THE TROUBLE WITH ECONOMICS

© Alan FreemanCalgary June 1st 2016

http://www.post-crasheconomics.com

“We were inspired to start the society when hearing about the 2011 Bank of England Conference – ‘Are Economics

Graduates Fit for Purpose?’

At this event, leading economists from the public and private sphere came together to discuss whether economics undergraduates were being taught the right things in light of the Financial Crisis … However, as the conference took

place its effect on the syllabus was minimal at most. It was not immediately thought that the crash called for a new

approach within economics. However, the BoE conference called this conclusion into

question.

http://www.post-crasheconomics.com

We in Manchester were intrigued and excited to hear about this event. The economics we were learning seemed

separate from the economic reality that the world was facing, and from the crisis that had made many of us

interested in economics to begin with. Through our own research, we began to learn more about

economics. We examined how its mainstream had begun to be dominated by a certain kind of economics, often referred

to as neoclassical, at the expense of other approaches. It was decided to set up a society that would bring this

discussion to Manchester.Event participants 400

“

We are committed to campaigning for a change in the syllabus itself. Whilst we believe events and discussion are

extremely valuable, most students won’t receive the economics education they require unless the content of

their degrees change.

As a society, we are committed to pluralism within economics. We believe that the mainstream within the

discipline has excluded all dissenting opinion, and the crisis is arguably the ultimate price of this exclusion.

Alternative approaches such as Post-Keynesian, Marxist, and Austrian economics (as well as many others) have

been marginalised. The same can be said of the history of the discipline.

“

facebook group 1200

Students are routinely taught that only one form of economics is ‘scientific’ and ‘correct’.

Complacency was therefore sure to arise, and the failure of so many mainstream economists to see

the crisis appears to vindicate these worries.

We hope to challenge this outlook that credits only one form of economics, and want to create an academic environment within economics that

never rests on its laurels, and invites intrigue and critical thinking from students.

“

As multiple reports on economics have shown, syllabuses at nearly all British

universities are close to identical. Other students at different institutions … have

started similar societies at Cambridge, UCL, LSE and SheffieldManchester, LSE, UCL, Cambridge, Sheffield and

Glasgow are the top economics universities in Britain

Glasgow students have started an international campaign called ISIP

“Rethinking Economics” (LSE) has 7242 members

“

The reactionhttps://www.timeshighereducation.com/news/bubble-bursts-on-economists-alternative-course/2013313.article

A lecturer who will not have his contract renewed at the University of Manchester despite helping to

prepare an “alternative” economics course to meet students’ demands has criticised the

“stubbornness” of some staff at his institution.Sakir Devrim Yilmaz, a lecturer in macroeconomics

in the School of Social Sciences, who had been teaching in the department for several years, will not have his temporary contract renewed when it

expires in the summer, it has been revealed.

Earlier this academic year he was asked by the university to prepare a module covering alternative approaches to the economic crisis, after a student group – the Post-Crash

Economics Society – called for the curriculum to better reflect non-mainstream economic theory.

But the course, called Bubbles, Panics and Crashes, was later rejected by the university. In response to this decision, Dr Yilmaz and the PCES offered the module across 10 out-of-

hours sessions, on a voluntary basis. More than 50 students opted to attend, the lecturer claims.

There was “immense pressure from some people within the department and the school of social sciences, and over 240 economics student’ signatures, for me to stay and [for] the

Bubbles module to run as an official module”,

[the spokesman said that] “We are now developing an ‘alternative approaches’ module which, from September 2015, would be taught

by existing staff on permanent contracts.”

He said a new second-year economics module on financial crises, at Manchester Business School, would be available to economics

students from September this year.

A second-year module on the economics of public policy would be delivered by renowned economist Diane Coyle, and two new politics

modules on global capitalism would also be made available to economics students from September, the spokesman added.

Sanitised heterodoxy?

WHAT’S GOING ON?

Economics as a religion• All forms of knowledge have two aspects• Exoteric aspect: capacity to explain human relation to nature• Esoteric aspect: capacity to justify human relation to nature• Esoteric systems provide the moral and ethical framework within which

a given social formation reproduces itself• They provide the ‘language of government’• In late feudalism, theology was the legal framework governing such

fundamental issues as who should be king, who was entitled to land, and so on

• In modern capitalism, its place is taken by economics• “Market perfection” takes the place of god. All economic theses are

deduced from this

The theoretical basis for mainstream economics

• Equilibrium: reality is defined as “that which would happen if there are no forces tending to produce change”

• All effects of motion are eliminated. Endogenous Crisis is theoretically impossible

• Equilibrium is a ‘meta-theoretical framework’. • ALL paradigms in economics have an equilibrium variant

• General Equilibrium Marginalism versus Austrian Marginalism• Bastard Keynesianism versus the Post-Keynesians, Kalecki, etc• Simultaneist Marxism versus temporal Marxism• New Institutionalism versus Veblen

• Economics teaching selects the variant which makes crisis impossible

The esoteric consequences of equilibrium

•The system is deductive, anti-inductive•Truth is deduced by logic, not events•Therefore the only disputes are ‘how to make true deductions’

•Monotheoreticism•Since all truth is a matter of logic, actually, there’s only one truth

•Anyone who disputes this framework is wrong by definition•Evidence is ‘quasi-irrelevant’.

• After a crisis, we make ‘adjustments’ to theory but don’t change the basic premise

•Comparison: the Ptolemaics, ‘epicycles’ and ‘eccentrics’•Positivism

•What we tell you must be true•You have to give in ‘to the laws of the market’

Deductivism + Monotheoreticism = Religion posing as a

science

NB: religion has its place. The objection is to a state religion posing as a science

Economics and the Henry VIII dilemma

• Economists are hired• The employer wants the answer she already

knows to be true• The economist provides the justification• If not….

The options•Capitulation•Martyrdom•Regicide•Divorce•100 years war•Secularism/Disestablishment

Pluralism as a professional qualification

•Most presentations of pluralism: I want to say what I think, because I’m clever

•Voltaire option: She has the right to say what she thinks, even though she’s stupid

•Organised pluralism: we will grit our teeth and hire stupid people

•Assertive pluralism: if you don’t understand what she thinks

- you don’t qualify as an economist

Pluralism as a civil code•The problem of regulation•Economics has been subject to regulatory capture•So you can’t regulate to make it better•DeMartino’s discovery: most economists want to be ethical•You have to establish a code of conduct which has pluralism built in

•You have to get the employers to hire according to this code•This also protects the economist who wants to do her job

Pluralism as science•Actual practice of science is not monotheoretic•There is no ‘null’ hypothesis in science•Science establishes conflicting hypotheses and tests them against each other•Newton versus Einstein•Wave theory versus Particle theory• Inherited characteristics versus Acquired characteristics

• In order to be a scientist, you have to formulate the alternative• If economics can’t do that, it should probably be abolished•And eventually, it will have to be

Two examples

Living Wage and Creative Industries at the GLA

There was no ‘orthodox’ solutionBut none of the heterodox solutions worked perfectly

We therefore had to examine all of themTell London’s Mayor what the choices were

And let him make the decision

The problem with heterodoxy• Most heterodoxies are ‘orthodoxies in waiting’• In religious terms, they are basically Protestant sects• They police their own dissidents more vigorously than the mainstream

polices them• They pay particular attention to proving they can rid their ranks of

‘troublesome priests’• Eg Marxist reaction to TSSI• Eg Keynesian reaction to Post-Keynesians• Eg New Institutional reaction to Old Institutionalism• The problem is not to substitute one orthodoxy for another• It is to remove the basis for all orthodoxy

Further reading• Kliman and Freeman ‘beyond talking the talk’• IWGVT guidelines (www.copejournal.org)• Special edition of IREE• Post-crash society• Rethinking Economics• ISIP• DeMartino Handbook of Professional Economic Ethics