In praise of the students of Economics at Manchester University for rising against neo-classical fundamentalism
- Kamran Mofid
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Undergraduates at Manchester University are seeking to tear up the free-market syllabus and proposing an overhaul of orthodox teachings to embrace alternative theories.
The Post-Crash Economics Society at Manchester University
What wonderfully good news! Once again, another group of brave students of economics at a university have risen against the “dismal science” and the madness of the neo-clasical economics, its ways and its teachings.
I am delighted to hear that the Manchester students have seen the light, like their fellow students at other universities, such as the class of 2000 at the Sorbonne.
Before coming to the story of the Manchester students, let me recall what I wrote about the Sorbonne students a while back: “In Praise of the Economic Students at the Sorbonne: The Class of 2000”. This is how I began the piece:
‘The recent global crisis has lead to questions about whether the kind of economics that is taught in universities was responsible for the crisis itself, or indeed for its widespread failure to predict the timing and magnitude of the events that unfolded in 2008. There are many reasons for such failure. However, whatever the reasons might be, I strongly believe that now is the time for us all to begin to debate this issue further and more deeply.
‘It is clear that some serious reflection is in order. Not to stand back and question what has happened and why, would be to compound failure with failure: failure of vision with failure of responsibility. If nothing else these current crises of finance, social injustice and environmental devastation present us with a unique opportunity to address the shortcomings of our profession with total honesty and humility while returning the “dismal science” to its true position: a subject of beauty, wisdom and virtue.
‘It seems clear to me that the time has come for economics to change direction and to find a path which does not deviate from true human values. The obviously contrived nature of neo-classical economics has begun to attract many calls for change. One of the most vocal has come from university students. This is music to my ears. It is something I would very much like to share with you.’
And now I have heard another beautiful sound, also music to my ears. This time from Manchester University. It is something I would very much like to draw to your attention.
However, before that, I want to share with you something coming from my heart, very relevant to the current topic. It saddens me that, about 15 years ago, when I began to say things very similar to what the economic students at the Sorbonne and Manchester and others are now saying, many of my fellow academic colleagues accused me of having gone mad. They told me, if I carry on like this, talking about ethics, morality, philosophy, theology, spirituality, love, sympathy, empathy, trust, sustainability, dignity, service, volunteerism, reverence for Mother Earth and the common good, I had better consider leaving the economics profession and perhaps become a priest or social worker, or joining the Salvation Army. They told me that I was a lecturer in economics and as such should behave like one! On reflection, I am so happy I did not!
I am not bitter, not at all. I am only sorry that not many at that time took economists like me seriously. But, who said there is no justice in this world? See them now, with their heads down in shame, the butt of jokes and ridicule. They turned economics, a subject of beauty, wisdom and elegance, into the incomprehensible ‘dismal science’ of arrogance and irrelevance. What a sad and tragic outcome!
Reverting now to the struggle of the students at Manchester University and their hopes for a value-led teaching of economics, this is cause for great celebration.
The battles at Manchester, the Sorbonne and elsewhere are worthy causes and they must be supported. However, to win will not be easy. There are many self-serving and self-interested groups that will fight them, wishing to destroy the spirit of their opponents. Let me explain this by recalling a paragraph from one of our conference papers*:
‘THE WISDOM OF Socrates was famously summarised as his ability to know that he knew nothing. So in modern times he would probably be an economist. Few saw the credit crunch coming. Since it arrived, opinions as to the severity of its consequences, its effects on different nations and the prescriptions to remedy them have varied wildly ...’ I wish to suggest that now is the time to acknowledge the failures of current economic models and theories, as well as the narrowness of market fundamentalism. The times demand a revolution in economic thought, as well as new ways of teaching economics, business and management, amongst others. In many respects this means a return to the soil in which economics was initially born, moral philosophy and ethics amid issues and questions of broad significance involving the fullness of human existence.
But the road to value-led economics is full of potholes. There are many questionable characters working in the opposite direction. We couldn’t have clearer evidence of this than Lord Kalms’ letter to the Times (08/03/2011):
Sir, Around 1991 I offered the London School of Economics a grant of £1 million to set up a Chair in Business Ethics. John Ashworth, at that time the Director of the LSE, encouraged the idea but had to write to me to say, regretfully, that the faculty had rejected the offer as it saw no correlation between ethics and economics. Quite. Lord Kalms, House of Lords
This is why I want to highlight the Manchester University students’ initiative. This is why I want to support them and why I am asking for your support too.
Economics students aim to tear up free-market syllabus
Undergraduates at Manchester University propose overhaul of orthodox teachings to embrace alternative theories
Under the above headline Phillip Inman**, the economics correspondent of the Guardian and Observer wrote:
‘Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.
‘Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs.
‘Next month the society plans to publish a manifesto proposing sweeping reforms to the University of Manchester's curriculum, with the hope that other institutions will follow suit.
‘Joe Earle, a spokesman for the Post-Crash Economics Society and a final-year undergraduate, said academic departments were “ignoring the crisis” and that, by neglecting global developments and critics of the free market such as Keynes and Marx, the study of economics was “in danger of losing its broader relevance”.
‘Earle said students across Britain were being taught neoclassical economics “as if it was the only theory”.
‘He said: "It is given such a dominant position in our modules that many students aren't even aware that there are other distinct theories out there that question the assumptions, methodologies and conclusions of the economics we are taught."
‘Multiple-choice and maths questions dominate the first two years of economics degrees, which Earle said meant most students stayed away from modules that required reading and essay-writing, such as history of economic thought. "They think they just don't have the skills required for those sorts of modules and they don't want to jeopardise their degree," he said. "As a consequence, economics students never develop the faculties necessary to critically question, evaluate and compare economic theories, and enter the working world with a false belief about what economics is and a knowledge base limited to neoclassical theory."
‘In the decade before the 2008 crash, many economists dismissed warnings that property and stock markets were overvalued. They argued that markets were correctly pricing shares, property and exotic derivatives in line with economic models of behaviour. It was only when the US sub-prime mortgage market unravelled that banks realised a collective failure to spot the bubble had wrecked their finances.
‘In his 2010 documentary Inside Job, Charles Ferguson highlighted how US academics had produced hundreds of reports in support of the types of high-risk trading and debt-fuelled consumption that triggered the crash.
‘Some leading economists have criticised university economics teaching, among them Paul Krugman, a Nobel prize winner and professor at Princeton university who has attacked the complacency of economics education in the US.
‘In an article for the New York Times in 2009, Krugman wrote: "As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth."
‘Adam Posen, head of the Washington-based thinktank the Peterson Institute, said universities ignore empirical evidence that contradicts mainstream theories in favour of "overly technical nonsense".’
*’Beyond the Wasteland: Seven Common Good Steps to Build a Compassionate World’
**Phillip Inman, ‘Economics students aim to tear up free-market syllabus’
‘In Praise of the Economic Students at the Sorbonne: The Class of 2000’
‘Why Love, Trust, Respect and Gratitude Trumps Economics: Together for the Common Good’
2013 Nobel Prize in Economics: An Opportunity Missed
And now, the pertinent questions: What is to be done? What might be a better way to study and teach economics?
To read about these and other questions and to discover what the answers may look like please see below:
A Path to a Spiritual Education for the Common Good: Education for a Just and Sustainable World
Can Business Education and the Business Schools Advance Sustainability and the Common Good?
Small is Beautiful: The Wisdom of E.F. Schumacher
Why Happiness Should be Taught at Our Universities?
Student Manifesto for New Economics
Economics and Economists Engulfed By Crises: What Do We Tell the Students?
Theology, Philosophy, Ethics, Spirituality and Economics: A Call to Dialogue
Economics lecturers accused of clinging to pre-crash fallacies
Academic says courses changed little since 2008 and students taught 'theories now known to be untrue'
“Economics teaching at Britain's universities has come under fire from a leading academic who accused lecturers of presenting "things that are known to be untrue" to preserve theories that claim to show how the economy works.
The Treasury is hosting a conference in London on Monday to discuss the crisis in economics teaching, which critics say has remained largely unchanged since the 2008 financial crash despite the failure of many in the profession to spot the looming credit crunch and worst recession for 100 years.
Michael Joffe, professor of economics at Imperial College, London, said he was disturbed by the way economics textbooks continued to discuss concepts and models as facts when they were debunked decades ago.
He said: "What if economics was based more on empirical studies and empirical evidence? There are lots of studies and economists are often very good at finding the evidence for how things work, but it does not feed into or challenge what's in the textbooks.
"I asked a textbook author recently why a theory that is known to be wrong is still appearing in his book he said to me that his publisher would expect it to be there."
Joffe, a former biologist, called for more evidence in economic teaching in the October edition of the Royal Economic Society newsletter. He said many reformers had called for economics courses to embrace the teachings of Marx and Keynes to undermine the dominance of neoclassical free-market theories, but the aim should be to provide students with analysis based on the way the world works, not the way theories argue it ought to work.
"There is a lot that is taught on economics courses that bears little relation to the way things work in the real world," he said.
The Treasury-hosted conference will debate the state of economics teaching, with leading figures from the profession invited to speak, including Bank of England director Andy Haldane. Sponsored by the Institute for New Economic Thinking (INET), it aims to highlight reforms to address the shortcomings of the core economics curriculum.
Headed by economics professor Eric Beinhocker of Oxford University, the INET has grown into a large international lobby group with the aim of reforming mainstream economic teaching in the world's leading colleges.
The conference comes only a fortnight after Manchester University economics students criticised orthodox free-market teaching on their course, arguing that alternative ways of thinking have been pushed to the margins.
Members of the Post-Crash Economics Society said their course was dominated by models and equations that trained undergraduates for City jobs without a broader understanding of the way economies and businesses work.
Joe Earle, a spokesman for the society and a final-year undergraduate, said academic departments were ignoring the crisis in the profession and that, by neglecting global developments and critics of the free market such as Keynes and Marx, the study of economics was "in danger of losing its broader relevance".
The profession has been criticised for its adherence to models of a free market that claim to show demand and supply continually rebalancing over relatively short periods of time – in contrast to the decade-long mismatches that came ahead of the banking crash in key markets such as housing and exotic derivatives, where asset bubbles ballooned.
Joffe said university economics department were continuing to teach concepts that had been disproved. In one example he said the idea that companies suffer "dis-economies of scale" when they increase production beyond certain capacity was true in only a small number of firms.
The U-shaped curve shows that unit costs are high when production begins and become cheaper as economies of scale allow a company to spread costs over more units. Units become more expensive to produce after a factory reaches capacity.
Joffe said: "We ought to stop teaching the U shape as the typical relationship between costs and scale, for the simple reason that it is false."
*The above article was first published in the Guardian on 10 November 2013: