Would post-crash economics be a step backward?

Finance and MarketsDiscussion of the need for the reform of economics in the post-crash world continues to gather momentum and prominence in parts of the econosphere. Wendy Carlin set out a case for change at the FT (£) on Sunday, while a group of post-Keynesian economists stuck their head above the parapet in a letter to the Guardian on Monday.

The thrust of the post-crash economics argument is not that mainstream economic approaches should be rejected in favour of an alternative. Rather it is the more modest plea that economics should be taught more pluralistically and contextually. Mainstream approaches should be set alongside alternative bodies of thought. Economics students would benefit from rediscovering economic history, genuinely institutional analysis, a dose of philosophy, and the history of economic thought. It’s an agenda with which I have a lot of sympathy.

We are seeing bits and pieces of a backlash. That is inevitable. [Read more…]

Keen insight into the monetary economy

Lucas Papademos, former vice-president of the European Central Bank, has now been installed as the new Prime Minster of Greece. The imminent arrival of former European Commissioner Mario Monti as Prime Minister of Italy will get the post-Berlusconi era properly under way. This is to be an era of technocratic policy-making by market-approved placemen.

Defenders of democracy are deeply concerned about the way in which this process has evolved. It is not so much that crisis has precipitated change at the top of national governments. Nor even that these countries find themselves governed by interim governments that are appointed rather than elected. More concerning is the apparent erosion of sovereignty through the overt intervention of foreign governments in domestic affairs, and the apparent concentration of European power in the hands of the eight members of the Frankfurt Group, only two of whom are democratically elected politicians.

But this is not simply a crisis of politics and the economy. It is also a crisis of economic epistemology. Of economic knowledge. Paul Mason, BBC Newsnight’s Economics Editor, observed on Friday’s programme that “The economic orthodoxy of an entire generation of politicians seems to be failing. And they don’t know what to do.” [Read more…]