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Teaching Macroeconomics
The Economy presents a new approach to teaching macroeconomics. It starts from real-life institutions of macroeconomic policy management, teaching models that engage directly with these institutions. Money and monetary policy are explained in the context of modern banking systems, while the Phillips curve is derived from the labour market model. By emphasising empirical applicability, and the linkages with microeconomics, it provides students with a more intuitive and realistic understanding than standard approaches.
The author is a co-author of CORE: The Economy.
Macroeconomics is not easy. In microeconomics, students’ intuitions can be developed by imagining how an individual might react to a given set of incentives. But our everyday experiences are little guide for the intuitions of macroeconomics. Consider the dreaded “household analogy”: the spurious claim, beloved by pro-austerity political parties, that a government must “live within its means” just like a household. As John Maynard Keynes showed long ago, this intuition is deeply misleading at the macro level, and can cause great harm. It is not only students who struggle; I have had more than one economist colleague refusing to teach undergraduate macroeconomics on the basis that they do not understand it themselves.
But macroeconomics does not need to be as hard as traditional textbooks have made it. If the reality can be confusing, traditional models have made matters worse by not accurately representing that reality. At the heart of CORE’s approach is the belief that many of the putative simplifications in traditional textbooks end up obscuring the phenomena they are intended to clarify.
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