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Department of "Huh!?": Oxford Macroeconomics Curriculum Department

Simon Wren-Lewis writes:

mainly macro: Teaching macroeconomics after the crisis: I was asked the other day how macroeconomics teaching at Oxford had changed as a result of the Great Recession of 2008-9. My answer, which was not much…. John Vickers, who gives the first year macro lectures, has added material on bank runs, leverage and banking reform…. My own second year undergraduate lectures include a wealth of topical examples to illustrate basic theory…. Martin Ellison now gives a couple of weeks of lectures on recent developments in modelling financial frictions as part of the core post-grad macro course.

So why was my answer not much? Because although the crisis has added material, nothing has really been thrown away as a consequence of what has happened. We have not, either individually or collectively, decided that the Great Recession implies that some chunk of what we used to teach is clearly wrong and should be jettisoned as a result. Speaking for myself and my second year undergraduate lectures, quite the opposite is the case. As Paul Krugman has pointed out many times, recent developments have in many ways been a vindication of the basic Keynesian model that lies at the heart of any undergraduate macro course.

Indeed, I would go even further. The mess we are currently in is due in part to policy makers ignoring this basic macroeconomic analysis. As a result, I teach this stuff with renewed vigour and determination….

I also teach the first part of the core macro for our MPhil (Oxford’s two year masters) course, and you might think that the basic Ramsey model which is covered there has less relevance to recent events. To some extent this is true: I’ve noted how the standard intertemporal consumption model is not going to explain trends in savings in the UK or US over the last few decades, and my colleague John Muellbauer has written extensively on this. On the other hand, I find the Ramsey model and its OLG variant very useful in discussing issues around the control of government debt.

So while the Great Recession has clearly shown that macroeconomics is incomplete in important respects, it has not shown that what we thought we knew is all wrong.  In many respects it has shown it is exactly right.

However I think I should add one important rider to this. Anyone wanting to understand what has happened over the last five years would be better off reading an undergraduate macro textbook like Mankiw than a masters textbook like Romer…. I am not suggesting anything is wrong with what we currently teach. Rather that the inevitable focus at the masters level on the recent macroeconomic literature leaves no place for the history of macroeconomic thought, and that is a problem…

When I read this, my immediate reaction is that Oxford's masters program badly needs to replace its "current macroeconomic issues" course with "monetary and financial history" and "history of macroeconomic thought" courses…

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