Reflecting economics

Reflecting economics

Not many things nowadays need more reflecting upon and rethinking than economics. This is why the economics education should not be dominated by one worldview only. Here is to the students who wants to make economics great again.

The majority of students might have heard about Rethinking Economics by now, thanks to a Blindern branch having been created just a semester ago. This student movement on economics reform sprung out simultaneously in England and in Germany soon after the economic crisis. Their names might give you a basic idea about their purpose: International Student Initiative for Pluralism in Economics, Netzwerk Plurale Ökonomik, Exploring Economics, Post-Crash Economics Society. What is their goal? They call for a radical reform in economics education for everybody’s sake.

How to Train Your Economist

How economics perceive the reality and how it describes it is perhaps the source of its problems. These must in turn be at least faced if not solved, since they do end up determining many economics students’ worldview. The leaders of the Rethinking Economics movement use the word “indoctrination”. Why should we care about how some bunch of graduates think? Well, some of them will venture to public offices and determine the policies that will in turn influence whole societies.

The magic of equilibrium

In the meantime, it seems, nothing gives an economist more pleasure than finding the point where two lines with opposite slopes cross and marking it with an asterisk (*). It is easy to grasp, it is elegant and it is orderly. It lures you with the feeling of safety and control. However, it comes at a price. You have to leave a big chunk of reality behind and instead move into a detached, abstract world of assumptions. It is not enough to maximize a specific goal of the “representative household” in hope that all the other households are indeed identical. I remember repeating caeteris paribus (everything else constant) as an undergraduate over and over again, with only my wand missing. It is a fiction.

They call for a radical reform in economics education for everybody’s sake.

Why are we constantly getting busier? Would the great British economist John Maynard Keynes slap our faces seeing this, after being so optimistic about his generation’s grandchildren’s workload diminishing radically? He could. “Was it 15 hours he said we were going to work?” I ask myself and type it in Google. The first find is the Guardian from 2008: “Economics: Whatever happened to Keynes’ 15-hour working week”. The result just below is Forbes writing in October 2015: “Keynes’ 15 Hour Work Week Is Here Right Now”. Now, wait just an opportunity-cost-generating-minute. Is it? Apparently it is, and in order to experience it just look out the window, according to the third result of my search. It is namely a letter from an economics professor published by Financial Times that states nothing less than: “Norway is on course for Keynes’ 15-hour workweek”. Well, shouldn’t we discuss it during the lectures? This is what all those supporting Rethinking want?

A remedy for confusion 

Rethinking Economics Norway organized its first conference in late January, welcoming everyone to SV on a sunny Saturday morning. Auditorium 1 was soon filled up, people were standing and bringing more chairs in. The speakers’ list was particularly thirst-for-knowledge arousing, with one of the Manchester students sparkling the Rethinking Economics movement, Jon Earl, included.

Foto: Marie Storli
Foto: Marie Storli

The evening before that however, at Litteraturhuset, Rethinking Economics welcomed us to a book-launch with Jayati Ghosh, Erik Reinert and Rainer Kattel. The volume in question was “Handbook of Alternative Theories of Economic Development” and its 40-chapter-rich content. I borrowed it at the HumSam on the way to the event. Jayati Ghosh called it “hernia causing” and one can hardly disagree. It is huge and for a good reason. There is namely much outside of the current curriculums of the economics students. The volume talks about a knowledge that has been ignored at a great loss to the satisfaction that comes from understanding realities. This is offered as a remedy for our present-time confusion.

Economics is about development

Jayati Ghosh is a professor of economics based in New Delhi. She opened the event with stating its purpose: “We want to rescue economics from the terrible state into which it has fallen, becoming the preserve of dead and living North-Atlantic, white, Anglo-Saxon men”. She also wishes to put development into the center of all economics since “development and economics is the same thing, has always been”. According to her, the obsessive focus on the micro approaches that influence the policies takes the focus away from the systemic and structural processes. Too much of the poverty alleviation has been focused on changing the properties of the poor, she notices. Conditional cash transfers, microcredit, focus on nutrition quotas and recently the use of randomized controlled trials and micro interventions. All this, says Jayati, is a fad that has nothing to do with development. As long as the policy will not be systemically inducing the productive transformation, it will not work. What about plain human relationships underlying those? As an example, Ghosh points out the role of unpaid labor, unrecognized but used across history. In what way has it been subsidizing the accumulation process? She throws many things on one table and makes a following pattern as an example: Post-industrial extinction of countries, their reversion to feudalism as a result of inequality, growing frustration culminating in violence and terrorism. It makes sense. Economics is all about development, but development is much more than just economics.

Economics is all about development, but development is much more than just economics.

Why history matters

Erik Reinert is a well-known persona in Norwegian academia. As a creator of the so-called Other Canon, a theoretical framework for “reality economics”, he considers the neo-classical economics a destructive ideology backed by mathematical models only. Not surprisingly, his ideas are considered somewhat controversial among Blindern professors. However, it is beyond anybody’s doubt, I think, that Erik Reinert knows the history of economic policy. After all, he does collect original editions of 15.century economics volumes. The interesting message we got with was that the price of labor, the wages should be maximized, not the profits. One of those things that should be discussed more during the lectures. One of the reasons to have a course on different theories in economics.Based on my impression of him gained during the Rethinking Economics conference, I begun to fantasize about him teaching the history of economic thinking to undergraduates at UiO. Unfortunately, his somewhat awkward clash with Steinar Holden during the closing debate on Saturday made me forget about it for now.In conclusion, even if there is some dose of confusion on how the “mainstream” economics is being criticized by the Rethinking movement, the value of more pluralistic economics education is not easily overestimated. That is why conferences like these should be a part of the economics courses.