Student Dissent and the Future of Economics

Photo credit: Wikipedia

Photo credit: Wikipedia

If the roaring success of the French economist Thomas Piketty is one indication of the disaffection with mainstream economics, the other signal that not everything is alright with economics comes from the growing discontent among economics students. In universities across the globe, students seem unhappy with the status quo in academic economics after the great financial crash six years ago shook the foundations of the discipline.

After several leading Western universities saw walkouts by students dissatisfied with their economic curriculum, a heterogeneous group of economics student associations from round the globe have banded together under the banner of the International Student Initiative for Pluralism in Economics (ISIPE) to demand reforms in the way economics is taught and practiced.

“We, over 65 associations of economics students from over 30 different countries, believe it is time to reconsider the way economics is taught,” said an open letter published by ISIPE earlier this year. “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. Such change will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated.”

As the British economist John Kay observed in a blog post, no other discipline has witnessed the kind of dissension within its ranks as economics has. “In no other subject do students express such organised dissatisfaction with their teaching.”

The call for reform by ISIPE followed a similar call by one of its most prominent members, the Post Crash Economics Society of Manchester University, formed by discontented students of the university. These students were at the forefront of protests against academic economists which have rocked campuses at Manchester, Cambridge, and London over the past couple of years. Their grouse against these academics is that they have been acting as the cheerleaders for the neoclassical economic models that pushed the world into the Great Recession, and that they refuse to change. The Post Crash Economics Society also published a manifesto on the agenda for change, with a foreword by none other than Andrew Haldane, the executive director for financial stability at the Bank of England.

In his introduction to the manifesto, Haldane points out that a large part of economic modelling was derived from Newtonian physics, and ignored the complexities of a human society. “That enabled macro-economics, as a fledgling (and perhaps rather self-conscious) discipline, to be built on optimizing foundations,” wrote Haldane in his introduction to the manifesto. “These gave the impression of rigour and solidity […]. In the light of the financial crisis, those foundations no longer look so secure. Unbridled competition, in the financial sector and elsewhere, was shown not to have served wider society well. Greed, taken to excess, was found to have been bad. The Invisible Hand could, if pushed too far, prove malign and malevolent, contributing to the biggest loss of global incomes and output since the 1930s. The pursuit of self-interest, by individual firms and by individuals within these firms, has left society poorer.

“In this light, it is time to rethink some of the basic building blocks of economics. And in this rethink we could do no worse than return to Adam Smith,” wrote Haldane. “For just prior to the Wealth of Nations, Smith had produced a rather different book. It was called The Theory of Moral Sentiments and was published in 1759. In it, Smith emphasizes cooperation, as distinct from competition, as a way of satisfying society’s needs. It places centre-stage concepts such as reciprocity and fairness, values rather than value.”

The Manchester students argue that “the mainstream within the discipline (neoclassical theory) has excluded all dissenting opinion, and the crisis is arguably the ultimate price of this exclusion. Alternative approaches such as Post-Keynesian, Marxist, and Austrian economics, as well as many others, have been marginalized. The same can be said of the history of the discipline.”

According to both ISIPE and the Manchester students’ manifesto, alternative ways of thinking about economic ideas should form part of the mainstream. So should inter-disciplinary approaches involving the study of sociology, history, politics, and anthropology.

The deeper message of these protests is that mainstream economics is in fact an ideology—the ideology of the free market, wrote the economist and politician, Robert Skidelsky in a recent Project Syndicate essay.

“If we assume perfect rationality and complete markets, we are debarred from exploring the causes of large-scale economic failures,” argued Skidelsky. “Unfortunately, such assumptions have a profound influence on policy […]. The efficient-market hypothesis—the belief that financial markets price risks correctly on average—provided the intellectual argument for extensive deregulation of banking in the 1980s and 1990s. Similarly, the austerity policies that Europe used to fight the recession from 2010 on were based on the belief that there was no recession to fight. These ideas were tailored to the views of the financial oligarchy. But the tools of economics, as currently taught, provide little scope for investigating the links between economists’ ideas and the structures of power.”

The “post-crash” students are therefore largely right, wrote Skidelsky.

The first stirrings of dissension within the ranks of economics came much before the crisis struck, when the “post-autistic economics movement” was launched in Paris in 2000, to correct the excessive use of mathematics and the resulting disconnect from reality in economics. The movement spread to other developed countries but petered out. The first major revival occurred in 2011, when Harvard University students walked out of the class of the renowned macro-economist Gregory Mankiw in protest against the overly conservative bias of his course.

In the years since then, the battleground of protests against mainstream economics and its guardians has shifted to the UK, with students across several of its universities collaborating to launch ISIPE. Incidentally, ISIPE also has an Indian association within its ranks, the Javadhpur University Heterodox Economics Association. Not surprisingly, the biggest response to these protests has also come from within the ranks of UK’s academia, with the launch of the Curriculum in Open-access Resources in Economics (CORE) project. CORE, funded by the George Soros-backed Institute for New Economic Thinking and the Azim Premji University, aims to bridge the gap between economics textbooks and reality.

Several policymakers, not just in the UK, have underlined the need for change in the profession since the crisis struck. The former governor of the Reserve Bank of India, D. Subbaro, would often quip that the great financial crash was not just an economic crisis but also marked a crisis in economics, challenging many deeply held notions of economists. His successor, Raghuram Rajan, has also struck a similar note in his writings. Rajan argued that “specialization, the difficulty of forecasting, and the disengagement of much of the profession from the real world,” was responsible for the failure of economists to foresee the crisis.

Rajan did not consider ideology to be a driving factor for the crisis but both Haldane and Skidelsky disagree with him there.

A key reason why the mainstream economic apparatus has withstood the crisis is because economics teaching and research “is deeply embedded in an institutional structure that, as with any ideological movement, rewards orthodoxy and penalizes heresy,” wrote Skidelsky. “Moreover, it has become an article of faith that any move toward a more open or ‘pluralist’ approach to economics portends regression to ‘pre-scientific’ modes of thought, just as the results of the European Parliament election threaten to revive a more primitive mode of politics.”

Not everyone is pessimistic about the profession though. In a recent opinion piece, the American financial economist Noah Smith argued that the economics discipline is much more heterodox today than earlier, and no longer serves as a handmaiden of conservative politics.

“I have the vague sense that if you were an idealistic, brilliant young libertarian in the 1960s and ’70s, you might naturally dream of growing up to be an economist,” wrote Smith. “You might watch a rousing speech by Milton Friedman, and you might imagine that one day you, too, would use the power of logic and rationality and mathematics to ward off the insanity of socialism. Well, America still has some idealistic, brilliant young libertarians, and some of them probably still dream of becoming economists. But now they will be in the minority. They will be joined by quite a fewmaybe more—idealistic brilliant young liberals, who recognize the power of markets but also want to figure out how to fix things when markets go wrong. And they will also be joined by quite a few brilliant engineers, for whom political ideals take a back seat to the solving of practical, real-world problems. Econ isn’t what it used to be. The world turns, and academic disciplines move along with it.”

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