Guardian columnist Seamus Milne seems to think that some kind of academic spring is going on in economics departments:
From any rational point of view, orthodox economics is in serious trouble. Its champions not only failed to foresee the greatest crash for 80 years, but insisted such crises were a thing of the past. More than that, some of its leading lights played a key role in designing the disastrous financial derivatives that helped trigger the meltdown in the first place.
Plenty were paid propagandists for the banks and hedge funds that tipped us off their speculative cliff. Acclaimed figures in a discipline that claims to be scientific hailed a “great moderation” of market volatility in the runup to an explosion of unprecedented volatility. Others, such as the Nobel prizewinner Robert Lucas, insisted that economics had solved the “central problem of depression prevention”.
Any other profession that had proved so spectacularly wrong and caused such devastation would surely be in disgrace. You might even imagine the free-market economists who dominate our universities and advise governments and banks would be rethinking their theories and considering alternatives.
After all, the large majority of economists who predicted the crisis rejected the dominant neoclassical thinking: from Dean Baker and Steve Keen to Ann Pettifor, Paul Krugman and David Harvey. Whether Keynesians, post-Keynesians or Marxists, none accepted the neoliberal ideology that had held sway for 30 years; and all understood that, contrary to orthodoxy, deregulated markets don’t tend towards equilibrium but deepen the economy’s tendency to systemic crisis.
Alan Greenspan, the former chairman of the US Federal Reserve and high priest of deregulation, at least had the honesty to admit his view of the world had been proved “not right”. The same cannot be said for others. Eugene Fama, architect of the “efficient markets hypothesis” underpinning financial deregulation, concedes he doesn’t know what “causes recessions” – but insists his theory has been vindicated anyway. Most mainstream economists have carried on as if nothing had happened.
Many of their students, though, have had enough. A revolt against the orthodoxy has been smouldering for years and now seems to have gone critical. Fed up with parallel universe theories that have little to say about the world they’re interested in, students at Manchester University have set up a post-crash economics society with 800 members, demanding an end to monolithic neoclassical courses and the introduction of a pluralist curriculum.
As one would expect from Milne this is all rather overstated. Academic economists are not all free market fanatics. I’m not aware of any British studies but research from America suggests that 75% of economics professors vote Democrat.
I took first year economics back in 2007/08 as the credit crunch was beginning to bite. Therefore, the curriculum I learnt was written before the crisis. And yes, As Milne would have suspected it was very neoclassical. However, that doesn’t mean what he thinks it does. The macroeconomics we were taught reflected what was called the “neoclassical synthesis” which was essentially Keynesian economics expressed using the mathematical models of neoclassical economics. And our microeconomics courses included a large section which explored why markets often produce undesirable consequences by looking at the incentives of the agents involved. In short what I learnt was neoclassical in terms of its methodology but could lead to a variety of political interpretations.
Is there an argument for a wider variety of methodologies? Absolutely. I dropped economics after my first year in part because I was frustrated with the limitations of the prevailing mathematically driven approach.* I have over time come to think there is much to be said for behavioural economics does away with the assumption that humans are ‘rational‘, and instead uses insights from academic psychology to build its models. However, the existence of other schools of economic thought is not an argument against an undergraduate curriculum that focuses on neoclassical methods. Any wannabe iconoclast ought to know what they are setting out to smash.
In fact, I’d suggest that other social sciences are in greater need of an overhaul than economics. That mathematical modeling that so annoyed me has its benefits. As Paul Krugman – one of the economists who Milne cites (incorrectly) as an outsider – explains:
Economists may make lots of bad predictions, but they do have a method – a systematic way of thinking about the world that is more true than not, that gives them genuine if imperfect expertise. (That is also, of course, why lay commentators and other social scientists tend to hate them). Other social sciences haven’t yet found anything remotely equivalent. Oh, there are bits and pieces, and some of them are very exciting; try taking a look at Robert Axelrod’s stuff. But basically when it comes to most of the questions that I am really interested in, one man’s view is as good as another.
And far from being a discipline that crushes ideological dissent economics actually embraces considerably greater political diversity than the rest of the social sciences. The research I cited earlier about the politics of academics, shows that there are significant numbers of both right and left wing economists. By contrast, 21 out of 22 sociology and anthropology professors vote Democrat. I would therefore suggest that the softer social sciences need to examine their political biases and methodology more urgently than economics.
*And also because I failed my mock exam but let’s not dwell on that.