This is a revolt of the masses, in this case masses of economic students from around the world who came of age during the 2008 financial crisis and have united in a movement they call Rethinking Economics. The leaders of the movement, which according to the Guardian has grown to 43 student campaigns across 15 countries, including the United States, were studying economics at the University of Manchester when the 2008 crisis almost brought the entire international financial system down. As the authors write:
While we were memorising and regurgitating abstract economic models for multiple choice exams, the Eurozone crisis was at its peak, with Greece and Italy on the brink of disaster. This wasn't mentioned in our lectures and what we were learning didn't seem to have any relevance to understanding it. The elephant in the room was hard to ignore.
It is a harsh criticism of the way economics is taught, and judging from the outpouring of indecipherable mathematical articles published by grant- and promotion-hungry academic economists, it might well be justified. The students worry that upon graduation, their jargon-enshrouded courses ill-prepare them for the power and responsibility conferred upon them when they take up positions in important institutions such as central banks. They will be unable to consider what really matters in people's lives, and unable to communicate with the broader public.
The result is an econocracy, in which policy goals are set by technocrats using tools that "obscure political judgments" and which "is incompatible with liberal democracy." So they have set out to reform the economics curricula of, well, graduate schools everywhere.
The students make many powerful points, the most important of which are the stultifying way in which economics is taught; the exaggerated claims that model-building economists give the power of those tools; the near-complete reliance on analysis built along lines suggested by neoclassical economists; and excessive reliance on cost-benefit analysis.
I can only rely on their appraisal of the quality of the teaching. In my day, as economists of a certain age like to say, I was taught and later did teach from reports in that morning's newspaper about farm prices, inflation rates, and the like, and worked back to theoretical materials, on the assumption that interested students are more likely to learn something than those wondering why they had to take my required course.
If economics is, indeed, being taught in a way that excluded mention of the financial crisis while it was in progress, that is a pity and—as Robert Bork once answered when I asked him how he would describe his experience having taught both Clintons when he was on the faculty of the Yale Law School—"a failure of pedagogy." If this critique from the consumers of the education on offer persuades universities to upgrade their courses to offerings more useful to students, it will have made a large contribution.
And I agree that model builders, most especially the quants who still roam the offices of investment banks, would do well to shed their self-belief and heed John Maynard Keynes's 87-year-old admonition: "If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid." Alas, the title of Master of the Universe is difficult to turn down.
But I wonder if the self-styled Rethinkers have fully considered two of their other criticisms: of cost-benefit analysis and reliance on neoclassic economics. Tallies of the costs and benefits of various policy proposals, they say, "always involve choices, value judgments and assumptions that are inherently political in nature. . . . [T]here is rarely a neutral scientific way to make these calculations." True. The answer is not to toss out cost-benefit analysis but to acknowledge the possible range of error in the computations and reveal the goals the economist had when he began measuring the costs and benefits. And to treat alternative computations as a basis for discussion, not a reason to denounce the motives of the dissenter.
Also, the complaint that "economics students are currently taught as if there is only one type of economics"—neoclassical economics—comes from students whose hands are not entirely clean. Of the 172 module course outlines the students reviewed, only 17 and 2 core modules mention non-neoclassical economic perspectives, while Cambridge does not mention them at all. But five of the modules that do mention non-neoclassical economics teach them late in the students' stay at university and are "essay-based." And "essay-writing is a skill students often lack after years of only doing mathematical derivations, and they understandably do not want to take the course in their final year when it counts most for their degree."
So the lack of these courses may be a demand-side, rather than a supply-side, failure: Given an opportunity to be exposed to non-neoclassical economics and to learn to write essays to boot, the students take cover in complaints that it is too late for that in their young careers.
But education does not end with the receipt of a bit of parchment proclaiming the ability of the recipient to survive poor teaching. One wonders what prevents them from dipping into the works not only of Keynes but of Karl Marx, Eugen Böhn von Bawerk, Thorstein Veblen, Joseph Schumpeter, John R. Commons, Wesley Clair Mitchell, Robert J. Gordon (762 pages and nary an equation in his The Rise and Fall of American Growth), and other non-neoclassical economists who did not restrict themselves to economics as defined by these students' professors. And they might try Adam Smith's Theory of Moral Sentiments for a bit of the broadening they so ardently seek.
As for the writing skills they feel they lack, but do not want to risk learning: Keynes (no slouch as a mathematician) found that an ability to write clear, compelling prose depended, in part, on the breadth of his interests, and was as important to his success as the mathematical skills that he found analytically useful. In 1945-46, in the first annual report of the Arts Council that he chaired, he had this to say:
The day is not far off when the Economic Problem will take the back seat where it belongs, and the arena of the heart and that the head will be occupied, or reoccupied, by our real problems—the problems of life and of human relations, of creation and behavior and religion.
Still, one can only admire these students for spending the time and energy to attempt to make the economics curriculum more meaningful to them—and more relevant to the economic policy issues they are likely to confront. Unfortunately, a glance at any mathematics-laden issue of the leading economics journals suggests that this plea will fall on academic ears more attuned to the word "tenure" than to "I get it."
In his splendid and sympathetic introduction to this book, Andrew Haldane, chief economist at the Bank of England (an institution he admits is guilty of "linguistic complexity"), points out that "the language used by economists has served as a barrier to entry. . . . Language is one way in which experts can preserve the rents associated with their subject-specific human capital." Barriers to entry erected by trade groups don't come tumbling down in the face of criticism; they fall when technology or repeated failure makes the members irrelevant. Which, despite their failure to predict the Great Recession, economists have not yet become.
The key movers of the "movement" that gave birth to this book were educated (or at least taught) at Manchester University in Great Britain. So they well know that their sovereign, who saw the crisis wipe some £25 million off the value of her portfolio, used the occasion of a reception at the London School of Economics to ask of the financial collapse, "Why did nobody notice it?" (The school's research director later replied that "everyone thought they were doing the right thing.") And one must, of course, applaud the students—not only for their efforts, but for their candor: "[We] are all keenly aware," they write, "that our economics education has not equipped us with the knowledge or skill to justify any authority we are given" to avoid policy errors in the future.
Whether they will follow up with the full disclosure now demanded of other products is uncertain. Not necessarily on their résumés, but perhaps in bold type at the front of any policy recommendation: "Warning: These policy prescriptions should only be taken with several grains of salt and are likely to have side effects we cannot predict."
Whether stated in quadratic equations or readable prose, economic theory cannot bear the burden often placed upon it. If policies could be developed to guide complicated industrial economies to a permanent plateau of prosperity, to end "boom and bust" as the extraordinarily intelligent then-chancellor of the exchequer Gordon Brown believed he knew how to do, the well-trained economists of the Soviet Union would have twisted the right knobs and pushed the right buttons to prevent economic collapse; Alan Greenspan, with access to huge amounts of information, would have known when an asset-price increase became a "bubble"; and we would not be debating whether looser fiscal policy requires tighter monetary policy.
These students, as they engage the real world, will realize that worries about too much neoclassical doctrine, or too little, too much mathematics or too little were best left on their campuses. "Economics," wrote Keynes, "is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw correct conclusions." Or, as the great economist Joan Robinson put it, "a box of tools" that enables the workman to understand the relationships between individuals, society, markets, and government. They will soon stop worrying about "The Perils of Leaving Economics to the Experts." Sensible policymakers won't do that, and if they did, politicians wouldn't abide it. Economists can recommend, but in democracies their, our, voice is only one among many. Good thing.