For many college students, introductory economics is a rite of passage. Some may call it a general education requirement, others may call it a gateway to the corporate world. But there is a common thread among how introductory economics is taught: it doesn’t really reflect what’s going on out there.
The value in economics is its supposed ability to explain exactly what it means for the economy when the Federal Reserve System lowers interest rates, why inflation exists or why some people get poorer and others, richer. Naturally, these concepts are connected to a wide range of factors, so in the end, an oversimplification of everything that’s going on in the real world seems to be the best available tool for university educators.
Unfortunately, all of these Econ 101 textbooks, lectures and seminars can be boiled down to a fundamentally flawed idea: homo economicus. Homo economicus is a core tenet of the study of economics, a dogma of sorts. To put it simply, it is premised on the assumption that humans are selfish, rational, and utility-maximizing agents. The implications of this are deeply permeating. The truth is, we are subject to circumstance, so our mind can never truly be a clear, concise, and calculating machine – frankly speaking, for the most part it’s a cesspool up there.
A professor at Harvard University, Raj Chetty, aims to reform the study of economics – specifically microeconomic theory – from one of axioms and theorizing to one of empiricism and sensitivity. He founded a research initiative known as Opportunity Insights with a few other like-minded professors with the aim of tracking and collating information about social and economic mobility in the United States. The range and purview of Chetty’s research can be discussed in serious depth, so what we should really focus on is how Chetty is transforming economics education.
Because of Chetty and his colleagues, Harvard now has a new introductory economics course aimed at all college students called Economics 1152: Using Big Data to Solve Social Problems. Although the classic Econ 101 course still exists at the university (and is still popular), Chetty strives to make Econ 1152 the norm, not only at Harvard, but at universities across the country as well. Insularity is economic theory’s downfall – and the social sciences should be anything but that. Chetty recognizes this very flaw, and remedies it by using the zeitgeist of our time: data.
Data is and is not many things, but it most definitely is all-revealing. Data can be skewed, manipulated, and be subject to bias, but in the end, it can tell us everything we need to know about human nature. Classical economics is useful in the sense that it provides a general framework, but beyond that, it falls short of coherently integrating the various nuances and cross-cultural differences in human behavior.
The key is that Chetty doesn’t just examine data, he examines big data. What differentiates big data from standard data is the fact that it crosses different categories, variables, instances, and contexts – basically the entire smorgasbord. And that’s exactly what we need. Economists must consider the entire spectrum of the social ingroups and outgroups they’re examining, or else they fall prey to the generality trap, which is exactly what has been happening.
Using Chetty’s more nuanced view of economics, professors and researchers can empower their students with advanced techniques that help them collect, analyze and synthesize data with theory to produce fascinating and applicable empirical insights. When every student can look at a piece of economic data and start asking important questions, it is then that we can say we actually learned something in Econ 101.
Concurrently, we shouldn’t just disparage the entire study of economics; it is important to remember that there is value in everything we learn. Theory provides us with basic intuition to guide us, so instead of throwing new ideology at people around the world, let’s first critically examine the groundwork of economics and then we can highlight the nuggets of gold.
A more holistic approach to college economics will lead to a more holistic approach to policy and societal interaction. This data and these numbers will endow us with an unforeseen sensitivity towards people from all walks of life, which will guide us towards better policy for all.
Anay Contractor can be reached at [email protected].
