Paul Seabright on micro: “Beauty, simplicity, and lack of realism”

Mon 9th December 2013 | Blog

Paul SeabrightIn a new post at Project Syndicate, Prof Paul Seabright (right) of the Toulouse School of Economics focuses on the central problem of teaching introductory microeconomics: how to reconcile elegance and clarity with reality. We should do more, he says, to show undergraduates that realistic economic models can be understood with comparatively simple tools.

He describes the Arrow-Debreu model of general competitive equilibrium as the epitome of that formal elegance: It embodies, he says, “the beauty, simplicity, and lack of realism of the two fundamental theorems of competitive equilibrium… while researchers attempt to grasp complex, real-world situations, students are pondering unrealistic hypotheticals.”

Seabright points out that microeconomics textbooks are practically unchanged in 20 years, and “as a result, undergraduate students struggle to understand even the abstracts of papers on the complex representations of microeconomic reality that fill research journals.” As a result, what he calls “real” microeconomic thinking becomes the domain of specialists and experts.

This is something we grapple with at the CORE project; precisely because the traditional order of teaching introductory micro, built from “unrealistic hypotheticals”, has been pervasive since all of us were undergraduates.

A practical argument against departing from this traditional approach is that the complex models that describe incomplete contracts, two-sided markets, intertemporal choice – or any of what Seabright calls the “messier” examples of microeconomics in the real world – are impossible to teach to new students. But Seabright argues, using the example of two-sided markets, that many of the principles of these real-world applications of microeconomics can be described using simple tools of the type that undergraduates already learn.

As we have discovered, a leap into the unknown like this isn’t straightforward: it forces us to recognise the constraints on what we can teach in introductory courses. There will always be trade-offs. In what order do we build a course that starts from first principles, if we don’t start with the simplicity of perfect competition? How much of Seabright’s “messiness” do we recognise, and how much must we ignore, when teaching time is also a constraint?

We’ll be keeping you up to date on how we try to solve these problems: but we are always pleased to hear your points of view, and we reply to as many of them as we can.