article 1 - group 4

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GROUP 4

P V Bhanu Prakash ReddyRachana Vatsyayan

Ramesh Nair

Sadique Reza

Saurabh Pugalia

Sneha Nagar

MACROECONOMICS

How Economic Crisis has affected Teaching?

Recession and Depression


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How has the

?Economic Crisisaffected themethods of teaching


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The onset recent global financial crisis, that

marred economic growth worldwide, begets a

relook into the way economics is taught in

educational institutions the world over.

This is so that in the future we learn from our

mistakes and dont tread the same path of

financial turmoil.

Introduction

A number of economists have

commented about what they feel

must change in the teaching of

economics


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Learn from the Great depression.

experts in finance are talking more about issues of financial regulation.

Discussion of pros and cons of activism in fiscal policy, and the

institutional role of central banks. The recession has changed what is being taught but not how things are

being taught.

Alberto Alesina


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Knowledge of history, enabled

economists to predict the impending

dangers in the economy.

The current cycle elements were

similar to those in the depression. While mathematical fluency is

useful, the heart of economic

instruction needs to be reserved for

economic history.

Michael Pettis


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The economic fear to fear is fear itself.

Watching one financial megalith after another bite the dust and one

politician after another scream, The depression is coming terrified the

private sector.

Laurence Kotlikoff

Such coordination failures

should be obvious to all

economists, but they arent.

The solution is taking fearout of the economic equation.


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Some people believe that economics is an exact science.

In fact, economics is inevitably inexact. And, some economic variables are inherently unpredictable.

While the ultimate cause of the crisis is not entirely understood, many of its

mechanisms are familiar to economists.

Gilles Saint-Paul

Crisis is not a major challenge for

economics research.

Thus, the crisis will affect the

research agenda of the discipline but in

a way that can hardly be called aparadigm shift.


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The crisis should have changed the way economics is taught, but little has

changed because it takes a long time to develop a new sequence of lectures and

very little time to give last years lectures.

Improving models dont really exist or are just emerging and are too fresh

to teach in most classes.

Richard Baldwin Three types of knowledgeare required so as to see the crisiscoming:

- Understand the recent

developments in the financial

system- New developments in

banking

- Macroeconomics


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Some knew all about the fragilities of the banking sector, financial

markets and some about the complex interactions between the banking and

capital market

They did not understand how problems in overnight lending could induce

a recession that could make banks balance sheets look worse which would

worsen the credit crunch.

The macroeconomists were organizing their thinking using models in

which there were no banks and the financial market consisted of a single,

riskless asset.


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Michael Bordo

Economics courses should discuss the financial crisis and financial stability

issues.

Introductory level: Need to discuss the long history of financial crisis androle of central banks in crisis management.

- Carmen Reinhart and Kenneth Rogoffs - This Time is Different

Graduate Level: Need to integrate the

latest researches into the area ofmacroeconomics and exposed to some

economic history in non-technical works

like:

- Franklin Allen, Douglas Gale, and

Jean-Charles Rochet

- Milton Friedman and Anna

Schwartzs The Great Contraction


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Two different ways to handle a crisis: First: Stick to the Keynesians theories and principles.

Second: Abandon the conventional theories of macroeconomics and act

according to the situation.

Guillermo Calvo

Challenges in implementation:

Poor coverage of financial sector

issues.

Instructors need to be well versed

in financial history and emerging

market issues.


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At the principles level, we should spend more time teaching about

financial intermediation, bubbles, and shadow banking system. At the graduate level, we should go to much greater lengths to teach both

economic history and the history of economic thought.

To understand tomorrow we again need to look back in economic history

and the writings of earlier economists.

Overall, the crisis has raised the relative status of generalists, compared to

specialists.

Tyler Cowen


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There can be two approaches to the teaching of macroeconomics:

Focus on the historical perspective alone Focus on research into certain functional areas.

Combine the learning from history and recent researches

The consensus of our group is that a combination of both research and

history will keep economics in good stead.

Conclusions

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