One high-profile response to the need to revise the economics curriculum, is the CORE project financially supported by the Institute for New Economic Thinking (INET) and based at INET at the Oxford Martin School. We look at the background and progress of the project.
Firstly, some background. CORE is funded by the Institute for New Economic Thinking (INET) which was founded in 2009 as a reaction to the crisis. Sciences-Po and Azim Premji University in Bangalore have also contributed. Leading figures in the early development of INET included Joseph Stiglitz, Robert Johnson, John Kay and George Soros (whose foundation provided financial support).1 It is clear from its inaugural report that INET felt the economics profession had suffered severe damage to its credibility as a result of the crisis and that INET’s mission should be to ‘…create conditions for a younger generation of economists to step forward and examine the world freely.’ (INET 2011, p.2).
In late 2013 INET launched an international project, to run for three years, to produce a new core economics curriculum. The first major report on progress was a workshop at HM Treasury in November 2013 but much of what follows reflects further work undertaken since then. The project is led by Prof Wendy Carlin at UCL, and draws on the expertise of more than 25 academics from universities across the world, together with web designers and developers in Bangalore, and panels of students, teachers and employers to give feedback (a list of participants can be found on the website: www. core-econ.org).
What is the CORE project?
Above all, the CORE project is producing an interactive on-line resource for a first course in economics. The nearest widely-available parallels are the ‘virtual learning environment’ materials produced by the UK’s Open University. Although there is a certain amount of on-screen text that students are expected to read, the emphasis is upon ‘interaction’. The various activities in which students can engage (for each part of the course) are:
• Self-testing of understanding
• Help with concepts and maths, optionally including calculus
• Step-by-step model-building and interactive charts
• Simulations and games
• Videos of economists in action
Illustrating this material on a printed page (the very medium which it is intended to repudiate!) is difficult and can scarcely do it justice. But we shall endeavour to convey something of the flavour to readers with strong powers of imagination.
Wendy Carlin has described the purpose of the material as closing a number of gaps:
• Between what we know and what we teach undergraduates;
• Between the questions we are being pressed to answer
by the public (including our students) and the often unrelated content of our curriculum; and
• Between conventional text-and-lecture methods and the now available low cost individualized and interactive
In doing this, the approach taken by CORE differs from the ‘conventional’ approach in a number of ways:
Organising the material
Wendy Carlin describes the logic of the course.
The CORE course is divided into 21 units and begins with ‘the capitalist revolution’ introducing the student to what the economy is (rather than, as is more common, what economics is). This starting point focuses attention on a series of pressing problems today — including economic prosperity, environmental challenges and inequality. And it underlines the fact that the economy is embedded in its social and environmental context. Knowledge that comes from other disciplines — from history, political science, climate science, demography, and psychology — is part of the formation of an economist.
In each unit the kinds of problem to be addressed are signalled with an opening vignette whether it be Apple’s global system of production, the South African government’s suit against pharmaceutical companies to permit use of generic retrovirals, or the global price and quantity ramifications of the cessation of U.S. cotton exports during the American Civil War.
Through the presentation of a series of long-run data sets, the first unit draws attention to the recent origin of consistently rising living standards and of the divergence in economic fortunes of regions of the world. The scene is set for the second unit which asks how some economies escaped the Malthusian poverty trap — why this happened first in England and why in the 18th century. Here we embark on systematic model-building and, as throughout, this is motivated by a real world question, knowing that empirical relevance and application are among the keys to effective teaching of conceptual material. A model of the choice of technique allows the student to learn about relative factor costs, production isoquants, iso-cost functions, and Schumpeterian rents (see below).
The vast increases in productivity made possible by technical progress then poses the question motivating our next model building task, taken up in Unit 3: how can a model of individual optimization subject to constraint illuminate an individual’s choice of work hours in the process of technical progress.
Students will however realize that there are two things missing from this Robinson Crusoe-like picture: strategic interaction with others, and preferences that may value the outcomes experienced by these others. So in Unit 4 we introduce the elements of game theory, social dilemmas, and non-self-regarding preferences, taught using real world examples of cooperation in social dilemmas and behavioural experiments. At this early stage in learning economics, students come to see that the subject encompasses a rich set of behaviour and that there are tools they can master to make sense of it. They also see that the experimental method, which they will have encountered in science courses, can enlighten economics.
Unit 5 extends the problem of strategic interaction to study the mutual gains from trade and how these are implemented and then shared among participants as the result of the individual endowments and economic institutions. By introducing interaction and conflict over the gains from trade early, students will learn that markets are just one way that economic institutions implement outcomes by influencing who does what and who gets what.
The habit of thinking of evaluating outcomes and policies from the dual perspectives of efficiency and fairness is established at this stage and is used in a wide variety of settings down the line in the course. Welfare economics is not hived off into a separate box. This is the reason for developing the intuition and modelling of the gains from exchange and conflict over their distribution before turning to markets.
In Unit 6, for the same reason, we introduce price-setting firms before competitive markets. Students get to think in terms of asking questions about who is making decisions in the economy, about the rules of the game and how to evaluate the outcome in terms of efficiency and fairness. Rents, opportunity costs and trade-offs are the fundamental concepts which allow beginning students to build an understanding of the economy as an inherently dynamic social system characterized by conflicts as well as mutual gains.
In Unit 6 incomplete contracts arise naturally by asking how firms hire workers, set wages, and seek to induce workers to provide high quality effort. This topic is often left to a late chapter on information economics or as part of the motivation for intermediate level macroeconomics. Here it follows directly from having established the role of large firms and wage labour in historical context in Unit 1 and then introducing the firm as both an actor in the economy and a stage upon which employees owners, managers and other actors play a part. (Incomplete contracts arise throughout the course, for example, in our treatment of credit markets in Unit 11).
Having laid these foundations and illustrated the concepts with a diverse range of empirical examples, markets are introduced in Units 7 (limited competition) and 8 (competitive markets). Given the dynamic nature of the concepts and examples used, students will be curious about how prices change and what they measure. Unit 9 addresses this question, building on the Hayekian insight of prices as messages that allow a decentralized economy to adapt to change.
Unit 10 draws together the themes of the preceding units to address the question of market failures and successes. When we turn to remedies for market failures, the concepts thus far developed allow for both a Coasean private bargaining perspective and a Pigouvian tax and subsidy public policy approach.
Unit 11 introduces the credit market and intertemporal trade offs, and makes the connection to the aggregate monetary economy with money and banks.
Units 12-16 will teach a set of facts about the aggregate economy and a simple framework for understanding how it works so that students move seamlessly to macro from the empirically based microeconomic theories of markets in labour and credit. The unit on credit markets and money is followed by the one on economic fluctuations. We take the household’s eye view of the macro economy, for example the problem of consumption smoothing in the face of employment shocks, before introducing macroeconomic aggregates and accounting. Using the idea from Unit 9 that prices can send the wrong messages, bubbles are introduced along with leverage cycles in the discussion of the global financial crisis.
The macro sections give equal emphasis to long run supply side determinants of macro performance (productivity including capital stock and its other determinants, wage-setting institutions and market structure) and to aggregate demand’s role in cyclical behaviour. They provide a simple and institutionally realistic model of macroeconomic policy-making consistent with both long and short run aspects of performance.
The remaining units address the international economy, the economy and the environment, economic inequality, innovation and the knowledge based economy, and the economics and politics of the public sector.
The course is divided into twenty-one units.2
1.The capitalist revolution
2.Innovation and the escape from the poverty trap
3.Scarcity, work and progress
4.Strategy, altruism and cooperation
5.Property, contract and power
6.The firm and its employees
7.The firm and its customers
8.Competitive goods markets
10.Market successes and failures
11.Credit markets, banks and money
12.Economic fluctuations and unemployment
13.Macroeconomic policy tools
14.Managing unemployment and inflation
15.Employment and living standards in the long run
16.The Great Depression, the golden age and the financial crisis
17.The nation in the world economy
18.The economy of the earth
19. Inequality and economic justice
20. Innovation, information and property
21.Political economy of government successes and failures
Each unit offers the interactive facilities that we referred to earlier. For example, the familiar process of model building by the use of diagrams is enlivened by the use of animated (sometimes interactive) diagrams. Unit 1 takes the long view of history by showing the imperceptible increase in GDP per capita for major economies from 1000 to 1800AD before focusing on the ‘take-off’ thereafter, beginning with the UK. Described as the ‘hockey-stick’ chart, the major issue here is the mechanisation of production, the lowering of costs and the increase in output. To understand this students are introduced to isoquants. (Readers will have to imagine the following diagram, animated so as to appear on screen, step-by-step).
Further animation reveals the effect of new technology:
‘Help with concepts and maths’ is provided by two types of ‘pop-ups’, the ‘Einsteins’ and the Leibniz. The following example deals with the work/leisure choice in the face of a change in wage.
The Liebniz ‘pop-ups’ are being developed to allow course materials to be used in both calculus-based and non-calculus-based coursces. Another set of ‘pop-ups’ is called ‘surprise me’s and relate some curiosity linked to the topic of study. These are intended to entertain but also, by their unusual nature, should help students to remember some aspect of the topic. For example, Unit 1 understandably makes references to Adam Smith as the first of CORE’s ‘Past economist’ series, and contains the following:
A recent introduction, at the request of the instructors and students who reviewed the draft material, is a series of ‘Debates among Economists’ that stresses the unsettled nature of much of economic knowledge, and how economists sometimes do manage to settle their differences. The text and links to further reading offers evidence and arguments on both sides of the debated topic. Included will be ‘Discounting the environmental costs to future generations,’ ‘Homo economicus in question: altruism, reciprocity and self interest’, ‘How big is the multiplier?’ and ‘The minimum wage: effects on jobs and incomes of the poor.’
Although the package will be an open-access on-line resource available to any student or indeed anyone at all with an interest in economics, it is designed to complement the instructor’s classroom teaching and additional written materials. It is not an on-line course (MOOC). The CORE project will also develop a series of guides to help teachers/instructors to make best use of the material.
The box below is an example of the first page of a teacher’s unit outline (to unit 4) and shows, inter alia, how recent developments in behavioural economics and recognition of institutional realities are built into the course from an early stage.
An aim of the project is to convey to students the excitement that economists feel about their research and policy engagement. The first two ‘Economist in Action’ videos feature economic historians: Suresh Naidu from Columbia University and Bob Allen from Oxford. Others lined up for the series include Olivier Blanchard, Richard Freeman, Kathryn Graddy, Jim Heckman, Thomas Piketty and Juliet Schor.
The current state of play
Wendy Carlin reports that at the recent project workshop in Oxford in June, Juan Camilo Cardenas from Universidad de los Andes in Colombia presented progress on developing in-class and e-games to fit the curriculum. Rob Axtell from George Mason University is building simple simulation models for use in a number of units.
Feedback from reviewers on thirteen of the units was presented to the June workshop by Alvin Birdi of the Economics Network and is being used to prepare the beta version of the eBook for the Introduction to Economics course. The course materials will be tested in the autumn at UCL, UMass Boston and Warwick University. From early 2015, they will be tested at Sciences Po, Sydney University, Azim Premji University Bangalore and the University of Chile, Santiago.
1. For more on INET see INET (2011a).
2. More examples of the CORE material can be found at http://core-econ.org/the-core-curriculum/
INET (2011a) ‘The history behind the institute’ http://ineteconomics.org/video/full-video/history-behind-institute
INET (2011b) ‘Building a Global Community of New Economic Thinkers: Inaugural Annual Report 2010-2011’, New York: INET. http://ineteconomics.org/sites/inet.civicactions.net/files/inet-annual-report-2010-2011.pdf