Home > Economics Curriculum, New vs. Old Paradigm, students > University economics departments must share the blame

University economics departments must share the blame

Financial Times, November 17.
University departments must share the blame 

Sir, The FT is far from alone in, once again and for the umpteenth time, decrying the “scandal” that a section of the financial sector – this time the foreign exchange market ​– has “remained immersed in a culture that subordinates everything to making money” (editorial, November 13). University economics departments cannot escape their share of the blame for this, so crucial have they been in recent years in providing academic justification for this “culture”. 

Economics is, according to the orthodoxy now almost totally dominant in these departments, a discipline whose very identity is inseparable from the calculus of maximisation and minimisation. This standpoint is not limited to those of a neoliberal orientation; on the contrary, among its most dogmatic adherents is the outspokenly non-neoliberal Paul Krugman, who states quite simply that the economist is a “maximising-minimising kind of guy”. 

Krugman is, however, exceptional in his radical views, and the inevitable bias that results from the exclusion from the economics curriculum of alternative approaches is towards turning out students who are ready-primed for incorporation into the “culture” that is revealed with such depressing regularity every time there is a thorough investigation of financial misdemeanours.
Fortunately, an increasing number of economics students are raising their voices against a curriculum which has become, in effect, little more than an indoctrination into that heinous “culture”.

It is about time the managements of economics departments stopped exploiting their freedom to appoint and promote their staff to perpetuate this situation. Let us hope that the demands of their students and of the wider public can begin to force them once more to open their doors to adherents of alternative approaches, and thus to reflect within themselves the debates on economic issues that rage in the world outside.

Hugh Goodacre

University College London and University of Westminster, UK​

  1. Bruce E. Woych
    November 17, 2014 at 9:59 pm

    A candle in the rain has been lit…lamenting the dire situation and its inhumane processes of inequality …of course that “others” have perpetrated on society and the human condition at large. At least a start!

  2. Mike Hall
    November 18, 2014 at 9:41 am

    I think the monoculture of Academic economics is far worse than this letter suggests. But it is a ‘neo liberal’ doctrine, and has been for many decades. We see the results all around us. It is far from just enthusiasm or nodding aquiescence to a so obviously vastly bloated & purely extractive ‘Financialised’ parasitic economy – one where money, banking and debt apparently didn’t matter – bad enough in itself.
    Rather it is denial of macro economics itself, as any meaningful distinction, by denial of any stabilisation or counter-cyclical role for Government. This is required in order to promote the minimisation of any role for Government to operate in the interests of the majority of citizens.
    This situation goes right back to the academic purges of the 1950s McCarthyite period. Sackings, blacklisting and removal of textbooks – especially in the areas of macro economics. In parallel, also, the rise of pseudo academic privately funded ‘think tanks’ which in most cases were, and still are, peddling propaganda whilst providing associated interests in mainstream media with a plausible cover of ‘respectability’ and ‘impartiality’.
    It follows also that there is no meaningful ‘democracy’ in any country. Via the intellectual bankruptcy, cowardice and self interest of economists, including academics, we have an entire system whose sole purpose is to justify Governments operating near exclusively in the interests of the Capital owning top few percent, whilst pretending otherwise. In mainstream media, politics and public discourse, economics is reduced to little more than ‘household’ finances thinking, merely with bigger numbers. That economists, academic and otherwise remain content to stay silent amid such disabling ignorance, is a further particularly disgusting failure.
    Academic economics has done nothing of substance to address its obvious failings, 6yrs after a major Financial pyramid crash, with enormous consequential damage. This speaks volumes about the un-scientific methods of the entire mainstream discipline. Much of which has entirely ignored any implications whatever of the episode. Denial again. The one astonishingly developed skill of economics academics.

  3. November 19, 2014 at 12:45 pm

    Moral incompetence or scientific incompetence?
    Comment on ‘University economics departments must share the blame’

    Hugh Goodacre blames academic economics for its indirect or even direct justification of the financial sector’s culture of ruthless money making. And he gives weight to his argument by quoting Krugman stating that ‘the economist is a maximising-minimising kind of guy.’

    It is simply naive to suggest that people of the financial sector (i) need a justification for money making, and (ii) that they need academic economics for that purpose.

    History shows that for any ruthless person in whatever walk of life Darwinism delivers a far stronger justification than the extremum principle. Economics has copied this principle simply from physics and physics ultimately had it from religion.

    “Already Maupertuis considered his minimum principle as proof that the world, where among many virtual movements the one leading to maximum effect with minimum effort is realized, is the ‘best of all worlds’ and work of a purposeful creator. Euler made a similar remark: ‘Since the construction of the whole world is the most eminent and since it originated from the wisest creator, nothing is found in the world which would not show a maximum or minimum characteristic.’ …” …(von Bertalanffy, 1969, p. 75)

    Nobody blames physics or religion for the latest financial crisis.

    The extremum principle is an almost instinctive and tautological way of explanation.

    “Throughout its history, the idea of some ‘Fundamental Assumption’, some basic ‘Economic Principle’ about human conduct, from which much or most of economics can ultimately be deduced, has been deeply rooted in the procedure of economic theory. Some such notion is still, in many quarters, dominant at the present time. For example, it has recently been stated that the task of economics is ‘to display the structure and working of the economic cosmos as an outgrowth of the maximum principle’.” (Hutchison, 1937, p. 636)

    When Krugman states that ‘the economist is a maximising-minimising kind of guy’ he affirms the trivial fact that he has studied economics and that he thinks that he has understood what economics is all about. And here the problem begins.

    Let us make it short: No way leads from a behavioral assumption (optimization or otherwise) to the understanding of how the economy works (2014). The crucial point is that standard economics is based on behavioral axioms (McKenzie, 2008) and this is not a solid enough foundation.

    “. . . if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky, quoted in Mirowski, 1995, p. 362)

    Economists owe the world the true economic theory, that is, a theory that satisfies the scientific standards of material and formal consistency and that explains how the economy works.

    Economists have not delivered. That economics is not yet a science is the only fact that university departments justly can be blamed for.

    Egmont Kakarot-Handtke

    Hutchison, T. W. (1937). Expectation and Rational Conduct. Zeitschrift für Nationalökonomie
    / Journal of Economics, 8(5): 636–653. URL http://www.jstor.org/stable/41793308.

    Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics:
    Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL

    McKenzie, L. W. (2008). General Equilibrium. In S. N. Durlauf, and L. E. Blume
    (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–18. Palgrave
    Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=

    Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University

    von Bertalanffy, L. (1969). General Systems Theory. New York, NY: Braziller.

    • November 21, 2014 at 2:09 pm

      comments on Egmont K—-(not be confused with the person who lives in Kafka’s castle)–

      1. I think I totally agree with you that maupertuis principle is essentially common sense—water flows downhill, and i always take the path of least action (though interesting sometimes that means I have to cross a 19,000 foot pass in Kashmir). My philo group is discussing occam’s razor this week which is also a sort of minimum principle (or maximum depending how you do it—one can glance at the literature on principles of ‘maximum entropy production’ versus ‘minimum entropy production’ in nonequilibrium statistical physics. My own view is that east is actually west—Putin may believe this.).

      A whole section of my ‘library’ (papers) is on various ways of making every single possible physical equation, or any other equation including all the ones in economics, into a standard hamiltonian or lagrangian form. This is both counterintuitive and also heresy—-but even the diffusion equation has a hamiltonian and it was found by Feschback and Morse for example (handbook of math phys) , but they said it was a useless curiosity. I have the cure for almost every mathematical disease in my handbook of hamiltonians.

      And interestingly, i didnt like physics when i took it (i wanted to do biology so i could be outside in nature) and rarely went to class since it was optional but they had 4 hour ‘open book tests’ so i would just do everything in that time. they didnt even teach hamiltonian-lagrangian formalism there it was all like f=ma. I had to learn it on my own, from Ralph Abraham’ and Marsden ‘classical mechanics’ (which i carried with me over the himalayas, as an alternative to food). I sat in Abraham’s chaos theory class at UCSC (though i didnt get admitted to a different program there, possibly because i couldnt get references since the person who could write them (from SFI) didnt support that program and he had already written one for me (for Robert Rosen) and was tired of me not showing up. Also I missed my appointment with Dona Haraway since i went to Abraham’s class. I did like about UCSC that they had wild bobcats on campus, along with golden eagles and trout, and free coffee.

      I’m also actually open to completely scrapping the hamiltonian/lagrangian formalism because its clumsy and it seems sometimes to make it work you end up adding some zero terms to both sides of the equation which should be unnecesary.

      2. P W Anderson also had a paper in that SFI ‘economy as a complex evolving system’ series—short on Pareto’s law for income distribution. His famous ‘more is different’ paper from the 70’s i think is a classic (either a ‘must read profound intellectual contribution’ or one other thing that should be taken to the dumpster.its only 2 pages so maybe it can be held on to until the end.

      3. Slutsky (cited by Mirowski i guess—and my reading of Mirowski was that there was ‘more heat than light’ in that book) is like P W Anderson to me—-i looked up his 1937 paper on spurious cycles (almost unreadable in many ways because its an ancient language, like ‘fluxions’ or hamilton on quaternions. (Some argue Hamilton’s formalism was the wrong way to go, as Godel argued Leibniz, rather than Newton, had a better formalism for calculus).

      However, there are in my view 2 ways to read at least that paper by Slutsky on ‘spurious cycles’. One can view it purely as ‘structural’. Or you can view it equally as ‘behavioral’ (Jean michel Grandmont or more recntly people at NYU and MIT ) shows one can view RBC theory as a psychological artifact. (Nowadays people might follow James Yorke of chaos and see if its due to computer roundoff error.) I think Pangloss showed we are at General Equilbrium. (give a salute); the ergodic hypothesis (like the ‘hamiltonian dream’).

      ‘nothing is real, and nothing to get hung about’
      (Lucy in the Sky with Diamonds, by an obscure band from some little backward country)

  4. davetaylor1
    November 19, 2014 at 1:11 pm

    As a Brit I find what Mike is saying about McCarthyism a very interesting gloss on Mirowsi’s reading of that period. I’d love to hear Robert Locke’s reaction to this.

    What Mike is saying is of course entirely justified, but most folk become defensive when challenged, and I feel scape-goating rather lets them off the hook, not least the real culprits: those who make their pile by persuading others to do their dirty work or (like Goethe’s Dr Faustus) being persuaded to let the Devil do it for them. Is there a more constructive alternative? G K Chesterton, the imaginative contemporary of Keynes, whose pearls of wisdom were likewise trodden underfoot by swine when he changed sides, usually sugared his pills with humour, but his story of “The Diabolist” was as seriously serious as his novelette “Manalive” was hilariously so.

    In “Manalive” the story starts with a strange man being seen shooting at a man in a garden, entering a house like a burglar over the roof-tops, repeatedly having bigamous affairs with his secretaries and eventually abandoning his wife before breezing in a year later as if nothing had happened. A kangaroo court is summoned to accuse him of these “crimes”, only for him to reveal the point of the title: the man he shot at was, like Economic Man, a zombie – one of the living dead – and he’d shot at him to shock him into being glad to be alive. He’d burgled his own house, had a honeymoon each year with his own wife, and walked round the world to see what it was like, all the better to appreciate the wife and home he had been blessed with. The trial, too, was of his judges, who like zombies had reacted to tittle-tattle and appearances without inquiring into the truth.

    In “The Diabolist”, by contrast, the young Chesterton tells of overhearing two young men, one seeking to persuade the other of the excitement of not merely ignoring but defiantly going against the rules; proposing an outrage which leads the other to protest: “If I do that I will not be able to tell right from wrong”. A few days later, he heard that the diabolist had committed suicide, bored by having nothing outrageous left to do. I hear the ghost of Hume, and see diabolical zombies committing suicide by killing the world.

    What am I trying to suggest? I suppose, not condemning the economic profession but challenging it to look at is happening to the world and say, with the second young man in Chesterton’s story, “Enough is enough”. Change sides. As Egmont’s J S Mill famously put it in his version of “Utilitarianism”, “Better a man dissatisfied than a pig satisfied”.

    The devil is money. The truth is that the rich owe society; mankind doesn’t owe them.

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