Financialcrisis and recession
Howhave the financial crisis and recession affected the way economics istaught? How should economic instruction change?
Thefinancial crisis and the ensuing recession affected the globaleconomy in a way not experienced before since the Great Depression.Thus, for students taking globalization as a course it is importantto review this scenario in order to know how the global economy worksand how we can improve or change the way economics needs to betaught. The crisis and recession caused disappointments amongeconomic students because it appears the theories they deal withespecially dealing with macroeconomics are“useless.” However, itis necessary to note that business and economics changes on a dailybasis not like other pure sciences where there are constants thatnever change such as physics.
Onthis perspective, it is hard to say that the financial crisis and theensuing recession changes the way economics needs to be taught. Givena historic perspective, it s clear that economics changes on a dailybasis and thus the tutors must be well informed in order tounderstand the changes taking place. For instance, the FederalReserve had to adopt different monetary policies to contain thecrisis that had never been taught in class before. This means thatstudents especially those studying on globalization need tounderstand the factors that can cause massive changes in the economiccycle. This is because the financial crisis affected almost alleconomies because globalization has made it impossible for economiesto be independent as was the case decades ago.
Thisimplies that the issue is not how economics is taught but rather howeconomists understand the situation. It is clear that the samephysical capital was in place during the crisis as was in 2007however, during the crisis there was an increase in unemployment rateand quite substantial underutilization of capital. Surprisingly theprecedent to the crisis was the mortgage issue but no one thoughtthat it would lead to such disastrous effects. All these factorsaffected all economies because globalization has led to increasedforeign investments. This means that an issue affecting one economywill have spiral effects on other economies, which have investmentsin that particular state.
Thus,it is clear in our minds that the issue is not how the crisis changesthe way economics is taught but rather what should economists teachbecause economics is like the backbone of every economy. Thus,whether someone studies economics in Peru, England, or Japan, thereis need for the students to observe what is going on rather thanrelying on the theories that keep changing every hour because ofinternational investments that cut across borders where economies donot necessarily use the same fiscal and monetary policies.
Economictheory cycles and trends are unpredictable. Thus, changing the wayeconomics is taught will negate economics itself. People do businessnot knowing what tomorrow brings. Companies like Apple were seen tobe negligible in the consumer electronics markets a few years back,but now Apple surpassed all its competitors in terms of marketcapitalization. This means that just because there was a mortgagecrisis, that led to the financial crisis and recession is notsufficient leave alone be a necessary condition to alter the wayeconomics is taught.
Shiller,R. J. (2010). How Should the Financial Crisis Change How We TeachEconomics? The journal of economic education, 41(4), 403–409