Students instruct teachers to bring economics into the real world

Following the Second World War, Western nations embarked on securing the welfare state as a balance to the capitalist market economy, the result of which was the most prosperous and equitable societies ever known. The most influential economist through this period was Britain's John Maynard Keynes with his prescription of a sensible balance between government and industry involvement in economic life. But with the emergence of Ronald Reagan and Margaret Thatcher in the 1980s, other economists came to the fore—market fundamentalists such as Friedrich Hayek and Milton Friedman.

The idea of ever less government, leaving the economy and indeed society, to the vagaries of capitalist markets increasingly gained precedence. The idea of fully-informed individuals maximizing their enlightened self-interest in rational markets captivated many in the academic and political class, combined as it was with generous support from the rich for politicians who cleaved to market dogma. The teaching of economics, which became increasingly enamoured of mathematical models over the reality of human behaviour, tended to reinforce the philosophy.

All this turned out to be utopian thinking. Like communists, the market fundamentalists believed all the answers lay in one economic and social model. Neither model, unfortunately, accounted for the messy reality of economic life as it is lived by real people. People don't always choose on the basis of mere utility and they aren't always rational in their decision-making. And the philosophy neglected the critical importance of the environment, the basis of all economies.

One result of the commitment to ever less government was the financial and economic collapse of 2008. Herd instinct, greed and sheer recklessness, among other very human behaviours, proved that the financial market was anything but the rational institution free-marketers insisted it was.

Reacting to the 2008 failure of the "liberated" financial markets, a growing number of students is rejecting an economic curriculum that doesn't apply to the real world. According to the Guardian, "Economics students from 19 countries have joined forces to call for an overhaul of the way their subject is taught, saying the dominance of narrow free-market theories at top universities harms the world's ability to confront challenges such as financial stability and climate change."

The International Student Initiative for Pluralist Economics insists that research and teaching is too narrowly focused, and declares, "The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. This will help renew the discipline and ultimately create a space in which solutions to society's problems can be generated." They go on to suggest that universities should "establish special departments that could oversee interdisciplinary programs blending economics and other fields."

The students are supported by economist Thomas Piketty, author of the best-selling Capital in the Twenty-First Century, who criticizes mainstream economic teaching for ignoring evidence of growing inequality and its influence on GDP growth.

Youth are often accused of being too idealistic. In this case, it seems, they are the realists. And if they are heeded, economics in itself as well as public policies drawn from it, will be much improved.