Question: Do we need to change how economics is taught?
Dan Ariely: So this goes back to the question of, “What’s the role of economics?” And economics has two roles. One role, it’s a field of study. It’s a fantastic, wonderful field of study. It shouldn’t be changed, right? It’s just lovely. The same way that philosophy is lovely, and sociology and so on. And the field should keep . . . keep on going. The second part where economics is different from all social sciences is that it has prescriptions for social policies. It tells us how to behave. It tells policies what to do. It tells business people what to do. And this is the place that worries me. This is the place that I think we should include more in the discussion than just standard economics. So for example my idea would be to create a new field that would be called “policy research”. So imagine that we do a tax cut for $800 billion just for example. What is the right way to do it? Is it just the right way to take economic principles, and based on that decide how much to give and who to give to and so on? Or is it better to take Iowa and give some people in Iowa some discounts, and other people other rebates and so on, and check which one works better? You see as a scientist I have ideas about what will work better or not. But I don’t have the confidence or the audacity to suggest that I know everything and I can predict the real right approach. I can suggest experiments, and the result of the experiments could tell us what to do. And that’s actually my hope. My hope is that economics will join psychology, and sociology, and behavioral economics to create a field where everybody proposed experiments. We test them out and we learn the most about what we should be really doing. Now I’ll give you one example for (46:04) this on some committee that is looking at the No Child Left Behind Policy . . . That’s a policy that gives schools money . . . to schools, and principals, and teachers based on performance of kids. We all have ideas about it. Is this right? Is this wrong? I personally think there’s a lot of things wrong with it. Most of teachers also think it’s very wrong. But with the billions of dollars that go into it – and I’m not sure what percent of GDP education; let’s say it’s about 15 . . . With the billions of dollars that go into it, nobody is creating good studies that are testing the efficacy of this. For me this is just unbelievable. And here is just a list of questions that we have no ideas about. What’s the right age to start studying? We don’t know. I mean for each topic we don’t know. How many minutes should a class session last? We have no idea. What is the ratio between teachers and kids that are ideal? No idea. I sat next to the head of UNESCO a few weeks ago and had lunch with him. And he said there’s one thing we know about education, and that’s the quality of the teachers really matters. I said fine. What does it mean – “quality of the teachers?” “I don’t know." I mean it’s unbelievable that we spend so much money based on our conceived notion about what’s right and what’s wrong. As a scientist I say we know some things, but we don’t know so much. Let’s just create a system where we do more experiments and test more things out. I think businesses should do it more, and I think the government should do it more. And one good case is medicine. You know medicine before the FDA was just placebos. We would put leeches, and bleach people, and all kinds of ointments. It was useless. And as a burn patient, you know I suffered through some treatments that were just placebos. What the FDA is doing is forcing people to work against their natural tendency, and forces people to do experiments. If you’re a physician and you think Ointment A is good, you’re not going to deprive half of your patients from it just to test if it’s working. You would give everybody this. If you’re a businessman and you think this is good for your clients or for your stockholders, you’re not going to deprive half of the population of it. You’re going to give it to everybody. The FDA is forcing people to do something that’s not natural – experiments. And by doing that we’ve advanced medicine in a fantastic way. But I think the same discipline is important for other things – for policies and for business.
Recorded on: Feb 19 2008
Discuss
Lamar Sapp on March 30, 2008, 8:08 PM
In terms of how economics is taught as a university discipline, the heightened emphasis on abstruse quantitative analysis (as opposed to the socio-historical basics) has contributed to economic illiteracy even among well-educated Americans. This is a problem that needs to be addressed.
Lamar Sapp on March 31, 2008, 12:08 AM
In terms of how economics is taught as a university discipline, the heightened emphasis on abstruse quantitative analysis (as opposed to the socio-historical basics) has contributed to economic illiteracy even among well-educated Americans. This is a problem that needs to be addressed.
Brian Cargill on April 24, 2008, 5:05 PM
lss546, i agree, but can you quantify social policies? how can you factor that in the GDP, most school when they teach economic only use quantitative values but they, or at least from what ive seen acknowledge that it leaves out some qualitative factors, so i think until someone figures out for example whats the quantitative affect of such things as global warming or no child left behind etc. its then we are doing the best we can
Brian Cargill on April 24, 2008, 9:05 PM
lss546, i agree, but can you quantify social policies? how can you factor that in the GDP, most school when they teach economic only use quantitative values but they, or at least from what ive seen acknowledge that it leaves out some qualitative factors, so i think until someone figures out for example whats the quantitative affect of such things as global warming or no child left behind etc. its then we are doing the best we can
Turil Cronburg on June 1, 2008, 5:35 AM
What's needed is an understanding that there is no one single solution to things. Having choices the freedom of CHOICE is one of the most basic elements of the US American system, and of a healthy economy, so it makes more sense to spend time developing several good options and then allow the individuals (students, business owners, etc.) to decide what approach is going to best suit their needs and their goals at any given time, with the freedom to choose a different options when their goals and needs change.
Turil Cronburg on June 1, 2008, 9:35 AM
What’s needed is an understanding that there is no one single solution to things. Having choices the freedom of CHOICE is one of the most basic elements of the US American system, and of a healthy economy, so it makes more sense to spend time developing several good options and then allow the individuals (students, business owners, etc.) to decide what approach is going to best suit their needs and their goals at any given time, with the freedom to choose a different options when their goals and needs change.
Luke Rodgers on August 15, 2008, 6:12 AM
education research is fundamentally different from health research in that in health you are experimenting on physiological systems, while in education you are experimenting on humans as a whole—ration/irrational, decision-making, value-holding humans. this raises a host of problems that mean you can't simply transfer the medical model to educaiton.
Luke Rodgers on August 15, 2008, 10:12 AM
education research is fundamentally different from health research in that in health you are experimenting on physiological systems, while in education you are experimenting on humans as a whole—ration/irrational, decision-making, value-holding humans. this raises a host of problems that mean you can’t simply transfer the medical model to educaiton.
Brian Crounse on October 14, 2008, 3:25 PM
I agree that experiment-based science tends to yield useful results, but there are pretty good reasons why experimentation isn’t more common in, e.g., economics, education, environmental science, etc.: One is that it’s really hard to conduct meaningful, controlled experiments in these settings. Wanting to do more good experiments is one thing; actually figuring out how to do good experiments in these contexts is quite another.
Louis Bina on October 15, 2008, 10:35 AM
Not only do we need to change how economics is taught, but we need to broaden the scope of what is included in that topic or discipline. We need to exercise more socially equitable decisions that reflect the needs of society and ensure the costs and benefits are shared equally by all groups.
Economically viable decisions consider ALL costs, including long-term environmental and societal costs.
It’s called sustainable development
Theodore Brown on October 15, 2008, 3:01 PM
One sort of problem that often arises, as Professor Airely well knows, is that the number of uncontrolled variables in social experiments is so large as to preclude unambiguous conclusions from the outcomes. Multivariate analyses of various sorts are helpful, of course, but conducting the experiments “in the wild”, so to speak, make for very difficult terrain. I think this means that one needs to try to formulate the experiment conservatively; try to figure out in advance what these various confounding variables are likely to be, and work hard at experimental designs that anticipate as much as possible their effects and where possible work around them. One would think this to be no more than common sense, but the flood of flawed studies that issue with regularity shows that not so many are ready to do the hard work needed to render a study meaningful. I can’t imagine, for example, how one would conduct the Iowa tax cut experiment that Dan Airely suggests in such as way as to get a meaningful result.
Samuel DeArmon on November 18, 2008, 12:52 AM
So much of economics is based on solid fundamental principal. Where the principal is flawed, you have failure. Where it is sound, you have a winner! This is true of so many things.
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