Olivier Blanchard, pound for pound one of the best macroeconomists out there, is revising his famous textbook. His experience at the IMF has forced him to reconsider the basic short- to medium-term models we teach.
In particular Blanchard wants to keep the ‘IS’ curve, which relates savings to investment, and mostly dump the ‘LM’ curve, which supposedly connects the demand for real balances to the interest rate via the money supply. He also wants to ditch the aggregate supply and demand model, which relates changes in aggregate demand and supply to employment and expectations over the medium term.
Blanchard wants to scrap this and connect the IS curve to an older idea, the Philips Curve, which will be paired with a new curve, called the MP curve in many formulations. Karl Whelan, formerly of this parish, has a nice exposition of the whole IS-MP-PC system here (.pdf). This should replace the older IS-LM and AS-AD formulations over time, but for that to happen, lecturers will need to update their notes, and textbook authors will need to update their offerings. We know Blanchard is doing his bit. What about our Irish colleagues?
A while ago Brian Lucey and I looked at how much the teaching of economics had changed in Ireland since the crisis. Not much, was the short answer. The presentation of our initial results is here (.ppt).
The next thing to do is to change how economists are taught about finance. I have quite a few thoughts on this, perhaps best expressed in my own teaching about financial economics, but Blanchard’s suggestions around the introduction of more than one interest rate reminds me a lot of this classic paper by Jack Treynor, and maybe that can be worked in, in a sensible way.
Either way, Blanchard’s textbook will be top of my recommended reading list when it comes out.
In 1909 Tom Kettle was appointed the first Professor of the National Economics of Ireland at University College, Dublin.
He was in Belgium running arms for the National Volunteers when the war broke out in 1914. What he perceived as the barbaric Prussian assault on European civilization prompted him to apply for a commission with the Royal Dublin Fusiliers, which he was awarded in 1916.
He was killed in action at Ginchy (Picardy) during the Battle of the Somme on 9th September 1916.
In the spring of 2006 the late Gerry Barry, the RTÉ broadcaster, organized a public meeting (in the former House of Lords chamber at College Green) to mark the 90th anniversary of Kettle’s death. He asked me to contribute a piece on Kettle’s work as an economist.
Ten years on, and a century after Kettle’s death, I thought readers might be interested in the brief essay I wrote for the occasion.
More details of his life are available in the excellent Wikipedia article on him:https://en.wikipedia.org/wiki/Tom_Kettle.
Drs Aedin Doris, Kevin Denny and I wrote a response to the consultation paper on the review of leaving cert economics for the Irish Economic Association.
The consultation paper is here (.pdf). The response is here (.pdf).
Scott Sumner provides a valuable discussion of the shifting ideological biases of American economists in this piece.
Some interesting thoughts (and evidence) from Brian Lucey here.
TheJournal.ie reports on a speech given by President Higgins at the University of Chicago this evening.
PRESIDENT MICHAEL D Higgins has told students at the University of Chicago that the teaching of economics is going through “an intellectual winter” because it doesn’t take account of the social impacts of policy.
“The recent economic and financial upheavals have thrown a glaring light on the shortcomings of the intellectual tools provided by mainstream economics and its key assumption regarding the sustainability of self-regulating markets (and, more particularly, of largely unregulated global financial markets),” he told the assembly.
The prepared text for the speech is available on the President’s website. A recording of the actual delivery and subsequent Q&A session is available here.
Brian Lucey and I conducted a survey of all university teachers of economics and finance in December 2013. A presentation of our findings is here (.pdf). Brian’s thoughts are here.
The main results from the sample of respondents are:
Teaching has not changed much in response to the crisis.
Attitudes to newer, or more critical material appear mixed at best.
Respondents emphasised the need for broader contextualisation and increased mathematical competence.We find it hard to see how to reconcile these findings.