Friday, 11 April 2014

Rethinking Economics Italia - Manifesto

Modern economics is a discipline that confronts a stark contrast between its willingness to reform and the static reality it faces, endlessly stuck on its own problems.

 Supporters of quantitative methods and supporters of qualitative methods often disagree about the role either plays in modern economics. While the former put forth a realist view of the world, the latter cry for normative reforms: students need to be taught how things should be rather than how they just are. Herein lies the figure of the social scientist, whose lack of interdisciplinarity today inevitably leads to a debate that is nothing short of hollow.

We need to stop thinking of the economist as someone who is able to tell us how things are going to change, how any economic policy affects our lives, and start turning future economists into social scientists who know how to face social, ethical, and anthropological problems alike. It is they who are going to carry on the normative approach, in a better, independent way.

Social scientists of tomorrow must base their work on their own beliefs, yet must overcome their creeds and to refute them, if needed. Their job is not to find the truth as much as disprove it. It is their own intellectual honesty and open-mindness which makes them a reliable scientist.

For this very purpose, we need to challenge the concept of the economics faculty as an institution whose sole job is to prepare its pupils to manipulate the inner workings of financial capitalism.

But even here universities fall short, and there are two words that tell us why: mainstream economics. In almost every university swathes of students are taught but mainstream economics – post-Keynesian and neoclassical. The rationale underlying this choice is that these are the only theories used by policymakers. A vicious cycle is thus created: alternative economic theories are put aside because they lack empirical evidence, and they lack empirical evidence because no policymaker wants to use them.

Therefore, we need to provide students, if possible from the very start of their academic careers, with the chance to have a taste of the different lines of economic thought, and to provide them with teachings that go pari passu with the evolution of the economic thought itself. To study different ways of thinking does not mean making things hard for the pupils as much as it means broadening their horizons.

We also need to overcome the hegemony of quantitative thinking. Quantitative tools, lacking variables that economic processes themselves cannot take into account, inevitably lead many a theory to fail. However, it needs to be said that challenging this hegemony does not mean reducing the use of quantitative tools; rather, it means aiming at discovering mathematical and statistical models that can take into account social and political parameters.

As of now, in fact, theoretical teachings and practical matters are completely out of kilter with each other. Economics, like any other social science, is created by people for other people. Hence, it withholds human virtues as much as its vices. Wrongdoings are commonplace and just because a law – be it economic, social, or political – works, it does not mean that it is right. Along similar lines, just because an economic theory has worked in the past, does not mean that it will fulfill any future needs.

Future social scientists, therefore, need to be prepared to work on the subtle difference between equity and equality and it is crystal-clear that modern economics cannot provide them with the necessary tools to face such a gigantic task. Rather than trying various (and not very successful) one-size-fits-all measures, universities should focus on offering specific trainings that encourage their students’ inclinations. This way, students can choose whether to follow a business-oriented career by applying to a business school, or to to continue towards a more academic path, in brand-new schools for social sciences.

Thursday, 10 April 2014

Intellectual Darwinism and the fallacy of the marketplace of ideas

Author: Sam Wheldon-Bayes (Originally posted here)
I recently attended a panel discussion, organised by the University of Manchester’s Post-Crash Economics Society as a counterweight to the Royal Economic Society’s conference, between Victoria Chick and Diane Coyle on economic pluralism. The Q&A session became somewhat heated after one audience member suggested that the reason modern economics is dominated by one school of thought is that this particular school of thought has beaten out the others. He referred to the numerous paradigm shifts we have seen in economics – from the classics to Keynesianism and from Keynesianism to the monetarists – as evidence that the best theory prevails.
This, however, is a view which neglects the long history of paradigm shifts, both inside and outside economics. Wherever ideas and viewpoints are challenged, those who hold them are often quite naturally defensive. This is normal, and a perfectly human reaction. I am certainly not accusing anyone of wilfully suppressing debate and critical engagement – I think it happens accidentally because we are all, alas, human. However, just because it happens by accident does not mean it is a phenomenon we should close our eyes to.
Throughout the history of the sciences – natural and social – challenging viewpoints have been met with hostility. Within our own discipline, John Atkinson Hobson’s initial theories on under-consumption were to influence the thoughts of John Maynard Keynes over 50 years later in his magnum opus, The General Theory. However, in his own time, Hobson was not so highly regarded. Having found himself unable to counter the arguments of a friend using orthodox theory, he turned away from it, in what was to be a damaging career move. In his own words (cited in Keynes’ The General Theory, 1936: 365-6)
The Physiology of Industry [was] published in 1889.This was the first open step in my heretical career, and I did not realise in the least its momentous consequences. For just at that time I had given up my scholastic post and was opening up a new line of work as a University Extension Lecturer in Economics and Literature. The first shock came in a refusal of the London Extension Board to allow me to offer courses in Political Economy. This was due, I learned, to the intervention of an Economic Professor who had read my book and considered it equivalent in rationality to an attempt to prove the flatness of the earth”

This situation – a promising theory which challenged the deficiencies of the orthodoxy of the time – bears a somewhat worrying resemblance to the present situation, particularly the recent cancellation of Manchester’s Bubbles, Panics and Crashes module. Differing points of view are blocked from academic positions, denied funding and effectively silenced. Of course, those doing the silencing do it in good faith, but that does not change the reality of the situation – dissent is possible, but exceedingly difficult. As a social science, we should be fostering dissent, debate and critical thinking, rather than impeding it. As pointed out in the Association of Heterodox Economists’ response to the last QAA review of the economics curriculum, almost all other social sciences view debate between different and legitimate viewpoints as central to their discipline itself.
If, like many in economics, we prefer to view our discipline as closer to the natural sciences than social sciences, there are still powerful lessons to be learned. Many of the natural sciences have a shameful history of suppressing what would later turn out to be revolutionary ideas. Alfred Wegener’s theories about plate tectonics were met with scathing criticism and hostility during his lifetime. Crick and Watson were instructed to drop their research on DNA, yet continued it on their own time – again, much like the recent Bubbles, Panics and Crashes module.  Even within the “purest” of fields, mathematics, Gauss was unwilling to publish his work on non-Euclidean geometry for fear of ridicule. This fear proved well-founded, as Lobachevsky was, indeed, to face ridicule for daring to publish work on non-Euclidean geometry.
This pattern of hostility to new thought proves that we cannot simply assume that the prevailing ideas of the time are the best. Much like advocates of Social Darwinism, advocates of Intellectual Darwinism fail to comprehend the structural constraints in a system they perceive to be perfectly competitive. The situation is more akin to a sapling trying to grow under a large tree; even if the sapling could potentially grow to be taller than the tree, it will not do so while the larger tree shades it and stunts its growth. It might, perhaps, be suitable to prune back some of the branches of the larger tree in order to see which sapling might grow tallest.
Building on this, it is difficult to see why a talented young economist who could potentially revolutionise the discipline would stay within it. Expensive degrees, vanishingly low wages for PhD tutors and few opportunities to meaningfully challenge the existing paradigm make the life of the next potential Smith, Marx, Keynes or Friedman a somewhat unappealing one, should they choose economic academia. Suffice to say, it is difficult to see why a rational utility-maximising individual would bother with trying to change economics.
Economics needs to change, and it cannot wait until the next great idea in order to do so. Without changing the discipline, we reduce the likelihood of that idea every coming into existence by driving its potential originators out of the discipline. Only by actively fostering debate and critical thinking, and going out of our way to ensure that orthodoxies can be challenged, do we ensure the survival and relevance of economics.
Whether we view economics as closer to a natural or social science, it is clear that we must learn from other disciplines. If it is to be viewed as akin to a social science, we must be mindful of the fact that paradigms in social sciences are allowed to compete and coexist, and that this complex interaction is a key part of the discipline itself. If, on the other hand, it is to be viewed as closer to a natural science, we must be mindful of the long and shameful history of silencing dissent within the natural sciences, and ensure that our paradigms can be effectively challenged.

Friday, 4 April 2014

Book Review Series

Money, Blood and Revolution  by George Cooper

             Author: Isabelle Crosby


Many authors have written about the failure of economic theory but best-selling financial author, George Cooper, seems to be the first to have come up with an original solution on how to fix both economic theory and the economies of the world once and for all. He has done this by “plagiarising from the masters’ (in his own words) and taking the key ideas from the greatest scientific revolutions in history to re-imagine how our economies really work in the first place.  Once you figure that out, it is much easier to identify the flaws. Child’s play? Why, yes. In fact, it could be taught in junior school.

By illustrating how both our economic theories and our economic policies can be fixed, Cooper is setting out to present a simple idea that has the power to revolutionise how we think about our economies and how our governments set their policies – he calls the idea the circulatory growth model in his new book Money, Blood and Revolution, published by Harriman House.

The circulatory growth model could help policy makers understand what really drives economic growth. It recognises that capitalism has a tendency towards wealth and income polarisation and explains how this problem can be addressed. The model makes it very clear why the financial crisis happened in the first place and why the policies we’ve been running since then – quantitative easing for example – have not really brought our economies back onto a sustainable growth path. If the model gets an audience and becomes widely understood it should help drag the policy debate back toward the centre ground. In the last few decades, economic theory has become surprisingly extremist, in ways that not many people understand. This is doing a lot of damage to our economies. For example the model makes it immediately obvious how policies designed to promote borrowing lead directly to lower economic growth, higher income inequality and, in the end, to higher government deficits. If the model can help fix that unholy trinity then it will have done some good.

The way Cooper gets to his circulatory growth model is as fascinating as the model itself. There are no pages of dry economic arguments, no equations and even the ubiquitous economic charts are banished to just the final chapter. Instead Cooper takes his readers on a remarkable journey through the history and philosophy of scientific progress.

He starts with the scientific philosopher Thomas Kuhn’s analysis of the process of scientific revolutions. He then goes on to illustrate Kuhn’s ideas with the stories of four of the greatest scientific revolutions in history: the Copernican revolution in astronomy, which started the modern scientific age; William Harvey’s theory of blood flow, which led to the development of modern medicine; Darwin’s discovery of evolution, which turned biology into a science; and Alfred Wegener’s theory of continental drift which allowed geology to also graduate to the science faculty.
Both Kuhn’s work and the stories of Copernicus, Harvey, Darwin and Wegener are there to soften his readers up for what comes in the second section of the book.

He compares the confused state of economics today to the confusion which dogged astronomy, medicine, biology and geology prior to their respective revolutions. In doing this he builds a persuasive case that economics is long overdue its very own scientific revolution.

Cooper constructs his circulatory growth model drawing directly on the ideas of Darwin and William Harvey, the doctor of King Charles I. The connections which he sees between previous scientific revolutions and his proposed scientific revolution for the field of economics are fascinating.

The circulatory growth model has some surprising implications. It shows, for example, why some countries have prospered while others have failed. It also shows why government spending and taxation are necessary for economic growth. These conclusions fly in the face of today’s accepted mainstream economic ideas, which press always for smaller governments and lower taxation.

Few readers will emerge from Money, Blood and Revolution with their preconceptions unscathed and a few policy makers may suffer more than superficial damage to their own ideas. Personally, I was very entertained by Cooper’s ability to link Captain Kirk to Copernicus, Darwin to the Declaration of Independence and the workings of the human heart to the ideas of Karl Marx and Adam Smith.  A jolly good read and renewed hope for a better world in one. How marvellous!

See also:
Review on Money, Blood and Revolution by The Economist

Motivations for Pluralism: Politics and Values in Economics

This document openly and explicitly states the motivations that bring together the RE organisers and RE groups, and address the underlying question of why we chose the aims that we have, and the direction for economic curriculum reform we have. We address the pertinent question: how political is our organising?

  1. We are not a politically aligned network, but we hold political, philosophical and ethical values at the core of our organising. By this, we mean that we share a broad vision of what is good for academia and society. Namely:
  2. We believe that the ability to effectively participate in democratic processes is vital for all citizens.
  3. Because of this, we want to demystify economics in the public eye and bring it closer to mass critique.  We believe that the current state of economic policy debate, in which citizens are liable to over-deference to experts and reliant on often badly argued “expert” opinion, is a bad one.
  4. We believe that a fully functioning democracy requires rich and imaginative debate at the level of economic concepts.
  5. Because of this, we want to enrich both public debate around economics, and the academic economics that feeds it. Right now both policy and academic debates have become mono-cultural and stale.
  6. We believe that the current neoclassical economics taught in most departments is not politically neutral, and thus it is important to introduce pluralism in economics. Nor did the classical economists see themselves as practising a politically neutral discipline.
  1. We believe that pluralism and open-mindedness to other disciplines is a value that would improve the culture, methodology, and practice of economic research and teaching. We do not collectively advocate for any single economic theory or policy to dominate others; we want to introduce substantial debate back into economics.


I: What we mean by “value-neutrality” in the social sciences
By “value-neutrality”, we mean neutral or silent on issues of: what kinds of changes are good for society; what one ought to value (ethical, normative or positive values); what kind of society is a good one; what is the good life; what is the essential nature of being human, that reaches beyond particular configurations of society.

Although every model is, by necessity, an abstraction from the full complexity of society, the abstractions that are made in neoclassical economics impose particular emphases that have values explicitly or implicitly embedded in them. The questions that any school of social science chooses to pose as its most fundamental questions reveal 1) what is considered as “important” or “relevant” for the discipline, and 2) a pre-made conception of what society is and how one ought to study it, prior to actual research. Therefore we cannot pretend that neoclassical economics is simply a value-neutral science, and instead we ought to discuss and debate what kinds of values it embeds, in contrast to other ways of studying society, and in contrast to other schools of economics.

II: Examples of posits of neoclassical economics that are not value-neutral
In the below section, we give examples of concepts, theories and assumptions that are predominant in neoclassical economics. Not all of them are included in every model, but we seek to give a wide range of examples. This does not mean we support the teaching of the opposites of these examples, but that we believe it is problematic to teach one side in isolation.

a) Normative concepts (concepts that explicitly suggest what is better or worse for people or for society)

  1. Pareto optimality: the major criterion of what it means for a situation to be good, or in economic terms, “efficient”; status-quo biased, blind to distributional issues such as inequality
  2. Kaldor-Hicks efficiency: possibly the second most popular criterion of efficiency after Pareto optimality; assumes that everyone has the same marginal utility of money
  3. Utility and welfare: both these terms are heavily structured economic concepts, with heavily ethical connotations in both their naming and their use
  4. Utility is derived from personal preference-satisfaction: this is implicitly politically libertarian, as it assumes individuals always know what is best to maximise their own utility, or equivalently, that a person’s preferences are the most important to satisfy
  5. Consumers’ and producers’ surplus: used in microeconomic analysis of gains from trade, prone to same problems as Kaldor-Hicks efficiency
  6. Discount rates: the use of exponential discounting under-estimates long-term costs such as environmental risks

b) “Thick” descriptive concepts (concepts that are descriptions of human nature, but which imply ethical attitudes as to what is important or what is good)

  1. Agents arrive at the market with preferences ready-formed: this assumption means that economists have not ventured into the questions of where preferences arise and how preferences themselves might be shaped by the structure of the economy or society
  2. Utility in macroeconomic models is determined solely by consumption: implies consumerism and materialism: people have no preferences over relational aspects of production, or even over whether they are employed or not (other than through its effects on their being able to afford more stuff)
  3. Representative agent modelling is utilitarian: the “social planner” in DSGE models aggregates individual utilities and maximises this aggregate utility
  4. Representative agent modelling is atomistic: this commits macroeconomics to an individualistic rather than holistic understanding of society

III: References to more material on value-neutrality and economics
Ingrid Robeyns, Economics as a Moral Science,

Robert Shiller, Economists as Worldly Philosophers,

Manifesto: A direction for the reform of economics education

This draft manifesto is intended as a statement to provide a unifying direction for those groups campaigning for economics curriculum reform in universities across the world. Please show your support by signing your name and organisation below.
This manifesto is based on the Manchester Post-Crash petition and the Rethinking Economics CORE feedback.


Rafe Martyn and Marco Schneebalg (University of Cambridge, Cambridge Society for Economic Pluralism)
Thomas Youngman and Hoang Nguyen (UCL, Better Economics Society)
Alex Andrade Martins (SOAS, Open Economics Forum)
Benolas Tippet, Katarzyna Buzanska & Franck Magennis (LSE, Post Crash Economics at LSE)
Yuan Yang and Diana Garcia Lopez (Rethinking Economics Organisers’ Hub)
Nicolò Fraccaroli and Mathia Achei (LUISS University Rome, Rethinking Economics Italia)
  1. We believe students should be taught to think independently and critically. This involves a critical approach to particular models within each school of economics, as well as the whole methodological structures underlying different schools of economics.
  2. We need to recognise the plurality within economics. In most courses “economics” is shorthand for “neoclassical economics”. There is no recognition of the variety of schools of thought within economics, across history or across the world. Academic integrity requires that alternative economic theories be introduced to students, alongside those currently taught. Economic questions cannot necessarily be answered adequately from a single theoretical standpoint, or solely from a mathematical approach.
  3. Economics, as in the case of any other social sciences, cannot always be value-neutral. Therefore we demand that the philosophical, political and ethical underpinnings of different economic theories should be explicitly discussed during lectures and seminars. Economists need to remain critical of the ethical underpinnings and consequences of their theories.
  4. Economics as it is taught currently is disconnected from real-world events and policies. In many departments, much of the curricula in the last few decades have slowly lost all mention of contemporary events or facts. This means that students are not being equipped to engage in real-world debates. We believe economics graduates should be prepared to consider and react to the economic problems that the world faces, because societies are shaped by economic events and policies, which are in turn shaped by people’s understandings of economics.
  5. Economic theory needs to be presented alongside economic evidence. Real-world data should be used to spark discussions of how useful different theories are. Students should be able to weigh up theories against evidence, criticise the multiple uses of evidence, and understand why statistical methods are contestable. This includes debating what constitutes evidence, and conditions under which finding evidence may not be possible.
  6. We believe a context-free economics is a misguided economics. Economic theories cannot be fully understood independently of the institutional, cultural and technological context in which they were formulated. Therefore, links to economic history and the history of economic thought should be made wherever possible. We should recognise that while some of today’s economic theories are a scientific “progression” from the past, many of them are just a different way of looking at society.
  7. As well as recognising the strengths of our approaches, we should foster humility and self-awareness within economics. We need to specifically mention the limitations of our approaches, and recognise that there are a plurality of disciplines that study society which have insights to offer economics. Interdisciplinary dialogue is necessary for economics to grow. We must stop isolating ourselves from anthropology, sociology and political science when we have much to learn from them.
We want to stress that individual departments are not the cause of the problem. It is difficult for any individual economist or department to act independently of others. We need to take the lead by pushing for reform together, within and across countries.

Our aims, who we are, why we act

Our aims

Last updated through consensus at London Strategy Day, 2013/08/04

ACADEMIC: To bridge disciplines within and outside of economics; to advance neglected but critical economic perspectives and methodologies; to promote collaboration, humility and ethical practice in academia.

EDUCATIONAL: To demystify economics as a technical science, building open and collaborative communities of economic thinkers. To expand the creativity and social awareness of our future economists and citizens. To bring the basic tools of economic analysis into the hands of all of us who participate in a society shaped by economic forces.

POLITICAL: To equip us all with the ability to organise effectively, and to get economics students and academics to recognise their roles and responsibilities as political actors within their institutions and within wider public life.

Who we are

Rethinking Economics is an international network of young economics students, thinkers and writers who are organising to create fresh economic narratives to enrich the predominant neoclassical narrative. We aim to demystify and diversify economics in the public eye; to educate ourselves and other students in a more reflective economics; to inspire divergent economists to engage with one another in debate; and to promote a politics of responsibility with academic economists.

Why we act

REIMAGINE our economy: We are thirsty for new ways of thinking. We want an economics that equips us to imagine alternative economies.
RETHINK your economics: Economics as it is widely taught does not reflect the economy we are living in. We need to ask new questions to get new answers, and we need a greater diversity of ideas in economics.
REDEFINE the debate: We deserve new narratives and new responses to the economic, environmental and social crises developing on our planet.