Learning economics changes your life and improves your mind.  As Dilbert creator Scott Adams insightfully observes, “When you have a working knowledge of economics, it’s like having a mild super power.”  Yet when grading economics exams, I often notice a serious downside of studying economics: Many econ students literally get detached from reality.

I don’t mean something lame like, “Some econ students disagree with me.  How dare they?”  What I mean is: I ask a question about the real world.  The question even contains the phrase, “In the real world…”  Then instead of discussing the real world, many economics students tell me about a model they learned in class.  Sometimes their answers even contain the phrase, “Assume model X.”

For example, an exam question might ask, “What determines the price of water when two individuals bump into each other in a remote desert?”  Many economics students will then start talking about supply and demand, or even state, “Assume perfect competition.  Then blah blah blah.” 

This wouldn’t be so bad if the students would at least argue that, contrary to appearances, the perfectly competitive model applies.  But when students take a model for granted despite the violation of its core assumptions – such as no individual has any noticeable effect on the market price – something has gone terribly wrong.

Learning how to logically analyze hypothetical social situations is a great skill.  Economists should proudly teach it.  But mastering this skill can and often does melt students’ brains.  Before studying economics, no one would imagine that you can discuss models in lieu of discussing the real world.  After studying economics, I’m sorry to say, many students tacitly embrace this absurdity. 

As economic educators, we bear a lot of the blame for the misconceptions our students acquire on our watch.  How can we do better?