What economics education is missing: the real world

1. A crisis of economics after the global financial crisis (GFC)?

The GFC led to a growing distrust in economic research and the economics profession. The criticism advanced against the current state of economics was manifold. Modern economics was, first, accused of being unable to understand and explain a wide range of real-world phenomena due to its strong focus on methodological rigor and monist paradigmatic structure (Beker, 2010; Colander et al., 2009). Second, recent studies have also formulated a critique of “economic imperialism” (Mäki, 2009), i.e. of economics as largely ignoring the theoretical and empirical findings from other social sciences (Fourcade et al., 2015). Third, there is further concern regarding the far-reaching political and societal impact of economics as a discipline and of economists as individual actors (Christensen, 2017; Dellepiane-Avellaneda, 2015), particularly since the GFC economists continue to hold core positions in policy advice and public economic debates (Green and Hay, 2014).

There is a long-lasting debate on the social and political impact of economics and its consequences for the economics discipline particularly in the field of social economics. For instance, prominent economists such as Boulding (1969) stressed the character of economics as a moral science. Hence, Boulding (1966, p. 13) states: “I became an economist because I thought there was an intellectual task ahead, of desperate importance for the welfare and even the survival of mankind.”

Fourth and finally, the outbreak of the GFC resulted in a new movement of critical students and researchers claiming a more pluralistic economic education, thereby focusing on a plurality of theories and methods as well as on interdisciplinary approaches. Students claim that studying economics in modern economics curricula fosters egoistic and purely economic attitudes. These fail, moreover, to prepare students to deal with real economic problems. Hence, the ISIPE (2014) concludes that “[…] students should understand the broader social impacts and moral implications of economic decisions.” A further critique against the current state of economics developed from the perspective of economics students is presented in the book “The Econocracy” (Earle et al., 2016). The authors conclude that even after the crisis “the people who are entrusted to run our economy are in almost no way taught to think about it critically” (p. 51).

During the last few years, several authors have conducted studies with economics students and found that they tend to behave more rationally and egoistically compared to students of other disciplines (Bauman and Rose, 2011; Frey and Meier, 2005; Rubinstein, 2006). However, it is controversial whether the empirical evidence can be interpreted as an effect of self-selection or indoctrination. In other words, the question is whether economics studies induce students to behave more in accordance with the homo oeconomicus model promoted by standard economic textbooks. This paper aims to contribute to this debate by presenting an interview-based assessment of undergraduate students of economics from five universities in Germany and Austria. Our research is mainly focused on the students’ general study experiences, their original motivation and whether, or to what extent, their study of economics has shaped their perception of economic phenomena. Hence, we aim to contribute to the debate about improvements in economic education in the twenty-first century as well as the debate on pluralism in economics. In doing so, we particularly pay attention to the perspective of undergraduate students. We found that students are confronted by a major dichotomy between their real-world economic orientations on the one hand and the way economics is taught in introductory economics courses on the other.

The remainder of the paper is structured as follows: Section 2 introduces our methodological approach. In Section 3, we illustrate some empirical findings from our study and discuss their consequences in Section 4. Section 5 provides a short summary of our main results as well as some concluding remarks including possible policy options for curricular change.

2. Methodological approach

Our investigation was primarily interested in the basic concepts and orientations students of economics themselves use when they talk about their studies. This entailed three different methodological consequences: first, not seeking to “test” an ex ante hypothesis, we structured the terms of the methodological design (e.g. questionnaires) accordingly, and contrarily required a method that, second, allowed students to express themselves as freely as possible and assured, third, that during the examination phase the empirical material would not be biased by our own perceptions. Against this background we needed to combine maximum openness with regard to collecting empirical material with maximum rigor in analysis.

Although quite uncommon within standard or even heterodox economic research (Lenger and Kruse, 2017), the field of qualitative empirical social research methods provided a rich source for adequate tools[1]. To collect student narrations of their daily study experiences, we chose the method of group discussions (Bohnsack, 2010), an open interview form where the interviewer emphasizes the field of interest (in our case: the study of economics) only at the beginning and subsequently endeavors to foster a self-reliant, casual group discussion atmosphere. The transliterated material was analyzed according to the documentary method (Bohnsack, 2014), aimed at reconstructing the fundamental concepts and orientations of participants in social contexts used by students to produce relevant contexts. As a consequence, documentary research is not interested in apparently “objective facts,” but in “the processes of the accomplishment or construction of ‘world’ and ‘reality,’ that is the ‘How’” (Bohnsack, 2014, p. 218) of meaningful sociality. These processes, it is assumed, mainly rely on implicit and habitualized knowledge which is essentially social in character and possibly never articulated by the actors themselves. Explicating this implicit knowledge is the main task for scholars, who “do not presume or presuppose that they know more than the actors in the field, but rather that the actors themselves do not really know exactly what they know all about” (Bohnsack, 2014, p. 224, emphasis by the author). Originating in Karl Mannheim’s sociology of knowledge, the documentary method is applied in a variety of fields, prominently in educational research (Bohnsack et al., 2010). As true for most qualitative research methods, the main quality criteria of the documentary methodology is not to engender quantitative representativeness but robustness of reconstructed orientations which allow generalizations (Przyborski and Wohlrab-Sahr, 2010, p. 29 ff.).

In total, 16 groups comprising more than 50 economics students (bachelors’ degree, second to sixth semester) were interviewed at five different universities ranking among the 20 largest economics faculties in German-speaking countries: Vienna (AT), Mannheim (DE), Cologne (DE), Frankfurt a.M. (DE) and Linz (AT). In accordance with the documentary research process, we ultimately aimed at reconstructing “basic orientations” backed by at least three different cases (i.e. groups). Surprisingly, we found a striking homogeneity across different groups, cities and countries. Most of the basic orientations, among them the one addressed in this paper, were found in all of the groups analyzed[2]. This meta-finding can possibly be linked to the magnitude of standardization in economics education (Graupe, 2012). From the various orientations established, the following will concentrate on only one.

3. Empirical results

On the empirical basis provided by the group discussions and their assessment as described in chapter 2, the following common orientation – among others – was reconstructed: students feel that there is a significant gap between their study experience of economics and the real world “out there” which they must bridge in some way. Hence, the relationship between the study of economics and the real world remains fundamentally opaque: neither does the economics curriculum explain its connection to the outside world, nor can reality bridge the gap to curriculum. Caught between these two poles, the student herself feels the need to resolve the situation by developing bridging strategies. The material shows three different kinds of dissociations and bridging strategies respectively: the epistemic, the practical and the moral/political. The following introduces each case, whereby two groups are referred to for each one.

4. Discussion

First, it should be pointed out that the above empirical inquiry clearly confirms the claim that students “enter the classroom with a wide range of backgrounds and with many preconceptions about how the world works” (Samuelson and Nordhaus, 2010, p. xx). The study shows that they bring with them preconceptions on how a bachelor’s degree in economics should support them in knowing, doing and/or being. These preconceptions of what an economics curriculum will look like become severely contested in their first four semesters of study. Hence, the experience and recognition of disassociation between the study of economics and real-world phenomena actually originates in the fundamental difference between an (inexperienced) concept of the study of economics and the (experienced) reality of the study program. For the student of economics, this difference becomes a serious biographical problem on a daily basis. Using the psychological concept of cognitive dissonance (Festinger, 1957), we now propose a theoretical framework which allows and promotes an interdisciplinary reflection of our empirical findings.

Since its introduction to psychological discourse by Festinger, cognitive dissonance has become a prominent concept of psychology, particularly within social psychology. It has further proven fruitful for other social sciences, e.g. the fields of sociology, anthropology and political science. Through the work of Hirschman (1965) and Akerlof and Dickens (1982), cognitive dissonance has become a widely referred concept in economics (Schlicht, 1984). Recently, Kessler (2010) used the concept of cognitive dissonance to describe responses to and explanations of the GFC by a group of influential market fundamental economist (described as “believers in laissez faire”). We now seek to apply cognitive dissonance theory to describe the economics discipline itself, i.e. its education programs[7]. In its original formulation, cognitive dissonance refers to a conflict between divergent “knowledge, opinion, or belief about the environment, about oneself, or about one’s behavior” that a person recognizes within herself (Festinger, 1957, p. 3)[8]. Furthermore, “cognitive dissonance can be seen as an antecedent condition which leads to activity orientated toward dissonance reduction just as hunger leads to activity oriented toward hunger reduction” (Festinger, 1957). By referring to the phenomenon of hunger, Festinger underlines the existential need for what the literature terms “cognitive consistency,” a balanced self-image or state of mind, where fundamental knowledge, opinions and beliefs fit together.

As our empirical results indicate, the “belief about the environment,” which here refers to the bachelor program in economics, becomes strongly contested within the first two years of study. The concept of a fruitful relation between the course content and real-world orientation in particular dissolves itself, which not only entails a major loss of motivation for the student, whether epistemically, practically or moral/politically, but – and more importantly – the cognitive dissonance between her conception and real experience also signifies a problem of self-image and sense-making: “Why do I spend so much time on an occupation that actually doesn’t serve its original purpose?.” By having chosen the economics curriculum in the first place and continually choosing to follow its necessities and obligations over the course of time, the student increasingly identifies herself with the subject and its reality. This identification is vastly performative in character, yet is not necessarily based on conscious reflection: “dissonance is greatest and clearest when it involves not just any two cognitions but, rather, a cognition about the self and a piece of our behavior that violates that self-concept” (Aronson, 1992, p. 305)[9]. Since their study experience and corresponding performances are affectively, if not consciously dissonant with their original motivations and conceptions, students face a dilemma of existential inconsistency. They continuously tend to perform what has been termed a “counter-motivational act” (especially within the “forced compliance paradigm”) (Girandola, 1997, p. 595). Or to put it more simply: the disappointing gap between economics and reality is also reflected in a psychic disassociation (i.e. “cognitive dissonance”) within the student herself. Aronson’s (1969, 1992) cognitive dissonance theory and similar work published in the 1980s (Steele, 1988; Higgins, 1987) emphasize the importance of a coherent self as the driving force behind dissonance resolution. Following this tradition, our research bears numerous interfacing points with the economics of identity (Davis, 2011; Akerlof and Kranton, 2010) and especially with the issue of conflicts and identity (Sen, 2007).

Aronson (1992, p. 305) mentions three different motivations and actions which may cause cognitive dissonance:

[…] most individuals strive for three things: (1.) To preserve a consistent, stable, predictable sense of self. (2.) To preserve a competent sense of self. (3.) To preserve a morally good sense of self. Or, in shorthand terms, what leads me to perform dissonance-reducing behavior is my having done something that (a) astonishes me, (b) makes me feel stupid, or (c) makes me feel guilty.

In our case, students experiencing epistemic or practical disassociation in their program of study can be subsumed in the second case: they strive for (idealistic or practical) sense of competence, which they are not granted. As a result, they feel stupid or betrayed considering their own counter-motivational actions. Students experiencing the moral gap clearly fall within the third category; they feel guilty for choosing their particular course of study.

In order to reestablish cognitive consistency, students gradually opt for different bridging strategies. In order to reduce cognitive dissonance Festinger suggests “that individuals may change behavioral cognitive elements, environmental cognitive elements or add new cognitive elements to reduce dissonance” (Metin and Metin Camgoz, 2011, p. 132). The following outlines some of the bridging strategies found and an enumeration of possible solutions to dissonance dilemmas:

• Practical gap/all of the strategies: since our search for potential discussants in the field exclusively focused on enrolled economics BA students, we missed those students who opted to leave their studies due to experiences of dissonance. Hence, we were not able to evaluate the phenomenon described as “self-selection” in the corresponding literature (e.g. Frey and Meier, 2005)[10]. That cognitive dissonance is being addressed performatively can be seen in the strategies bridging the practical gap. As a pragmatic solution, desired abilities lacking in the curriculum are being sought in other contexts, i.e. students acquire the ability they need somewhere else. Hence, in actively seeking to fulfill their original motivation and self-image, there is a gradual shift from dissonant and obligatory performance to consonant performance. Students opt for a change in behavior by continuously reducing dissonant performance, which entails remaining enrolled in the study program in order to finally achieve the motivation- and self-image-consistent goal of a graduation.

• Epistemic gap/engaged strategy: another performative solution evolving from the dissonant study experience involves an engaged strategy exhibited by discussants of pluralist student groups. In order finally get to know reality-orientated theories and methods, they engage in concrete activities supporting their goal and original motivations. Cognitive dissonance is reduced through a change in behavior, which while in this case does not immediately eliminate the sources of dissonance (i.e. by quitting the study program) but rather seeks to transform these sources themselves according to their original reasons for choosing the economics curriculum.

• Moral gap/moral outsourcing: another performative solution to develop from the dissonant study experience is a strategy we denote as “moral outsourcing.” Many students perceive their education as either immoral or as a-moral. Regarding the former, students feel that the study of economics – e.g. through the emphasis on egotistic behavior – promotes activity that contravenes the students’ own moral and social claims, or the respective claims of their social environment. In the latter case students report that moral and political questions simply are not addressed at all. In both cases, the participation in the study program causes cognitive dissonance, as each does not match with their moral/political demands and self-image. In order to reestablish consistency they cognitively uprate already established moral behavior (change the order of cognitions) or choose to encourage new consistent engagement (change in behavior), for instance by actively engaging in social and charitable initiatives. In both cases, the reference point for their moral actions lies outside their studies. The moral and political dissonance induced by their study of economics culminates in an active coping strategy marked by intensified political activism to directly eliminate sources of dissonance. Students who adopt this strategy try to reformulate their criticism against the current state of economics education in political terms. A possible alternative strategy could involve students adapting their sense of morality accordingly so that a contradiction to the study content no longer exists, signifying successful indoctrination. Rabin (1994) for instance discusses such a behavioral adaption as a typical example of a performative effect of cognitive dissonance[11].

• Epistemic gap/thinking like an economist: one prominent branch within cognitive dissonance research is called the “effort-justification paradigm” (Harmon-Jones and Mills, 1999, p. 7 f.). Early experiments (Aronson and Mills, 1959) showed that the experience of tough (i.e. dissonant) initiation rituals to social groups lead to an enhanced identification with the group compared to those with mild initiation rituals. Hence, when new positive cognitions are projected as the outcome of a dissonant process, the respective effort becomes justifiable. As recent economics textbook analysis has shown (Graupe, 2017), a tough and “troublesome” learning experience, especially during the first semesters, is not only anticipated but also explicitly formulated in combination with positive/rewarding cognitions: “As you work through your modules you will find that it is not always easy to think like an economist and that there will be times when you are confused, find some of the ideas and concepts being presented to you running contrary to common sense (i.e. they are counter intuitive). […] Don’t worry about this – what you are experiencing is perfectly normal and a part of the learning journey” (Mankiw and Taylor, 2014, p. 17). In this manner, the study programs’ lack of epistemic qualification toward real-world problems becomes tolerable through the prospect of new cognitions as a final outcome: the future reward, i.e. the ability to “think like an economist,” outweighs the dissonant aspects experienced in the first semesters. This strategy in effect implies that it is normal and necessary to live through a dissonant phase in order to finally being able to think differently. Daily participation in the programs’ obligations thus becomes consistent with the students’ original motivation. Depending on the manner in which students are led to the acquisition of new cognitions offered by the program (through its didactical material, lecturers, etc.), this process may also be subsumed under the virulent “indoctrination hypothesis” (Frey and Meier, 2005; Rubinstein, 2006).

Based on the empirical findings discussed in Section 3 and their theoretical contextualization above, we conclude with an outline of possible policy implications.

5. Conclusion

In summarization, the main conclusion to be drawn from our research is that, in its current form, the study of economics causes dissonances for many students. The concept of economics which originally motivated the interviewed students to enroll differs substantially from their real experience while studying. In order to avoid such disappointment and frustration, one possible solution would be to simply point out (in study manuals, advertising material, corresponding websites and official study objectives) that seeking an economics bachelor’s degree initially involves a course of study that is completely abstract from economic reality.

However, as recent research in the field of social economics or economic sociology, e.g. in the performativity studies of economics, has impressively shown, economics and economic knowledge have a huge political and social impact. Against this background it seems to be a plausible claim that fruitful economic education should enable prospective economists to understand real-world economic phenomena and to act accordingly. Moreover only a small minority of economics students become academic economists (Colander, 2009), where abstract modeling is a core requirement. Nevertheless, as the debate on the GFC has shown, not only do economics graduates leaving academia to work and live “in reality” need to be able to mindfully cope with that reality, academic economics particularly need to provide concepts and strategies that foster an understanding rather than an undermining of reality. Responsible economics education should therefore become concerned about students’ dissonances and the consequences from the unrealistic assumptions it engenders as well.

In order to establish a social responsible and more reality-oriented economics curriculum we would like to make three important suggestions based on what we found motivated students in our study. First, students should learn about economics’ and the economy’s political and social embeddedness as claimed by prominent social economics scholars. This requires a pluralism of economic theories and methods as well as courses in economic history and the philosophy of science. Second, economic education should empower students to act responsibly in the context of real-world economic phenomena and thus enable students to develop their own perspectives and approaches to economic processes. Third, a central concern of economics education based on the humanist educational ideal should be to promote the moral and political development of its students, i.e. help them to become thoughtful and engaged citizens.