Policy Research in Macroeconomics

On brilliant, neglected women economists – for Woman’s Hour

Joan Robinson in the 1920s

Joan Robinson in the 1920s

Yesterday I was invited on to Woman’s Hour to talk about outstanding women in economics that have never properly been recognized and acclaimed for their contributions.

The context is the Virago/New Statesman women’s prize for new, young writing on politics and economics. The prize was launched in late October to address the underrepresentation of women in non-fiction publishing“and most particularly in the vital, society-shaping fields of economics and politics”.

At first, the producer of Woman’s Hour (Helen Fitzhenry) had asked if I wished to put forward a list of women economists and writers. I did so with alacrity. At the top was Emeritus Professor Victoria Chick, a formidable and outstanding monetary theorist and macroeconomist.  She is best known for the integrity and rigour with which she evaluated both Keynesian and monetarist traditions in her book, The Theory of Monetary Policy (1973). And for her magnum opus: Macroeconomics after Keynes, published in 1983. (Listen to her here on the subject of “why economists don’t understand money.”)

Then there was Susan Strange (no longer with us sadly) one of the architects of the field of political economy and author of the prescient Mad Money – when markets outgrow governments in 1998 and Casino Capitalism in 1997. Cheryl Payer’s The Debt Trap: the international monetary fund and the third world – had a significant impact on many economists working in the field of sovereign debt – but her work and insights go largely unrecognized. Then there is the wonderful Yves Smith, editor of the website naked capitalism, and author of Econned: how unenlightened self interest undermined democracy and corrupted capitalism. Yves’s fearless commentary on finance, economics, politics and power makes her a proper and courageous role model for any young women writers on economics. Finally, I was very keen to promote the outstanding work and writing of Professor Mariana Mazzucato and her book, The Entrepreneurial State.

Sadly, my hastily curated list was to be overturned. Instead the Woman’s Hour producer explained there was too little time to discuss all these women. She wanted my fellow guest (Anne McElvoy of The Economist) and I to name just one historic economic writer each; someone who has not had appropriate recognition for her contribution to the field. Anne chose Octavia Hill, the Victorian reformer that campaigned for decent housing for the poor (but opposed municipal housing.)

The New Palgrave Dictionary of Economics identified my choice – Professor Joan Robinson – as

“…..the only woman among the great economists.”

While there have been women since Joan Robinson that have won prizes including the Nobel Prize, Palgrave’s editors are quite clear: Joan Robinson was the only woman among the great economists.

The Dictionary goes on to explain that she was held in very high esteem not only by her Cambridge Keynesian friends, but also by orthodox American economists, who were her fiercest critics, and who assemble each year at the American Economics Association. In 1975 they pushed for her to win the Nobel Prize.

“…1975.. was proclaimed Woman’s Year, most economists in the United States expected that she would naturally be chosen for the Nobel Memorial Prize in Economics for that year.

“She had received triumphant acclaim as a Special Ely Lecturer, at the American Economic Association annual meeting three years earlier, in spite of the harsh hostility that her theories had always met in the United States.

“The American magazine Business Week, after sounding out the American economics profession, felt so sure of the choice as to anticipate the event by publishing a long article on her, presenting her explicitly as being ‘on everyone’s list for this year’s Nobel Prize in Economics’. But the Swedish Royal Academy missed that opportunity (and alas, never regained it).

“Ever since, in shoptalk among economists all over the world, Joan Robinson has become the greatest Nobel Prize winner that never was.”

Metaphysics, Morals and Science

Back in the 1970s I owned a battered little Penguin book by Joan Robinson, entitled Economic Philosophy (published in 1962). I liked it because it made “common sense” of economics. As a young South African student I had struggled through Samuelson’s Economics 101, which did not make sense of the then South African context of apartheid. It seemed clear that capitalism did not work in the simplistic way explained by Samuelson. Instead South Africa’s version of capitalism was buttressed by a system of ideologically constructed political power – Afrikaner national socialism – that while colluding with the owners of capital, was often hostile and in contradiction to the system itself.

Economic Philosophy by contrast, begins with a discussion of Metaphysics, Morals and Science – a fine place to start any discussion of a particular economy. Robinson walks us carefully through much that is ideological about economics – and does so sympathetically.

“Metaphysical statements are not without content. They express a point of view and express feelings which are a guide to conduct. The statement “All men are equal” (while not true) expresses a protest against privilege by birth. It expresses a moral standard for private life….. Metaphysical statements do not belong to the realm of science and yet they are necessary to it.” (p.9)

I recommend it to today’s young economic writers. It is a beautifully written economics text and refreshing to read. Refreshing because while there is much that is metaphysical (and ideological) about today’s economics, yet ethics, ideology and morals are no longer used to elucidate or defend theories and policies. Nor is there much that is truly scientific about the profession’s obsession with the mathematical modeling of complex economic activities.

Robinson had avoided mathematical modeling like the plague. She once famously said: ”I never learned math, so I had to think.

In typically succinct and elegant prose she explains in Economic Philosophy why Keynes was so challenging to orthodox economists: his doctrine was counter-intuitive.

“Worse than private vices being public benefits, it seemed that the new doctrine was the still more disconcerting proposition that private virtues (of thriftiness and careful husbandry) were public vices.”

The nature of money

But what is really important about the work of both Joan Robinson and Victoria Chick (and indeed Strange, Payer and Smith) is that they all understand the nature of money. Many of the male economists striding the world stage and pronouncing on economic conditions today do not share the profound understanding these women have of credit and money, and its role within the economy. Bizarre, but true, this ignorance explains why the world so often gets into a mess – and why these women need to be acknowledged and celebrated. Until we do, citizens, entrepreneurs, workers and capitalists will continue to be confronted with the consequences of today’s flawed neo-classical economics: increasingly frequent financial crises.

Macroeconomics vs microeconomics: modeling fish behavior  

The Woman’s Hour presenter, Jane Garvey wanted me to explain the difference between macro and microeconomics to the programme’s varied audience.

Macroeconomics (I think I said) deals with the economy as a whole, rather than (as in micro economics) the behavior and decision-making of individual markets, or of individual consumers, workers, investors or rentiers.  Macroeconomics reviews the economy in the aggregate, over time and space while acknowledging uncertainty about the future. It includes national, regional, and global economies.

To simplify the difference, I risked the wrath of many professional economists by using the metaphor of a house. Micro economists tend to focus on studying the market for bricks, and the behavior of investors and workers engaged in house building. Like bricklayers, they specialize in putting the individual pieces together.

Macro economists, by contrast, are more like the architects of the house, or even urban planners. Is the house well designed? Does it suit, and take into account all the economic activities (both domestic and international) of all the “inhabitants” of the house (i.e. both private and public sectors of the economy)? Is it built on inherently stable foundations? Given historical knowledge of the terrain, is the house built on solid ground? Or is it built on the economic equivalent of a flood plain or geological fault?

The very big mistake made by many microeconomists – as Professor Chick once argued – is to draw macroeconomic conclusions from microeconomic reasoning. Any politician that compares the government’s budget to a household budget is guilty of using microeconomic reasoning to draw flawed macroeconomic conclusions.

Stephen Cecchetti explains why. At a workshop organised by the Bank of International Settlements, in May 2012 he highlighted a key flaw at the heart of most micro-economic modelling:

“Let’s say that we are trying to measure tide height at the beach. We know that the sea is filled with fish, and so we exhaustively model fish behaviour, developing complex models of their movements and interactions….The model is great. And the model is useless. The behaviour of the fish is irrelevant for the question we are interested in: how high will the seawater go up the beach?….By building microeconomic foundations we are focusing on the fish when we should be studying the moon.”

Congratulations to Woman’s Hour for stimulating today’s discussion of those neglected geniuses, Joan Robinson and Octavia Hill. May they prove an inspiration to young women entering the Virago/New Statesman competition for economic and political writing.

And may they in turn be encouraged to lift their sights up from the waves at their feet, and instead to focus on the moon.

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