Economics students are being miseducated about the way the economy really works. Mike Konczal has an intriguing proposal about how to fix that.

Yesterday over at WonkBlog, Mike Konczal wrote about an issue that’s long been a problem in the field of economics: the systematic miseducation of economics students. Most introductory economics classes largely ignore politics and institutions, center the individual as the focal point of their analyses, and unrealistically portray individuals as behaving like rational, optimizing actors at all times. In economics textbooks, there is a powerful bias in favor market solutions, and an equally powerful bias against government intervention in those markets. Situations where markets fail, or the usual assumptions don’t hold, tend to be covered only briefly or in more advanced classes. This has left us with a generation of students, and indeed economists, who are ill-equipped to dealing with the economy as it is — to diagnosing its problems and applying the correct solutions.

What to do? Konczal suggests an ingenious solution: teaching introductory economics backwards. That is, rather than the usual sequence of teaching microeconomics first, and then macroeconomics, he suggests that colleges start with with macro. He also recommends that micro classes be taught backwards: that they start with institutions, then move on to firms, and deal with individuals last, rather than beginning with individuals, as is the usual practice.

His solution makes a lot of sense. It would create a far more realistic and nuanced picture of what economic life actually looks like. Furthermore, there is a precedent for it. Konczal notes that in most universities, the course sequence of macro first, micro second had been standard for many years. When the sequence was switched, the justification for it was explicitly ideological: to advance a free market agenda. Here’s how Konczal tells this fascinating story:

In the first version of his blockbuster textbook Economics (1948), the study of macroeconomics came first. And institutions were emphasized before the more abstract microeconomics that start off the education now. One of the central ideas was the “fallacy of composition,” or how things true of individual people or markets were not true of the aggregate behavior of the economic system.

Now, however, the newest editions of this textbook follow the normal curriculum. When did it change? Between the 13th and 14th editions, which came out in 1989 and 1992. In the 13th edition macroeconomics come first, while in the 14th edition there was a massive the whole ordering has been flipped.

The preface to the 14th edition is very clear on why it changed. The 14th edition says it has a new “leitmotif” in the “rediscovery of the market.” Celebrating the end of the Soviet Union, countries in Eastern Europe were rushing to introduce capitalism, while Western countries were deregulating and privatizing industries. Samuelson describes these political events marking the End of History as “parallel to placing microeconomics first in the sequence.” Microeconomics was seen as intellectually prior to and necessary for macroeconomics, tossing the concept of the fallacy of composition overboard. Not only that, but the new emphasis on an abstract and decontextualized microeconomics meant that the authors “deleted a great deal of institutional material that is less important for an understanding of modern economics

In Age of Fracture, Daniel Rodgers’ magisterial intellectual history of the past 30 years, this change of the Samuelson textbook is used to describe the major shift in the understanding of economics since the 1970s, as well as how the metaphor of a “market” gained such a foothold in the popular imagination. In the old model, still there as late as 1989, “the real-world complexities of the aggregate, institution-thick, ‘mixed’ state-and-private economy had come first.” However, by the early 1990s, all economics education would just be “a series of elaborations and qualifications of the idea of perfect competition.” (The same could be said about the field as a whole.)

The only critique I have with Konczal’s solution is this: switching the sequence so that macro comes first would be a relatively simple administrative matter. But if colleges are to start teaching micro “backwards,” they will require new textbooks and syllabi. Re-incorporating material about institutions and “fallacy of composition,” etc., would demand the same. I’m sure that many economics departments would be hostile to this proposal — they’d see it as too disruptive, if nothing else. But something needs to be done to shake up this ossified profession, and Konczal’s proposal would be a fine place to start.

Kathleen Geier

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee