Assault on the Establishment

Below is an English translation of an article by Olaf Storbeck in today’s (26 May) Handelsblatt, the German business daily.  The original German version is here.  Also, on Storbeck’s personal website you will find in English a longer version of his Handelsblatt article, Nothing to lose but their models.  It includes longer comments from various pillars of the international economics establishment about the possible significance of economists worldwide rushing to join the World Economics Association.  And here is another article by Storbeck on the WEA, Does the American Economic Association finally get a competitor?

Handelsblatt, May 26,  2011, translated from German

Assault on the Establishment

Economists from all over the world have founded the World Economics Association – and are almost overwhelmed by people wanting to join

By Olaf Storbeck, London

The Revolution was a week late. For months, 141 economists from all corners of the earth had prepared the foundation of the “World Economics Association” (WEA). The goal is to turn the profession inside out.  First, however, technical problems with the online payment service Paypal held up the project. Then, on Monday 16, the “first genuinely international and pluralistic association for economists” was operational.

From the day it went publoic, the association was flooded with membership requests from all over the world.  More than 3,600 economists from 110 countries joined in the first 10 days. “This is more than we had expected”, says the father of the WEA, the British economist  Edward Fullbrook.

The new association already has a similar number of members as the German Verein für Socialpolitik or the Royal Economic Society (RES) in Britain.  

The WEA is pushing for a renewal of economics in content and methodology. Mainstream economics has been widely criticised after the outbreak of the financial crisis for being blind to what is going on in the real world and not being helpful for practical policy. “The economic profession has confused mathematical elegance with truth”, complains Nobel-laureate Paul Krugman.  

“We share the public perception that knowledge of the real world is lacking in parts of the economics profession” it says in the invitation to join. This is not the first initiative that wants to modernize economics, though. The Institute for New Economic Thinking (INET), which was founded last year with a million-dollar-donation by Hedge-fund manager George Soros, has similar goals. “We are natural partners”, says INET-Boss Robert Johnson, who has already joined WEA.  

So far, WEA is keeping its distance from INET and is stressing its independence. “This is why we have not tried to win large grants”, says Fullbrook. He adds that “this does not preclude cooperating with national or regional associations or to take grants from foundations or organizations in the future” and stresses that there are currently no concrete plans in this respect. Individual members have donated about $14,000 so far, according to Fullbrook. “This is enough for now to finance what we intend to do.”

Among the founding members are Harvard-Professor Dani Rodrik and James Galbraith from the University of Austin, Texas, Nomura Chief-Economis Richard Koo and Norbert Häring, a journalist working for this newspaper and a book author. Many of the organizers around Fullbrook come from the “post-autistic-economics” camp. This movements has been criticising mainstream economics for years as out of touch with reality and single-minded.

WEA is also an attack on the dominance of the American Economic Association (AEA), founded in 1885. AEA has a global membership of 18,000, publishes influential professional journals and its annual meetings are the most important economic conferences worldwide. “Many alternative approaches to research – including history of economic thought, economic history and approaches which do not assume equilibrium – are dramatically under-represented in the AEA,” says INET-chief Robert Johnson. Richard Blundell, Professor at University College London and President of the Royal Economic Society shares this judgement. ”The dominance of the US is pushing the profession in the wrong direction,” he says.

To ameliorate this situation, the WEA wants to publish two new professional journals, the World Economics Journal and Economic Thought. These journals are supposed to be open for all fields of research and all approaches.

As is customary with established journals, WEA promises strict quality control of papers before they are published. In contrast to what is currently the norm, WEA propagates an open and transparent selection of papers. All members of the organization are invited to discuss the papers together with experts of the respective fields.

Established journals let referees work anonymously and stay in the background. Critics argue that this form of “peer-review” stands in the way of scientific progress. “We put too much emphasis on publications in the best journals, which base their selection on the judgement of referees, who often have a vested interest in protecting old research against new ideas,” says RES-President Blundell.

Despite all the arguments that can be raised in favor, established economists are sceptical of the WEA. “I am not sure we need something like that”, says Lars Hendrik Röller, President of the German economists’ association Verein für Socialpolitik. “The established association are no closed shops. They are open for all economists. Many German economists are members of the AEA, for example.”

Richard Blundell is also rather critical. “These guys are probably exactly the wrong ones to make the change stick,” he says. In his opinion, this requires the backing of the old guard and the production of policy relevant research that wins the attention of policy makers.  He predicts that “setting up an alternative journal run by alternative types will attract a very low quality of work.”

The AEA is trying to ignore the new competitor. “I am afraid I do not know enough about the organization or issues related to it to comment,” says AEA-President Orley Ashenfelter from Princeton.