Tag Archives | Economic thought

Is a little economics dangerous?

/ April 2, 2013 / Economics / Permalink

meme-warsA few weeks ago I had a brief exchange on Twitter with @unlearningecon about the possibility of introductory economics instruction going beyond teaching the neoclassical model of perfect competition and exploring alternatives. If I remember correctly our exchange didn’t get much beyond me saying that to do so is quite a challenge. Students can find it difficult enough to grasp the standard model, let alone alternatives to it. The challenge is compounded because some of the alternatives, at micro-level at least, are not as well worked through as the standard model. @unlearningecon didn’t feel it was so difficult.

Of course, I’ve no idea upon what @unlearningecon is basing his/her view. Our exchange was no more extensive than that. We didn’t pursue the issue. The view might be underpinned by plenty of experience. All I can say is that, in that case, the experience is different from mine.

For quite a while I have been thinking about what students should be introduced to when they are introduced to economics. The issue has become somewhat more high profile following the global financial crisis and the questioning of established economic paradigms. Continue Reading →

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Keen insight into the monetary economy

/ November 15, 2011 / Economics, Politics / Permalink

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.” Continue Reading →

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On knowing what’s going on

/ November 5, 2011 / Economics / Permalink

Leading active members of today’s economics profession … have formed themselves into a kind of Politburo for correct economic thinking. As a general rule—as one might generally expect from a gentleman’s club—this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen. … They oppose the most basic, decent and sensible reforms, while offering placebos instead.

James K Galbraith

Last weekend in a brief post over at Pop Theory Clive poses one of the key social scientific questions of our time – What do economists know? Of course, the answer depends on which economists one is talking about. As the epigraph above notes, the mainstream of macroeconomics largely misses the point. It didn’t see the current economic turmoil coming and has little to offer by way of solutions. One striking thing about Galbraith’s comment is that it was written in 2000. Not a great deal has changed since then. These deficiencies with mainstream approaches have been recognised by some high profile mainstream practitioners, as I noted last month in the aftermath of this year’s Nobel prize in economics.

Yet, it is not as if economics has nothing sensible to say on the matter. Continue Reading →

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On economic amnesia

/ October 12, 2011 / Economics / Permalink

Economists, one might assume, have something useful to say about the current problems afflicting the world economy. Yet, since the crash of 2008 there has been a considerable amount of reflection in parts of the discipline about its failure to anticipate the crash and its failure to offer effective prescriptions for getting the economy out of the hole it’s in. Of course, elsewhere in the discipline it is business as usual – with a range of prescriptions for privatisation and deregulation at the microlevel and fiscal restraint at the macrolevel.

This week’s Nobel announcements are salutary in that respect. Olaf Storbeck described them as a prize for the Ancien Régime. He was criticised for doing so, but his intervention might be better seen as simply the most recent in a chorus of disapproval directed at an approach to macroeconomics that came to dominate the field. Thomas Sargent, who shared this year’s prize, did as much as anyone to propel rational expectations and new classical macroeconomic models to the forefront of the field, and his macroeconometric work has been hugely influential. That is why he was awarded the Nobel prize. But that can be separated from the question of whether, looked at from a broader perspective, such models actually shed much light on the way the economy operates.

Some see the solution to the problems afflicting macroeconomics as the need to search for new ideas. Paul Krugman has recently argued, on the contrary, that the problem is that the discipline has amnesia. Continue Reading →

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Osbornomics – the path to enlightenment

/ May 30, 2011 / Economics, Politics / Permalink

Is a major change in policy thinking imminent? Will Hutton’s piece in Sunday’s Observer focused on the question of quite what the Labour party stands for. It is relatively clear what it is against, but its positive project is rather less obvious. And it needs such a project if it is going to counteract Conservative economic strategy. In the course of his discussion, Hutton argues that we can expect a change in the Coalition’s approach to deficit reduction some time soon and the recent less than congratulatory OECD report on UK policy is evidence in support of the case: Continue Reading →

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Economists, implicated

/ February 19, 2011 / Economics / Permalink

John Maynard Keynes famously wrote that “[i]f economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid”. Many economists, somewhat uncharacteristically, might well be craving that type of anonymity at the moment. Because they’ve been getting a hard time of it. And the discipline may be about to get even less popular.

The arrival of the film Inside Job is likely to fuel the public’s anger at bankers for causing the financial crisis. And not only causing the financial crisis, but subsequently carrying on with business pretty much as usual, while the fallout of the crash is felt in public spending cuts, unemployment and welfare benefit reductions.

But the film does more than that. It broadens the scope of criticism to implicate a range of other professionals. It wasn’t just the corporate bankers: lawyers, central bankers, accountancy firms, lobbyists and government officials were also complicit in pushing a deregulatory agenda. Their actions magnified systemic risk and increased the instability of the financial system in ways that theory said shouldn’t happen. The real world clearly hadn’t read the script.

In amongst the culprits identified are academic economists. Continue Reading →

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