Wednesday, 23 April 2014

The need for a new Economics

The Vice President of the Cambridge Society for Economic Pluralism

UK in Italy Even after the crash, Economics teaching has changed little
The shape of the world economy has changed dramatically over the last twenty years, but the economic curriculum has not. Curriculum reform is necessary and long overdue to overhaul some of the outdated concepts that are still being taught. A re-introduction of the intellectual dynamism of pluralism would reinvigorate the discipline. The last twenty years have seen the dotcom bubble burst and the worst financial crisis since the Great Depression. It’s fair to say that economists failed to anticipate the coming of the crisis or its magnitude once it had arrived.
In fact, if anything, there was a sense of self-congratulatory complacency. A tranquil period of steady growth, low inflation and wealth for all was set to continue indefinitely. Then the crisis of 2007/8 arrived and shook the economics establishment out of its happy torpor. Suddenly the discipline burst to life, throwing out now defunct ideas like perfect competition and resuscitating neglected concepts like banks and money to reinvigorate their models.
The Institute for New Economics Thinking was set up to promote research at the frontier of economics to the tune of millions of dollars. Despite this blossoming of new ideas in academia, economics education remains broadly static. Economics continues to be taught as if it were a science. Theories are taught as if they are proven beyond reasonable doubt, rather than fallible, as models of human behaviour must be. Little attempt is made to relate the abstract mathematics we are fed back to the real world, to the economy you see in your day-to-day life.
Some will say that this is harmless, but many students graduate straight into a job where their relative ignorance regarding the status of economics is used to make economic policy decisions using a rationale that academic economists have not believed for decades. Perhaps the most striking example of the effect this can have is the Treasury’s policy of austerity, which has been widely derided as economically harmful by economists – including at the IMF – and yet it’s supported in a typical undergraduate curriculum, where austerity is lauded thanks to its oxymoronic properties of expansionary contraction.
Updating the syllabus to bring it into line with current economic thinking and injecting a bit more realism and critical thinking are uncontroversial changes and as such there can be no excuse for not making them. Indeed, the CORE initiative led by Professor Carlin of UCL and funded (once again) by INET is developing a new first-year undergraduate curriculum that intends to do exactly that.
But is this enough? Opportunities for change are rare, so when they arise it is important to consider whether a more radical transformation is necessary. Should other schools of economic thought enter the syllabus? Would students not benefit from learning about Austrian, Ecological or Feminist schools alongside the dominant neoclassical mainstream?
And perhaps economics should rediscover its relationship with its social science cousins. Is not economics so unavoidably intertwined with psychology, politics, sociology and anthropology that teaching it in isolation is unduly monochromatic? A rising chorus of voices would answer ‘yes’. In January 2013, the Post Crash Economics Society of Manchester University launched its campaign for a more pluralist curriculum. In June, a national body, Rethinking Economics, was launched at an LSE conference that has now expanded to become a network of over 2,000 young people. Indeed, the Cambridge Society for Economic Pluralism has been promoting alternative schools of economic thought since 2011.
There has never been a better moment for economics to be self-critical and carefully consider whether the time for greater pluralism has come.

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