Teaching Economics as a Soft
Science
Achim Kemmerling
Figure 7 Consumer and Producer Surplus in the Market
Equilibrium
Price A
D
Supply
Consumer
surplus
Equilibrium
price
E
Producer
surplus
B
Demand
C
0
Equilibrium
quantity
Quantity
Copyright©2003 Southwestern/Thomson Learning
Problems
• Little diversity: too little empirics, few
accepted methods, overconfidence in findings
• Little normativity: implicit choices, role of
politics
• Little reflexivity: changing behaviour, no risk
management
Too little diversity
• Very little empirics, with focus on one type of
method (regression) and on one type of
research design (quasi-experiment)
• Focus on one type of theory (micro-based,
representative consumer, no domain
restrictions)
Author
Year
Simple
Stats
Other
quantitative
anecdotal
Micro
Mankiw
1992
+
−
+++
Varian
B&B
1992
2002
−
++
−
−
−
++
P&R
Parkin
Macro
Blanchard
2005
2005
+
+
−
−
+++
+++
2005
2006
1994
++
+
+
−
−
−
++
+
++
C&S
Mankiw
Author
Year
Simple
Stats
Other
quantitative
anecdotal
Micro
Mankiw
1992
+
−
+++
Varian
B&B
1992
2002
−
++
−
−
−
++
P&R
Parkin
Macro
Blanchard
2005
2005
+
+
−
−
+++
+++
2005
2006
1994
++
+
+
−
−
−
++
+
++
C&S
Mankiw
Too little diversity
• Very little empirics, with focus on one type of
method (regression) and on one type of
research design (quasi-experiment)
• Focus on one type of theory (micro-based,
representative consumer, no domain
restrictions)
Most economic models work like this:
Most political science models work like
this:
Too little normativity
• In theory problems of benchmarks and
tradeoffs well-known, but in teaching they
often disappear.
• Politics is still more of a disturbance then a
normative realm in itself
The development of macroeconomic theory has shown
policymakers how to reduce the severity of economic
fluctuations. By “leaning against the wind” of economic change,
monetary and fiscal policy can stabilize aggregate demand and,
thereby, production and employment. (Mankiw, Principles of
Economics, p. 793)
A better model would acknowledge the great heterogeneity
in consumer behavior that is apparent in the data. The saversspenders theory sketched here takes a small step toward
including this microeconomic heterogeneity in macroeconomic
theory, and it yields some new and surprising conclusions
about fiscal policy (Mankiw AER 2000, p. 124).
Too little normativity
• In theory problems of benchmarks and
tradeoffs well-known, but in teaching they
often disappear.
• Politics is still more of a disturbance then a
normative realm in itself
An example: Tax Politics
• Economic theory of taxation produces a firstbest tax system
• Political system produces a different type of
tax (eg. the one preferred by the median
voter)
• Political equilibrium is second-best compared
to the economic equilibrium
• Problem: no political benchmark such as
stability or legitimacy
Too little reflexivity:
• Economic theory changes people, and markets
• But often in counterintuitive directions
Economists Behave Differently in Lab
Experiments
Too little reflexivity:
• Economic theory changes people, and markets
• But often in counterintuitive directions
A Fine is a Price (Gneezy, Rustichini
2000)
• Child day care center fines parents who pick
up their kids late.
• Parents are gladly paying fine and pick kids up
even later.
• Day-care center lifts fine to restore old
shaming equilibrium.
• Parents still pick up kids later.
Conclusions: A Softer Science
• Teach pluralism: More types of theories and
empirics, flagging out domain conditions.
• Teach normativity: more on different
benchmarks, more on politics.
• Teach reflexivity: side-effects and unintended
consequences of economic theory
Thank you!
Additional Stuff
US Congress
Bundestag
Lawyer
168
155
Economics
50
135
Social Science
33
154
Other
Academic
40
167
Total
435
622
House of
Commons
European
Parliament
A quick survey of textbooks
Simple
Stats
Other
quantitative
anecdotal
formal
Focus
Micro
Mankiw
1992
+
−
+++
+
Basics
Varian
1992
−
−
−
+++
normative
B&B
2002
++
−
++
++
Intermediate
P&R
2005
+
−
+++
+
Basics
Parkin
2005
+
−
+++
+
Basics
Blanchard
2005
++
−
++
+
Basics
C&S
2006
+
−
+
++
Institutions
Mankiw
1994
+
−
++
+
Basics
B&W
1997
++
−
++
+
Europe
S&L
1993
+++
+
++
+
Non-OECD
Macro
A Comparison of Top Journals
A Econ Rev
A Soc Rev
World Politics
Formal Theory ++
Other Theory +
Simple
++
Statistics
−
++
++
−
+++
++
Regressions
Other
Statistics
+++
−
++
+
++
−
Qualitative
−
+
++
A Comparison of Top Journals
A Econ Rev
A Soc Rev
World Politics
Formal Theory ++
Other Theory +
Simple
++
Statistics
−
++
++
−
+++
++
Regressions
Other
Statistics
+++
−
++
+
++
−
Qualitative
−
+
++
A Comparison of Top Journals
A Econ Rev
A Soc Rev
World Politics
Formal Theory ++
Other Theory +
Simple
++
Statistics
−
++
++
−
+++
++
Regressions
Other
Statistics
+++
−
++
+
++
−
Qualitative
−
+
++
Standard Reasoning
Market
Assumptions
Equilibrium
Efficiency
Economic Reasoning
Firms, Consumers
Eg. Sonnenschein-Mantel-Debreu
Markets clear
Maximum Rents for Firms and Consumers
Politico-Economic Reasoning
Voters, Parties
Eg. Median-Voter-Theorem, Probabilistic Voting
Axioms
Policy Decisions Are Made
Suboptimal, Compared to Efficient Outcome
Political Reasoning
Voters, Parties
Eg. Median-Voter-Theorem, Probabilistic Voting
Axioms
Policy Decisions Are Made
Ensures Political Stability, Legitimacy…