Sunday, June 29, 2008

Teaching the Worldview First

An op-ed in the NYT by two neuroscientists says:

Adding to this innate tendency to mold information we recall is the way our brains fit facts into established mental frameworks. We tend to remember news that accords with our worldview, and discount statements that contradict it.
This is hardly breaking news, but it strikes at the heart of my central criticism of the way economics is taught. In economics, the worldview is taught first. Professors teach students the basic neoclassical model first, with its assumptions of complete information, efficient financial intermediation, a full set of competitive markets for all goods and services, etc. As the economics courses get more advanced, the neoclassical model is augmented and expanded upon to more accurately represent the real world. The problem, as should be obvious, is that by the time students get to the more advanced courses—assuming they get to the advanced courses at all, which most students probably don't—they believe that the basic neoclassical model is a much more accurate representation of the real world than it actually is. (When I got to graduate school, I thought my economics education was pretty far advanced; as it turned out, I didn't know shit.) In other words, if a student who has just taken Econ 101 is presented with two pieces of evidence, one supporting and one contradicting the claim that more government regulation of the market for tomatoes would enhance efficiency, the student would be much more inclined to believe the evidence contradicting the claim that more government regulation of the tomato market would enhance efficiency. (Now, it's possible that the evidence against more government regulation of the tomato market is more likely to be true, but the point is that the Econ 101 student would assign a greater probability to the chances of that evidence being true than is warranted.) Teaching students first that markets are totally awesome and basically always efficient unduly slants their worldview toward believing that markets are infallible. Once that worldview is established, it becomes harder and harder to convince students that sometimes markets aren't totally awesome. This is why I've always said that the most dangerous employee is the economics minor. Avoid them at all costs.


Patrick R. Sullivan said...

I've found that most people badly underestimate the 'awesomeness' of markets, and equally badly overestimate the ability of government to regulate markets well.

Was Ted Williams a bad baseball player because he failed to get a basehit twice as often as he succeeded? Or, was he an awesome baseball player because he succeeded at a rate almost un-exceded by anybody else who tried to do the same thing

Economics of Contempt said...

You're right. Most people do badly underestimate the awesomeness of markets. I didn't make it very clear, but my point was that economics students tend to overestimate the awesomeness of markets. Economics students are certainly closer to the mark than the general public, but I think their views are still skewed on the whole.

More specifically, I think econ students underestimate how many things need to go right for a market to achieve optimal efficiency. They tend to think only a handful of assumptions need to hold to achieve optimal efficiency, when in reality countless assumptions need to hold. The real world is incredibly complex: no two markets are identical, and each market provides a different incentive structure.

Patrick R. Sullivan said...

I think econ students underestimate how many things need to go right for a market to achieve optimal efficiency.

Again, compared to what? How many things have to go right for government regulation to achieve optimal efficiency?

For the tax system to do the same?

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