Adapting Macroeconomics Courses

Change often happens incrementally and slowly. In the economics textbook market, for example, there is an unwritten rule that new textbooks cannot differ more than roughly 15% from the standard textbook in order to be ‘acceptable’ (Colander, 2003).

While our book clearly breaks this rule and proposes more far-reaching and fundamental changes in most chapters, in this chapter we focus instead on how existing courses could be adjusted incrementally. By doing so, we hope to assist educators in improving and adapting the courses they teach without needing to rip them up and start again, as well as helping students make suggestions for how this could be done.

First, we set out the typical contents of current courses. Second, we provide our suggested additions and changes. It is important to note that we pose all these suggestions as potential sources of inspiration, not a checklist of all the things that necessarily should be included. After all, there is a practical limit to what can be taught within a single course.

Courses:

Current macroeconomics courses typically focus mainly on ideas and models of the neoclassical-Keynesian synthesis, sometimes also called neo-Keynesian macroeconomics, frequently complemented with monetarist critiques and alternative models. Key models to which a lot of teaching time is devoted are the aggregate demand-aggregate supply model, IS-LM model, and the Phillips curve. Sometimes the topic of economic growth, in particular the Solow and Ramsey growth models, are also included. In more advanced macroeconomics courses, dynamic stochastic general equilibrium (DSGE) models, with both their new classical and new Keynesian variants, are often central. In this way, topics, such as unemployment, inflation, growth, monetary and fiscal policy, are analysed using concepts such as adaptive and rational expectations.

Frequently used textbooks:

Macroeconomics courses are often strongly focused on theoretical models. While theory is crucial, it is also important to make students familiar with the real-world economy around them. In particular, it can be useful to teach students about the main institutions that shape the national economy in which the course is given, such as its regulatory or social security system, its economic ministries and central bank, labour unions and employers associations. Besides this, it can be helpful to show students how various indicators, such as unemployment, inflation, life-satisfaction, income and wealth inequality, carbon footprint, and household, corporate, and public debt levels, have developed. These indicators are often variables in models, so this real-world knowledge will enable them to also better understand and put in context the theories they are learning.

One could use our 30-minute This Month in the Economy Exercises to bring recent developments into the classroom. Or our Economy Studies Essential Lecture: The Practice of Central Banking with ECB Director Ulrich Bindseil by the Centre for Economy Studies, from 2022. This free open access teaching pack is designed for 90-minute (online or offline) sessions that can be added to existing courses.

For more detail, see Building Block 2: Know Your Own Economy and Building Block 9: Problems & Proposals.

Macroeconomic theory is a relatively contested field. Nevertheless, there are many important insights that students could learn. Besides the key ideas and models of the neoclassical-Keynesian synthesis, it could be interesting and relevant to introduce students to Austrian and post-Keynesian ideas about how macroeconomies function and how malinvestment and effective demand are crucial. Since government policy has a central role in macroeconomics, it could also be useful to introduce students to the different economic perspectives on governments with ideas such as discretion, rule-bound policy, the entrepreneurial state and nudging.

Furthermore, it is important to discuss, and let students debate, how these various theories and models can and should be used and applied in practice. How should one choose a model or theoretical approach when trying to tackle a real-world problem? How should one use the theories, what can they tell you about the world and what are their limitations? These matters can be discussed systematically by teaching philosophy of science to students.

For more detail, see Building Block 7: Research Methods & Philosophy of Science, Building Block 8: Economic Theories.

Teaching Materials

When teaching students macroeconomics, it can be very enriching and informative to discuss the basics of macroeconomic systems with them. So before going into the various theories about how capitalist economies and their markets function, one could discuss what capitalism is, what varieties it has and what other political-economic systems are. Basic knowledge about these matters enables students to put the taught theories better in perspective and context, allowing students to understand the more fundamental implications of the theories. It also helps students to engage in a more knowledgeable way in political discussions about the economy and reforming it.

For more detail, see Building Block 6: Political-Economic Systems.

Teaching Materials

When teaching students about the core economic indicators, such as GDP, it can also be helpful to discuss different ideas about how important the various indicators are. Many, if not all, of these indicators are developed because people thought they were important in themselves, or through their impact on other outcomes. Here it can be particularly useful to discuss the most prominent indicator today, GDP, and what its normative relevance is. Furthermore, alternatives to GDP, such as the OECD Better Life Index, Genuine Progress Indicators, and the World Happiness Report, are important. As with indicators, when discussing political-economic systems, it can be useful to also discuss normative views on them. Moral ideas about how the economy should look are at the core of public and political debates. As Robert Heilbroner (1953, p. 14) put it : “A man who thinks that economics is only a matter for professors forgets that this is the science that has sent men to the barricades’’. As future economists, students would do well to learn about these normative ideas on economic systems.

For more detail, see Building Block 1: Introducing the Economy and Building Block 10: Economics for a Better World.

Teaching Materials

Economic history is a particularly useful tool when teaching macroeconomics. It helps make the content lively and concrete, giving students more feeling for the matters that are discussed. Here the history of capitalism and business cycles seems specifically relevant as these are at the core of macroeconomic courses. Besides economic history, the history of macroeconomic thought can also be interesting and useful to teach to students, as it can help them better understand ideas, how they were developed and relate to other ideas.

For more detail, see Building Block 3: Economic History and Building Block 4: History of Economic Thought & Methods.

Teaching Materials

To create space for the above suggested additions, we advise to focus more on the key ideas and intuitions behind the taught models and devote less teaching time to their technicalities and mathematics. As teaching students to reproduce and work through mathematical models often takes up a large part of the teaching time, this would give the teachers the opportunity to devote more time to practical knowledge, the relevance, institutions, and history. Furthermore, a more even balance between neoclassical economics and other economic approaches could be achieved by decreasing the number of neoclassical ideas and models that are taught.