I signed up for my first university economics course when I was just finishing up high school. I’m not sure what I was thinking, but I signed up for the 8am class on Mondays, Wednesdays and Fridays. It was painful. I remember going cross-eyed trying to understand all the supply and demand curves that the professor was drawing furiously on the boards.

I now know that economics isn’t all about supply and demand. It can actually be quite interesting, especially with the emergence of behavioural economics. Like the Economist says, economics 101 doesn’t even scratch the surface of what the discipline is capable of. Economics is a lot more than supply and demand. But, does it accomplish what it’s supposed to?

For tonight’s program we are going to discuss the limits of economics. Ever since the economic crisis unfolded economists have come out to critique their own craft. Nobel Prize-winning economist Paul Krugman has been one of those vocal critics. He has said that the “macroeconomics of the past 30 years was spectacularly useless at best, and positively harmful at worst”

Tonight we are going to discuss the three major criticisms of classical economics:

1)  Economists caused the crisis

2) They didn’t see it coming

3) They have no idea how to fix it. 

We are also going to discuss whether or not the discipline of economics is in for a major overhaul to pull the science out of the dark ages.

Just so we are all prepared for tonight, let’s brush up on our economics 101 and go through a couple key economic definitions that will pertain to the discussion:

Keynesian Economics:  (according to investopedia.com)

A supporter of Keynesian economics believes it is the government's job to smooth out the bumps in business cycles. Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation.

Behavioural Economics: (according to Wikipedia)

Behavioural Economics and Behavioural Finance are closely related fields making up a separate branch of economic and financial analysis using social, cognitive and emotional factors to understand the economic decisions of consumers, borrowers and investors, and their effects on market prices, returns and the allocation of resources.

For example: behavioural economics will explain why people are willing to pay $4 for one cup of coffee based on psychology.

What do you think? Are economists stuck in the dark ages?