The report from the Manchester Post-Crash Economics Society has renewed discussion about the teaching of economics and prompted a few responses. Simon Wren-Lewis agrees that "[s]tudents should certainly be shown something of heterodox (non-mainstream) thought", but disagrees strongly with the idea that the "current dominance of mainstream economics should be reversed, and that we should go back to ‘schools of thought’ economics."
He gives three reasons for this, all of which deserve some comment.
1. "..because [mainstream economics] has proved far more useful than all of its heterodox alternatives put together."
I'm not going to attempt to address the question of which is more useful - mainstream or heterodox - partly because I think it's hard to specify the question precisely, but mainly because I think it's the wrong question.
Instead, what I think we should be asking is whether the ability to apply different approaches is more useful than only being able to apply one. And in particular, whether heterodox approaches give us a valuable additional perspective on economic issues.
Amongst the strands of heterodox economics, I mainly look to the post-Keynesian stock-flow consistent modelling approach, most comprehensively set out in the works of Godley and Lavoie. Whilst there are elements of their work that I would certainly question, I find the balance sheet and flow of funds methodology one of the most useful frameworks for understanding and addressing many questions of monetary economics.
This is especially true in understanding the interactions of financial balances and the dynamics of debt. I know a number of recent graduates in economics that have subsequently discovered the work of Godley and Lavoie and have seen it as a revelation - a way to finally see how various things fit together.
But again, the point is not whether one approach is better than the other. It is whether looking at the issue from different angles is more enlightening than sticking to one.
2. "...because mainstream economics can be remarkably flexible."
It may well be the case that it mainstream economics has managed to say something useful about a wide range of issues. However, to me it is the very inflexibility of the mainstream approach that makes the best case for the use of alternative tools. I think this is particularly the case when it comes to the insistence on microfoundations.
I think it is an excellent principle that what we assume about aggregate behaviour should be grounded in what we think about how people actually behave. However, the requirement to model from one to the other is sometimes too onerous. It may be possible in principle to formalise the underlying behaviour for many of the things we want to look at, but it may then be impractical to extrapolate from that. Reference agents, smooth time horizons and well behaved utility functions are all chosen for tractability. Sometimes that's fine, but in many cases it forces us into too narrow a perspective on some of the most interesting things that are going on. It's just too restrictive. We don't need to throw it out - we just need to be able to be able to look beyond it.
3. His last reason is simply that he has found" ...at least as much intolerance on the other side. Some heterodox economists appear to reject almost everything that is mainstream, which is frankly just silly."
Now, I have some sympathy with this. I think there are many heterodox economists who think mainstream economics can tell us nothing. I think this is unfortunate and I think they are wrong. But, in any event, what certain advocates of a particular school of thought happen to believe is not a basis for judging the merits of that school of thought.
So, I don't find any of these three reasons very convincing. I think a more "schools of thought" approach is exactly what is needed in economics education.