The subject of economics as we know it now is fundamentally flawed in my opinion. The entire premise of the discipline rests on the principle of rationality, which does not exist. Some may argue that it is a good reference point for understanding the truly irrational nature of markets but how does it equip economists to really understand markets and make optimal decisions? As the recent crisis in housing and debt markets showed, even the premise that the free market will tend to rational behaviour fails. What, then, is economics?
I believe that the entire foundation of the study of economics must be changed to be of any use in this new world where the dynamics of information has drastically changed. Economics based on rational foundations was sufficient to explain world affairs in a simpler world of even 10 years ago where people were not as connected and information was not as available. Technology and the internet has changed the dynamics of decision-making at individual and market levels. The irrational nature of humans has always existed but the new and quicker information availability globally has exaggerated this irrationality and made existing economics models virtually irrelevant.
The models put forth by Daniel Kahneman and Amos Tversky are good starting points for re-shaping university syllabi. Given the pace of technological change and the way in which technology is changing information and decision-making in the world of economics, can universities' economics courses keep up with the pace of change?
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