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Economics Textbooks

from Steve Keen

Thomas Kuhn once famously described textbooks as the vehicle by which students learn how to do “normal science” in an academic discipline. Economic textbooks clearly fulfil this function, but the pity is that what passes for “normal” in economics barely deserves the appellation “science”.

Most introductory economics textbooks present a sanitised, uncritical rendition of conventional economic theory, and the courses in which these textbooks are used do little to counter this mendacious presentation. Students might learn, for example, that “externalities” reduce the efficiency of the market mechanism. However, they will not learn that the “proof” that markets are efficient is itself flawed.

Since this textbook rendition of economics is also profoundly boring, the majority of those exposed to introductory course in economics do no more than this, and instead go on to careers in accountancy, finance or management  –  in which, nonetheless, many continue to harbour the simplistic notions they were taught many years earlier.

The minority which continues on to further academic training is taught the complicated techniques of economic analysis, with little to no discussion of whether these techniques are actually intellectually valid. The enormous critical literature is simply left out of advanced courses, while glaring logical shortcomings are glossed over with specious assumptions. However, most students accept these assumptions because their training leaves them both insufficiently literate and insufficiently numerate.

Most modern-day economics students are insufficiently literate because economic education eschews the study of the history of economic thought. Even a passing acquaintance with this literature exposes the reader to critical perspectives on conventional economic theory – but students today receive no such exposure.

They are insufficiently numerate because the material which establishes the intellectual weaknesses of economics is complex. Understanding this literature in its raw form requires an appreciation of some quite difficult areas of mathematics-concepts which require up to two years of undergraduate mathematical training to understand.

Curiously, though economists like to intimidate other social scientists with the mathematical rigour of their discipline, most economists do not have this level of mathematical education. Though economics students do attend numerous courses on mathematics, these are normally given by other economists. The argument for this approach – the partially sighted leading the partially sighted – is that generalist mathematics courses don’t teach the concepts needed to understand mathematical economics (or the economic version of statistics, known as econometrics). As any student of econometrics knows, this is quite often true. However, it has the side effect that economics has persevered with mathematical methods which professional mathematicians have long ago transcended. This dated version of mathematics shields students from new developments in mathematics that, incidentally, undermine much of neoclassical economic theory.

Developing an economics for the post-crisis world

  1. Econoclast
    May 18, 2022 at 5:30 pm

    “Most modern-day economics students are insufficiently literate because economic education eschews the study of the history of economic thought.”

    True. Several years ago an emeritus professor asked me to do an informal survey of economics departments across the United States to ascertain the status of courses similarly named “The History of Economic Thought”. I checked some 3 dozen departments and found the course rarely required (as it was in my undergrad days) and not even offered in many.

    I am unable to see how any profession can claim expertise if it doesn’t know its own philosophical history.

  2. John deChadenedes
    May 18, 2022 at 8:13 pm

    My own impression from studying economics, which I came to from a philosophy and public policy background, is that its basic problem is deeper than its reliance on mathematics. When I first studied microeconomics it became clear that many of its fundamental assumptions were wrong. Having thought about it for years now, I have come to think that all of the basic assumptions of economics are incorrect. Given that, it doesn’t really matter how good your mathematics is. While you may find you can prove anything, you will not be able to have confidence in any of your conclusions. As they taught you in Logic 101, you can prove anything from a contradiction.

    • yoshinorishiozawa
      May 18, 2022 at 9:25 pm

      Yes, John, you are right. The basic problem is deeper than its reliance on mathematics.

      Let us argue basic problems. Whether one uses mathematics or not is almost irrelevant to whether a theory is true (or more exactly “truer”) or not. I am opposing Lars Syll when he writes as if mathematics is the very cause of the malaise of present economics. See for example
      https://rwer.wordpress.com/2022/05/11/godel-and-the-limits-of-mathematics/

      We must change basic terms, propositions, and structure of the economic theories. Please see for example Chapters 1 and 2 of our book: Microfoundations of Evolutionary Economics. We should fight in substances and not in formalities.

    • Meta Capitalism
      May 26, 2022 at 12:40 am

      My own impression from studying economics, which I came to from a philosophy and public policy background, is that its basic problem is deeper than its reliance on mathematics. When I first studied microeconomics it became clear that many of its fundamental assumptions were wrong. Having thought about it for years now, I have come to think that all of the basic assumptions of economics are incorrect (John deChadened Summarizing Lars Core Thesis)
      .
      Recent events in the financial markets have, as rightly noticed by Paul Krugman [2009], “pretty decisively refuted the idea that recessions are an optimal response to fluctuations in the rate of technological progress” and that “unemployment is a deliberate decision by workers to take time off”.  According to Krugman what went wrong was basically that “the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” This is certainly true as far as it goes. But it is not deep enough. Mathematics is just a means towards the goal – modeling the economy as a closed deductivist system. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 1075-1079). WEA. Kindle Edition.)
      .
      Economics can’t be a “Euclidean” science. It reduces it to a logical axiomatic system in applied mathematics, with little bearing on real economies. As Keynes stated, we should use a more “Babylonian“ approach and aim for less universal theories and accept that there will always be binding spatio-temporal restrictions to the validity of our theories. The real economy is – to use the words of Cartwright [1999] – no “nomological machine”, but rather a “dappled” world. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 737-740). WEA. Kindle Edition.)
      .
      (….) Keynes [1936:297] maintained that “the object of our analysis is not to provide a machine, or method of blind manipulation, which will furnish an infallible answer.” Strictly deductive argumentation is possible only in logic. “In … science, and in conduct, most of the arguments, upon which we habitually base our rational beliefs, are admitted to be inconclusive in a greater or less degree” [Keynes 1973(1921):3]. In economics you can’t “convict your opponent of error” but only “convince him of it”. Hence, the aim of economic reasoning can only be to “persuade a rational interlocutor” [Keynes 1971-89 vol XIII :470]. Economics is an argumentative science. Since you cannot really prove things, you have to argue and justify. And if one does use deductive arguments, one has to be aware of the limits of their validity and justify their use. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 866-871). WEA. Kindle Edition.)

      .
      Mathematics, like computer science, big data science, etc., is GIGO—garbage in garbage out. Modeling assumptions (premises) that do not pass the smell test and are absurdly unrealistic and “basically incorrect” yet there to produce the desired result are the core target of Lars thesis. The misuse of mathematical axiomatic deductive models founded upon such if-pigs-could-fly critical assumptions (premises) are the core target of Lars critique, and those if-pigs-could-fly assumptions (premises) when used in a formalized mathematical model produce garbage.
      .

      Social science is relational. It studies and uncovers the social structures in which individuals participate and position themselves. It is these relations that have sufficient continuity, autonomy, and causal power to endure in society and provide the real object of knowledge in social science. It is also only in their capacity as social relations and positions that individuals can be given power or resources – or the lack of them. To be a capital-owner or a slave is not an individual property, but can only come about when individuals are integral parts of certain social structures and positions. Just as a cheque presupposes a banking system and tribe-members presuppose a tribe – social relations and contexts cannot be reduced to individual phenomena. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 146-151). WEA. Kindle Edition.)
      .
      The theories and models that economists construct describe imaginary worlds using a combination of formal sign systems such as mathematics and ordinary language. The descriptions made are extremely thin and to a large degree disconnected to the specific contexts of the targeted system than one (usually) wants to (partially) represent. This is not by chance. These closed formalistic-mathematical theories and models are constructed for the purpose of being able to deliver purportedly rigorous deductions that may somehow by be exportable to the target system. By analyzing a few causal factors in their “laboratories” they hope they can perform “thought experiments” and observe how these factors operate on their own and without impediments or confounders. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 152-157). WEA. Kindle Edition.)
      .
      Unfortunately, this is not so. The reason for this is that economic causes never act in a socio-economic vacuum. Causes have to be set in a contextual structure to be able to operate. This structure has to take some form or other, but instead of incorporating structures that are true to the target system, the settings made in economic models are rather based on formalistic mathematical tractability. In the models they appear as unrealistic assumptions, usually playing a decisive role in getting the deductive machinery deliver “precise” and “rigorous” results. As noted by Frank Hahn [1994:246] – one of the icons of neoclassical mathematical economics – “the assumptions are there to enable certain results to emerge and not because they are to be taken descriptively.” (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 158-163). WEA. Kindle Edition.)

      .
      Science is not mathematics; mathematics is a tool, a yardstick, a precise formal language used for measuring and thinking about quantitative material reality. The history of science is replete with examples of how economists in their effort to make economics more like physics based on a mistaken view of what physics was, engaged in wholesale mathematization of economics that led to the epistemic quagmire it finds itself in today.
      .

      Mathematical tractability is not enough   It is hard to escape the conclusion that it is an enormous waste of intellectual power to build these kinds of models based on next to useless theories. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 2200-2202). WEA. Kindle Edition.)
      .
      Mathematical tractability cannot be the ultimate arbiter in science…. [T]he burden of proof is on those who still want to use models built on ridiculously unreal assumptions. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 2200-2213). WEA. Kindle Edition.

  3. May 19, 2022 at 5:38 am

    New and more valid theoretics are all well and good, but what economics really needs is a new philosophy, a new philosophical concept that spots the most operant out factor and then illuminates the new paradigm concept and its aligned policies that changes its entire pattern. As R. Buckminster Fuller said we need to become systems philosophers.

    • yoshinorishiozawa
      May 27, 2022 at 8:31 am

      Sear Steve,

      Buckminster Fuller died in 1983, about forty years ago. Systems theory and system dynamics seemed hopeful in 1980’s, but disappointment spread after that. To understand how the economy really works, we had to have more concrete systems idea than general systems theory. What is the philosophy that you are expecting from systems theory?

      To tell a short story of modern economics, Leon Walras, who was one of, and perhaps the most influential founders of neoclassical economics, was a systems theorist who thought that everything is related to everything and therefore we must analyze the economy as a general equilibrium system. His idea was quite modern as it became the leading idea of mathematical economics (such as Arrow and Debreu 1954), 40 years after his death. Their system (General Equilibrium theory) became the very paradigm of all neoclassical economics. Even the Dynamical Stochastic General Equilibrium, which had been the dominant theory of mainstream macroeconomics from 1980 to 2008, draws on the Arrow and Debreu’s General Equilibrium theory.

      I wonder if systems theory was operative in rescuing economics from its fatal disease. Heterodox economists are proposing to change the picture or vision on how the economy works. Instead of seeing that it works by a price mechanism, they claim the modern industrial economy works as a quantity adjustment system. See Morioka’s chapters (3, 4, and 5) in our MIcrofoudnations of Evolutionary Economics. How this new vision works is developed for example in my A new framework for analyzing technological change and The principle of effective demand: a new formulation (open access paper).

      Of course, this is not a new idea of ours. For example, in 1985, Nicholas Kaldor stated
      in his small book Economics without Equilibrium that

      The main conclusion of the first lecture was very much the same as the mains conclusion of Arthur Okun’s posthumous book Prices and Quantities, namely, that in the vast majority of cases (which means in practically all cases except for certain staple products of agriculture and mining) the sellers are price-makers and quantity takers, and not, as Walrasian equilibrium theory supposes, the price-takers and quantity-makers.This means that prices are mainly cost determined; demand has virtually no influence on prices (except of course by an indirect route in that demand determines the quantities produced, and changes in the latter may have an influence on unit costs.)
      Kaldor 1985 p.31

    • Meta Capitalism
      June 1, 2022 at 2:25 pm

      Systems theory (thinking) has moved far beyond the anachronistic just-so story Shiozawa reminisces about (i.e., post-Walrasian economics that include dynamic “part-whole system relationships”). If all you have is a hammer (pet theory) the entire world looks like a nail (quantity adjustment) and like a tautology always circles back to one’s pet theory. Fortunately for us, the many authors on RWER do keep up with the progress in new philosophy that Steve speaks about; it is called systems theory:
      .

      Conceptual complexity follows from philosophical and methodological systems thinking, and from complexity thinking. The status of intractability divides it in two branches. One, “Conceptual T” is silent on intractability. It includes notably classical systems thinking (von Bertalanffy, 1968) and sparse philosophical thinking (McIntyre, 1998; Allen, 2001). The other one or “Conceptual NT” addresses both philosophical and methodological limits to knowledge (Morin, 2008; Cilliers, 2005; Hayek, 1967, 1975; Prigogine and Stengers, 1984; Le Moigne, 1990; Richardson, 2008; Tsoukas and Hatch, 2001) and second-order cybernetics (von Foerster, 2003). Although it integrates nontrivial intractability and a critical reflection on the limits of knowledge, it remains programmatic and at a distance from theoretical and empirical problem solving.
      .
      This impediment should be remedied in principle by phenomenal complexity and its orientation towards empirical problem solving. This perspective gets also divided in two parts by the status of intractability. Its “Phenomenal T” part, with trivialized intractability, characterizes several perspectives in the systems approach to empirical issues. One finds this kind of complexity in H. Simon’s architecture of complexity which solves for the intricacy of nearly decomposable systems. (Davis, John. Economic Philosophy: Complexities in Economics (Kindle Locations 452-469). WEA. Kindle Edition.)

      .
      If we are to avoid a complete environmental systems breakdown and all that will entail for humanity we must begin thinking in terms of systems. And that is what RWER’s best are all about:
      .

      Provisioning during rapid, uncertain change

      Given this explanation of how the human predicament arose, what does it suggest for responding to a rapidly changing and uncertain future?[88]  Many environmental scientists predict total environmental systems breakdown as multiple thresholds or tipping points are crossed (Rockstro¨m et al., 2009; Barnosky et al., 2012; Wunderling et al., 2021) and planet Earth goes into a hot phase that will be uninhabitable (Steffen et al., 2018). Such tipping point perspectives are difficult to work with because the science of detecting thresholds in environmental systems, let alone socio-environmental systems, before they are crossed is weak (Biggs, Carpenter, and Brock, 2009). The warning from this scientific understanding and its inherent uncertainties are clear: humanity needs to back off from likely brinks as soon and quickly as possible.[89] This is the state of scientific understanding. As when a nation is attacked and war is declared, the appropriate defense policy is not fine-tuned by values derived from the current consumptive economy. Rather, societies in war rapidly alter their economy to serve immediate war needs. Markets and economists play a subsidiary role in war, as they will in rapid environmental change. And if total catastrophe unfolds, economies and economic belief systems will collapse as well. In the catastrophe scenario, there is little role for economics.[90] (Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (pp. 112-113). World Economics Association Books. Kindle Edition.)
      .
      [88] I struggle here as to how to characterize scientific understanding of the future. In my way of understanding, all systems – ecosystems, hydrological systems, climate systems, weather systems, etc. – are scientific constructs that have helped us think and understand, yet they do not exist in nature. Conceptual systems have boundaries that we have put on nature that do not actually exist in the continua we mostly find. There are also different ways of hypothesizing how things interact within a system, for example species interacting in a food web or species interacting and coevolving in a food web in response to external disturbances. While systems thinking is more systematic than thinking, for example, about the characteristics of an individual species, systems thinking necessarily still has artificial boundaries. The areal boundaries of ecosystems are constructs of the mind and need to be chosen strategically with respect to organisms and processes that are central to the analysis (Wiens, 1989). The question in my mind is whether the ways in which we have learned through seeing nature as a composite of systems, typically systems that have equilibria, impedes our understanding now that we are in the Anthropocene, or Econocene. (Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (p. 522). World Economics Association Books. Kindle Edition. Bold added)

      .
      As Kate Raworth sums it up, it’s time to “get savvy with systems:
      .

      The iconic criss-cross of the market’s supply and demand curves is the first diagram that every economics student encounters, but it is rooted in misplaced nineteenth-century metaphors of mechanical equilibrium. A far smarter starting point for understanding the economy’s dynamism is systems thinking, summed up by a simple pair of feedback loops. Putting such dynamics at the heart of economics opens up many new insights, from the boom and bust of financial markets to the self-reinforcing nature of economic inequality and the tipping points of climate change. It’s time to stop searching for the economy’s elusive control levers and start stewarding it as an ever-evolving complex system. (Raworth, Kate. Doughnut Economics (p. 25). Chelsea Green Publishing. Kindle Edition. Bold added.)

      .
      In conclusion:
      .

      The multiple social, ecological and economic crises of our age, and the failings of mainstream economics to explain or address the structural causes of these crises, means new approaches to economics are essential. SEE has been outlined here as a necessary and emerging paradigm. Economics has become increasingly detached from its object of study and the orthodoxy is fundamentally flawed as a social science because it advocates a prescriptive methodology while lacking any serious engagement with epistemology and ontology.  The resulting epistemic fallacy means it promotes a narrow implicit world view as if a factual truth.  Failures here include the imposition of limited quantitative methods and mathematically formalist methodology that exclude qualitative aspects of reality, and the use of isolated/closed systems thinking for an open system reality. (Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (p. 449). World Economics Association Books. Kindle Edition.)
      .
      Economies are socially structured institutional processes involving the interaction of humans with the natural world. Social reproduction is achieved only within the bounds of the given structure and mechanisms of biophysical reality. The form and scale of economic processes depends upon a set of spatially and temporally contextual social institutions. That is, economics concerns the form and function of social provisioning process which can be actualised in a variety of ways, and are far from limited to price-making markets or capitalist institutions. Starting from processes of social provisioning, economics becomes the study of plural historical, actual and potential economies with their underlying institutional arrangements and biophysical basis, rather than a singular abstract idealised “economy”. This broadens analysis not only to what institutions, norms and values shape the economic process and agents’ behaviours, but also to what are socially desirable and ecologically sustainable systems of social provisioning. Economics is neither value free nor ethically neutral but its stance on both should be made explicit. It must also be realist about how economies are reproduced via social and ecological mechanisms.  That means linking to both power relations and ethical and just means of provisioning, but also material and energy throughput that respects others (human and non-human). The aspirations of economists to provide for the well-being of humanity, if taken seriously, mean a revolutionary change in economics is long overdue. (Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (pp. 449-450). World Economics Association Books. Kindle Edition. Bold added.)

  4. John Emerson
    May 27, 2022 at 12:32 am

    I have a longtime outsider’s interest in econ, and one of my basic conclusions is that Econ 101 may be the most important econ class of all, because it is the most-studied introductory social science class by far, and it introduces students to a simplistic introductory version of economic science which serves, in effect, as indoctrination in a very narrow versi0on of “free market” ideology, especially if they stop there. Over and over again when arguing with a conservative you will hear them regurgitating Econ 101 as if it were the last word. And these are not the dumb students. These are some of the smartest in their cohort, in the top 10%, and some of the ones who often become influential in political decision making or the formation of public opinion.

    • yoshinorishiozawa
      May 28, 2022 at 12:53 pm

      Dear John Emerson,

      you are right. Econ 101 is the most important econ class of all. There two kinds of movements that aim to change the status quo: one from students and one from economists.

      Students are conscious that they are confined to a narrow view of mainstream economics and are demanding that more pluralistic economics education should be given. One of the earliest movement was University of Sydney professors and students who published an open letter to the American Economic Review in 1992. In 2000 -2001, French students asked the Minster of National Education to reform the economics education. This became the Post-Autistic Economics Review, which was later reorganized to the actual Real-World Economics Review. Similar movements emerged in many places in the world and they are now networked as Rethinking Economics. Their main aims are three:
      (1) Reforming the Economics Curriculum
      (2) Building a Global Community of Critical Economists
      (3) Diversifying & Decolonising Economics

      Another movement but closely related to the first movement is trials of economists to produce alternative economics textbooks. One of them is The Economy by the CORE group. It started in 2014 and have now textbooks not only in English but also in Spanish, French, Italian, Portuguese and Suomi.

      Another, more recent, trial is a 2021 book Economy Studies / A Guide to Rethinking Economics Education by Sam de Muijnck and Joris Tieleman, which is rather a pedagogic argument on how to produce alternative textbooks.

      Although I do now doubt their good intention, I am not much satisfied by The Economy for example. It is more oriented toward economic history than ordinary textbooks. It is good. But the theoretical contents of the book is not very much detached from the neoclassical economics. The explanations are based on equilibrium framework, marginal analyses and others. French students are not satisfied by the Economy either. See the article in RWER #75.

      I believe it is necessary to continue our discussion on these attempts by inviting many other people, economists and non-economists, in this forum.

  5. yoshinorishiozawa
    June 1, 2022 at 3:54 pm

    As far as we talk Economics textbook we cannot ignore The Economy by the CORE (The Curriculum Open-Access Resources in Economics) team.

    The first β-version was released in 2017. As of July 2017, the course attracted 3,000 teachers from 87 countries who registered to have access to their supplementary teaching materials. It is told that there are now more than 300 universities worldwide using the Economy by the CORE team. In some sense, this is the most successful textbook Econ 101 now in the world.

    Two of promoters of this project Samuel Bowles and Wndy Carlin published an article
    What Students Learn in Economics 101: Time for a Change in the Journal of Economic Literature 58(1): 176-214.

    It is sure that this textbook was written by a best part of progressive and democracy-oriented economists. But in my opinion, this is also the most subversive textbook for an attempt to build a new economics other than neoclassical economics.

    I want various comments, props and cons, on this important issue. Those who believe that neoclassical economics is fundamentally wrong and those who aim to construct a new economics are necessarily required to take part in this subtle question.

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