Teaching Economics the Pluralist Way

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This is a talk I gave in Ams­ter­dam to launch the Ams­ter­dam Rethink­ing Eco­nom­ics cri­tique of the cur­rent state of eco­nom­ics “edu­ca­tion” in the Nether­lands. The text of my slides is repro­duced below.

–Read the orig­i­nal sources—journals & books—not text­books

  • Let experts teach maths & com­put­ing, not econ­o­mists
  • Facts exist & are not the­o­ry-neu­tral

–Rules of account­ing ver­sus Mon­ey Mul­ti­pli­er

–Great Depres­sion Soup Kitchens ver­sus RBC “vol­un­tary unem­ploy­ment” myths

–Decline of Sovi­et Union ver­sus Marx­ist faith in social­ism

  • Learn Eco­nom­ic His­to­ry & His­to­ry of Eco­nom­ics
  • Learn mod­ern “com­plex sys­tems” approach to dynam­ics from math­e­mati­cians (see www.ChaosBook.org)
  • Learn com­put­ing & mul­ti-agent mod­el­ling from com­put­er sci­en­tists
  • Look at the “Clio­dy­nam­ics” approach to his­to­ry

–Arguably doing what econ­o­mists should always have be doing

  • Use the Web for aca­d­e­m­ic free­dom where Uni­ver­si­ties sup­press it
  • Teach Hon­est­ly
  • Eco­nom­ics text­books have “air­brushed” eco­nom­ic the­o­ry
  • Teach Hon­est­ly
  • Absur­di­ties like “Ricar­dian Equiv­a­lence” look rea­son­able in text­books
  • Teach Hon­est­ly
  • Look more dubi­ous when you read orig­i­nal arti­cle:
  • “Sup­pose now [i.e., “pre­tend”] that house­holds’ demands for goods depend on the expect­ed present val­ue of tax­es…
  • I shall dis­cuss five major the­o­ret­i­cal objec­tions that have been raised against the Ricar­dian con­clu­sions.
  • The first is that peo­ple do not live for­ev­er, and hence do not care about tax­es that are levied after their death…
  • The argu­ment fails if the typ­i­cal per­son is already giv­ing to his or her chil­dren out of altru­ism…
  • The main idea is that a net­work of inter­gen­er­a­tional trans­fers makes the typ­i­cal per­son a part of an extend­ed fam­i­ly that goes on indef­i­nite­ly.
  • In this set­ting, house­holds cap­i­tal­ize the entire array of expect­ed future tax­es, and there­by plan effec­tive­ly with an infi­nite hori­zon.”
  • Teach Hon­est­ly
  • Does it take an Aus­tralian to tell you that that’s bull­shit?
  • Did you realise that when you stud­ied “Ricar­dian Equiv­a­lence” in Macro?
  • Major issues in Neo­clas­si­cism ignored or sug­ar-coat­ed in text­books

–“Cam­bridge Con­tro­ver­sies” over nature of cap­i­tal

  • Not men­tioned (or imply won by Neo­clas­si­cals)

–Son­nen­schein-Man­tel-Debreu The­o­rem

  • Not men­tioned, or treat­ed as “Spe­cial con­di­tions” under which mar­ket demand curve can be derived
  • Rather than “proof by con­tra­dic­tion” that mar­ket demand curve can’t be derived from aggre­gat­ing indi­vid­u­als

–Empir­i­cal data that firms do not have ris­ing mar­gin­al cost

  • Com­plete­ly ignored by text­books
  • Child­ish “lemon­ade stand” exam­ples of fac­to­ries rather than con­tra­dic­to­ry real-world data
  • But oth­er schools aren’t saints either…
  • Teach Hon­est­ly
  • Marx­ists just as bad

–Still invent­ing excus­es to keep Labor The­o­ry of Val­ue alive

  • It’s wrong. Get over it; or…
  • At least teach that some peo­ple think it’s wrong even if you don’t
  • Admit short­com­ings

–Post Key­ne­sians

  • Are weak on eco­log­i­cal issues
  • Have yet to devel­op a com­plete­ly coher­ent method­ol­o­gy
  • Admit strengths in oth­ers

–Post Key­ne­sians can admire Aus­tri­ans on uncer­tain­ty, expec­ta­tions, entre­pre­neur­ship

–While crit­i­cis­ing them on mon­e­tary account­ing & undue faith in equi­lib­ri­um

  • Above all…
  • Teach Hon­est­ly
  • Teach that econ­o­mists have the right to dis­agree with each oth­er

–No School is per­fect; All can learn from each oth­er to some degree

  • Our approach at Kingston:

–Intro­duc­to­ry course Becom­ing an Econ­o­mist starts with

  • “Why Econ­o­mists Dis­agree”

–Lec­tures cov­er­ing method­ol­o­gy & major schools

  • Neo­clas­si­cal
  • Aus­tri­an
  • Post Key­ne­sian

–Empha­sis on the ques­tions that define each school

  • Each ques­tion valid in its own right
  • Each sets school to con­sid­er some issues, ignore oth­ers

–Facts mat­ter too:

  • Some facts sup­port some schools, under­mine oth­ers…
  • Teach when econ­o­mists are fac­tu­al­ly wrong
  • Neo­clas­si­cal “Loan­able Funds”, “Mon­ey mul­ti­pli­er” mod­els of mon­ey:

–Bank of Eng­land “Mon­ey cre­ation in the mod­ern econ­o­my”

  • “Mon­ey cre­ation in prac­tice dif­fers from some pop­u­lar mis­con­cep­tions
  • banks do not act sim­ply as inter­me­di­aries,

–lend­ing out deposits that savers place with them…

  • nor do they ‘mul­ti­ply up’ cen­tral bank mon­ey to cre­ate new loans…”
  • Teach when econ­o­mists are fac­tu­al­ly wrong
  • Actu­al cost struc­tures of real firms:

–Alan Blind­er, Ask­ing About Prices (1998)

  • Teach Why Econ­o­mists Dis­agree
  • Answers to “Which School asks which ques­tion?” should be obvi­ous to expe­ri­enced stu­dents
  • But nov­el for school stu­dents who think there is only “eco­nom­ics”:

–“Can the econ­o­my equate demand and sup­ply in every mar­ket?”

–“How does inno­va­tion & change occur in cap­i­tal­ism?”

–“How did cap­i­tal­ism evolve, and will it turn into some­thing else?”

–“What caused the Great Depres­sion, and can it hap­pen again?”

–“How does the econ­o­my pro­duce more out­puts than inputs, and what are the impacts of this on the envi­ron­ment?”

–“How do real peo­ple behave in eco­nom­ic sit­u­a­tions?”

–“How do rela­tions between the sex­es affect eco­nom­ics?”

–“Can we under­stand the econ­o­my using tools from physics?”

  • Major issue for school stu­dents is they’ve only learnt “eco­nom­ics”, “physics”, “maths”, “his­to­ry”
  • Ques­tion of “how should one do eco­nom­ics (& physics, etc) not asked
  • I intro­duce the issue of method­ol­o­gy by the exam­ple of astron­o­my…
  • Teach Why Econ­o­mists Dis­agree
  • How can two peo­ple look at the same thing and see it so dif­fer­ent­ly?
  • Devel­op­ing a new real­is­tic eco­nom­ics
  • Par­al­lel course “Cap­i­tal­ism” cov­ers

–Eco­nom­ic His­to­ry

–His­to­ry of Eco­nom­ic Thought

  • Both as “live” sub­jects

–Fukuyama’s report of the “End of His­to­ry” was great­ly exag­ger­at­ed

–Eco­nom­ics under­go­ing rapid evo­lu­tion right now

  • From Lucas “cen­tral prob­lem of depres­sion pre­ven­tion has been solved, for all prac­ti­cal pur­pos­es, and has in fact been solved for many decades.” (2003)
  • To Kocher­lako­ta “we sim­ply do not have a set­tled suc­cess­ful the­o­ry of the macro­econ­o­my.
  • The choic­es made 25–40 years ago … should not be treat­ed as writ­ten in stone or even in pen.
  • By doing so, we are chok­ing off paths for under­stand­ing the macro­econ­o­my.” (2016)
  • Devel­op­ing a new real­is­tic eco­nom­ics
  • Sub­se­quent cours­es (Eco­nom­ic Mod­el­ling, Macro)

–Teach Neo­clas­si­cal vs Post Key­ne­sian views of Macro

–Intro­duce essen­tial tech­niques for gen­uine dynam­ics

  • Basics of dynam­ic sys­tems

–Includ­ing sta­bil­i­ty & insta­bil­i­ty of lin­ear & non­lin­ear sys­tems

  • Sys­tem dynam­ics
  • Clio­dy­nam­ics
  • Essen­tials of mul­ti-agent mod­el­ling
  • New foun­da­tion degree in Eco­nom­ics & Com­put­ing start­ing in 2018

–Half com­put­ing & half eco­nom­ics over 3 years

  • More com­put­ing in ear­ly years, more eco­nom­ics lat­er years

–Econ­o­mists are not com­pe­tent to teach basics of com­put­ing

  • Just as not com­pe­tent to teach the basics of math­e­mat­ics
  • Cours­es not enough

–Can’t cov­er all of lit­er­a­ture and sup­port areas in 24 semes­ter units

  • Real­ly inter­est­ed stu­dents need to read out­side cours­es as well
  • Exis­ten­tial chal­lenges
  • Via­bil­i­ty of non-main­stream eco­nom­ics always ten­u­ous

–Sup­pressed at lead­ing uni­ver­si­ties (Oxford, Cam­bridge, Prince­ton)

–Sur­vives at low-ranked uni­ver­si­ties (Kingston, UMKC)

  • Poor­er fund­ing, less aca­d­e­m­ic free­dom, more bureau­crazy

–Vul­ner­a­ble to “mar­ket reforms” of edu­ca­tion

  • Aus­tralian gov­ern­ment removal of “caps” on stu­dent num­bers led to clo­sure of eco­nom­ics at UWS

–Pre­lim­i­nary enrol­ment went from 120 to 16 in one year

–Sim­i­lar pol­i­cy in the UK in 2015

  • Halved Kingston’s Human­i­ties intake across the board
  • TEF “Teach­ing Eval­u­a­tion Frame­work” next year will com­pound the dam­age with insti­tu­tion­al “Gold, Sil­ver, Bronze” Medals for an entire University’s teach­ing staff
  • Pro-plu­ral­ist unis (Kingston, Green­wich, etc.) like­ly to receive Bronze awards, pro-main­stream (Oxbridge) Gold
  • Bureau­cra­zies who dreamed this up deserve Lead Medals
  • Exis­ten­tial chal­lenges
  • Ranks low­ly in research stud­ies giv­en Neo­clas­si­cal gate­keep­ing on “lead­ing” jour­nals
  • Blanchard’s recent calls for broad­er approach­es in jour­nals wel­come:

–“It has to become less impe­ri­al­is­tic. Or, per­haps more fair­ly, the pro­fes­sion (and again, this is a note to the edi­tors of the major jour­nals) must real­ize that dif­fer­ent mod­el types are need­ed for dif­fer­ent tasks.” (“Do DSGE Mod­els Have a Future?”)

  • But main­stream jour­nals still high­ly resis­tant to non-par­a­digm papers

–2013 debate with AER Macro edi­tor after reject­ing “mod­el­ling Great Mod­er­a­tion & Reces­sion” paper with­out ref­er­ee­ing:

  • “But what if they get more infor­ma­tion about the future? How would that change things?”
  • Main­stream jour­nals will con­tin­ue to exclude non-par­a­digm papers

–Makes pro­mo­tion dif­fi­cult for non-Neo­clas­si­cal econ­o­mists

  • Uni­ver­si­ties & fund­ing bod­ies remain hos­tile to plu­ral­ism
  • So pres­sure for change from stu­dents, pub­lic, still vital
  • For more…
  • My next book Can we avoid anoth­er finan­cial cri­sis?

–Com­ing out in April/May 2017

–Short: just 25000 words; Non-tech­ni­cal expla­na­tions of

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.