The Perils of Leaving Economics to Experts

One of the books in the list of “best reads of 2019” was a little one –  The Econocracy – the perils of leaving economics to the experts; - which I had, as I tend to with most economics books, dipped into briefly and returned to intermittently. But it was worth the wait – being a

concise and well-researched critique of modern economics and how it is taught in universities as well as the broader issue of public engagement with economics as part of the democratic process.

The authors define the ‘Econocracy’ as

‘a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it’. 

Since the financial crisis of 2008, there has been an endless stream of books and articles about economists’ failure to predict the crisis, and more recently a sense that the subsequent economic response in the form of austerity policies has done more harm than good. Is it any wonder then, the book asks, that the public might be left questioning economic ‘experts’, and economics students their education? In fact, as I noted in an earlier post, student reaction to the overly mathematical nature of economics (and its lack of pluralism) began before the financial crash  

The Post-Crash Economics Society has its origins in this disenchantment, and one of the book’s strongest contributions is its critique of the highly stylised and homogenised curriculum that would be familiar to economics students worldwide. The authors contend that despite attracting capable students who are interested in the world around them, economics as it is taught at university has little to do with the real world, uncritically setting out a model based on rational individuals and an economic system that tends towards equilibrium, while also being insufficiently pluralist, downplaying debate between different schools of economics or relegating these to the History of Economics.

This argument is supported by a useful analysis of the final exam questions on core and elective economics courses at various universities. These rely heavily on what the authors call ‘operate the model’ problems: asking students to uncritically apply the taught model to a stylised situation, with no thought to whether the model, situation or answers are realistic or useful. Overall this analysis finds that 76 per cent of exam questions required no ‘critical or independent thinking whatsoever’ (51).  Even if exams aren’t perfectly representative of course content, they will very much influence student efforts, so it is concerning that critical engagement is neither valued nor rewarded. The authors lament: ‘It is hardly an exaggeration to say that it is now possible to go through an economics degree without once having to venture an opinion’ (p51).

This disheartening state of affairs is blamed on a combination of factors that come under the umbrella of ‘Econocracy’: the increasing marginalisation of heterodox thought from the discipline, for example, starting with the kinds of articles that are accepted into the major journals. This, in turn, influences what research is prioritised by universities and funding bodies (currently through the Research Excellence Framework), and inevitably who is hired or promoted (the ‘curse of the top five’ journals was discussed at this year’s American Economic Association meeting).  This is compounded by the increasing financial pressures facing the Higher Education sector, with reduced funding per student leading to ever-larger class sizes and time-poor lecturers and graduate teaching assistants.

That economics discourages students from thinking and expressing opinions would have Adam Smith turning in his grave – he was, after all, a Professor of Moral Philosophy. But is hardly a new argument - Stefan Collini, for instance, has long spoken out against the worsening outcomes not just for students of the modern university, but society more broadly. 

It was only last week that I reminded readers of the 36 types of capitalism one could discern in 12 academic disciplines. And one of the most important parts of the book for me was therefore the table (at page 61) which identifies 10 different “schools” of thinking which can be discerned within economics itself…

Pluralism in Economics

Name of “school”	Humans….	Humans act within…	The economy is…..
Old “neo-classical”	Optimise narrow self-interest	A vacuum	Stable
New “neo-classical”	Can optimise a variety of goals	A market context	Stable in the absence of friction
Post-Keynes	Use rules of thumb	A macro-economic context	Naturally volatile
Classical	Act in their self-interest	Their class interests	Generally stable
Marxist	Do not have predetermined patterns	Their class and historical interests	Volatile and exploitative
Austrian	Subjective knowledge and preferences	A market context	Volatile – but this is generally sign of health
Institutional	Have changeable behaviour	Instit envt that sets rules and social norms	Dependent on legal and social structures
Evolutionary	Act “sensibly” but not optimally	An evolving, complex system	Both stable and volatile
feminist	exhibit engendered behaviour	A social context	Ambiguous
ecological	Act ambiguously	Social context	Embedded in the environment

This is an excerpt only – the full table is from Ho-Joon Chang’s “Economics – a User’s Guide” but can be viewed at diagram at p61 of The Econocracy – the perils of leaving economics to the experts; Earle, Moran and Ward-Perkins (2017)

The authors note that economics degrees are seen by many universities as a particularly useful money-maker (used to cross-subsidise other departments), being most compatible with large lectures and exams relying on stock answers and multiple-choice questions. In spite of this, the authors observe that a growing number of universities are dropping their economics degrees completely, which is a worrying trend if decreasing public engagement with economics is to be addressed.

The authors have clearly dedicated a lot of thought to the question of how to improve university economics and do offer some concrete suggestions, which mainly revolve around a more engaged style of pedagogy (for example, peer-to-peer teaching and alternative forms of assessment).  In fact, one of the most interesting contributions of this book is its account in Chapter Four of the authors’ experience lobbying their own university for reform, making this a valuable case study in campaigning and network-building for similarly motivated readers.  However, despite their tenacious optimism, even the authors have to admit that ‘reforming economics education to better serve its students, the discipline and society will be extremely difficult without a change of direction in university and government policy’ (p140).  Incremental change at the level of the curriculum can only do so much, but that doesn’t mean it shouldn’t be attempted (the book provides a good overview and critique of one such attempt, the CORE project).

But the broader problem of the ‘Econocracy’ beyond how economics is taught is surely the growing public disenchantment with the discipline. While much ink is yet to be spilt trying to explain the rise in populist movements worldwide, public engagement with economic debate is surely a key issue. The authors argue that while many of the factors associated with this new wave of anti-globalist sentiment are economic (including stagnant middle-class wages and the loss of blue-collar jobs), the rhetoric of these movements is decidedly non-economic, emphasising instead questions of national security and sovereignty. 

This is a crucial insight: that combatting the appealing messages of populism might not be a case of simply ‘winning’ the economic debate (the rhetoric around Brexit being a clear example of this failed strategy), but instead creating a new kind of discourse that addresses the concerns of a disengaged public and, more importantly, actively involves this public.

The book concludes with a rousing call for a new kind of ‘citizen economist’ who can facilitate this engagement, decoding the ‘econobabble’ of economists and policymakers and empowering citizens to be part of the debate. Economics has for too long been seen as a set of tools for use only by the experts.  But economics, as this book argues, is for the public, and they too can pick up these tools and decide how they want to use them.

Best Reads in 2019

Just a few years back, people were predicting the demise of the book – at least in its “real” as distinct from “virtual” form. E-books, we were told, would make physical books obsolete. For once, however, the neophiliacs seem to have been proved wrong…..In 2017, for the first time real books had positive growth but sales figures for virtual books declined…

Although publishing giants continue to gobble up other publishers – most famously in recent years my favourite, Penguin – small publishers somehow continue to grow and seduce us with their wares.

There is, of course, a downside to this – that we are swamped by the number of new titles which churn from the printing presses….

Indeed I have, half-seriously, raised in my blog the idea of rationing at least non-fiction books to which I am most partial

On the question of real or virtual books, I feel I can be reasonably objective since I am both a great reader of real books and writer of E-books (at least 12 if you include the edited annual collection of posts) ….

Virtual books are functional but simply do not satisfy aesthetic and ergonomic needs. 
I heed to be able to flick the pages quickly to find the index and recommended reading; scribble comments; check pages I’ve already marked,.....I need, indeed, to smell the pages….

The E-book published at the beginning of the month - To Whom it May Concern – the 2019 posts – has several annexes, including my list of favourite blogs and of non-fiction classics of the past century.

I realise it would have been useful have added an indication of the books which most impacted on me during the year – and to see whether they passed the tests I had suggested in 2018 we might use to decide whether to purchase yet another non-fiction book.

I start with the oldest. In many cases the hyperlinks explain what I found interesting about the book and sometimes the commentary there will actually allow you to access the book itself. In a few cases the hyperlink in the title itself will give you the entire book (or at least some sample pages)

 The British Regulatory State – high modernism and Hyper-innovation; by Michael Moran (2003). This gave a very different interpretation of the modern UK state from the one found in most textbooks

Monoculture – how one story is changing everything; FS Michaels (2011) A very readable explanation of neoliberalism

“The Righteous Mind” Jonathan Haidt (2012). The link explains…

The Capitalist Papers – fatal flaws of an obsolete system; Jerry Mander (2012) Ditto

The New Few – a very British oligarchy; Frederick Mount (2012) Ditto

A Life in Pictures; Alasdair Gray (2012) Ditto

Dealing with Dysfunction – innovative problem-solving in the public sector; Jerry de Jong (2014) A highly original perspective on good decision-making.

The Road to Character; David Brooks; (2015) The link explains

Interestingly, the books which left the biggest impression were all produced in the last 2 years. They are -

The Econocracy – the perils of leaving economics to the experts; Earle, Moran and Ward-Perkins (2017)

The Lure of Greatness – England’s Brexit, America’s Trump”; Anthony Barnett (2017)

Capitalism – the new anxieties;  Paul Collier (2017)

The Fear and the Freedom; why the second world war still matters; Keith Lowe (2017). A history book which reminds me of Theodor Zeldin in the way it uses portraits of individuals as a hook on which to hang the narrative.

The Laws of Human Nature; Robert Greene (2018)    

Reckless Opportunists – elites at the end of the establishment by Aeron Davis (2018)

Bullshit Jobs – a theory; David Graeber (2018)

The Dawn of Euroasia – on the trail of the new world order; Bruno Macaes (2018)

Lost Connections; Johann Hari (2018)

The Square and the Tower – networks and power from the Freemasons to Facebook (2018)

Post-Modernism – an intellectual history

The matrix presented in the last post tells the same story as did the Indian parable of three millennia ago of the blind men who encounter an elephant

They have never come across an elephant before and learn and conceptualize what the elephant is like by touching it. Each blind man feels a different part of the elephant's body, but only one part, such as the side or the tusk. They then describe the elephant based on their limited experience and their descriptions of the elephant are different from each other. In some versions, they come to suspect that the other person is dishonest and they come to blows. 

The moral of the parable is that humans have a tendency to claim absolute truth based on their limited, subjective experience as they ignore other people's limited, subjective experiences which may be equally true

This seems to put post-modernism and its claims in its place – is it really all that new?

That’s the question which this post considers…

Some time ago I came across a reference to a short book written in 1944 which I had never heard of – The Abolition of Man – which seemed to anticipate the threat which the “anything goes” strand of post-modernism would bring (which I have taken to calling - the “whatever” response). It was penned by a very well-known figure of CS Lewis and is summarised here – the full version can actually be downloaded here.  

It seems that Lewis (father of Daniel D) took the threat so seriously that he wrote a dystopian novel about it – That Hideous Strength whose plot is summarised in great detail here; serialised here; and available (courtesy of Gutenberg) in entirety here

Rashomon was a famous Japanese film, made in 1950, which considered an event from four different perspectives – a few years before I learned this knack, operating as I have described elsewhere in the no-man’s land between classes, between different academic and professional fields and, from the age of 50, even between different countries.

And it was political scientist Graham Allison’s Essence of Decision – explaining the Cuban missile crisis (1971) which helped me appreciate the significance of what I had felt, in my youth, to be, quite simply, personal tensions.

That book set out three very different ways of understanding the events of October 1962 when the world stood on the edge of nuclear war (see the diagram at p23 of that link). His 1969 paper in the American Political Science Review rehearsed the basic argument – which outlines first a “rational model” of decision-making; then one based on “organisational behaviour”; and finally one based on “governmental politics”.

The clearest explanation of the phenomenon, however, is probably the earliest – American sociologist Peter Berger’s The social construction of reality (1966) whose significance I didn't recognise at the time

Frame analysis” – variously attributed to anthropologist Geoffrey Bateson (1972) and Erving Goffman (1974) – was the technical term given to the recognition of diverse and divergent perceptions of “reality” and one which I came across during a part-time course I was taking on policy analysis – actually the UK’s first such course in the mid 1980, run by Lewis Gunn. 

I can still remember the room I was in when we discussed the concept and the frisson experienced - although when I google the term, I can’t find a satisfactory article – all gibberish, associated with the field of communications studies.

But it was, probably, Gareth Morgan who popularised the notion that we could view organisational reality in many different ways. His Images of Organisation appeared in 1986 and pointed out that nine different metaphors (or “ways of seeing”) had developed about organisations eg as a “machine”, as a “brain”, as “cultures”, even as a “psychic prison”. And each of these have very real and distinctive effects on the way we think about organisations.

A drawing made the same point visually – see, for example, p 26 or so of Stephen Covey’s Seven Habits of really Effective People (1990) – some saw an old woman, others a young thing with a bonnet….

Like David Harvey in The Condition of Post-modernity – an enquiry into cultural change; (1989), I’m not sure when I first came across the expression “post-modern” to describe the age which has taken the celebration of diverse ways of looking at events to such extremes that “anything goes” and “fake news” flourishes.

Harvey is a geographer and better known for his exegesis of Marxism – and it’s only now I have come across this book of his on postmodernism which seems at first glance to be quite the best thing I know on the subject

Of course, the question everyone poses when the subject turns to postmodernism is – what was modernism? For which the best read is Marshall Berman’s All that is solid melts into air (1982) which was the subject of a famous exchange between Perry Anderson and the author in 1984 in the pages of the New Left Review 

Further reading

https://www.preceden.com/timelines/62885-postmodernism-timeline-1939-2001; The Preceden website is a very useful tool I didn’t know about – and this entry helps us understand PM

The Saturated Self – a collage of postmodern life; K Gergen (1991) A psychologist’s take on the matter

Self and modernity on trial – a reply to Gergen which contains a great summary of the book

https://www.newworldencyclopedia.org/entry/postmodernism

https://www.jacobinmag.com/2017/04/marshall-berman-living-urban-city-modernism-dissent/

https://www.dissentmagazine.org/blog/marshall-berman-archive-cities-modernism-signs-in-streets

One Dimensional Man; Herbert Marcuse (1964) which can be accessed here

http://bostonreview.net/books-ideas/ronald-aronson-herbert-marcuse-one-dimensional-man-today

Common cause (2010) a vivid example of how postmodernism now drives the marketing machine

57 Varieties of Capitalism

Last October I developed a table in what was probably the most important post of the year – one in a series about capitalism. The table listed 11 academic disciplines; showed how 3 “schools” of thinking could be discerned in each discipline; and how they tended to treat the subject.

The key variable distinguishing these schools was the extent to which they recognised the realities of power. I named them “market theoreticians”; “mixed” and “critical-realist” respectively.

The subsequent matrix produced 33 different “lens” with which to try to understand the system which rules over us with Minotaur-like voraciousness. I was proud of the result – I had never seen it done before. Of course there was a school of political economists which developed in the 1980s and 90s called the Varieties of Capitalism approach – but this focused on essentially two basic models. 

My matrix is distinctive in 3 ways – first that so many academic fields are listed. At best people will mention economics, sociology and political science – with little recognition that economics has several very different sub-fields. And I might have added “complexity science” which has rapidly developed its own specialism.

The second original aspect of the table is the recognition of three very different “schools” or approaches…Most economists, of course, still adhere to highly theoretical and unrealistic assumptions which were explored (and exploded) in this recent post

But political and behavioural economists – let alone the sociologists, geographers and even psychologists have been muscling in….Indeed I have had to add the psychologists to the table…giving 36 "lens" or squares

And the final distinctive aspect of the table is the identification of so many books – almost 50 covering most of squares…
I have selected the books which appear in the table according to whether they portray a world of “perfect competition” in which, according to the theory, no one has any power or, at the other extreme, a world of large companies and groups exercising power (legal and illegal). 

We are prone these days to use ideological labels too easily – so I want to avoid that by using less obvious labels.

- “Market theoreticians” (column 3) are those whose writing is based on the totally unrealistic assumptions of perfect competition

“Mixed economy” therefore covers those who clearly argue for what used to be called “the mixed economy” and are quite clear that they wish a better, more balanced capitalism;

- The “critical-realist” label covers those who go further in their critical approach, extending their analysis to the role exercised by dubious and illegitimate power players who try to buy democracy and whose activities threaten the planet’s very survival.

Some academic disciplines, of course, like economics, are almost exclusively associated with one school (market) whereas others are more pluralist 

Needless to say, the allocation to one particular column is arbitrary and could be disputed – as can the choice of illustrative authors and books (not all of which I have actually read)

The table is, however, a rather superb example of what post-modernism has done to us – which I will explore in a subsequent post   

The table is, however, a good example of what post-modernism has done to us

 Key Texts about the future of capitalism – by academic discipline and “approach”

 

Academic Discipline	1. Critical-Realist	2. Mixed approach	3. “market theoreticians”
Economics	Debt and Neo-Feudalism; Michael Hudson (2012)  Credo – economic beliefs in a world of crisis; Brian Davey (2015). Davey is not a career or conventional economist!   23 Things they didn’t tell you about capitalism; Ha Joon-Chang (2010)	People, Power and Profits – progressive capitalism for an age of discontent; Joseph Stiglitz (2019) The Future of Capitalism – facing new anxieties; Paul Collier (2018) Shifts and Shocks – what we’ve learned, and still have to, from the financial crisis; Martin Wolf (2014) Conceptualising Capitalism – institutions, evolution, future; Geoff Hodgson (2015)	Why Globalisation Works; Martin Wolf (2004)     most of the discipline
Economic history	Capitalism and its Economics – a critical History; Douglas Dowd (2000) Never Let a Good Crisis go to waste; Philip Mirowski  (2013)	Crashed – how a decade of financial crises changed the world Adam Tooze (2018)	Economic historians by definition have a strong sense of political and other institutions
Political economy	Inside Capitalism – an intro to political economy; Paul Phillips (2003) Susan Strange - States and Markets (1988) - Casino Capitalism ; (1986) - The Retreat of the State (1994)	Austerity – the history of a dangerous idea; Mark Blyth (2013) Yanis Varoufakis - And the Weak Suffer what they must – Europe, austerity and the threat to global stability (2016) - The Global Minotaur (2012)	The discipline still rediscovering itself but, again, by definition, has a strong sense of the importance of institutions
Political Science	Crisis without End - the unravelling of western prosperity: A Gamble (2014)  Democracy Incorporated – managed democracy and the spectre of inverted totalitarianism; Sheldon Wolin (2008)	Paul Hirst eg Revisiting Associative Democracy; ed Westall (2011).  The Great Disruption – human nature and the reconstitution of social order; Francis Fukuyama (1999)  Mammon’s Kingdom – an essay on Britain, Now; David Marquand (2015)	Only a few brave pol scientists trespass into the economic field – although it is becoming more fashionable
Policy analysis/Think Tanks		“The Locust and the Bee – predators and creators in capitalism’s future”; G Mulgan (2015)	An Intro to Capitalism (IEA 2018)
Sociology	Wolfgang Streeck. - How will Capitalism End?; (2016) - Buying Time – the delayed crisis of democratic capitalism (2013) End of capitalism? Michael Mann (2013) Capitalism; Geoff Ingham (2008)	Vampire Capitalism – fractured societies and alternative futures; Paul Kennedy (2017)	The sociological voice is still inspired by C Wright Mills, Veblen, Weber and Durkheim
Geography	David Harvey - Seventeen Contradictions and the End of Capitalism (2014) - The Enigma of Capital (2010) - A Brief History of Neo-Liberalism (2005).	Danny Dorling - A Better Politics – how government can make us happier (2016 - Injustice (2014)	The geographers are a bolshie lot - with a strong sense of geo-politics
Environment	Come On! Capitalism, short-termism, population and the destruction of the planet; (Club of Rome 2018).	Why we can’t agree about Climate Change; Mike Hulme (2009) Natural Capitalism – the next industrial revolution; Paul Hawken (1999)	they pride themselves on their technocracy
Management and man’t studies	“The Dictionary of Alternatives – utopianism and organisation”; M Parker (2007)	Rebalancing Society; Henry Mintzberg (2014) Peter Senge Charles Handy	Most mant writers are apologists – apart from the critical mant theorists
Religious studies	Laudato-Si – Pope Francis’ Encyclical (2015). Accessible in its entirety here	The Crisis of global capitalism – Pope Benedict XVI’s social encyclical and the future of political economy; ed A Pabst (2011)	Questions of Business Life; Higginson (2002)
Psychology	Herbert Marcuse What about me – the struggle for identity in a market based society?; Paul Verhaeghe (2014)
Journalism	Post Capitalism – a guide to our Future; Paul Mason (2015) ….  The Capitalism Papers – Fatal Flaws of an Obsolete System; Jerry Mander (2012).	How Good Can we be – ending the mercenary society Will Hutton (2015)  Capitalism 3.0 Peter Barnes (2006)	They don’t enjoy the tenure of the academics (altho Hutton is a college Director)