Home > The Economics Profession > Assault on the Establishment

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.

  1. Bruce E. Woych
    May 25, 2011 at 10:19 pm

    start with a formal statement on ethics and a binding code of disclosure with strict censure protocol for infractions.

    2. Denounce the phoney Nobel Prize bought and sold by the Swiss Bank without regard to true humanitarian merits.

  2. May 25, 2011 at 11:13 pm

    I hope the WEA will be a vehicle for reconnecting economics to the real world.
    I also hope that it will be open and truly democratic in nature and not biased towards any particular political ideology.

  3. Godfrey Dunkley
    May 26, 2011 at 3:02 am

    If you do not address the problem of land being kept idle by speculators, whilst people are denied acess to land on which to build or earn a living, then you are wasting your time!
    Present dead-weight taxes kill employment.

  4. May 26, 2011 at 6:35 am

    Is this from the print issue? I can’t find the original article in my copy. Do you have a page number?

  5. May 26, 2011 at 6:35 am

    “setting up an alternative journal run by alternative types will attract a very low quality of work.”

    Aha. Very good. Thanks Richard. I’ve just won my bet that until end of May one of the high priests of mainstream economics will come up with a canonical judgement about the bad quality of not-yet-written papers in not-yet-published journals. Now my first Cheers once the six bottles of Riesling are delivered goes to Richard Blundell.

    • May 26, 2011 at 8:51 am

      @ Stephan: I respectfully claim one of this bottles as a royalty. :-)

  6. May 26, 2011 at 8:49 am

    The German version of my article is avaiable online here: http://www.handelsblatt.com/politik/oekonomie/nachrichten/angriff-auf-das-establishment/4220352.html

    I’ve just published an augmented and extended English version of the text on my blog “Egonomics Intelligence”: http://olafstorbeck.com/2011/05/26/nothing-to-lose-but-their-models/

    It comes with more quotes from Blundell and Johnson.
    Best regards
    Olaf Storbeck

  7. Georg R. Baumann
    May 29, 2011 at 10:13 pm

    In my little world – Banana Republic of Ireland – where the mainstream media is dominated by conformist economists who preach austerity and bootlick EU-Commission and IMF assaults, I am grateful to see this ‘participatory thinking’ on a new economic coming alive.

    This crisis requires a multilevel and interdisciplinary approach to stand a fighting chance to make useful suggestion for possible near future decisions.

    With a largely unregulated commodities market, FOA’s and UNCTAD’s attempts failed to date, my biggest short term concern is a possible flood of capital being pushed into these markets, with effects we know too well.

    Best wishes
    Georg R. Baumann

  8. June 1, 2011 at 5:51 pm

    Please be aware that I just learned I made an embarassing mistake in my article.
    The quotes by Richard Baldwin were erroneously attributed to Richard Blundell. I profusely apologise. This happend because I emailed Richard Blundell a few questions and cc’ed Romesh Vaitilingam, who does press work for the Royal Economic Society as well as the CEPR. Romesh came back to me, but the quotes came from Richard Baldwin, not from Richard Blundell. I did not realize that. I’m really sorry.

    • June 1, 2011 at 6:09 pm

      Oops … I have the bottles already in the fridge. So I lost my bet? Doesn’t matter. 99% of mainstream economists are wrong with 99% of their predictions. Thus as a matter of fairness and balance I can claim my bounty in this particular case. Shall I send you one? No problem to ship from Cologne to Duesseldorf. By the way: I really enjoyed your answer to our Overlord-Economist Hans-Werner Sinn.

      • June 3, 2011 at 2:42 pm

        Stephan, it depends if you consider Richard Baldwin a mainstream economist or not.

        Unfortunately (at least wrt to the wine) I’m based in London nowadays. Will be in Cologne at the end of June, however (29th). We could meet in the afternoon, if you like. Drop me an email at o [dot] storbeck [at] gmail [dot] com

        I’m glad you liked my piece on Sinn.

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