What should happen to employment when a government raises the minimum wage? For a long time, American undergraduates who took introductory economics were trained to answer this question before ever looking at the world. They began with a simple principle: when something becomes more expensive, people usually buy less of it. Labour is no different. If the price of labour goes up, firms will demand less labour. In the tidy language of the classroom, a higher minimum wage should reduce employment.
There is, however, another way to approach the question. One can step outside the model and ask what actually happened. In the early 1990s, David Card and Alan Krueger did exactly that. They studied fast-food restaurants in New Jersey and neighbouring Pennsylvania before and after New Jersey raised its minimum wage. The restaurants on the two sides of the border were similar enough to make the comparison useful. One group now faced a higher wage floor; the other did not. The question was simple: did the New Jersey restaurants cut jobs?
The standard theoretical prediction, Card and Krueger noted, was clear. But the evidence did not obey it. Employment in New Jersey fast-food restaurants did not fall. If anything, it rose slightly. The paper became famous not only because it challenged a familiar lesson about minimum wages, but because it helped change how economists argued. Instead of asking only what a model predicted, economists increasingly asked where they could find a real-world situation that tested the model. The search for “natural experiments” became one of the defining habits of modern economics.
In the decades since, advanced economics has become more empirical, more attentive to psychology, and more interested in the many conditions under which markets do not work as neatly as old models suggest. Yet the introductory course has changed more slowly. Introductory textbooks are large, expensive, carefully packaged objects. Once universities build their courses around them, professors are reluctant to discard them. Publishers also prefer revision to revolution. As a result, the first economics many students encountered continued to present the minimum wage as a straightforward example of how price controls reduce quantity demanded. The lesson survived even as the discipline around it became more complicated.
This created a strange divide. Students first met economics as a discipline of elegant deductions from simple premises. Markets were introduced as powerful, efficient mechanisms; policy interference was often framed as a distortion. Meanwhile, professional economists and graduate students were busy documenting cases where the assumptions behind those models failed: where people were not perfectly rational, where firms had market power, where information was uneven, where institutions mattered, and where government action could sometimes improve rather than damage outcomes.
Today, more than 30 years after Card and Krueger’s minimum-wage study, introductory economics is finally beginning to absorb the changes that transformed the rest of the field. The new Econ 101 is less likely to treat unfettered markets as the default answer to every question. It spends more time on market failure, public policy, inequality, climate change, and human behaviour that cannot be reduced to selfish optimisation. These changes have obvious political implications, because the old introductory logic was often used to defend laissez-faire conclusions. But the shift is not simply ideological. It reflects what economics itself has become: more empirical, more plural in its models, and less willing to let one beautiful theory stand in for the world.
In 2019, Harvard’s famous introductory economics course, Ec10, underwent a symbolic transition. Greg Mankiw, the conservative economist whose textbook had shaped economics teaching for a generation, handed the course to Jason Furman and David Laibson. Furman had served as chair of the Council of Economic Advisers under Barack Obama. Laibson, also a textbook author, works in behavioural economics, a field he often describes more plainly as psychology and economics. With the change in instructors came a change in textbook: Harvard moved from Mankiw’s widely used Principles of Economics to Economics by Laibson, Daron Acemoglu and John List.
Furman describes the aim of the revised course in three parts. It should be useful and coherent for students who never take another economics class. It should address the problems students already care about, such as poverty, inequality and climate change. And it should show economics as it is actually practised today: grounded in evidence, open to psychology, and concerned with public policy as well as markets.
David Martin, an economist at Harvard and a section leader for the course, says introductory economics historically mirrored the discipline’s own development. Theory came first. Adam Smith and David Ricardo offered broad principles about markets, value and trade. Later, 20th-century economists such as Paul Samuelson and Kenneth Arrow formalised those ideas into mathematical models. The discipline’s teaching reflected that lineage: begin with theory, then use the world as illustration.
This was science imagined from the theorist’s desk. Since then, the centre of gravity has quietly shifted.
Two late-20th-century developments pushed economics in another direction. Computers made large datasets easier to collect, store and analyse. At the same time, advances in statistics gave economists better tools for drawing causal conclusions from messy evidence. This movement became known as the “credibility revolution”. In 2021, Card and two other economists associated with this empirical turn were awarded the Nobel Prize.
The transformation reshaped economics, but textbooks moved slowly. New editions are often expected to look much like old editions; publishers know that instructors dislike dramatic change. One common industry norm is that a new edition should not alter too much at once, since large revisions risk disrupting existing courses. This conservatism slowed the pace at which Econ 101 could catch up.
Mankiw’s 1997 introductory textbook included a discussion of observation and the scientific method, but its image of science was still heavily theoretical. It quoted Einstein’s remark that science refines everyday thinking and recalled Newton watching an apple fall before formulating a theory of gravity. The scientist in this picture observes the world, certainly, but the emphasis is on the elegant theory that follows. In the textbook now used at Harvard, first published in 2015, empiricism is placed at the centre of the subject. Alongside optimisation and equilibrium, evidence-based reasoning is presented as one of economics’ core principles. Each chapter includes material on how economists use evidence.
Harvard students now encounter the Card-Krueger minimum-wage paper in the second week of Ec10. It appears not as a curiosity at the end of the semester, but as part of the course’s introduction to empirical economics. Students work through a simplified version of the study, comparing employment changes in New Jersey and Pennsylvania after the policy change. The point is not that theory is useless. It is that theories earn their value by helping us understand behaviour in the world. Martin describes the course’s method as “facts first”. Where the old course often began with theory and moved outward, the revised course begins with evidence and lets theory answer to it.
The theoretical content of Econ 101 is changing as well. The classic workhorse of introductory economics is the perfectly competitive market. Generations of students learned it through familiar goods such as pizza, ice cream or apples. If pizza is free, you will probably take several slices. If it costs a few dollars, you will take fewer. If it costs forty dollars a slice, you may take none. From this everyday reasoning emerges the demand curve: when price falls, quantity demanded rises.
Then comes supply. Sellers respond in the opposite direction. The higher the price, the more worthwhile it becomes to produce and sell pizza. The place where supply and demand meet is equilibrium. In this model, consumers and firms are rational optimisers. They understand their preferences and constraints, and they act to maximise utility or profit. The model is simple, powerful and memorable. It is also, like all models, a simplification.
Harvard students still learn supply and demand. But almost immediately, they are asked to examine the model’s limits. The third week of Ec10 begins a sequence of lectures that challenges some of its key assumptions, especially the idea that human beings are purely selfish and perfectly rational. Students are introduced to psychology, game theory and social economics: fairness, trust, cooperation and altruism.
One classroom exercise is the Keynesian beauty contest. Each student chooses a number between one and 100. The winner is the person whose guess is closest to two-thirds of the class average. At first glance, 33 seems sensible: if everyone guesses randomly, the average will be around 50, and two-thirds of 50 is about 33. But if everyone reasons that way, the average will be 33, and the winning guess becomes 22. If everyone takes that next step, the answer moves lower again. In the pure logic of infinite strategic reasoning, if every participant is rational and believes everyone else is rational, the correct answer is zero. That is the Nash equilibrium.
But classrooms do not behave like the textbook ideal. Many students choose 33. Many choose 22. Some choose zero, but not most. The exercise shows that even clever, motivated people do not always reason to the theoretical endpoint. They use shortcuts. They stop after one or two rounds. They make assumptions about what others will do. Real behaviour is strategic, but not perfectly so.
Students learn that even when people try to optimise, they often fall short of perfect rationality.
Another exercise is the dictator game. One student receives money and can either keep it all or share some of it with another student. If people were narrowly selfish and faced no consequences, they would keep everything. Yet many choose to share. The lesson is not that humans are saints, but that behaviour is often shaped by fairness, sympathy, norms and self-image. The purely selfish actor of old introductory theory is a useful fiction, not a full description of human beings.
Economics textbooks have long acknowledged such complications, but usually near the end. Altruism, behavioural bias, asymmetric information and strategic interaction often appeared in the back chapters, after students had already absorbed the basic market model as the normal case. Courses tended to follow the same structure. First came the competitive market; only later came the exceptions.
Ec10 now integrates these complications from the beginning. Furman says that as soon as the course teaches the competitive model, it also tells students that they will learn many ways the model can fail. The point is not to discard the model, but to prevent students from mistaking it for the whole discipline. What used to be supplementary material is now part of the introductory core.
Harvard is not alone. In Britain, a group of economists concluded that even these reforms did not go far enough. Their ambition was to bring the back of the textbook to the front and, more controversially, to move the perfectly competitive market model toward the back.
For Wendy Carlin, an economist at University College London, the spark was the financial crisis. Students wanted to understand what had gone wrong in the global economy. Traditional introductory courses, built around efficient markets and tidy equilibria, struggled to answer. Margaret Stevens at Oxford faced a similar problem. Her students in philosophy, politics and economics wanted economics to speak to the world after the crisis, and the standard curriculum often seemed evasive.
Carlin argues that textbook examples were too often selected because they fit the model being taught. Research works differently. Economists usually begin with a problem in the world: a pattern, a puzzle, a body of descriptive data, a question that matters. Only then do they ask which tools might help make sense of it. The model should serve the question, not the other way around.
Carlin and Stevens joined with Sam Bowles of the Santa Fe Institute to build a new open-source textbook, published by CORE Econ under the title The Economy. The first version appeared online in 2017. The project has since expanded to include dozens of contributors from around the world and has produced updated microeconomics materials.
For Bowles, the project had roots far earlier than the financial crisis. In the late 1960s, he corresponded with Martin Luther King Jr, whom he had met through anti-war activism. King sent him a list of economic questions he wanted help answering. Bowles later recalled opening the list and realising that he did not know how to answer them. More than that, he did not know where in economics one would even look.
They wanted a textbook that began with questions students recognised and kept them curious enough to continue.
Carlin, Stevens and Bowles had all been teachers before they became economists. Carlin studied education; Stevens taught high-school mathematics; Bowles taught high school in Nigeria. Their teaching experience shaped the project. They wanted a textbook that did not ask students to wait months before economics addressed the problems that had drawn them to the subject.
The result looks very different from the traditional introduction. CORE begins with the dramatic “hockey stick” rise of both economic growth and greenhouse gas emissions. Its first chapter moves through technological change, Malthusian population theory and colonialism. According to CORE Econ, the textbook is now used at hundreds of universities across six continents and in a large share of UK institutions offering economics degrees.
In CORE, the perfectly competitive market does not appear until Chapter 8. Bowles describes this as an attempt to bring into the introductory classroom ideas that graduate students have long encountered. Rather than starting from the special case of perfect competition, CORE begins from a world where firms, workers and institutions have power.
This matters. In a standard competitive market model, firms are price takers. There are many sellers, products are identical, and no individual firm can set the price. A pizza shop on a street of identical pizza shops cannot charge far more than the others without losing customers. The market sets the price; firms decide whether to sell at that price.
CORE treats this as one possible case, not the normal form of economic life. Many firms sell differentiated products. Many employers have some power over wages. Many markets are shaped by institutions, bargaining and information. Moving perfect competition away from the beginning signals that it is a special benchmark, not the natural starting point. It also allows the course to introduce power as a central feature of markets rather than an afterthought.
CORE includes subjects that older textbooks might have ignored altogether: forced labour, the gender wage gap, colonialism, and the institutional rules that shape distribution. One lesson uses 18th-century pirate ships to examine how institutions determine who gets paid and how decisions are made. The newer curriculum includes material on colonialism’s role in industrialisation. These are not decorative examples. They are attempts to show that economic outcomes are shaped by rules, power and history.
It is easy to interpret CORE, and even Harvard’s revised Ec10, primarily as political projects. They do move attention toward subjects often associated with the left: inequality, climate, labour power and market failure. But this interpretation is too narrow. CORE has itself been criticised by some for not being heterodox enough. The more important change is methodological. By teaching students to compare models and test them against evidence, the new curricula show economics as a social science rather than as a single doctrine.
In his intermediate microeconomics course at MIT, David Autor tells students that a model is an allegory. That is a useful way to think about the old Econ 101. For decades, introductory economics gave students one dominant allegory: markets coordinate self-interested people, prices transmit information, voluntary exchange makes everyone better off, and government intervention often disturbs what would otherwise work well. Government appeared, when it appeared, as a sometimes necessary but frequently clumsy repairman.
That is not how most contemporary economists understand the field. The competitive market is one model among many. Dani Rodrik, in Economics Rules, argues that the strength of economics lies precisely in its menu of models. The challenge is choosing which model fits the case at hand, and that requires empirical judgment. A good economist is not someone who carries one model everywhere, but someone who knows which abstraction clarifies which problem.
The new Econ 101 gives students an introduction to that variety. It asks them to think about markets, but also about psychology, institutions, power, evidence and policy. It does not tell them that markets always fail, any more than the old course should have told them that markets always succeed. It gives them more than one lens.
Yet the new approach faces a problem of its own. The traditional course was often misleading, but it had great pedagogical strength. It was coherent. Students left with a simple framework they could remember: incentives matter, prices coordinate behaviour, markets move toward equilibrium. What does the revised course leave behind? Complexity is not, by itself, a framework. “Look at the data” is essential advice, but it is not a mental model.
Carlin’s answer is that decision-making remains the central workhorse. Economics is still about actors making choices under constraints. What has changed is the description of those actors and the environments in which they act. They may be selfish, but they may also care about fairness. They may reason carefully, but they may also be biased, impatient or confused. They act strategically, socially and institutionally, not only as isolated consumers facing prices. Firms may compete fiercely, but they may also wield power. Governments may distort markets, but they may also correct failures or create the conditions for markets to exist.
The new Econ 101, at its best, does not abandon models. It teaches students that models are tools, not monuments. Some are simple and general; others are narrow and realistic. Some illuminate trade; others explain monopoly, bargaining, discrimination, pollution, financial crises or cooperation. The economist’s task is not to worship the simplest model, but to ask which model helps explain the facts before us.
That may be a less tidy first lesson than the old one. It is also a more honest one. Economics no longer begins and ends in the armchair. It still values abstraction, but it asks abstraction to meet evidence. It still teaches markets, but no longer treats the perfectly competitive market as the whole story. It still teaches choice, but no longer assumes that every chooser is a perfectly rational egoist. The world is complicated, but that is not a reason to give up on economics. It is the reason economics had to change.
