Robert Skidelsky challenges mainstream-economists about Europe's Post-Crash Economics

Post-Crash-Ökonomie

Jun 18, 2014 Robert Skidelsky

LONDON – Bei der Wahl zum Europäischen Parlament im letzten Monat errangen euroskeptische und extremistische Parteien 25 Prozent der Stimmen, wobei sie die größten Zugewinne in Frankreich, Großbritannien und Griechenland verbuchen konnten. Diese Ergebnisse wurden weithin – und richtigerweise – als Zeichen für den Grad der Spaltung zwischen einer arroganten europäischen Elite und den gewöhnlichen Bürgern interpretiert.

Weniger beachtet - weil weniger offensichtlich politisch – werden die gegenwärtigen intellektuellen Unmutsäußerungen, deren jüngste Manifestation Thomas Pikettys vernichtende Anklage gegen die wachsende Ungleichheit Das Kapital im 21. Jahrhundert darstellt. Wir sind möglicherweise Zeugen des Anfangs vom Ende des neoliberalen kapitalistischen Konsenses, der im gesamten Westen seit den 1980er Jahren vorherrscht – und von dem viele behaupten, dass er zum wirtschaftlichen Desaster der Jahre 2008 und 2009 führte.

Von besonderer Bedeutung ist die wachsende Unzufriedenheit der Ökonomie-Studenten mit ihrem Lehrplan. Diese Unzufriedenheit spielt deshalb eine Rolle, weil die Ökonomie lange Zeit als der politische Leitstern des Westens galt.

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Robert Skidelsky

Writing for PS since 2003
158 Commentaries

Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

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0 Comments on this paragraph, 23 in all 23 Comments on this article

Barry McHugh Sep 15, 2014

It’s not necessarily fair or correct to direct the argument singularly at the structures of power. It could just as well be that the economic establishment is afraid of God and what he would ask us to do if we knew him. So by keeping the model largely academic, we avoid having to meet God and his sense of fairness head on. However, it’s not just power that does that, we all do, Priests, Nuns, Popes, you and I white collar guys, the lot. We do a bit, give a bit to appease God, then dump it and say, - I'm now dammed well going to look after myself -. So it’s wrong to blame power, its correct to blame all of us and our enormously half-hearted principles: what's wrong with us? We are only buying insurance against our conscious when we see ourselves helping out the less fortunate. Moreover, the post-autistic economics movement, I advise, should tread very carefully.
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André Rebentisch Jun 26, 2014

The reason behind using formalistic models lies in the economics of the university process that rewards formal, abstract modes of expression as a tool of discourse exclusion. The real value of that formalism as a school of thought emerges when you talk to lawyers and listen to the preconceptions of alleged neoliberal policy makers. Economic models are like philosophy. If you want to deal with actual economic problems better study geography.
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Alasdair MacLean Jun 26, 2014

Obviously part of the bandwagon, currently in vogue, attempting to change the world to a more equitable place and so need to change econ 101.
It is also worrying when students start to publish manifestos. I thought that these days were long gone.
Finally did they or do they say that a key measure should be GNH not GDP. Or are they not yet at the stage of showing what is their complete thought.
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slightly optimistic Jun 26, 2014

Audit dilemma continued.
The Hague's decision on the Russian Federation's take over of Yukos, once Russia's largest oil company, is due to be reported mid-July. The transaction took place nearly a decade ago.
"This is, by a hefty multiple, the largest investment arbitration case ever brought: the shareholders are looking for more than $100bn damages", reports the FT.
State pressure on the auditors of Yukos apparently led them to withdraw audit reports for over ten years. This led to the company's bankruptcy and the lengthy imprisonment of officials.
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Neva Goodwin Jun 24, 2014

New thinking about education in economics is moving rapidly in parallel with a huge number of experiments with new ways of organizing economic activity. A recent conference in Boston, organized by the New Economy Coalition, brought together more than 100 organizations and businesses that are “working to build the movement for just and sustainable future.” There has been wide circulation of some of the results; especially relevant to Robert Skidelsky’s excellent “Post-Crash Economics” is a report on a panel called “How to Change the Teaching of Economics” which briefly reviews the barriers to change in the content of college level economics courses and then suggests strategies for overcoming these barriers. The Report is intended to be a living document, and invites teachers, students and others to share additional ideas and experience at http://www.ase.tufts.edu/gdae/education_materials/ChangingTeaching.html
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Neva Goodwin Jun 24, 2014

New thinking about education in economics is moving rapidly in parallel with a huge number of experiments with new ways of organizing economic activity. A recent conference in Boston, organized by the New Economy Coalition, brought together more than 100 organizations and businesses that are “working to build the movement for just and sustainable future.” There has been wide circulation of some of the results; especially relevant to Robert Skidelsky’s excellent “Post-Crash Economics” is a report on a panel called “How to Change the Teaching of Economics” which briefly reviews the barriers to change in the content of college level economics courses and then suggests strategies for overcoming these barriers. The Report is intended to be a living document, and invites teachers, students and others to share additional ideas and experience at http://www.ase.tufts.edu/gdae/education_materials/ChangingTeaching.html
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slightly optimistic Jun 24, 2014

A parliamentary investigation into the collapse of the UK banks was carried out in London. Disregard of the nation's vital checks and balances was found to be responsible. The auditors claimed that the government overruled their concerns, and clearly the government of a nation is influential - as one resolute firm found some years back it led to their ruin. So not unnaturally, the auditors caved in this instance. The banks later went bust and £billions of public money was spent in the rescue.
No doubt this happened elsewhere - auditors aren't protected.
Are students taught about this professional dilemma?
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Rentz Hilyer Jun 23, 2014

Glad to see a reference to Supply Shock here. This book made a big impact on my world view. I agree that readers here would especially enjoy the section (ch. 4) that explains how the backlash against Henry George's land tax sent neoclassical economic thought down a road based on corruption and deceit that led to the decoupling of today’s mainstream economic growth theory from ecological principles. To this day, typical economics curriculums present EG as the primary goal of the economics profession.
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Nathan Coppedge Jun 23, 2014

It would be interesting to see more economics models focus on the technology-infrastructure parallel, if they have not done so already. Permanent or relatively permanent (infrastructure) resources may not be commodities, but they offer a lot of bang for the buck. If economics is not by-and-large a product of infrastructure, then I would suggest seriously considering virtual economics as a functionalist platform serving democratic or democratic-elite values. Like a lot of things in politics and economics, it may sound stupid, but in some ways, it has something to say.
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Michael Lewis Jun 21, 2014

Neoclassical economics is a political reaction to the single-tax on land proposal of Henry George in late 19th Century United States.

For more economic history... and the future, see "Supply Shock: Economic Growth at the Crossroads and the Steady State Solution," by Brian Czech. http://www.supplyshock.org/
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William Wallace Jun 20, 2014

While I'd love to see economics approached properly as a social science, with focus on data first and theory later, it sounds like some of what is being advocated is the replacement of one set of a priori objectives for another (justice, equality, etc.)
I'd rather see the field "go descriptive" for a decade or two before prescribing again; we've seen enough of that kind of pseudoscience already from the field.
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Procyon Mukherjee Jun 20, 2014

The tragedy of Economics as a social science lies in the admissibility of the self-induced dissonance that stems much from the use of models that do not replicate reality while it is influenced by the make-believe world of finance that tends to distort reality to meet short term selfish objectives that could have far-reaching consequences in the long term.

Much of the world's talent finally moves to this world and their influence on Economics and other social sciences is far from being a balanced one.
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Achilleas C. Jun 19, 2014

Another much simpler solution would be to abolish Economics as a standalone undergraduate degree in the UK and teach economics along with a combination of the other social sciences.
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slightly optimistic Jun 19, 2014

A demonstration of exasperation with how national politics at present can lead to financial instability came last month from the former chairman of the US Federal Reserve. But this is only one example of long-term and serious indiscipline within the global economy.
Paul Volcker referred to the Nixon shock in 1971 that destroyed the world's financial discipline, and no doubt led to the euro troubles and the near collapse of economies elsewhere around the world - the mayhem led to the G20 taking responsibility for financial stability.
Will Australia's G20 dare to address the fundamentals?
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Ken Clark Jun 19, 2014

This article follows a common pattern found in critiques of "mainstream" or "orthodox" economics. There are three steps: (1) economists all believe X; (2) X is clearly nonsense; (3) therefore economics is nonsense and needs to be reformed. Like most such critiques it breaks down at step (1). The idea that mainstream economics is a free market ideology ignores the vast swathes of the discipline that investigate what happens when markets fail to deliver socially desirable outcomes. In the academic literature this is the most dynamic and interesting current research agenda while most practising, non-academic, economists are engaged in precisely this kind of endeavour. Would a discipline in the thrall of the oligarchs have produced the New a economics of the Minimum Wage, current advances in behavioural economics or any of the huge literature on, say, involuntary unemployment where government intervention leads to a better equilibrium? Lord Skidelsky mentions capital in the 21st Century but neglects to remind us that Piketty has been feted within the economics profession, published in the leading mainstream journals and tipped as a future Nobel prize winner.
As for blaming economics as a discipline for both the crash and austerity, Lord Skidelsky fails to acknowledge the many economists who argued and continue to argue against the offending policies. Is there a consensus amongst UK macroeconomists on austerity? Certainly not, but it is not the discipline's fault whom policy makers choose to ask for economic advice and which advice they choose to follow.
There are undoubtedly developments in the economics discipline which could be better reflected in the undergraduate curriculum. In a dynamic, developing subject, this will always be the case but dismissing the mainstream as narrow and ideologically driven is wide of the mark and undermines the case for any reform that might legitimately be required.
- Charles Stewart Jun 30, 2014
  
  This criticism of Ken Clark seems unfair: if you accuse Skidelsky of arguing from "(1) economists all believe X; (2) X is clearly nonsense", you need to give an X for which he asserts both of those.
  
  The criticism in the first place is not that mainstream economics lacks depth, but that it lacks breadth (lack of interest in problems that don't fit GE model, lack of interest in problems that don't give an opportunity to show off technical sophistication). In the second place, is there no ideology involved in an economist like Krugman being a pioneer of New Trade Theory among his peers, while putting forward the Davos-friendly simplified free-trade agenda as a litmus test for being a respectable economist?
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philip meguire Jun 19, 2014

If the nationalists and populists come to power, they will have no more time for Skidelsky than they do for the rest of profession. Be careful what you wish for.
It is impossible to learn business and policy reality, and standard and heterodox economics, within the ambit of the English/Commonwealth 3 year degree. This is doubly true given how poorly prepared many average uni students are nowadays. A major problem in New Zealand universities, where I have taught for 20 years, is that only 4 years of post high school instruction is offered. That is not enough time in which to obtain a broad and serious education.
Piketty's book does not understand the Solow-Swan model of the elementary dynamics of a industrial economies, as taught to university students everywhere. If Piketty were right, the share of labour would decline over time, and household net worth would grow faster than household income. Both assertions are falsified by post WWII USA history, if transfer payments are seen as largely made up of delayed and contingent wages.
I agree that the first degree in economics should include more economic history and history of ideas, and more political philosophy and ethics.
Little can be done about inequalities in wealth, beyond mitigating inequalities in incomes, without threatening the the health of the entire economic order. Inequalities of income can be mitigated via a flat tax combined with an annual amount paid to every legal resident of the country. It must be emphasised that the sort of confiscatory marginal rates Piketty advocates will starve the public purse over the long run.
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Tim Chambers Jun 18, 2014

I majored in economics in college and didn't learn anything useful from it. I suspected it was mostly ideology then (late 70s), particularly Friedmanism. If Milton Friedman and Monetarism have not been put to rest post-crash by the ineffective monetary stimulous of Quantitative Easing, it should be but won't because its adherents are the only beneficiaries and they are still in unmerited positions of power.

For all their talk of the evils of government intervention in the economy, we would not have the form corporate Capitalism we have today without government intervention. Read Polanyi. What made corporate Capitalism possible were policy choices by governments - imperialism. colonialism, militarism, the gold standard... - a collection of evils whose unwinding continues to bedevil us worldwide.

My college offered no courses that dealt with such critiques, because we were being indoctrinated in an ideology, not educated to think and make rational choices for ourselves.
- philip meguire Jun 19, 2014
  
  Monetarism is dead. QE should not be evaluated by how much growth its has stimulated (which is not much), but how much free-fall disaster it prevented (which we will never know for sure).
  The modern corporation emerged in the USA 1890-1914, for two reasons. First was a growing hostility in legislatures and courtrooms to the large business trusts that immediately preceded the modern corporation. Second was the continuous valuation of a corporation's stock in the stock market. This made buying a piece of a business vastly easier, and enabled the eventual rise of well diversified managed funds.
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Earl Staelin Jun 18, 2014

Excellent, but what is left out is identification of the most serious problem with the U.S. financial system, and that is that government has given up its power under the Constitution, Art. I, section 8 (5), to create our money through direct issuance of currency, and turned it over to private banks, and eventually to the Federal Reserve System and the private banks who own it. This private system then creates our money and lends it to our government at interest---an enormous, unnecessary expense that gives Wall Street a large measure of control over our government, and creates an every-growing deficit. If students understood this, they would refuse to take courses in the field until the curriculum is reformed to fill this enormous gap. Students would then include study of the writings of Ben Franklin, 19th century economist Alexander Del Mar, 20th century economist Irving Fisher of Yale, and present day economist Michael Hudson of the U. of Missouri at Kansas City, among others, on our financial system and how to change it in order to restore a healthy economy that is protected against recession.
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radek tanski Jun 18, 2014

"The development of a profession of economists is an offshoot of interventionism. The professional economist is the specialist who is instrumental in designing various measures of government interference with business. He is an expert in the field of economic legislation, which today invariably aims at hindering the operation of the market economy." Von Mises

I suppose that was the past. Now we have the new age economics of live and let live.
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slightly optimistic Jun 18, 2014

One criticism that Ha-Joon Chang made about the current form of capitalism is that economics is becoming a value-free science. The subject used to be called political economy.
This could explain why international rules are often broken, we have such instability in Iraq and Ukraine, and some developed countries ignore even national checks and balances on finance in order to beggar others.
It remains to be seen if the G20, under Australia's chairmanship, will dare to address the fundamentals. I agree with the comment below: "A simple reshuffling of university curricula will not change the discourse."
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Denis Burakov Jun 18, 2014

Dear Mr. Skidelski,

I share some of your concerns about the mathematization of the field of economics, which has undoubtedly changed beyond recognition in the course of past decades. Indeed, we are no longer talking about classical economic theory as professed by D. Ricardo and others; neither do we seek to look deeper into human relations through the prism of economics. Instead, we model an economic life of fictional utility-maximizers who pursue their self-interests and keep our economies running. So now we are talking economics.

While this all seems true, I do not see how a curriculum reform can "remind students that economics is not a science like physics, and that it has a much richer history than is to be found in the standard textbooks." I personally think that there is no turning back. Classical and neo-classical economic theory sure can be taught along with other social science courses, but let's admit it: economics of today is all about quantitative modeling and complex mathematical techniques. A simple reshuffling of university curricula will not change the discourse, let alone provide students with new ideas how to solve all exigent economic issues.
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