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40 Critical Pointers for Students of Economics

Stuart Birks

Published 20 Oct 2015 by WEA Books

Economics courses have been trimmed back significantly in recent decades. Many of the reservations and qualifications that used to be presented in descriptions of theory have now been dropped, especially as the length and content of courses have been reduced. Consequently there has been a narrowing down of the discipline. The real world is ‘explained’ largely by means of models. These may give some explanation that is consistent with what is observed. However, models also give a framing of the issues such that the explanations are largely predetermined.

It is important to know the limitations of this approach. However, for many students these limitations are given scant attention. This book introduces 40 critical pointers for those who wish to see the theory in a broader, more realistic context. The material is suitable for introductory and intermediate courses and can be included selectively by students for additional reading or in lectures or tutorials as discussion points.

Contents

Introduction

CORE ECONOMICS: 1. A market-focused world; 2. Static analysis; 3. Comparative static analysis; 4. Supply and demand; 5. Marginalism; 6. Diminishing marginal utility, relievers and pleasers; 7. Gains from trade; 8. Producer and consumer surplus and gains from economic activity; 9. The circular flow and the quantity theory of money

METHODOLOGY: 10. Aggregation; 11. Model building; 12. Equilibrium, existence, uniqueness and stability; 13. Ceteris paribus assumptions; 14. Long run and short run; 15. Proof and consistency; 16. The Theory of Second Best; 17. Framing; 18.Consequentialism; 19. Pareto optimality and cost-benefit analysis; 20. Externalities and the “Coase Theorem”

POLICY: 21. Fixed targets; 22. Flexible targets and policy evaluation; 23. Aims, goals and objectives; 24. Forecasting; 25. Lags; 26. Equity; 27. Income distribution measures, the Lorenz curve and the Gini coefficient; 28. Industry concentration; 29. Politics; 30. Democracy; 31. Administration, compliance and law

POLICY APPLICATIONS: 32. Unemployment measurement issues: frictional, structural and cyclical; 33. Efficiency wage; 34. Rent controls; 35. Price ceilings and floors, capitalisation effects; 36. Physical life and economic life; 37. Returns to education (private and social); 38. Age distribution issues, generational transfers, dependency ratios, etc.; 39. Measuring unpaid work – what does it tell us?; 40. Cost of illness and impact analyses

Where to from here?

About the author

Stuart Birks began studying economics 50 years ago. He trained in mathematical economics and econometrics at Essex University and the London School of Economics when these were (albeit ‘elite’) subfields of economics overall. After a spell in multi-disciplinary teams working on long-term strategic planning he returned to academia, being based primarily at Massey University in New Zealand. He has focused on applied economics in the areas of land, social policy, health, education and law and economics, while also maintaining an interest in methodological issues. His teaching has been primarily at the graduate level, but he also teaches introductory economics. In recent years he has been active in the World Economics Association, for which he edits the bi-monthly newsletter and oversees the Textbook Commentaries Project. He is the author of Rethinking Economics: from analogies to the real world (2015, Singapore: Springer). Much of this material has been compiled and refined during his spells as Visiting Professor at the University of the West of England, Bristol, UK.

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Endorsements

Students of mainstream economics need a guide like this to help them understand the underlying assumptions, limitations and inbuilt biases of what they are studying. It helps them open their eyes to a broader view of how real economies work. It should also help economics teachers to 'get real'.

Emeritus Professor Frank Stilwell, University of Sydney

Stuart Birks has shared with me his 40 Critical Pointers for Students of Economics. Granted that different approaches are required to move from Neo-classical Theory's artificial world of economics to Real Life Economics, the invitational style that Birks has used is likely to be one of the most productive ones. He enters into the students' comfort zone and takes them along pointing out the limitations of what is familiar and its inadequacies to deal seriously with policy issues. Once this approach is given an initial push, I am quite sure that its persuasive power will be widely recognized.

C T Kurien

In recent years, a sense of unease about the academic and practising discipline of economics has been gathering momentum globally. This unease has been strong enough to prompt existing and prospective students of economics as well as some of its practitioners to demand a wholesale rejection of what goes by the name of conventional economics, and introduce something that better reflects the real world as we observe it. There has also been a proliferation of critical writings shedding light on various aspects of the core economic ideas as it has come to be taught and practised. This book belongs to that genre. It critiques the traditional market-focused world of economics in a systematic fashion, with copious well-chosen examples from everyday life to underscore the anomalies and weaknesses involved in the understanding of problems and seeking their solutions. It is quite wide-ranging in its scope and written in a style that would make it accessible to the intelligent non-specialist. Indeed, it would be a “good read”, not just to the existing or aspiring economist, but also to those who are not particularly concerned about the state of affairs in the discipline of economics. It is refreshingly enlightening.

Emeritus Professor Srikanta Chatterjee

This book presents an honest and critical set of reference notes that are extremely useful for a cross-section of economics modules. The real benefit of the text is that it is critical about the underlying assumptions that we implicitly hide behind when we create our models. The more honest and critical we are when we teach our students then the more effective economic policy will be in the future, which surely we, as a discipline, should be striving towards. I’d recommend this book to those who don’t realise the severity of the assumptions that they hide behind, to students who can use these ideas to engage in debate with each other and with their lecturers, and to honest and critical lecturers who can refer to it simply to remind themselves why they already do it the honest way. It should be mandatory for all economics departments to have at least one copy.

Professor Don Webber