Does this mean that nothing should change in the way we teach economics? By no means — it’s quite clear that the teaching of macroeconomics has gone seriously astray. As Saraceno says, the simple models that have proved so useful since 2008 are by and large taught only at the undergrad level — they’re treated as too simple, too ad hoc, whatever, to make it into the grad courses even at places that aren’t very ideological.
Furthermore, to temper your modeling with a sense of realism you need to know something about reality — and not just the statistical properties of U.S. time series since 1947. Economic history — global economic history — should be a core part of the curriculum. Nobody should be making pronouncements on macro without knowing a fair bit about the collapse of the gold standard in the 1930s, what actually happened in the stagflation of the 1970s, the Asian financial crisis of the 90s, and, looking forward, the euro crisis.
I’d put my oar in for history of thought, too. Watching highly trained economists reinvent old economic fallacies suggests to me that there would be real payoff to requiring that students have some idea how the current leading doctrines got to where they are.
But must we reconstruct all of economics? No. Most of what we need, at least for now, is in those old books.
Vir: Paul Krugman