbooks.

David Hemenway


  1. blocke
    January 8, 2016 at 2:07 pm

    If these important ideas have not made it into economic textbooks, then my question is why? Could it be that they do not lend themselves to mathematical modeling?

  2. Alan
    January 8, 2016 at 2:36 pm

    6. Economic textbooks misrepresent intellectual history. For example, practically everything ever written about Adam Smith’s ideas (e.g. the supposed invisible hand of the market) in popular economic textbooks is wrong and often conspicuously so to anyone willing to consult the primary texts. Anyone familiar with Moral Sentiments and Wealth of Nations and the recent work of Smith scholars would appreciate points 1 and 5 above about people being social animals and the power of large corporations.

  3. January 8, 2016 at 4:52 pm

    Rule ONE. ” “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha[Gautama Siddharta] (563 – 483 BC),
    Rule TWO. Rule One is for ALL MANKIND.

  4. January 8, 2016 at 6:01 pm

    Understand the banking system FIRST.

  5. January 9, 2016 at 6:10 am

    I’ve worked with economists for 40 years on all sorts of projects from dam and bridge engineering to building cities to providing water and sanitation. My experiences have not been good. The economists either wanted to boss the whole project or continually fought with other members of the team, or both. Community and coordination seem to be unknown concepts to the economists.

  6. January 9, 2016 at 3:25 pm

    I haven’t lpoked at any economic textbooks much recently, but the ones i used to read mostly ignored or just briefly discussed those points. (I remember one which had fairly long chapters on basic ideas like supply and demand curves, etc. and then about two paragraphs on market failures—basically a list of where idealizations can fail.) However, in the academic journals I think those ideas are very commonly discussed though more in the theoretical ones rather than for example AER, JPE, or QRE, which tend to be more standard. One might have to do a ‘content analyses’ to really know. To me the problem is there seems to be a huge time delay between what is in academic literature, and what is in textbooks. I saw this in the sciences as well—it takes it seems 10 or 20 years before current research topics will be discussed in undergrad courses. Often, the ‘popular’ books are more current than the textbooks—some written by journalists, others by researchers presenting current topics to a mass audience. The problem with them is they don’t usually have technical details, so they are incomplete.
    Also there would still be disagreements—i for one think opportunity cost is an idea or term i dislike, basically because i view it as redundant, with other terms for the same thing in the literature. If one could settle on one term that would be fine. This is like biology—often different people will have different names for the same plant. This generates confusion, though it can be good to preserve market niches for various experts. And maybe that diversity and confusion has some value. (One paper which is well known says for example that for real markets to function, actually one needs imperfect information. The same holds of the second law of thermodynamics in the boltzmann formulation—one cannot have ‘perfectly elastic collsions among particles’ in fact for the theory to work, though that is one assumption of the model.)..

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