A must read: The Economist asks a number of prominent economists the following:
How have the financial crisis and recession affected the way economics is taught? How should economic instruction change?
For the 'how should it change' question, my views are closest to that of Harold James.
As far as my own introductory course – in the past we treated monetary policy as the Central Bank setting a target for the Fed Funds rate/overnight rate and didn't worry too much about the 'zero bound' problem, though it did come up in the context in Japan. Now my course is far more Sumnerian and makes a point that Prof. Sumner likes to make:
People often misinterpret the stance of monetary policy. As Milton Friedman observed, low interest rates are not easy money, they are a sign that money has been tight.
As well, we spend a lot more time on the other tools the Fed/BoC have at their disposal.
Worthwhile Canadian Initiative 
money-multiplier as marginal cost.
Brad DeLong at Berkeley has changed his introductory economics course to start with macro, and then do micro, rather than the reverse. He also begins the macro part immediately with a section on “depression economics”. His rationale is that students are less likely to fall asleep if he begins with something obviously relevant to current events, even if the foundations have to wait for later. By the way, I think it works well.
It provided a justification for new textbook editions
You could also consider Steve Keen’s book ‘Economics Debunked’
goto ebook link:
http://www.debtdeflation.com/blogs/
I swear I saw other books critical of economics as it is taught, but I can’t seem to find the links. Sorry. I definitely saw enough articles.
oops – ‘Debunking Economics’
I thought “Debunking Economics” had been thoroughly, um, debunked already. IIRC the conclusion was that, while it had several incisive criticisms, mostly it was misrepresenting neoclassical theory.
But I could be wrong…
It provided a justification for new textbook editions
Posted by: Rob | September 20, 2010 at 08:34 PM
LOL! That is SO hilarious! Hmmmph. Please carry on.
Great article! Thanks for linking Mike.
Good question. Allowing current affairs to guide introduction course material choices is always one option. Micro can be applied to kill-negotiate decisions or perhaps of regional interest, how colonial settlers and their contemporary descendants took fish and other renewable resources from Aboriginals, and then utterly mismanaged these resources.
Simple game theory should be taught. National accounting should be minimized. The national accounts never become interesting until you are actually trying to do real applied economics. Though Paul Krugman did a good job making them more interesting a few years ago when pointed out the inconsistencies in the anti-freer trade crowd that predicted both increased imports and capital flight which is impossible. In equilibrium: (S-I)=(X-M).
In the world of macroeconomics, I would emphasize Taylor Rules and time inconsistency models of central bank behaviour even if message is largely intuitive.
It is still important to teach an AD-AS or IS-LM model as an historic curiosity and as a useful guide for understanding the modern business press.