1. Teaching Economics as a Soft Science Achim Kemmerling

3. Figure 7 Consumer and Producer Surplus in the Market Equilibrium Copyright©2003 Southwestern/Thomson Learning Producer surplus Consumer surplus Price 0 Quantity Equilibrium price Equilibrium quantity Supply Demand A C B D E

4. Problems Little diversity: too little empirics, few accepted methods, overconfidence in findings Little normativity: implicit choices, role of politics Little reflexivity: changing behaviour, no risk management

5. Too little diversity Very little empirics, with focus on one type of method (regression) and on one type of research design (quasi-experiment) Focus on one type of theory (micro-based, representative consumer, no domain restrictions)

6. AuthorYearSimple Stats Other quantitative anecdotal Micro Mankiw1992+−+++ Varian1992−−− B&B2002++− P&R2005+−+++ Parkin2005+−+++ Macro Blanchard2005++− C&S2006+−+ Mankiw1994+−++

7. AuthorYearSimple Stats Other quantitative anecdotal Micro Mankiw1992+−+++ Varian1992−−− B&B2002++− P&R2005+−+++ Parkin2005+−+++ Macro Blanchard2005++− C&S2006+−+ Mankiw1994+−++

8. Too little diversity Very little empirics, with focus on one type of method (regression) and on one type of research design (quasi-experiment) Focus on one type of theory (micro-based, representative consumer, no domain restrictions)

9. Most economic models work like this:

10. Most political science models work like this:

11. Too little normativity In theory problems of benchmarks and tradeoffs well-known, but in teaching they often disappear. Politics is still more of a disturbance then a normative realm in itself

12. The development of macroeconomic theory has shown policymakers how to reduce the severity of economic fluctuations. By “leaning against the wind” of economic change, monetary and fiscal policy can stabilize aggregate demand and, thereby, production and employment. (Mankiw, Principles of Economics, p. 793)

13. A better model would acknowledge the great heterogeneity in consumer behavior that is apparent in the data. The savers- spenders theory sketched here takes a small step toward including this microeconomic heterogeneity in macroeconomic theory, and it yields some new and surprising conclusions about fiscal policy (Mankiw AER 2000, p. 124).

14. Too little normativity In theory problems of benchmarks and tradeoffs well-known, but in teaching they often disappear. Politics is still more of a disturbance then a normative realm in itself

15. An example: Tax Politics Economic theory of taxation produces a first- best tax system Political system produces a different type of tax (eg. the one preferred by the median voter) Political equilibrium is second-best compared to the economic equilibrium Problem: no political benchmark such as stability or legitimacy

16. Too little reflexivity: Economic theory changes people, and markets But often in counterintuitive directions

17. Economists Behave Differently in Lab Experiments

18. Too little reflexivity: Economic theory changes people, and markets But often in counterintuitive directions

19. A Fine is a Price (Gneezy, Rustichini 2000) Child day care center fines parents who pick up their kids late. Parents are gladly paying fine and pick kids up even later. Day-care center lifts fine to restore old shaming equilibrium. Parents still pick up kids later.

20. Conclusions: A Softer Science Teach pluralism: More types of theories and empirics, flagging out domain conditions. Teach normativity: more on different benchmarks, more on politics. Teach reflexivity: side-effects and unintended consequences of economic theory

21. Thank you!

22. Additional Stuff

23. US CongressBundestagHouse of Commons European Parliament Lawyer168155 Economics50135 Social Science33154 Other Academic 40167 Total435622

24. A quick survey of textbooks Simple Stats Other quantitative anecdotalformalFocus Micro Mankiw1992+−++++Basics Varian1992−−−+++normative B&B2002++− Intermediate P&R2005+−++++Basics Parkin2005+−++++Basics Macro Blanchard2005++− +Basics C&S2006+−+++Institutions Mankiw1994+−+++Basics B&W1997++− +Europe S&L1993+++++++Non-OECD

25. A Comparison of Top Journals A Econ RevA Soc RevWorld Politics Formal Theory++−− Other Theory++++++ Simple Statistics ++ Regressions+++++ Other Statistics −+− Qualitative−+++

26. A Comparison of Top Journals A Econ RevA Soc RevWorld Politics Formal Theory++−− Other Theory++++++ Simple Statistics ++ Regressions+++++ Other Statistics −+− Qualitative−+++

27. A Comparison of Top Journals A Econ RevA Soc RevWorld Politics Formal Theory++−− Other Theory++++++ Simple Statistics ++ Regressions+++++ Other Statistics −+− Qualitative−+++

28. Market AssumptionsEquilibrium Efficiency Standard Reasoning

29. Firms, ConsumersEg. Sonnenschein-Mantel-DebreuMarkets clearMaximum Rents for Firms and Consumers Economic Reasoning

30. Voters, Parties Eg. Median-Voter-Theorem, Probabilistic Voting Axioms Policy Decisions Are MadeSuboptimal, Compared to Efficient Outcome Politico-Economic Reasoning

31. Voters, Parties Eg. Median-Voter-Theorem, Probabilistic Voting Axioms Policy Decisions Are MadeEnsures Political Stability, Legitimacy… Political Reasoning