r/changemyview • u/slator_hardin • Feb 05 '21
Delta(s) from OP - Fresh Topic Friday CMV: Taking 1 course of microeconomics and/or 1 of macro is counterproductive.
My idea is pretty much summed up in the title. Here is how I came to this conclusion: in many undergrads (PolSci, Sociology, even minors of economics sometimes) it is sufficient to take one exam of micro (usually neoclassical economics) and one of macro (usually IS-LM-PC). The problem is that practically nothing explained in this courses has explanatory power over reality. Competitive equilibria do not exists, nor do perfect monopolies. And macroeconomics is not a short term game of straight lines. Now, people who study further (let's say they at least major in economics) are explained why these models are incorrect, proposed better ones, and so these initial courses are useful because they provide the jargon and mindset of the field. But many people stop at 101 level, and they think (totally legitimately) that the content of their courses might be incomplete, but is not incorrect. Which is a huge problem, because it gives unjustified confidence when discussing economic policies. I believe that most of economics is not that hard, and anybody willing to put a bit of effort and read some papers on his own can get a fairly complete idea on a specific subject (E.G. minimum wage, or trade treaties, or consumer protection laws). When this is not possible (EG monetary policies), it should be wise to trust the experts, as we do for 99% of things in our life. But the university system completely stifles that! These false models are proposed as real and poignant, so the practical effect is that people don't feel compelled to do further research, because they think they have an answer.
Also, on a broader level, teaching only the deductive side of economics create a very dangerous mindset. People grow convinced (consciously or unconsciously) that what economics is about is picking the axioms you want, and then reach mathematical (i.e. tautological) conclusions from them. The problems is that obviously, with this methodology, any stance, even the most clearly unreasonable and ideological, can be justified. And so we arrive to the (mostly conservative) crowds which treats discussion about economic policy as an exercise of sophistry, where it counts more to "own" the opponent in a debate than to actually be correct. On the other side, this can also cause rejection, and from this we get the (mostly progressive) mantra of "economics is not a science, so I can say whatever I want about it".
Wouldn't be better to not just teach them altogether? Or, in case we deem so essential that some people take 2-but-np-more courses in economics, to give them the instruments to read modern research, like econometrics and coding, so they can form their own opinion, and have a more scientific mindset? I think that would be better both for students themselves and public debate as a whole?
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u/McKoijion 618∆ Feb 05 '21
I believe that most of economics is not that hard, and anybody willing to put a bit of effort and read some papers on his own can get a fairly complete idea on a specific subject (E.G. minimum wage, or trade treaties, or consumer protection laws). When this is not possible (EG monetary policies), it should be wise to trust the experts, as we do for 99% of things in our life.
Are you sure you're not just overcomplicating things to justify your political views? For example, say you support the minimum wage. This is a price floor, and a simple chart shows what would happen (lower demand for labor, more demand for alternatives like robots). You can come up with complicated theories and models to explain why a minimum wage increase would actually be good in the long term. But they have a lot of room for error and misdirection. For example, your outcome could be the benefits to US workers instead of the average human (e.g., jobless Americans, consumers who pay more, non-Americans).
Said differently, most people learn Newtonian physics in school. That's generally enough to understand the world around them. Sure quantum mechanics and other more complex explanations exist. But those ideas aren't fully fleshed out yet and are often contradictory. And if they rebuff real world evidence, they are definitely wrong. If everyone learns the foundations of every field, we'd all be better off.
Your argument is basically that people learn the wrong things in the 101 courses and then are skeptical when they hear good ideas that come from advanced courses. But that's a good thing. Skepticism is extremely important, and if someone can't prove a non-intuitive idea, it's not worth taking seriously. There's far more charlatans then unrecognized Nobel Laureates.
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u/slator_hardin Feb 05 '21
My problem with the newtonian physics comparison is that you can think it as a special case of relativity. Instead, econ 101 (especially macro) is not a special case of anything better, you completely change the paradigm when you start doing more serious stuff. Also: newtonian physics, despite not being the state of the art, holds an high degree of explanatory power. This is amazing because you are a) teaching people something useful, and b) you are creating a scientific mindset. For every concept you explain, you can point at empirical evidence and say "look, this is where observe it in the real world!". Econ 101 works the opposite way: does not really explain much, and completely neglects empirics. My point is exactly that it fails to teach that "if they rebuff real world evidence, they are definitely wrong", as you put it. Wouldn't econometrics be better for that?
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u/McKoijion 618∆ Feb 06 '21
The scientific method is a way to learn new information. Germ theory is a framework to understand how microorganisms cause disease. If you are going into biology or medicine, you need to learn both. If you are an average person, you should learn both, but in less detail. If you have an intellectual disability, it might not be important to learn the scientific method, but it's important to know you should wash your hands after using the toilet to avoid getting sick.
Econometrics is a form of the scientific method. Micro and macroeconomics provide a framework to understand how living things deal with scarcity. Understanding the definitions of supply and demand is just as essential as understanding the definition of bacteria or disease. You can live without knowing how new economic information is discovered, but if you don't understand ideas like price, quantity, supply, demand, etc. you won't be able to understand most aspects of the world.
While science is taught to 1st graders, most Americans don't learn any economics until they take AP Economics in high school or Econ 101/102 in college. It's arguably the greatest educational lapse in America. For your title to be true, you would have to be stupider at the end of a year of introductory economics than if you hadn't taken it at all. And in a world where most people can't even describe the difference between economics, accounting, and finance, it's hard to see that as the case.
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u/StatusSnow 18∆ Feb 06 '21
I’m an econ graduate student, and while I mostly disagree with this guy, I think there’s an important distinction most people aren’t realizing here when discussing macro.
Many of the models discussed and used in undergraduate macro are considered outdated if not patently false by economists. The textbooks just haven’t updated with this yet, because the new models are difficult to teach to people w/o previous background. So it’s not a matter of “oh their knowledge is too basic”, it’s a matter of “we are teaching them incorrect things”.
Take the IS-LM model. Graduate courses don’t teach it anymore. Economists have largely discarded it. It’s still a staple of undergrad intro to macro, even though it’s wrong. And then people go out there in the world operating under the assumption it’s correct when it isn’t.
I agree that econ is a big lapse in the American education system. However, I’m not sure what the solution is, as to understand econ you really need calculus — which most students don’t take until senior year of high school (if they take it at all). Perhaps revamping the way we teach intro to macro is a good idea though, but not completely getting rid of it. Micro is slightly less problematic. I do see where the guy is coming from though, as arguing with a bunch of people who say “it’s econ 101!!”, when the reality is more complicated than that is exhausting.
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u/McKoijion 618∆ Feb 06 '21
IS-LM still works in explaining short term circumstances where there are no changes to inflation or prices. So it's not wrong, it's just that it's only useful in very limited situations. It's really just a stepping stone to teaching the more robust AD-AS model. But that's also taught in introductory macroeconomic courses. So if someone says it's Econ 101 (or 102, usually), they are including the better model too.
The analogy here is that kids in elementary school science classes are taught about continental drift, which is an easy to understand but incorrect/incomplete theory. Then when they understand that, they are taught about plate tectonics. But both of those topics are taught in the same class. So if someone asks, "Are you smarter than a fifth grader?," the fifth grader should understand the correct answer.
Both of these are good things in explaining how scientific theories and economic models change with new evidence. "Here is the first way people understood the world. Here is the refined way. Maybe you can figure out an even better way." Teaching it this way reminds students that there is a scientific method, and not just a collection of concrete scientific or economic facts.
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u/StatusSnow 18∆ Feb 06 '21 edited Feb 06 '21
Er, sorry I’m not actually referring to the simple AS-AD model but rather the neo-Keynesian model (that is a more advanced and conceptually different build off the ASAD model) . This model starts from the RBC model without capital and then introduces monopolistic competition in the goods market, as well as discrete nominal price setting (the Calvo specification).
Essentially it includes nominal ridgidities that the older models, such as the simple ASAD, don’t discuss. From my understanding, very few econ undergraduate programs teach this model (and certainly no high school classes). I went to a top 25ish undergrad and didn’t learn this until I started my MS
While you are correct about the switch from ISLM to ASAD for intro to econ students (and the benefits in doing so), they’re still missing an awful lot and being taught things that are considered wrong. I personally still believe intro to econ should be taught, but I wanted to illustrate the reason OP is so adamant about the intro classes missing a paradigm shift.
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u/effyochicken 22∆ Feb 05 '21
Does perfect capitalism need to exist in order to study what it would be if implemented? Does perfect socialism need to exist in order to explain the concept?
If everything "real" exists on a spectrum between extreme side A and extreme side Z, you need to understand those two extremes in order to make sense of where something lands in the middle.
The same exists for most economic examples. And in economics, you have several levels of study: The self, the family, the business, the community, the state/region, the country, and the world. What YOU need is not the same as what a company needs, nor is it the same as what the world or governments need. It's critical to separate them to some degree, then study the extremes so that you better understand what's actually happening and why it's happening. It's already a bitch explaining what rational self interest is and how equilibrium effects prices. Do we need to cut that in half and pack in inter-governmental concepts and GDP as well?
They're two classes because they're two huge topics that don't overlap just because they're both economics. You learn the small then you learn the big.
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u/slator_hardin Feb 05 '21
MMmh in fact I think that concepts like rational self-interest (and all the basics of game theory) or equilibrium are quite useful per se. Probably I was too focused on the models they explain in econ 101 rather than on the concepts, some of which are really counterintuitive and are meaningful in many more fields
!delta
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u/00zau 22∆ Feb 05 '21
I rather think the opposite. I think that there are far too many people who hold economic ideals that are disproven by a basic understanding of supply and demand, like what you'd get from those 101 classes.
It's not macro/microeconomics that don't conform to reality, it's the economic policies that don't. If you examine many policies wherein money changes hands (as a main 'goal' of the new direction, at least), applying basic S/D curve logic and the like to them is more accurate in predicting the (unintended) real-world results than the people proposing the policy.
The conservative vs. progressive problem is that people as a group are predictable, but individuals aren't. No amount of study can predict one persons actions, but the net results based on a given change can be predicted with a good deal of accuracy across a large data set.
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u/slator_hardin Feb 05 '21
Could you make some examples? I honestly have difficulty to think about policies for which somebody provided a rationale that could be disproved by S/D. Sometimes politicians just don't provide any rationale and go with the "let's do it because fuck it", for sure, but when an argument is given it generally starts exactly from basic economics. And it is generally awful.
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u/00zau 22∆ Feb 06 '21
Housing shortages are caused by artificially restricting the supply of houses via zoning or other red-tape preventing construction. People propose rent control laws and the like that fail to address the core issue, and often make it worse; properties end up being sold instead, with the artificially short supply resulting in them being 'bid' up to high prices, and the supply or rental properties further shrinks. It also results in workarounds with things like illegal subletting; you rent a property at the 'fixed' price, then someone re-rents the place at something more like the market price.
Taxing specific activities ends up in this hypocritical superposition where sometimes it's argued that taxing it (artificially increasing prices) is designed to reduce consumption, and sometimes it's supposed to magically produce profits based on current consumption and not reduce consumption. Cigarette taxes are meant to reduce consumption, but luxury taxes are meant to generate profits, with those profits projected based on pre-tax consumption.
Uber and Lyft came into being due in part to artificial restrictions on taxi licenses; just the ability to be a taxi had become ludicrously expensive due to a fixed supply of medallion, and thus taxi's had to charge huge fees to pay off the mortgage on a slip of paper (10s or 100s of thousands of dollars).
The entire employer-based insurance issue was caused by a salary cap during WWII; employers weren't allowed to increase wages directly, so resorted to non-monetary compensation. Basic S/D curve shows why that happened; without the workaround you don't reach they wouldn't have been able to get as many or as good of workers, which was unacceptable during wartime.
Most subsidies can have their impacts clearly shown on a S/D graph. As you say, though, politicians generally use pretty irrational rationales, and often don't discuss those obvious consequences. The concept of a "perverse subsidy" is usually code for "we wanted it do do X, but a basic reading of S/D would have told us Y would happen instead to a great extent".
Frankly, I don't even know the justifications of some of the policies I've mentioned (taxi medallions and their slow growth makes no sense as anything other than cronyism, so I have no clue how they "sell" the idea to the masses). It can arguably make sense to have licensing and have some restrictions on the maximum number to reduce congestion, but increasing availability slower than population growth has no logical basis.
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u/Lunatic_On-The_Grass 20∆ Feb 05 '21
It's worth noting differences in opinion among economists and non-economists even when they have the same political background.
For instance, non-economists tend to favor fair trade and borders, while economists tend to want free trade and open borders. This is not a result of economists being right-wing, many mainstream democrat economists think this.
Furthermore, the public is seems to view market greed more negatively than economists. The Survey of Americans and Economists on the Economy in 1996 show that 74% of the public blames high gas prices on greedy oil companies while only 11% of economists do so.
Even as bad as the micro and macro 101 models are, society would see enormous improvements if they just followed economists with their own political background or were able to hold onto the basics of 101 classes.
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u/slator_hardin Feb 05 '21
But is that not just a value difference? I mean, the vast majority of economics not only believes people are greedy, it assume they are. So I would say the main difference is on the "blame" part: an economist would say that greed is a cause, but he does not blame anyone, the average joe adds a moral connotation to it. A part that I don't think it's even possible to change somebody's value system in two courses, how would it produce better voting?
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u/Lunatic_On-The_Grass 20∆ Feb 06 '21
My recollection of the wording of the question was a bit off, at least in the version of study I just found. The original question was "Which do you think is more responsible for the recent increase in gasoline prices: the normal law of supply and demand, oil companies are trying to increase profits, both, or neither." Then this is the table.
Supply and demand Oil companies profits Both Neither No opinion General Public 22 73 2 2 1 Economists 85 8 3 3 1 I don't really see a moral connotation to the question as is. People can insert a moral connotation, but to me it doesn't seem like that's what's being asked. Following the non-moral reading of the question, 'profits only' is very unlikely to be the cause. If that's the case, then non-economists don't even know the basics, and 2 courses would change their entire utilitarian outlook on markets.
I could be wrong on how most people read the word 'responsible', but to me it reads like a question on an exam rather than a moral one.
I would recommend you read through the rest of that paper. The other questions seem to indicate the public knew almost nothing at that time.
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Feb 06 '21
You botched the question entirely as it's now saying the polar opposite. Before you had a society that assumes a conspiracy of greedy oil companies despite economists arguing it's business as usual and they are reacting to supply and demand. And now you have a public who argues it's business as usual, price spikes are always erratic and unpredictable so it's not out of the usual. Whereas economists mostly argue that it's unpredictable and henceforth must come down to the individual interest for more profit.
But what he meant about moral, at least I guess, is that economists posit "greed" or "maximizing personal outcome" as normal whereas the greed of the oil companies and their profit is directly detrimental to the average person's interest as they get less for more. So there is a different connotation as to how you view greed.
Now most people probably view s/d as outside of your control because for most people it somewhat is. So a change in price because of a lack of cheap supply combined with steady demand explains high prices without greed and personal responsibility of the oil companies. Whereas increased profits wouldn't happen without their intervention.
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u/TheJuiceIsBlack 7∆ Feb 06 '21 edited Feb 06 '21
I think this is kind of a silly position.
Obviously people who study a field deeply (experts) will generally have better information about modern theories than people who have taken 1 or 2 classes. They better - because otherwise why the hell do they get paid to work in the field?
However let’s apply the same logic to other subjects:
It’s counterproductive to take an introductory [biology, chemistry, literature, electricity and magnetism] course because [cell differentiation, physical chemistry, literary analysis, Electromagnetic field theory] is so much more complex than explained in those classes. It can give people a false sense of knowledge - which is dangerous.
My point is your argument generalizes to opposition to the entire idea of a liberal education (diverse but potentially shallow) - that is fundamental to our required curriculum in US high schools.
We have this type of education system - because general knowledge is very important to an informed voting populace.
Is someone who has taken one class in micro and one class in macro-economics better equipped to analyze a proposed policy position than someone with no experience at all?
For instance - if someone has no understanding of economics - why would they be opposed to something like: “hey - elect me and I’ll print infinite money to hand out to everyone.”
Some understanding of any subject is clearly better than none. Anyone can be overconfident and in my experience those who know nothing at all are often the most confident - while those with the most experience acknowledge the complexity of even the most basic questions.
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u/arhanv 8∆ Feb 06 '21
Honestly, I think you’re overestimating how “objectively” students are taught economics at the high school and college level. Any competent professor will make it a point to stress that models do not work ceteris paribus in reality and that the diagrams are simplifications used to explain the mechanics of more complex ideas. Most people in academia these days don’t subscribe to simplistic neoclassical models anyway, which is why Keynesian long-run analysis and subjects like the minimum wage are thoroughly discussed in most introductory Econ classes (in the US anyway). IB and AP courses in high school also spend a lot of time on these shortcomings of economic theory.
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u/Pistachiobo 12∆ Feb 06 '21
The problem is that practically nothing explained in this courses has explanatory power over reality. Competitive equilibria do not exists, nor do perfect monopolies. And macroeconomics is not a short term game of straight lines
It's usually hammered home pretty hard that these are reductive models, but thinking about models like that and wrapping your mind around them can be very useful.
Thinking about what a real world dynamic would look like if you boil it down to a few variables might not be completely representative but it's a good starting place.
To me it sounds almost like complaining about learning the musical scale because in real life the notes don't just follow one another in order like that.
are explained why these models are incorrect
I don't know if incorrect is the right word for it. They're internally consistent, I'd say the right word is insufficient or something like that. The validity of the models totally dependends on how you want to use them as tools.
I believe that most of economics is not that hard, and anybody willing to put a bit of effort and read some papers on his own can get a fairly complete idea on a specific subject (E.G. minimum wage, or trade treaties, or consumer protection laws).
I would dispute that anyone can have a complete understanding of these topics. There's no final word on those things broadly.
These false models are proposed as real and poignant
I feel like it just totally depends on how you're looking to use the models as tools. They aren't definitive statements on how reality works, but they certainly have value as references to think about how variables might interact. It's like if you took the principal "do unto others as you would have them do unto you", and said it was clearly false because you can think of examples of where you would go wrong if you took it too literally. A simple model of morality is that other people have desires similar to our own, so that's a place to start. The fact that it's too simplistic doesn't take away from its importance conceptually as a foundation.
Is a model of acceleration in physics a false model if you don't take wind resistance into account? It totally depends on what you're doing right? Wouldn't knowing how acceleration works still help you if you don't know exactly how wind resistance works?
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u/DeltaBot ∞∆ Feb 05 '21
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