Wednesday, August 22, 2012

What do you make of this?

'...Our teaching about monetary policy must be completely revamped. Specifically, students must now learn something about “unconventional” monetary policies. Remember “conventional” monetary policy? The Federal Reserve shortens recessions by creating more bank reserves (“printing money”), which fuels a multiple expansion of the money supply and credit because banks don’t want to hold excess reserves. So they get rid of them making more loans and deposits, which also lowers short-term interest rates. Compare that to current reality: Banks are content to hold over $1.6 trillion in excess reserves, short-term interest rates are stuck near zero, and Fed policy often works on long-term interest rates instead. No, this is not your father’s monetary policy, and the old ways of teaching about it simply won’t do....'

You will find his short contribution (Not Your Father’s Monetary Policy) in a roundtable hosted by the New York Times on 'Rethinking how we Teach Economics' here. You will also find there An Open Letter to Greg Mankiw written by some of his Harvard Econ 10 students and published in the Harvard Political Review.

The opening piece by Mona Chalabi is also interesting (and those against the HLP3 will rejoice but will be missing the point):

 '...An economist must be a "mathematician, historian, statesman, philosopher, in some degree." So, promisingly, begins the sixth edition of "Macroeconomics" by Greg Mankiw, a key reading for my introductory economics class at the University of Edinburgh (and still a key reading six years on). Unfortunately, the book, like the course that prescribed it, delivered on only one of those claims: to be a mathematician.What began as eloquent and logical graphs and formulas quickly spiraled out of control and I soon found myself reading that “economics is not only a social science, it is a genuine science. Like the physical sciences” and that financial crises can bepredicted by using the following formula:


I was not persuaded. The over-reliance on mathematical modeling and its subsequent abstraction, together with a near-disdainful attitude toward other social sciences, left me feeling entirely disillusioned with economics in the U.K. So much so that I decided to leave the university and study abroad at Sciences Po in Paris, which took a broader approach to the field of economics.'

All contributions are of interest.  Click away!

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