Archive for the ‘New Paradigm Economics’ Category

The manifesto of 42 networks of economics students from 19 countries


An international student call for pluralism in economics

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It is not only the world economy that is in crisis. The teaching of economics is in crisis too, and this crisis has consequences far beyond the university walls. What is taught shapes the minds of the next generation of policymakers, and therefore shapes the societies we live in. We, 42 associations of economics students from 19 different countries, believe it is time to reconsider the way economics is taught. We are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades. This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability, to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. This will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated.

United across borders, we call for a change of course. We do not claim to have the perfect answer, but we have no doubt that economics students will profit from exposure to different perspectives and ideas. Pluralism could not only help to fertilize teaching and research and reinvigorate the discipline. Rather, pluralism carries the promise to bring economics back into the service of society. Three forms of pluralism must be at the core of curricula: theoretical, methodological and interdisciplinary.

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Modeling financial instability

February 7, 2014 5 comments

from Steve Keen

This paper will be published in a forthcoming book on the crisis edited by Malliaris, Shaw and Shefrin. In what follows, I derive a corrected formula for the role of the change in debt in aggregate demand, which is that ex-post aggregate demand equals ex-ante income plus the circulation of new debt, where the latter term is the velocity of money times the ex-post creation of new debt.

The PDF is available here: Keen2014ModelingFinancialInstability. The Minsky models used in this paper are here in a ZIP file. The latest version of Minsky can be downloaded from here.

  • Introduction

Literally no-one disputes that the financial sector was the cause of the post-2007 economic crisis: disputation instead centers on the causal mechanisms. I follow Fisher (Fisher 1933) and Minsky (Minsky 1980) in assigning key roles to the growth and contraction of aggregate private debt (Keen 1995; Keen 2000), but this perspective is rejected by New Keynesian economists on the a priori basis that private debts are “pure redistributions” that “should have no significant macro-economic effects” (Bernanke 2000p. 24), and as a corollary to the oft-repeated truism that “one person’s debt is another person’s asset” (Krugman 2012c, p. 43).

My analysis also follows the Post Keynesian tradition of Read more…

Tony Lawson has changed our conversation

November 26, 2013 10 comments

from Edward Fullbrook

The case for Lawson’s significance that I argued five years ago and appears below seems to me even truer today.

Tony Lawson has become a major figure of intellectual controversy on the back of juxtaposing two relatively simple and seemingly innocuous ideas.  In two books and over fifty papers he has argued:

  1. that success in science depends on finding and using methods, including modes of reasoning, appropriate to the nature of the phenomena being studied, and
  2. that there are important differences between the nature of the objects of study of natural sciences and those of social science.

Taken together, these two ideas lead to the conclusion that the methods found to be successful in natural sciences are generally not the ones that should be used in social science.

By relentlessly focusing on this pair of ideas, Lawson has in a short space of time changed one of economics’ key conversations.  His chapter, “A Realist Theory for Economics”, published in Roger Backhouse’s 1994 landmark collection New Directions in Economics Methodology, stands out like someone standing alone at a party.  As recently as then the ideas of three thinkers, none of them economists, none social scientists and all of them dead, dominated economics’ literature on methodology.  The index of Backhouse’s wonderful book powerfully illustrates this.  It lists 47 pages that refer to Thomas Kuhn, 69 to Karl Popper and 73 to Imre Lakatos.  Twelve of the book’s sixteen chapters (excluding Lawson’s) refer to one or more of the three and eight, as well as the back cover, to all three.  Lawson does not refer to any of them.  More significant, Lawson’s key reference point is ontology, a word that, except in the Introduction when Backhouse is introducing his collection’s odd man out, appears in none of the other chapters.  Notably, when Lawson first uses “ontology” he feels it necessary, despite his highly specialized audience, to explain what the word means: “enquiry into the nature of being, of what exists, including the nature of the objects of study.” [Lawson 1994, p. 257]

Thirteen years later and anyone in economics who knows anything about methodology knows what “ontology” means.  Read more…