Book: The Econocracy Review


February 12, 2017

The Econocracy Reviewhow three students caused a global crisis in economics

by Aditya Chakraborthy

https://www.theguardian.com/books/2017/feb/09/the-econocracy-review-joe-earle-cahal-moran-zach-ward-perkins

Unhappy at how economics is out of touch with reality and defined by an elite, Joe Earle, Cahal Moran and Zach Ward-Perkins sum up their explosive call for change

By making their discipline all-pervasive, and pretending it is the physics of social science, economists have turned much of our democracy into a no-go zone for the public. This is the authors’ ultimate charge: “We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t.”–Aditya Chakraborthy
Riot police clash with demonstrators outside parliament in Athens, October 2011, as anger breaks out over new austerity measures

Riot police clash with demonstrators outside Parliament in Athens, October 2011, as anger breaks out over new austerity measures Photograph: Angelos Tzortzinis/AFP/Getty Images

In the autumn of 2011, as the world’s financial system lurched from crash to crisis, the authors of this book began, as undergraduates, to study economics. While their lectures took place at the University of Manchester the eurozone was in flames. The students’ first term would last longer than the Greek government. Banks across the west were still on life support. And David Cameron was imposing on Britons year on year of swingeing spending cuts.

Yet the bushfires those teenagers saw raging each night on the news got barely a mention in the seminars they sat through, they say: the biggest economic catastrophe of our times “wasn’t mentioned in our lectures and what we were learning didn’t seem to have any relevance to understanding it”, they write in The Econocracy. “We were memorising and regurgitating abstract economic models for multiple-choice exams.

Part of this book describes what happened next: how the economic crisis turned into a crisis of economics. It deserves a good account, since the activities of these Manchester students rank among the most startling protest movements of the decade.

After a year of being force-fed irrelevancies, say the students, they formed the Post-Crash Economics Society, with a sympathetic lecturer giving them evening classes on the events and perspectives they weren’t being taught. They lobbied teachers for new modules, and when that didn’t work, they mobilised hundreds of undergraduates to express their disappointment in the influential National Student Survey. The economics department ended up with the lowest score of any at the university: the professors had been told by their pupils that they could do better.

The protests spread to other economics faculties – in Glasgow, Istanbul, Kolkata. Working at speed, students around the world published a joint letter to their professors calling for nothing less than a reformation of their discipline.

Economics has been challenged by would-be reformers before, but never on this scale. What made the difference was the crash of 2008. Students could now argue that their lecturers hadn’t called the biggest economic event of their lifetimes – so their commandments weren’t worth the stone they were carved on. They could also point to the way in which the economic model in the real world was broken and ask why the models they were using had barely changed.

The protests found an attentive audience among fellow undergraduates – the sort who in previous years would have kept their heads down and waited for the “milk round” to deliver an accountancy traineeship, but were now facing the prospect of hiring freezes, moving back home and paying off their giant student debt with poor wages.

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I covered this uprising from the outset, and later served as an unpaid trustee for the network now called Rethinking Economics. To me, it has two key features in common with other social movements that sprang up in the aftermath of the banking crash. Like the Occupy protests, it was ultimately about democracy: who gets to have a say, and who gets silenced. It also shared with the student fees protests of 2010 deep discomfort at the state of modern British universities. What are supposed to be forums for speculative thought more often resemble costly finishing schools for the sons of Chinese communist party cadres and the daughters of wealthy Russians.

Much of the post-crash dissent has disintegrated into trace elements. A line can be drawn from Occupy to Bernie Sanders and Black Lives Matter; some of those undergraduates who were kettled by the police in 2010 are now signed-up Corbynistas. But the economics movement remains remarkably intact. Rethinking Economics has grown to 43 student campaigns across 15 countries, from America to China. Some of its alumni went into the civil service, where they have established an Exploring Economics network to push for alternative approaches to economics in policy making. There are evening classes, and then there is this book, which formalises and expands the case first made five years ago.

Joe Earle, foreground, with the Post-Crash Economics Society at Manchester University.

Joe Earle, centre, with the Post-Crash Economics Society at Manchester University. Photograph: Jon Super

The Econocracy makes three big arguments. First, economics has shoved its way into all aspects of our public life. Flick through any newspaper and you’ll find it is not enough for mental illness to cause suffering, or for people to enjoy paintings: both must have a specific cost or benefit to GDP. It is as if Gradgrind had set up a boutique consultancy, offering mandatory but spurious quantification for any passing cause.

Second, the economics being pushed is narrow and of recent invention. It sees the economy “as a distinct system that follows a particular, often mechanical logic” and believes this “can be managed using a scientific criteria”. It would not be recognised by Keynes or Marx or Adam Smith.

 

Image result for Keynes quote on Economics

In the 1930s, economists began describing the economy as a unitary entity. For decades, Treasury officials produced forecasts in English. That changed only in 1961, when they moved to formal equations and reams of numbers. By the end of the 1970s, 99 organisations were generating projections for the UK economy. Forecasting had become a numerical alchemy: turning base human assumptions and frailty into the marketable gold of rigorous-seeming science.

By making their discipline all-pervasive, and pretending it is the physics of social science, economists have turned much of our democracy into a no-go zone for the public. This is the authors’ ultimate charge: “We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t.”

This status quo works well for the powerful and wealthy and it will be fiercely defended. As Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the narrow orthodoxy and you will be branded an economic illiterate – even if they add up. Academics who follow different schools of economic thought are often exiled from the big faculties and journals.

Image result for Economics in crisis

The most devastating evidence in this book concerns what goes into making an economist. The authors analysed 174 economics modules for seven Russell Group universities, making this the most comprehensive curriculum review I know of. Focusing on the exams that undergraduates were asked to prepare for, they found a heavy reliance on multiple choice. The vast bulk of the questions asked students either to describe a model or theory, or to show how economic events could be explained by them. Rarely were they asked to assess the models themselves. In essence, they were being tested on whether they had memorised the catechism and could recite it under invigilation.

Critical thinking is not necessary to win a top economics degree. Of the core economics papers, only 8% of marks awarded asked for any critical evaluation or independent judgment. At one university, the authors write, 97% of all compulsory modules “entailed no form of critical or independent thinking whatsoever”.

Remember that these students shell out £9,000 a year for what is an elevated form of rote learning. Remember, too, that some of these graduates will go on to work in the City, handle multimillion pound budgets at FTSE businesses, head Whitehall departments, and set policy for the rest of us. Yet, as the authors write: “The people who are entrusted to run our economy are in almost no way taught to think about it critically.”

They aren’t the only ones worried. Soon after Earle and co started at university, the Bank of England held a day-long conference titled Are Economics Graduates Fit for Purpose?. Interviewing Andy Haldane, chief economist at the Bank of England, in 2014, I asked: what was the answer? There was an audible gulp, and a pause that lasted most of a minute. Finally, an answer limped out: “Not yet.”

The Manchester undergraduates were told by an academic that alternative approaches were as much use as a tobacco-smoke enema. Which is to say, he was as likely to take Friedrich Hayek or Joseph Schumpeter seriously as he was to blow smoke up someone’s ass.

Image result for Hayek

The students’ entrepreneurialism is evident in this book. Packed with original research, it comes with pages of endorsements, evidently harvested by the students themselves, from Vince Cable to Noam Chomsky. Yet the text is rarely angry. Its tone is of a strained politeness, as if the authors were talking politics with a putative father-in-law.

More thoughtful academics have accepted the need for change – but strictly on their own terms, within the limits only they decide. That professional defensiveness has done them no favours. When Michael Gove compared economists to the scientists who worked for Nazi Germany and declared the “people of this country have had enough of experts”, he was shamelessly courting a certain type of Brexiter. But that he felt able to say it at all says a lot about how low the standing of economists has sunk.

The high priests of economics still hold power, but they no longer have legitimacy. In proving so resistant to serious reform, they have sent the message to a sceptical public that they are unreformable. Which makes The Econocracy a case study for the question we should all be asking since the crash: how, after all that, have the elites – in Westminster, in the City, in economics – stayed in charge?

The Econocracy is published by Manchester University.

5 thoughts on “Book: The Econocracy Review

  1. Improving the economy has come to be seen as perhaps the most important task facing modern societies. Politics and policy making are conducted in the language of economics, and economic logic shapes how political issues are thought about and addressed. Political decisions are increasingly devolved to experts who speak in the language majority of citizens cannot understand and are locked out of politics.

    Three brilliant students (Joe Earle, Cahal Moran and Zach Ward-Perkins) from the University of Manchester were unhappy at how economics is out of touch with reality and defined by the elite, summed up their explosive call for change and came up with “Econocracy” to explain how economics came to be seen this way, and the damaging consequences. It opens up the discipline and demonstrates its inner workings to the wider public so that the task of reclaiming democracy can begin.

    In my opinion, the problem comes when economists start using economic theories and models as irrefutable fact and truth. I am not an economics major, and I had only taken a couple classes in macro- and micro-theories. But I remember the first thing my professor in Stanford did was to warn the class that, essentially, all economic models are wrong but some are useful. That economic theory is a very useful set of tools to explain why things are happening, but like all tools they need to be constantly refined, upgraded and ultimately thrown away and replaced with better ones. Too often economics gets politicized and theories that may have worked in the past become dogma that can’t be challenged and improved.

    Economics is not an exact science. It can never be a science because it studies a human construct, not the real world outside of us, our culture and society. It is, at best a Social Science, though these are not scientific in any genuine way.

    Economics is a pseudo science because it isn’t a science and it is full of pseudo facts. Its theories can never be established by proper randomized controlled experiments and so remain hypotheses with no possibility of being disproved. Any data that does not support the hypothesis is simply discarded or ignored.

    In short, most of it is based on unproven and unprovable ideas from which models are created, using often very silly assumptions. These are then used to make projections which are inevitably wrong as soon as anything “unexpected” happens in the real world. The real world is then dismissed as exceptional and the model continues on serenely, as do the economists who continue to pocket their salaries for predicting what the people who pay them want to hear, and assuring the wealthy that all is right with the world. Nice gig.

  2. My view is that the “behavioural economics” branch of mainstream neoclassical economics is an interesting exception.

  3. Before economics was called “economics”, it was called “political economy”

    “A classic definition of the term was articulated in 1877 by Friedrich Engels: “Political economy, in the widest sense, is the science of the laws governing the production and exchange of the material means of subsistence in human society… Political economy is therefore essentially a historical science. It deals with material which is historical, that is, constantly changing” — Wiki

    Now it is used to predict the future instead. It has become a glorified crystal ball, and just by adding some fancy math to it changes nothing, other then giving suffering economic students sleepless nights before exams and after graduating to ask for high pay to compensate for the suffering.

  4. Mankind has reached the crossroad , when he thinks he has learned and earned every conceivable knowledge….when in fact he has learned nothing…..

    ( to the effect ) Socrates says that the only thing Man knows is that he knows nothing…… –

    Example, its enthralling to have an insight into the Question of Evolution , viz :

    ” EVOLUTION is THE CONTINUOUS GENETIC ADAPTATION OF ORGANISM OR SPECIES TO THE ENVIRONMENT BY THE INTEGRATING AGENCIES OF SELECTION …..” –

    As in the Animal kingdom (& plant life ) , so too in the Human world….and a few Evolutionists say, that it can be in the REVERSE process…. Instead of Man ascending from the Apes, Man could DESCEND to become the Bonobos or Collobus ( monkey species ) , in a Book ” Language of the Gods ” ….. –

    Yes…..THE REVERSE PROCESS ………

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