Home > students, The Economics Profession > Undergraduates at Manchester University propose overhaul of orthodox teachings to embrace alternative theories

Undergraduates at Manchester University propose overhaul of orthodox teachings to embrace alternative theories

from today’s Guardian

Economics students aim to tear up free-market syllabus

Post-Crash Economics Society

The Post-Crash Economics Society at Manchester University. Photograph: Jon Super for the Guardian

Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.

Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs.

A growing number of top economists, such as Ha-Joon Chang, who teaches economics at Cambridge University, are backing the students.

Next month the society plans to publish a manifesto proposing sweeping reforms to the University of Manchester’s curriculum, with the hope that other institutions will follow suit.

Joe Earle, a spokesman for the Post-Crash Economics Society and a final-year undergraduate, said academic departments were “ignoring the crisis” and that, by neglecting global developments and critics of the free market such as Keynes and Marx, the study of economics was “in danger of losing its broader relevance”.

Chang, who is a reader in the political economy of development at Cambridge, said he agreed with the society’s premise. The teaching of economics was increasingly confined to arcane mathematical models, he said. “Students are not even prepared for the commercial world. Few [students] know what is going on in China and how it influences the global economic situation. Even worse, I’ve met American students who have never heard of Keynes.”

In June a network of young economics students, thinkers and writers set up Rethinking Economics, a campaign group to challenge what they say is the predominant narrative in the subject.

Earle said students across Britain were being taught neoclassical economics “as if it was the only theory”.

He said: “It is given such a dominant position in our modules that many students aren’t even aware that there are other distinct theories out there that question the assumptions, methodologies and conclusions of the economics we are taught.”

Multiple-choice and maths questions dominate the first two years of economics degrees, which Earle said meant most students stayed away from modules that required reading and essay-writing, such as history of economic thought. “They think they just don’t have the skills required for those sorts of modules and they don’t want to jeopardise their degree,” he said. “As a consequence, economics students never develop the faculties necessary to critically question, evaluate and compare economic theories, and enter the working world with a false belief about what economics is and a knowledge base limited to neoclassical theory.”

In the decade before the 2008 crash, many economists dismissed warnings that property and stock markets were overvalued. They argued that markets were correctly pricing shares, property and exotic derivatives in line with economic models of behaviour. It was only when the US sub-prime mortgage market unravelled that banks realised a collective failure to spot the bubble had  wrecked their finances.

In his 2010 documentary Inside Job, Charles Ferguson highlighted how US academics had produced hundreds of reports in support of the types of high-risk trading and debt-fuelled consumption that triggered the crash.

Some leading economists have criticised university economics teaching, among them Paul Krugman, a Nobel prize winner and professor at Princeton university who has attacked the complacency of economics education in the US.

In an article for the New York Times in 2009, Krugman wrote: “As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.”

Adam Posen, head of the Washington-based thinktank the Peterson Institute, said universities ignore empirical evidence that contradicts mainstream theories in favour of “overly technical nonsense”.

City economists attacked Joseph Stiglitz, the former World Bank chief economist, and Olivier Blanchard, the current International Monetary Fund chief economist, when they criticised western governments for cutting investment in the wake of the crash.

A Manchester University spokeman said that, as at other university courses around the world, economics teaching at Manchester “focuses on mainstream approaches, reflecting the current state of the discipline”. He added: “It is also important for students’ career prospects that they have an effective grounding in the core elements of the subject.

“Many students at Manchester study economics in an interdisciplinary context alongside other social sciences, especially philosophy, politics and sociology. Such students gain knowledge of different kinds of approaches to examining social phenomena … many modules taught by the department centre on the use of quantitative techniques. These could just as easily be deployed in mainstream or non-mainstream contexts.”

  1. paul davidson
    October 25, 2013 at 1:30 pm

    yet Oliver Blanchard has noted that all the econometric models used by Central Banks, the IMF, etc require the neutral money axiom as an “article of faith”.

    Yet in 1935 Keynes wrote that the neutral money assumption was never applicable to our economic system — not applicable in either the short run or the long run. When I noted this in a debate with Milton Friedman (published in the JPE and then as a book entitled MILTON FRIEDMAN’S MONETARY FRAMEWORK: A DEBATE WITH HIS CRITICS (University of Chicago Press) Milton Friedman merely waived off my and Keynes’s comment of the irrelevance of the neutral money assumption.

    This is one reason that Sidney Weintraub and I started the JOURNAL OF POST KEYNESIAN ECONOMICS to encourage young economists to develop non orthodox mainstream theory.t

    • October 27, 2013 at 12:01 am

      The neutrality of money may have led to an appalling ignorance about money among the public and economists. For example, even economists who answer questions in media display such ignorance. This ignorance is evident in orthodox textbooks on monetary economics such as Walsh, Woodford etc which teach only monetary dynamics, policy etc., but nothing about money itself, which is presumably simple and obvious!

      Even if it were true (false at least to Keynes) that money has no long-term effect on economic production, there is no justification to neglect teaching a full understanding of money to students, for the following reason.

      If neoclassical economics were to be a science, then empirical observations necessitate measurements of key economic variables such as production, consumption, inflation etc. Such measurements can only be made in nominal terms using currency as a unit of account.

      Without a proper understanding of how money supply manipulated by banks affects the measurement of real economic variables, the measurements are surely inaccurate. That is, the real economy can only be understood empirically through the nominal economy. It is impossible to empirically prove the neutrality of money without understanding how money affects measurements.

      It seems that economic education is designed to keep students ignorant of important basics of economics such as money, which does not really involve alternative theories, just facts. Students are now waking up to the educational fraud which keep them ignorant of important facts.

  2. October 25, 2013 at 6:08 pm

    Reblogged this on Arijit Banik.

  3. BFWR
    October 25, 2013 at 8:49 pm

    Thinking economically about the relationships between the various cost accounting datums to be found in any and all enterprises would be fruitful areas of study.

    Also, seeings how the temporal world always changes, and technology wed to profit making systems, the logics of which are both efficiency (the first of human effort and eventually even human input, and the second of cost as in labor/income costs) will inevitably result in an economic absurdity, understanding that allowing profit making systems to adapt and evolve by expanding the individual options for consumer finance from loan and work for pay ONLY to also monetary Grace, the free gift….would also be enlightening.

  4. October 27, 2013 at 10:42 am

    Here from the Guardian are 5 comments on this article.

    Bravo Manchester University economics students for criticising “university courses for doing little to explain why economists failed to warn about the global financial crisis” (Economics students rebel at orthodox free-market syllabus, 25 October). However, there could be no explanation of why economists had failed to warn about the crisis, precisely because a significant number of high-profile non-neoclassical economists had warned about the crisis.
    Gary Kempston

    Further, of the 12 or so economists – recent Nobel prize winner, Robert Shiller among them – identified in Dutch academic Dirk Bezemer’s paper No One Saw This Coming, three were awarded the inaugural Revere Award for Economics. Steve Keen, Nouriel Roubini and Dean Baker were voted to be the three economists whose recommendations, if world powers had acted on them, could have avoided the global financial collapse. Keen, in his 2011 book Debunking Economics, writes: “Why, despite the destructive impact of [neoliberal] economic policies, does economics continue to be the toolkit which politicians and bureaucrats apply to almost all social and economic issues? The answer lies in the way economics is taught in the world’s universities.” Vive the post-crash economics society.
    David Murray
    Wallington, Surrey

    • The students are right to complain about the limited scope of the economics curriculum. This seems to be true of all economics departments as well as politicians, Treasury officials et al. All seem to be unaware of any alternatives to free-market economic analysis. A recent article in the Guardian about new measures the Bank of England governor proposed to control the housing market, said these new measures were an unknown as to their possible effects on the financial markets. To any student of economics in the 1960s, these measures were very familiar. Then they were known as directives and were highly effective in preventing an inflationary property boom. The so-called revolutionary policy of quantitative easing is not so new. The open-market operations, as they were then known, of the late 40s exceeded in scale that carried out by today’s government. It was so extensive that it resulted in a credit strike, when the banks refused to buy government bonds.
    Derrick Joad

    • Your story comes hard on the heels of the Mail’s unpleasant attack on Ralph Miliband’s marxism. A focus on narrow mathematical modelling, which reduces everything to statistics and graphs, and which is used as propaganda to talk up stock markets and distract from the real economy of jobs and wages, is not going to encourage critical thinking about how the world works. Marxism, by contrast, is about people and the social relationships between them; about the owners of wealth and how they use it to exploit others; and how this generates both class struggle and economic crises.

    Those interested can find out more at the 21st Century Marxism festival which takes place in and around the Marx Library, Clerkenwell Green, London on 2-3 November.
    Chris GuitonCrowborough, East Sussex

    • Of course universities should invest in the future (Letters, 25 October). The problem is they don’t. Climate change, population growth, mass extinctions and other global problems mean that we are heading towards disaster. If we are to make progress towards as good a better world as possible – or at least avoid the worst of disasters – we need to learn how to do it. That in turn requires that our institutions of learning are rationally designed and devoted to the task.

    We need universities to be devoted to helping us solve our problems of living – above all, our global problems – in more effective, intelligent and humane ways. But universities at present are devoted to the pursuit of “knowledge” and technological know-how, not to helping humanity learn how to resolve conflicts and problems of living in more co-operatively rational ways. The key crisis of our times is the failure of our universities to help us learn how to make progress towards a better world.
    Nicholas Maxwell
    University College London

    • October 27, 2013 at 7:41 pm

      The comments miss the mark. The key point is NOT whether ANY economists or non-economists “had failed to warn about the crisis”.

      The key point is: the economic students who learnt mainstream economics and who are eventually IN CHARGE of universities, business, government and central banks ALL failed to see the crisis coming – educated blindness.

      It was a clear failure of the economic paradigm (by definition the orthodoxy) which must be replaced in order to avoid future blindness.

      • BFWR
        October 27, 2013 at 10:25 pm

        Now that (failure of the economic paradigm) I completely agree with.

  5. Robert Locke
    October 27, 2013 at 1:18 pm

    This discussion about economists that have or have not predicted the crisis is misleading. It is as if most of mankind was sitting around unaware of what was happening to them, waiingt for economists to clarify. Some economists did predict the crisis, most didn’t. But that does mean that those who did are heroes. There were a lot of noneconomists who knew that the crisis was coming and predicted it. We don’t need to rely on economists to predict anything. They are lousy at it and the average man has as much insight into the future as they do, perhaps more.

  6. October 29, 2013 at 6:49 pm

    It’s good to see people thinking outside the box at a place of higher education. All too often we get stuck in previously existing structures, which have long since become obsolete models. The dialogue continues to expand.

  7. November 12, 2013 at 8:33 am

    I’d like to see dissatisfied economics undergraduates demand more attention be paid to insights from ECOLOGICAL economics. The human economy is embedded in a containing ecosystem that cannot defy the laws of thermodynamics. Without resilient biodiversity, and effective scale limits on the human economy, we will ultimately transgress planet Earth’s carrying capacity for human beings and suffocate in the high entropy wastes that “economic activity as we know it” is so good at producing. Whatever other insights Marxian and Keynesian economics have contributed towards the improvement of the received (but limited) wisdom of neoclassical economics, they are still paradigms that are pretty much as anthropocentric and short-sighted as the neoclassical one.

    A better economics needs to be open not only to more sophisticated insights from behavioural psychology, but to relevant insights from physics, chemistry and biology. Heck, there are even things that macroeconomists could learn from enterprise-level accountants, and certainly from sustainability-smart engineers. Economists of all schools also need to become much more realistic about the possibility of substituting man-made capital for natural capital (opportunities for that are very limited, and confined to substitutions at the margin) and make their ethical assumptions, especially about other species and distant future generations of our own as well as other species, a whole lot more explicit.

    Michael Barkusky
    Pacific Institute for Ecological Economics
    Vancouver BC, Canada

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