In the years following the 1929 crash, economists responded with a flurry of new and innovative ideas to better understand the bigger questions of how the economy works. Keynesianism, over the decades, came to be shaped more by the political mores of the time than any true adherence to what Keynes actually wrote, while Hayek’s free market theories present questions that we are still grappling with.
There have been other flurries of activity calling for “better economics” over the decades, and the 2008 financial crisis sparked another wave of calls for a deeper and more accurate understanding of what is actually going on. Clearly, while microeconomics might have given us the answers to some questions, macroeconomics has a way to go in understanding how the world works. But really, since 2008, what has actually changed?
“Very little” appears to be the general answer to this. There are several reasons here. In academia, the way your research is assessed and the way that promotions are awarded tends to come down to publications that support, rather than challenge, the mainstream (more on this later). In business, monopolies are unlikely to campaign for better antitrust regulation and enforcement. And we have a generation of politicians who have been taught (indoctrinated in) orthodox, mainstream economics and have been told that this is the only way to do economics and that it works. But there are calls for diversity, plurality and different approaches appearing.
I thought it might be helpful to set out some of the institutes and organisations that have appeared since the financial crisis calling for a rethink of economics. In the UK, Promoting Economic Pluralism (PEP) aims to change the way economics is taught in universities, and sets out an ambitious accreditation for pluralist economics teaching that it aims to have up and running by 2020. The blog for the group can be accessed here, and charts some interesting developments, seminars, and movements that have the common purpose of changing the way we do economics.
Other research programmes include “Rethinking Macroeconomics” at the National Institute of Economic and Social Research (NIESR) in London, which has secured ESRC funding for a project looking at how we could do macroeconomics better.
In the US, the Institute for New Economic Thought sets out to challenge the dominance of mainstream economics by funding research, engaging in public dialogue and driving forwards a new way of thinking about economics. Their goals are listed on this page.
Both institutes are engaged in highlighting and tackling the crisis of conformity in economics – in the way it is taught, the way it is practiced, and the way it is thought about in academia. The conformity within academic thought is more of an institutional problem, as this touches on publication, promotion, and professionalism within academia.
The problem here is that to progress as an academic you have to publish, preferably in the “top” or most prestigious journals. Obviously, if you’re trying to do something innovative or outside of the mainstream box, or even worse trying to tear down the existing box and build a new one, it is unlikely the more prestigious mainstream journals will accept your paper for publication. They have strict criteria for what they accept, and usually this means conforming to mainstream standards and not challenging or undermining the entire field. The publication industry actually reinforces the mainstream way of doing things, and in economics, that means reinforcing methodologies and frames that led us to the financial crisis.
As I mentioned in the previous post, there is a lot to be said here for greater education. Not just in universities on macroeconomics 101 courses, but more generally and broadly. We need a much higher level of economic literacy across the board, so that society is able to engage with – and more importantly challenge – economic ideas, plans, models and conclusions. This needs to happen hand in hand with an expansion of economics methodologies and approaches, and an appreciation of economics as a social science that is about perfectly imperfect and irrational people.
We all need to hope that the voices currently calling for diversity and plurality are more successful this time than previous waves of soul searching have been.