Policy Research in Macroeconomics

Rethinking Economics: a “cagey and evasive” response from the mainstream

The standard diet at St Pancras workhouse. Image from https://en.wikipedia.org/wiki/Workhouse

The standard diet at St Pancras workhouse. Image from https://en.wikipedia.org/wiki/Workhouse

A review of BBC R4 ‘In Business’, Economics rebellion’, 31 March 2016

Two weeks ago, in an excellent ‘In Business’ programme, Peter Day caught up with several of the students from the ‘rethinking economics’ campaign.

He found that the mainstream of the profession had recognised the need for some (cosmetic) reform to the way economics is taught, but no ground has been given on the demand for ‘pluralism’ (i.e. as well as mainstream or neo-classical economics, teaching the views of other schools of thought, sometimes known as ‘heterodox economics’). The arguments of those defending the status quo are worth examining.

Professor Ralph Becker of Manchester University economics department (where the student movement began as post-crash economics), responded to a question about the uniform nature of taught material: 

Certainly a certain degree of uniformity how it is taught and that’s because the huge majority of economists agrees what are the useful things that should be taught.  Does it have to be like this? I don’t think so. We are economists, we love markets and we know that diversity is good.  And if there are other universities which have a slightly different emphasis that’s perfectly fine and then students can decide to go there. But I doubt it’s going to happen.

Given that a key student complaint was that the extent of consensus meant the profession was ill-equipped for the crisis, appealing to majority opinion against change hardly confronts the challenge. It also seems highly unlikely that the teaching of economics in elite academic institutions conforms to a competitive market.

John Kay of the Financial Times resorted to abuse towards heterodox traditions, but also deployed another market mechanism:

What I hope won’t happen, which I suspect will be the response in a number of places, is to put on odd courses in rather flaky branches of what people think of as heterodox economics. And the best analogy is really with medicine. We have what is so-called alternative medicine. Now most of what is called alternative medicine is rubbish. Sometimes there are things in alternative medicine that make sense and in due course they typically get adopted into medicine. But in the end there is only one medicine and there isn’t, in a sensible world, a conventional medicine and a heterodox medicine. And I think that’s where we should be in economics.

It is hard to see how this process of ‘adoption’ might work if mainstream academics are not expected to be familiar with heterodox work.  The obvious example is Hyman Minsky, a post-Keynesian economist who wrote about the financial instability in the 1970s and 1980s. The mainstream finally woke up to his contributions – but unfortunately only after the financial crisis of 2007. And what about some respect for those ‘heterodox’ traditions that kept Minsky’s legacy alive?

But Kay’s stance is peculiar and disappointing in the light of his own work. Much of his recent economic commentary is based on an interpretation of uncertainty that is owed to Keynes, but which is not recognised by the mainstream tradition – even now.  His aggression is even more surprising given, for example, his article on “why economists stubbornly stick to their guns” (FT, 15 April 2013):  

In economics, the academic realm ought to be the home of pluralist discourse but the growth of peer review and journal publication has undermined this. University economists … are now under relentless pressure to conform to a narrow established paradigm.

Previously he had a taste for ‘alternative medicine’. And rightly so – for while there may be good evidence that much alternative medicine is ‘rubbish’, that is not the case for heterodox economics. At the start of the programme Peter Day recalled:

… five years ago I asked a clutch of the world’s top economists, all of them Nobel-prize winners, for some insights into the 2008 financial crisis that we are still to a certain extent living through.  Much to my surprise the wise men were cagey and evasive, and they had very little to say about it. “Not really our subject” was the response to me and my microphone.

This kind of attitude, along with Becker’s and Kay’s superficial remarks and the absence of any specific critique, rather suggest it is the conventional economists that are the purveyors of snake oil. 

2 Responses

  1. An interesting development in The Guardian:
    Mr Monbiot opines: "Every invocation of Lord Keynes is an admission of failure. To propose Keynesian solutions to the crises of the 21st century is to ignore three obvious problems. It is hard to mobilise people around old ideas; the flaws exposed in the 70s have not gone away; and, most importantly, they have nothing to say about our gravest predicament: the environmental crisis. Keynesianism works by stimulating consumer demand to promote economic growth. Consumer demand and economic growth are the motors of environmental destruction."
    Of course this is nonsense. But what chance does Keynesian theory stand if even those supposedly "on our side" so totally misunderstand it?

  2. Steve Keen likes to quote the words of Niels Bohr to the effect that the discipline will change "one funeral at a time".

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