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Evidence of intelligent life in the economics profession

March 3, 2015 6 comments

from Dean Baker

Last month, former Clinton Treasury Secretary and top Obama adviser Larry Summers ripped into those arguing that more education is the answer to the country’s inequality problems:

“The core problem is that there aren’t enough jobs. If you help some people, you could help them get the jobs, but then someone else won’t get the jobs. Unless you’re doing things that have things that are affecting the demand for jobs, you’re helping people win a race to get a finite number of jobs.”

He made these comments at a conference put on by the Robert Rubin funded Hamilton Project held at the Brookings Institution.

If the significance of these comments is not clear, the most important economic figure of the mainstream of the Democratic Party was demolishing one of the party’s central themes over the last two decades. He was arguing that the problems of the labor force — weak employment opportunities, stagnant wages, and rising inequality — were not going to be addressed by increasing the education and skills of the workforce. Rather, the problem was the overall state of the economy.

The standard education story puts the blame for stagnant wages on workers. Read more…

Economic Ignorance?

March 2, 2015 15 comments

from Peter Radford

Ha-Joon Chang nails it.

But I wish he hadn’t.

You see, I agree with his analysis of the inverse nature of status within the economics profession. As a useful general rule the more notable you are within the profession the less you know about the economy. This is a result of the perverse nature of what economists actually do: they are amongst the very few disciplines — perhaps they are unique — who invent the artifacts that they then seek to explain and study. This relieves them, as you can imagine, from having to engage with the mucky real world.

You might wonder how this came about. It is quite a puzzle isn’t it? All those extremely clever people resolutely avoiding contact with the very substance that their chosen topic of study presents them from outside; averting their eyes from the glare of reality; turning inward as they search for clarity and that song sought after simplicity that so beguiles them.

It’s actually quite dispiriting for anyone who dares imagine that economics has relevance to humanity and its ability to chart a course towards a generally more prosperous world.

So how did this disconnect happen? How is it that the very best are the most ignorant? Read more…

Economists pretending to know

March 2, 2015 2 comments

from Lars Syll

economists pretend to know

We are storytellers, operating much of the time in worlds of make believe. We do not find that the realm of imagination and ideas is an alternative to, or retreat from, practical reality. On the contrary, it is the only way we have found to think seriously about reality. In a way, there is nothing more to this method than maintaining the conviction … that imagination and ideas matter … there is no practical alternative”

Robert Lucas (1988) What Economists Do

Sounds great, doesn’t it? And here’s an example of the outcome of that serious think about reality … Read more…

How to get published in ‘top’ economics journals

February 28, 2015 3 comments

from Lars Syll

 February, 2015 at 09:56 | Posted in Economics | Leave a comment

an-inconvenient-truth1By the early 1980s it was already common knowledge among people I hung out with that the only way to get non-crazy macroeconomics published was to wrap sensible assumptions about output and employment in something else, something that involved rational expectations and intertemporal stuff and made the paper respectable. And yes, that was conscious knowledge, which shaped the kinds of papers we wrote.

Paul Krugman

More or less says it all, doesn’t it?

And for those of us who do not want to play according these sickening hypocritical rules — well, here’s one good alternative.

Categories: economic journals

Econom(etr)ic fictions masquerading as rigorous science

February 28, 2015 5 comments

from Lars Syll

In econometrics one often gets the feeling that many of its practitioners think of it as a kind of automatic inferential machine: input data and out comes casual knowledge. This is like pulling a rabbit from a hat. Great — but first you have to put the rabbit in the hat. And this is where assumptions come in to the picture.

As social scientists — and economists — we have to confront the all-important question of how to handle uncertainty and randomness. Should we define randomness with probability? If we do, we have to accept that to speak of randomness we also have to presuppose the existence of nomological probability machines, since probabilities cannot be spoken of – and actually, to be strict, do not at all exist – without specifying such system-contexts.

Accepting a domain of probability theory and a sample space of “infinite populations” — which is legion in modern econometrics — also implies that judgments are made on the basis of observations that are actually never made! Infinitely repeated trials or samplings never take place in the real world. So that cannot be a sound inductive basis for a science with aspirations of explaining real-world socio-economic processes, structures or events. It’s not tenable. Read more…

Categories: econometrics, methodology

I am a know-nothing

February 27, 2015 2 comments

from Peter Radford

Beware of the possible snark in the following:

One of the possibilities you face when you commit to writing about something is that you get called names. Sometimes you are called wrong. And sometimes when you are called wrong, you are indeed wrong. Such is life. We learn.

This is not one of those times.

Because I am right.

Anyway, this time I have been called wrong because I asked that we raise a collective voice to ask questions about economics. I made no substantive claim in my call for questions. I just asked for questions and then did claim that the resultant conversation would/could be interesting. I thought this was uncontroversial.  Read more…

French economics needs you to sign this petition

February 26, 2015 1 comment

Where is our economic system going? What about our societies? How did we get here? And what next?

The current situation reveals not only an economic crisis but also a deep crisis of economic thought. There are many causes for this situation, and solutions can only be found through theoretical, practical and political inventiveness with our critical faculties to the fore. But, whilst such voices do exist, they have been silenced as far as orthodox economics is concerned. Simply put, there are profoud institutional barriers to the emergence and presentation of original thinking, but this blocked creativity could be released through a simple and immediate political solution. Establishing in French universities a new section, entitled Economics and Society, would allow a new way of thinking in economics.

Madam Minister, you recently decided to create this new section promoting the study of economic facts with a renewed perspective within rather than apart from social sciences. You did so because you know how much the research in economics and its teaching, but also public debate, are suffocated by the monopoly of ideas imposed by a dominant school of thought that failed to anticipate or even to allow for, let alone understand and respond to this crisis.
The proposal for this new section, and your commendable approval for it, unleashed such a backlash from the established orthodoxy that it seemed to persuade you to withdraw your support.
For these reasons, by reaffirming your support for this petition for pluralism in economics, we demand that you publish the decree that you already signed in order finally to create this new section.

Economics needs pluralism now!

You can sign this petition here http://assoeconomiepolitique.org/petition-pluralism-now/

4,559 people have already signed it, but they need lots more.  You can read the names at the petition sight.

The Pope is a heterodox if you are a Greek or a Russian

February 25, 2015 Leave a comment

Well, heterodox is relative, isn’t it? The Pope is a heterodox if you are a Greek or a Russia. I don’t particularly like it but wouldn’t mind if people use it as an easy way of saying that I am not a neoclassical economist. But, as I have explained in my latest book (Economics: The User’s Guide), I don’t entirely subscribe to one school or another. I have been influenced by many different schools. I believe—not only for political reasons but for intellectual reasons too—we need pluralism in economics. Different schools have different methodological approaches, have different interests (some more interested in production, while others are more interested in exchange, for instance) or make different political and ethical assumptions. We need all of them to understand fully the complexity of the world.

Read more…

An open letter to economics student groups

February 18, 2015 1 comment

from Stuart Birks

Well done, your concerns about the economics curriculum are getting attention. There are also many practicing economists who have concerns about the current emphasis and direction of economics as a discipline.

As in any such situation, the process of change can be crucial in determining the outcome. Often many different initiatives are called for. There is one initiative which may be effective in the short term and also instrumental in shaping developments in the long term. I am referring to the World Economics Association’s Textbook Commentaries Project.

The project involves the development of an online platform containing brief commentaries which can be used right now in existing and new economics courses. This growing collection is designed to increase critical understanding of economics approaches and awareness of alternative perspectives. The commentaries are each short and stand-alone, so can be easily be incorporated into existing courses without greatly increasing the workload. They do generate an awareness of the concerns about various approaches and the diversity of thought that exists, even if no longer included in the standard curriculum. Many commentaries draw directly on alternative literature by recognised experts in the field. It is important that students be made aware of these sources, if only to put their own knowledge in a wider context. Additional pages also highlight other accessible material (books and online teaching resources).

How can you participate?

Read more…

Rats! History does repeat itself

February 10, 2015 3 comments

from Peter Radford

And clearly economists don’t learn from it.

Ponder this:

“It was all very well for the rich, who could raise all the credit they needed, to clamp rigid deflation and monetary orthodoxy on the economy … it was the little man who suffered, and demanded easy credit and financial unorthodoxy.”

That’s the voice of E. J. Hobsbawm in his book, “The Age of Revolution 1789 – 1848″, and he is talking about post Napoleonic Europe.

But how contemporary is that sentiment?

We are stuck in a similar situation. Our elite, both here and in Europe, is managing the economy  for its own ends. The disconnect with everyday folk is astonishing. The hubris and plain meanness of it all is equally astonishing.

Look at Greece: the attempt to impose a teutonic fiscal ‘discipline’ via stringent austerity has simply led to the debt that was the target of the policy becoming an even larger problem. It is an example of epic policy failure. The Greeks, for all their previous laxity and fiscal ineptitude, are to be applauded for calling for an end to the stupidity. Read more…

Economics curriculum reformulation

January 28, 2015 2 comments

from Lars Syll

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One of the main ideas underlining the book is that “being an economist” in the XXI century requires a radical change in the training of economists and such change requires a global effort. A new economics curriculum is needed in order to improve the understanding of the deep interactions between economics and the political forces and the historical processes of social change. The need for trans-disciplinary and interdisciplinary work is highlighted.

Discussions include the following. Main critiques of current practices on theory, methods and structures. Current gaps in the economics curriculum. What should economics graduates know? The contributors are: Nicola Acocella, Sheila Dow, David Hemenway, Arturo Hermann, Grazia Ietto-Gillies, Maria Alejandra Madi, Lars Pålsson Syll, Constantine Passaris, Paul Ormerod, Jack Reardon, Alessando Roncaglia, Asad Zaman.

Yours truly’s contribution to the collection is on “Economics textbooks – anomalies and transmogrification of truth.” Read more…

Categories: Economics Curriculum

Zero Shocker

January 20, 2015 2 comments

from Peter Radford

What with the World Economic Forum folks wading in on inequality ahead of the annual Davos shindig for the great and beautiful, here’s what Oxfam has to say:

“Global wealth is increasingly being concentrated in the hands of a small wealthy elite … These wealthy individuals have generated and sustained their vast riches through their interests and activities in a few important economic sectors, including finance and pharmaceuticals/healthcare. Companies from these sectors spend millions of dollars every year on lobbying to create a policy environment that protects and enhances their interests further.”

Moreover Oxfam predicts that the top 1% will have more wealth than the bottom 99% by about 2016. Here’s their chart: Read more…

Piketty’s response to Mankiw et al.: “and some consume academics.”

January 17, 2015 7 comments

from David Ruccio

I didn’t attend the most recent American Economic Association/Allied Social Sciences Association meetings in Boston. But, according to Chuck Collins, several sessions focused on the sensation of French economist Thomas Piketty and his 2014 book on inequality, Capital in the Twenty-First Century.

As an outsider to academic economics, I was struck by just how compartmentalized and smug the field appears. At one point, [Gregory] Mankiw even put up a slide, “Is Wealth Inequality a Problem?” Any economist who ventures across the disciplinary ramparts will, of course, find a veritable genre of research on the dangerous impacts of extreme inequality.

We now have over two decades of powerful evidence that details how these inequalities are making us sick, undermining our democracy, slowing traditional measures of economic growth, and turning our political system into a plutocracy.

Mankiw, at another point in his presentation, had still more embarrassing comments to make. Piketty, he intoned, must “hate the rich.” Piketty’s financial success with his best-selling book, Mankiw added, just might lead to self-loathing.

These clearly well-rehearsed quips, aimed at knee-capping the humble French economist, fell flat. Mankiw’s presentation, entitled “R > G, so what?,” came across as little more than an apologia for concentrated wealth.

And Piketty’s response? Read more…

University of Greenwich shows the way!

January 15, 2015 4 comments

from Lars Syll

The last seven years have not been easy for the global economy as well as the teaching of economics. The recent financial crisis and the Great Recession have led many economists, non-economists and students in economics to question the state of the discipline, wondering to what extent it provides the necessary tools to interpret the complex world we live in, signalling a deep dissatisfaction with economists’ ability to provide solutions to real world problems. Employers have recognised that the economics graduates that the standard curriculum generates are not equipped with the skills that the real world requires. Likewise, students themselves have recognised that the tools and theories they learn don’t enable them to make sense of the world they live in, let alone to address and solve real world problems …

The reason the revalidation of the economics programmes at the University of Greenwich is special is that it constitutes one of the first institutional responses to current pressures from students, faculty, employers and policy makers to produce more ‘world-ready’ graduates. In redesigning our economics programmes we – the economics programmes team – have decided to:  Read more…

Categories: Economics Curriculum

Extraordinarily absurd things called ‘Keynesian’

January 13, 2015 2 comments

from Lars Syll

Today, it seems, just about anyone can get away with calling themselves a Keynesian, and they do, no matter what salmagundi of doctrinal positions they may hold dear, without fear of ridicule or reproach. Consequently, some of the most extraordinarily absurd things are now being attributed to Keynes and called “Keynesian theories”. For instance, J. Bradford DeLong, a popular blogger and faculty member at Berkeley, has in a (2009) paper divided up the history of macroeconomics into what he identifies as a “Peel–Keynes–Friedman axis” and a “Marx–Hoover–Hayek” axis: clearly he has learned a trick or two from the neoliberals, who sow mass confusion by mixing together oil and water in their salad dressing versions of history. The self-appointed “New Keynesians” of the 1990s (including Gregory Mankiw, David Romer and Michael Woodford) took the name of Keynes in vain by unashamedly asserting a proposition that Keynes himself had repeatedly and expressly rejected, namely that market-clearing models cannot explain short-run economic fluctuations, and so proceeded to advocate models with “sticky” wages and prices (Mankiw, 2006). Read more…

Economics is what?

January 12, 2015 6 comments

from Peter Radford

This week’s Economist magazine includes an article designed to uplift the hearts of depressed economists everywhere. It devotes a whole page under the headline “Meet the market shapers”, to a catalog of what it regards as cutting edge examples of economists doing useful stuff at the ‘micro’ level. By micro in these cases the Economist means working inside or alongside a business firm.

All the cases in the article are about some clever folk doing some clever analysis that, so we are told, really and truly helps the firms in question do better. In particular a theme emerges that the work seems to help the firms match what they have to sell with people who are likely, though not certain, to buy.

Naturally, although the magazine doesn’t admit to any added value in this, all the firms cited are Silicon Valley start ups and the like. As we know all Silicon Valley firms are very, very smart – they disrupt the dullards who have only managed to survive a few decades by shooting into orbit and surviving [gasp] for months and even years. So to help firms that are already clever is a real feather in anyone’s cap.

All this cutting edge stuff has the Economist really excited. Not only does it give the story a full page, but it even devotes one of its editorial columns to explaining what micro-economists do:  Read more…

The power of economic theory: Graphically illustrated

January 4, 2015 5 comments

from Asad Zaman and the WEA Pedagogical Blog

A near perfect graphical illustration of the power of economic theory is provided by the following graph; copied from RWER Blog

The impact of the roaring 20’s can be seen clearly as the shares of the bottom 90% drop steadily from 20% to around 13%, while the shares of the top 0.1% shoot up. The Great Depression led to a slew of regulations on banking, and also eventually the development and implementation of Keynesian ideas, which provide an economic rationale for government interventions to reduce unemployment. From 1930 to 1980, we see the rise of populist ideas, implementation of Keynesian theories, and the eclipse of Hayek and the Chicago School. After reaching a nadir in 1978, we see an upswing in the fortunes of the top 0.1%. Read more…

Economic theory creates the world we live in, and the rules we live by.

December 19, 2014 8 comments

How does it happen that we have given our quiet assent to a situation where the richest 85 individuals have more money than the bottom 3.5 billion? Where vultures wait for starving children to die, while others eat luxurious meals on private resort islands? Where horrendous military and commercial crimes leading to deaths, misery, and deprivations of millions are routinely committed by highly educated men with multimillion dollar salaries in luxury corporate and government suites?

A core component of the answer to these critical questions is that we have been educated to believe that this is a normal state of affairs, which comes about through the operation of iron laws of economics. Economic theories currently being taught in universities all over the world are an essential pillar which sustains the economic system currently in operation. These theories state that we (human beings) are cold, callous, and calculating. Microeconomic theory says rational individuals are concerned only with their own consumption. They are callous; completely indifferent to the needs of others. They maximize, calculating personal benefits to the last penny. They are cold – their decisions are not swayed by emotions of any kind. All this theorizing is not without power – it creates the world we live in, and the rules we live by.

Asad Zaman

A case study of Harvard Business School ethics

December 12, 2014 Leave a comment

from David Ruccio

Screen-Shot-2014-12-09-at-8.46

Or, in this case, only at Harvard. . .  Read more…

Categories: ethics

The rise and fall of debate in economics

December 9, 2014 9 comments

http://www.joefrancis.info/economics-debate/

New data illustrate the extent to which economists have stopped discussing each other’s work.

Once upon a time, economists regularly used to publicly criticise each other’s work in academic journals. But not any more.

In Figure 1 I have illustrated the degree to which economists have stopped debating. The data have been culled from Jstor, the online database of academic journals. To estimate the number of debating articles for each year, I searched for articles with “comment”, “reply”, and/or “rejoinder” in their titles, as these are the key words used to indicate a comment on someone else’s article and a reply to that comment. I did the search for the five most prestigious economics journals. I then used the total number of articles in those five journals in each year as the denominator.

Economics debate

Figure 1 shows how there was a dramatic increase in the level of debate in economics from the 1920s through the 1960s. Then, however, there was an equally dramatic fall. At the peak level, in 1968, fully 22 per cent of the articles published in these journals appear to have been related to debate. By 2013, however, just 2 per cent were.

Why did this rise and fall happen? Read more here

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