The Value of Flawed Theories…

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As part of my research on eclecticism and pluralism in economics I am discussing the relevance of eclecticism in economic pedagogy, i.e. how should we teach economics in the future. In regard to this I came across Chris House’s blog post about the usefulness of real business cycle theory (RBC).

RBC has been criticised in the economic literature quite a lot. Gregory Mankiw for example wrote in a paper in the late 80’s that RBC has no persuasive power due to a lack of empirical evidence of its major claims and will therefore disappear at one point.

However, Chris House argues that there is still some value in RBC, despite its flaws, and therefore we should continue to teach to students . First of all, it has a historic value, i.e. the important role it played in the development of macroeconomics in the past. Secondly, it allows students to learn the ‘language’ of mainstream economics. RBC is embedded in a dynamic stochastic general equilibrium framework (DSGE) and by teaching it, students will learn the basics needed in mainstream economics. The third point is the most interesting one, an epistemological argument that claims even if RBC is wrong; it helps us to understand why it is wrong.

I think that is quite an interesting point, because it allows us to think about falsified theories and their epistemological value. Especially as teachers we should not dismiss falsified theories completely. After all, they can serve us as tool to teach students knowledge. At this point, I shall not jump into the discussion on what knowledge actually is. Every failed theory is not only an important part in giving the reason why it failed but also reflects the general controversies and historic, cultural and social environments surrounding and inspiring scholars and their discipline.

Based on this, I hope to develop the concept of, as I call it, pedagogical eclecticism in economics. Under eclecticism, I generally understand a philosophical leitmotif of unprejudiced but critical endorsement of the established contents in research traditions. That may sound a bit complicated but it is quite simple once you read it twice, or three times. In economic pedagogy, this leitmotif translates itself into a teaching style that accepts and teaches the otherwise unaccepted. Not because it provides reliable knowledge about the research object, i.e. the economy in my case, but it gives us an understanding of the subject itself. Such a self-awareness is, in my opinion, necessary for a better comprehension of economics and will help students to gain a critical understanding of the subject they study.