There is an old joke about economics which says that the questions stay the same, only the answers change. Though there is some truth in that idea, I would argue that over the past 50 years, there have been marked changes both in the questions and in the answers, but that many of these changes are still only imperfectly reflected in undergraduate textbooks. To be sure, there have been marked changes in the commonly used texts during the past 50 years: Paul Samuelson's was the most successful in introducing Keynesian economics into the Principles course in the late 1940s. While that was a major departure from earlier texts, his book continued many earlier traditions. For instance, Joseph Schumpeter, writing several years earlier in Capitalism, Socialism, and Democracy, bemoaned the lack of attention in undergraduate (and graduate) texts to technological change, a discussion of which he saw as essential for an understanding of modern industrial economies. Samuelson, and the texts after him, ignored Schumpeter's pleading. Similarly, the domain of economics was narrowly construed. I remember being told when I took the Principles course at Amherst, some 32 years ago, that subjects like finance and organizations belonged in business schools and were not properly part of a liberal-arts education; Samuelson's text, as well as the other Principles books, reflected these views. Indeed, if we look at modern developments in economics, it is remarkable how few of them are adequately represented in most of the Principles textbooks. To take but one example, economists have devoted increasing attention to problems of incentives. In our complex modern economy, most workers work for others. Whether we are concerned with a government employee acting on behalf of the public he is supposedly serving, an investment banker acting for an investor, or an assembly-line worker working for an industrial firm, the incentives of the parties are often not well aligned. The collapse of the Soviet empire is often attributed, in large part, to a failure to develop an adequate incentive system; and the failure of the SL but the fact that it is a cliche does not alter the importance of recognizing this in our undergraduate economics courses. At the time Samuelson's textbook-which set the tone for the generation of books to follow-was written, it was perhaps understandable that economics, at least in America, would be approached from the perspective of a closed economy. One could, perhaps, make an argument that, in the basic Principles course, one might legitimately ignore international issues. With this closed-economy perspective as its starting point, the evolution of the modern American undergraduate textbook is also perhaps understandable: as international issues mattered more and more in the 1960's and 1970's, additional material was added incrementally, without a thorough rethinking of how it fit into the text. One can only conjecture how undergraduate economics (or the profession as a whole) might have developed had Keynes himself, or some other * Department of Economics, Stanford University, Stanford, CA 94305-6072. Financial support of the National Science Foundation and the Hoover Institution is gratefully acknowledged.
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