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"Economics aspires to be a science. But in this it does not succeed. Neither does finance. This despite the fact that there is an annual, optimistically named Nobel Prize in "Economic Sciences." Financial crises keep happening-the list is long. Could they be avoided if economics and finance were science? To paraphrase financial observer James Grant: science is progressive, but finance is cyclical. But why should this be? Do we not learn from experience? Does economic knowledge not increase? And how about having computers, vast amounts of data and information, and new mathematical models to guide lending and investing decisions?"

"When high school students in Shanghai crack their history textbooks this fall they may be in for a surprise. The new standard world history text drops wars, dynasties and Communist revolutions in favor of colorful tutorials on economics, technology, social customs and globalization. Socialism has been reduced to a single, short chapter in the senior high school history course. Chinese Communism before the economic reform that began in 1979 is covered in a sentence. The text mentions Mao only once - in a chapter on etiquette. Nearly overnight the country's most prosperous schools have shelved the Marxist template that had dominated standard history texts since the 1950's. The changes passed high-level scrutiny, the authors say, and are part of a broader effort to promote a more stable, less violent view of Chinese history that serves today's economic and political goals. Supporters say the overhaul enlivens mandatory history courses for junior and senior high school students and better prepares them for life in the real world. The old textbooks, not unlike the ruling Communist Party, changed relatively little in the last quarter-century of market-oriented economic reforms. They were glaringly out of sync with realities students face outside the classroom. But critics say the textbooks trade one political agenda for another. They do not so much rewrite history as diminish it. The one-party state, having largely abandoned its official ideology, prefers people to think more about the future than the past."

"Seinfeld ran for nine seasons on NBC and became famous as a "show about nothing." Basically, the show allows viewers to follow the antics of Jerry, George, Elaine, and Kramer as they move through their daily lives, often encountering interesting people or dealing with special circumstances. It is the simplicity of Seinfeld that makes it so appropriate for use in economics courses. Using these clips (as well as clips from other television shows or movies) makes economic concepts come alive, making them more real for students. Ultimately, students will start seeing economics everywhere - in other TV shows, in popular music, and most importantly, in their own lives."

"I. MISTAKING BEAUTY FOR TRUTH It's hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes - or so they believed - were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled "The State of Macro" (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that "the state of macro is good." The battles of yesteryear, he said, were over, and there had been a "broad convergence of vision." And in the real world, economists believed they had things under control: the "central problem of depression-prevention has been solved," declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. Last year, everything came apart. Few economists saw our current crisis coming, but this predictive failure was the least of the field's problems. More important was the profession's blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable - indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economie

To better understand the world in which they will live, students need foundations in economics, statistics, finance and psychology.

"BUSINESSES in nearly every industry were caught off guard by the Great Recession. Few leaders in business - or government, for that matter - seem to have even considered the possibility that an economic downturn of this magnitude could happen. "

"When high school students in Shanghai crack their history textbooks this fall they may be in for a surprise. The new standard world history text drops wars, dynasties and Communist revolutions in favor of colorful tutorials on economics, technology, social customs and globalization. Socialism has been reduced to a single, short chapter in the senior high school history course. Chinese Communism before the economic reform that began in 1979 is covered in a sentence. The text mentions Mao only once - in a chapter on etiquette. Nearly overnight the country's most prosperous schools have shelved the Marxist template that had dominated standard history texts since the 1950's. The changes passed high-level scrutiny, the authors say, and are part of a broader effort to promote a more stable, less violent view of Chinese history that serves today's economic and political goals."

"Even economists are finally waking up to this fact. A wind of change is now blowing some human spirit back into the ivory towers where economic theory is made. It is becoming increasingly fashionable for economists, especially the younger, more ambitious ones, to borrow insights from psychologists (and sometimes even biologists) to try to explain drug addiction, the working habits of New York taxi-drivers, current sky-high American share prices and other types of behaviour which seem to defy rationality. Alan Greenspan, the chairman of the Federal Reserve, made a bow to this new trend when he wondered about the "irrational exuberance" of American stockmarkets way back in December 1996 (after an initial flutter of concern, investors ignored him). Many economic rationalists still hold true to their faith, and some have fought back by devising rational explanations for the apparent irrationalities studied by the growing school of "behavioural economists". Ironically, orthodox economists have been forced to fight this rearguard action against heretics in their own ranks just as their own approach has begun to be more widely applied in other social sciences such as the study of law and politics. "

"The economic forecasts are in for 2010, and there are mixed views about whether the economy will turn the corner this year. The consensus among leading economists is for 2.7 percent growth this year. A lot goes in to forecasting the economy and getting the math right is only one of them."

Like it or not - and I don't - the Obama-McConnell tax-cut deal, with its mixture of very bad stuff and sort-of-kind-of good stuff, is likely to pass Congress. Then what? The deal will, without question, give the economy a short-term boost. The prevailing view, as far as I can tell - and that includes within the Obama administration - is that this short-term boost is all we need. The deal, we're told, will jump-start the economy; it will give a fragile recovery time to strengthen. I say, block those metaphors. America's economy isn't a stalled car, nor is it an invalid who will soon return to health if he gets a bit more rest. Our problems are longer-term than either metaphor implies. And bad metaphors make for bad policy. The idea that the economic engine is going to catch or the patient rise from his sickbed any day now encourages policy makers to settle for sloppy, short-term measures when the economy really needs well-designed, sustained support.

"Could a Tunisian fruit vendor's self-immolation spark political turmoil - in China? That may be less far-fetched than it sounds. Revolutionaries have always inspired each other, from French san-culottes channeling Thomas Paine to South American Marxists embracing Chairman Mao. And as recent events in Egypt show, civic anger these days is viral; it shows little respect for frontiers. Noted economic historian Barry Eichengreen, for one, thinks Beijing should worry. He sees parallels between the dire political and economic conditions that lit the fuse in Cairo and circumstances in China."

"The economic crisis in Ireland has shown that "too big to fail" can quickly turn into "too big to save" as the Irish government tried to shore up faltering private banks, with catastrophic results for the entire economy. In a recent Op-Ed article, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, wrote that despite financial reform legislation, the biggest banks still control our economy and pose a serious threat. After the last round of bailouts, the five largest financial institutions are 20 percent larger now than they were in 2008. If large American banks run into trouble, would they ever be allowed to go bankrupt? If not, what can be done if they start to fail? As global financial institutions grow in size, how perilous is this condition for the U.S.? "

"The behavioral revolution in economics and psychology has successfully identified and named close to three dozen biases (my favorite behavioral folk song defines them in verse). I had thought that these biases transcended issues of culture. Indeed, both neoclassical and behavioral economists were united in a belief that cultural variables were of secondary importance when it came to the deep drivers of behavior. But a series of experiments now has me thinking that the underlying heuristics are less universal."

"Giving and receiving gifts can be a joyful thing - unless you're an economist. From an economic perspective, all those books that will never be read and ties that will never be worn are a huge waste."

"Andrew Pole had just started working as a statistician for Target in 2002, when two colleagues from the marketing department stopped by his desk to ask an odd question: "If we wanted to figure out if a customer is pregnant, even if she didn't want us to know, can you do that? " Multimedia How to Break the Cookie Habit This article is adapted from "The Power of Habit: Why We Do What We Do in Life and Business," which will be published on Feb. 28. More in the Magazine » Readers' Comments Share your thoughts. Post a Comment » Read All Comments (35) » Pole has a master's degree in statistics and another in economics, and has been obsessed with the intersection of data and human behavior most of his life. His parents were teachers in North Dakota, and while other kids were going to 4-H, Pole was doing algebra and writing computer programs. "The stereotype of a math nerd is true," he told me when I spoke with him last year. "I kind of like going out and evangelizing analytics." As the marketers explained to Pole - and as Pole later explained to me, back when we were still speaking and before Target told him to stop - new parents are a retailer's holy grail. Most shoppers don't buy everything they need at one store. Instead, they buy groceries at the grocery store and toys at the toy store, and they visit Target only when they need certain items they associate with Target - cleaning supplies, say, or new socks or a six-month supply of toilet paper. But Target sells everything from milk to stuffed animals to lawn furniture to electronics, so one of the company's primary goals is convincing customers that the only store they need is Target. But it's a tough message to get across, even with the most ingenious ad campaigns, because once consumers' shopping habits are ingrained, it's incredibly difficult to change them. There are, however, some brief periods in a person's life when old routines fall apart and

A new study has revealed that whether or not a company's CEO holds a college degree from a top school has no bearing on the firm's long-term performance.

"Why do economists argue at all? Given that Fed members and economists are looking at the same data, and given the reams of evidence accumulated over decades - not to mention a few centuries of great minds, great theories and thick books that preceded this crisis - why isn't a right answer self-evident? "

"Gift-giving makes economists crazy. It's so inefficient! So we wondered: Is there a way to make the holiday season both more efficient and more joyful? On today's Planet Money, we try to answer that question by conducting a wildly unscientific experiment. We go into a seventh-grade classroom and give a bunch of kids some small gifts - candy, raisins, fig newtons. Then we ask them how much they value what they got, and if they can think of a way to make everyone better off, without buying any more gifts. They quickly arrive at a solution: trade. Behold, the power of economics!"

This is the better version.

"I've come to believe that these failures spring from a single failure: reliance on an overly simplistic view of human nature. We have a prevailing view in our society - not only in the policy world, but in many spheres - that we are divided creatures. Reason, which is trustworthy, is separate from the emotions, which are suspect. Society progresses to the extent that reason can suppress the passions. This has created a distortion in our culture. We emphasize things that are rational and conscious and are inarticulate about the processes down below. We are really good at talking about material things but bad at talking about emotion. When we raise our kids, we focus on the traits measured by grades and SAT scores. But when it comes to the most important things like character and how to build relationships, we often have nothing to say. Many of our public policies are proposed by experts who are comfortable only with correlations that can be measured, appropriated and quantified, and ignore everything else. Yet while we are trapped within this amputated view of human nature, a richer and deeper view is coming back into view. It is being brought to us by researchers across an array of diverse fields: neuroscience, psychology, sociology, behavioral economics and so on. "

"For these days one of America's two great political parties routinely makes equally nonsensical promises. Never mind the war on terror, the party's main concern seems to be the war on arithmetic. On Thursday, House Republicans released their "Pledge to America," supposedly outlining their policy agenda. In essence, what they say is, "Deficits are a terrible thing. Let's make them much bigger." The document repeatedly condemns federal debt - 16 times, by my count. But the main substantive policy proposal is to make the Bush tax cuts permanent, which independent estimates say would add about $3.7 trillion to the debt over the next decade - about $700 billion more than the Obama administration's tax proposals. "