The heterodox economics movement aims to dispel and combat the myths perpetuated by the majority of economics courses around the Western World. Ben Fine and Ourania Dimakou’s two new books Macroeconomics and Microeconomics add to the growing literature surrounding this movement. In this blog post, Ben Fine, Professor of Economics at SOAS, University of London expresses the sorry state of the economics establishment today.
‘No one can now doubt that economies are currently unfit for purpose after the failures to recover from the Global Financial Crisis that began to break in 2007. Both the hardship inflicted across the majority of the population and, yet, the support for, prominence of, and rewards to finance remain astonishing. This is despite the undoubted role of the over-expansion of finance in causing the deepest crisis and recession since 1929. About that time, Baron Josiah Stamp had this to say:
‘Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.’
Nor was Stamp some raving lefty as his Baronetcy indicates; he founded one of Britain’s most successful companies, was reputedly its richest private individual, served on the Board of the Bank of England, and much more besides.
We do not seem to have learnt Stamp’s lesson and we continue to remain the slaves of bankers, with just hundred financial firms alongside fifty or so others, more or less dominating the world economy, through their interlocking ownerships and networks, and, at times, opaque operations.
But, equally alongside economies being unfit for purpose, the same can be said of economics. Long enough after the crisis broke for it to have an effect (and to respond to the Queen’s query why economists had not been more on the ball), a literature search on “crisis in economics” or the like came up with just a handful of entries, most referring back to a dispute of eighty years ago around Schumpeter. By contrast, the similar search for sociology for purposes of comparison came up with 7230 entries, the majority far more contemporary. Yet, no one is blaming the sociologists for the crisis!
This is indicative of what many students and heterodox economists have been saying in the wake of the crisis. The dismal discipline is not only unfit for purpose but totally unyielding in allowing for alternatives to be taught and to prosper despite its own transparent deficiencies. Instead, it is business as usual, if allowing for a few tweaks here and there in the university classrooms.
In this light, Macroeconomics and Microeconomics, the two companion texts just published are intended both to teach much of what students need to know about standard economics but also to critically tease out why these core fields are the way they are, how they became so and the ways in which they are desperately deficient in method, conceptualisation, theory and, unsurprisingly, attachment to realism.
Consider, for example, the concept of financialisation which has swept across the social sciences in the wake of the crisis, in seeking to capture the increasing presence and power of finance in our daily lives, at both macro and micro levels. The one major exception to the use of this concept is economics itself, just where it might be thought to be of most significance in remedying the discipline’s deficiencies. But the nature of micro and macro do not allow for it to be incorporated.
This is, however, just the tip of the iceberg in terms of the extent to which economics is unfit for purpose, even if its deficiencies have inevitably been sorely exposed by the Global Financial Crisis. Similar sins of deficiency, if not omission altogether, apply to other topics such as distribution, technical change, monopolisation and so on.
Significantly by way of example, consider the Nobel prizes for economics in 2010. Discreetly avoiding the recently favoured if by then tainted terrain of finance, they were awarded to three mainstream economists who study unemployment as a mismatch in search or trust between those who want to give jobs and those who want to take them. As Yannis Varoufakis put it, before he stumbled over the orthodoxy in practice as Greek Finance Minister:
‘Imagine a world ravaged by a plague, and suppose that the year’s Nobel Prize for Medicine is awarded to researchers whose whole career is based on the assumption that plagues are impossible. The world would have been outraged. That is precisely how we should feel about yesterday’s announcement of the recipients of the 2010 Nobel Prize … Interestingly, these three fine mathematical economists have one thing in common, other than their work on labour markets: in their voluminous theoretical output on unemployment and the like, there is not a smidgeon of a hint, of a mention, of an economic crisis which may boost unemployment in every sector and for all types of workers. Not one!’
In short, if in parody of Stamp:
‘Mainstream economics was conceived in iniquity and was born in sin. The orthodoxy owns the social, the historical and the ethical. Take it away from them, but leave them the power over the discipline, and with the flick of the pen they will create enough models to bring them back in again. However, take it away from them, and all the flawed posturings will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of the mainstream and pay the cost of your own slavery, let them continue to create their models.’
In short, economics is unfit for purpose across so many dimensions that it is hard to know where to begin to remedy it. Hopefully, these books can make a start by critical exposition as potential point of departure.
Ben Fine is Professor of Economics at SOAS, University of London. He is co-author of Marx’s ‘Capital’ (Pluto, 2015) and co-editor of Beyond the Developmental State: Industrial Policy into the 21st Century (Pluto, 2013). He was awarded both the Deutscher and Myrdal Prizes in 2009. He is Chair of the International Initiative for Promoting Political Economy, IIPPE, iippe.org.
Ourania Dimakou is Lecturer in Economics at the University of London’s School of Oriental and African Studies. She specialises in macroeconomic theory, policy and institutional design, particularly the central bank independence paradigm.
Macroeconomics: A Critical Companion is available to buy from Pluto Press here.
Microeconomics: A Critical Companion is available to buy from Pluto Press here.