Home > Uncategorized > The need for a new economics curriculum without the present suicidal formalism

The need for a new economics curriculum without the present suicidal formalism

from Lars Syll

When the global economy crashed in 2008, the list of culprits was long, including dozy regulators, greedy bankers and feckless subprime borrowers. Now the dismal science itself is in the dock, with much soul-searching over why economists failed to predict the financial crisis. One of the outcomes of this debate is that economics students are demanding the reform of a curriculum they think sustains a selfish strain of capitalism and is dominated by abstract mathematics. It looks like the students will get their way. A new curriculum, designed at the University of Oxford, is being tried out. This is good news. …

heilThe typical economics course starts with the study of how rational agents interact in frictionless markets, producing an outcome that is best for everyone. Only later does it cover those wrinkles and perversities that characterise real economic behaviour, such as anti-competitive practices or unstable financial markets. As students advance, there is a growing bias towards mathematical elegance. When the uglier real world intrudes, it only prompts the question: this is all very well in practice but how does it work in theory? …

Fortunately, the steps needed to bring economics teaching into the real world do not require the invention of anything new or exotic. The curriculum should embrace economic history and pay more attention to unorthodox thinkers such as Joseph Schumpeter, Friedrich Hayek and – yes – even Karl Marx. Faculties need to restore links with other fields such as psychology and anthropology, whose insights can explain phenomena that economics cannot. Economics professors should make the study of imperfect competition – and of how people act in conditions of uncertainty – the starting point of courses, not an afterthought. …

Economics should not be taught as if it were about the discovery of timeless laws. Those who champion the discipline must remember that, at its core, it is about human behaviour, with all the messiness and disorder that this implies.

Financial Times

  1. paul davidson
    November 13, 2016 at 5:24 pm

    Some economists saw the global financial crisis coming. on page117 of my 2002 book entitled FINANCIAL MARKETS, MONEY AND THE REAL WORLD,I noted that wit the growth of securities floated by “nonbank financial intermediaries…has permitted a significant expansion of debt obligations by debtor households and enterprises. This suggests that a sudden switch … to a fast exit strategy at a future date could cause a horrific liquidity problem.” This 2002 prophesy provide correct in 2007-8!

    Why? You have to understand Keynes’s TREATISE ON MONEY as well as his GENERAL THEORY

  2. November 14, 2016 at 6:37 am

    In my view all this talk about failing to predict the financial crisis of 2007-2008 is wrongheaded if our goal is to reconstruct economics. After all even if economics was a properly designed and functioning science, it is a science of human collective life. The actions and interactions in this life are complex and often unpredictable in any absolute sense. So failing to predict this crisis would not in any way be so black a mark against economics as to demand its reconstruction. Failing to study or understand the crisis afterwards or helping provide the conditions that lead to the crisis would be such a mark, however. As would making no effort to change circumstances to prevent further such crises.

  3. John Bragin
    November 18, 2016 at 12:48 am

    I agree with Ken Zimmerman. The hallmark of a science is not its ability to predict the future, or at least not its ability at point prediction, even in a deterministic system-process. That demand died with Poincare’s work on dynamics. The economy is a non-linear, complex evolving system and like any such system exact (or even nearly exact) prediction is not possible. Add probabilities to this and such dreams of predictive-power are completely smashed. Mainstream economics is a failure not particularly because it cannot predict (pace Milton Friedman’s POSITIVE ECONOMICS), but because of its utter failure to explain, based primarily on its unreal (not just simplifying) assumptions. Economics education must include a thorough grounding not only in economic history, other current social sciences, and heterodox thinkers of the past, but on the concepts, methods and applications of COMPLEX SYSTEMS SCIENCE as they are currently developing.

    • November 18, 2016 at 6:08 am

      I take a pragmatic view of the failure of professional economics. It cannot predict, except within identified limits. It can explain. But why should economists’ explanation be deemed superior or preferable to those of psychologists, or politicians, or the local butcher? They can be considered preferable or even superior according to the consequences of those explanations. If they prove more useful or beneficial in identifying and resolving problems and helping others to organize for those efforts then economic explanations are worth pursuing. If not, then going with the butcher is certainly reasonable.

    • November 18, 2016 at 9:26 am

      Thanks for this, John. However, the point of complex systems science is to make outcomes predictable. The simplest complex system is the method of navigation, as built into an auto-pilot. Add probabilities of being turned off-course or drifting sideways off-course or deliberately turning off-course to avoid an obstacle does not mean you will utterly fail to reach your intended port. The probabilities of these happening does not matter if you can correct them (by steering, course correction and non-linear routing) if and preferably when they actually happen. What does matter in economics is to remember one’s intended destination (e.g. to supply good cars) and not fall into the trap of short-sightedly thinking it is to avoid bankruptcy (by avoiding collisions or running down any perceived opposition). There is in fact a ‘macro’ aim as well as our ‘micro’ aims such as supplying cars, and this is the reliability of the whole system in meeting those micro-aims.

      • November 18, 2016 at 10:28 am

        Actions and interactions are complex. They don’t need either your permission or you calling them systems to do that. When I get in my plane and file a flight plan to San Diego I believe that so long as the magnetic poles of the planet don’t switch (which they have before), the speed of the earth’s rotation doesn’t change (which it has before), the earth’s tilt doesn’t change (which it has before), etc. I can get there. The problem in doing the same with economic interactions is that we don’t know what’s changing, when it’s changing, or what it’s changing to. Hell with that situation me and my Cessna will end up in San Francisco, maybe. Predicting your company can build “good” cars is a case in point. Government regulations might change, competitors might vandalize your factory or steal your designs, unions might strike your factory line, trolleys and street cars might make a big comeback (which they are). the rare metals for batteries might be rationed, and so on and so on. Even with the best of intentions you might be unable to build that “good” car.

  4. November 18, 2016 at 6:14 pm

    Change is not predictable…unless the exact terms and conditions are known and followed;
    but that would NOT be ‘change’.
    What can be predicted is the possibility of something occurring at a future time as a result of certain terms and conditions.
    We are all “Justaluckyfools”. Any one that attempts to predict the future is a fool; if by chance
    correctly, then just a lucky fool- albeit still a fool.
    Why “BOOM to BUST”?
    “The curriculum should embrace economic history and pay more attention to unorthodox thinkers such as…” Frederick Soddy, who saw it coming.

    • November 19, 2016 at 12:10 pm

      One aspect of neoliberal thinking that always fascinated me is economic austerity. Psychologists, sociologists, and anthropologists have studied the theories explaining austerity programs and the impacts of those programs. The research consistently finds no acceptable justification for the policies and identifies dozens of negative impacts, some quiet serious. So why is this policy approach advocated by neoliberal economists?

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s