A while back I read a piece on The Conversation by Jim Stanford and Richard Denniss about how economics needs to change that made me absolutely livid. So livid in fact that I decided to pen an email to them. I never got around to sending it (not having public emails must thicken the echo chamber at think tanks), and it's been so long now that I won't bother. But having written the thing I thought I might as well post it somewhere, so voila. Honestly I don't think The Conversation should make a habit of publishing pieces by people at Think Tanks even if they have academic affiliations. The academy is already borderline compromised by partisanship; let's not push it.
Original article here:
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Dear Dr Stanford and Dr Denniss
I recently read your piece on The Conversation about economics education. I read it with interest, because this is a topic I care deeply about. Forgive me for being frank, but the piece seems to me to be factually inaccurate and, I think, liable to do more harm to your cause than good.
I'll take it point by point. You start by noting, correctly, that economics isn't attracting women. This is perhaps the biggest discussion within the profession at the moment. I see huge movement on this front. It dominated the American Economic Association Annual meeting this year and to a lesser extent in 2018. The Undergraduate Women in Economics project has huge RCTs at play across the US and most universities seem poised to adopt its recommendations as soon as they are finalised. Universities are screaming with demand for female hires to the point where it really does start to look unfair to more meritorious male candidates. The Go8 has hired mostly women (despite them being ~15% of candidates) into economics for the past 3 years, and is also promoting them to senior ranks rapidly.
You then note that enrolments are declining. I don't dispute this fact, but I do dispute your claim that this is because economics isn't covering issues that matter. Quite the opposite. The things that you seem most acidic towards, notably axiomatic rational choice theory and the like, is increasingly regarded as a relic of the pre-data era, and some of the top programs are discussing removing things like proving the welfare theorems from their masters programs and replacing them with more applied courses. Some topics you mention as being under-served are anything but. Climate change, the gig economy, why productivity and wages have diverged, the origins of the GFC, anti-corruption policies, making trade fair, industrial policy and the like are all the rage in economics, especially among the younger generation. Neoliberalism (that great, nebulous boogeyman) is hardly ascendant. Justin Lin, lord of muscular government, was head of the World Bank! He followed Stiglitz! Macro is engaged in a similar soul-searching exercise about the usefulness of micro-founded models. If anything, this is a communication problem, and the profession is again having a sustained discussion at the moment about how to market "what economists actually do". I worry that your piece will undermine this work precisely because it trots out the tired old stereotypes of what economics was in the 80s rather than what it is today.
By way of an example, I teach an introductory graduate course in microeconomics to policy students at the Crawford School. Following a long running trend, I teach it with close to zero mathematics and an emphasis on applications of the concepts. We cover equity policies that don't distort prices like conditional cash transfers, industrial relations (the Danish flexicurity system in particular), why private markets for health care don't work, sophisticated schemes for dealing with monopolies, tradeable permits for fisheries management (which have made Australia's fisheries among the world's most profitable and sustainable since their introduction), how to generate revenue (the Australia institute seems to want this emphasised) using the tax system while minimising the efficiency cost and keeping an eye on equity, the merits of GDP as a measure of wellbeing, its shortcomings and alternatives, and the political economy of trade. I am perhaps a bit more progressive in my curriculum than most micro1 lecturers, but I'm also mostly just harping Rodrik, who is the definition of the economic mainstream.
The suggestion that all the problems of the world today are the result of the market-worship that runs through economics is specious. I can accept the argument that the Thatcher and Reagan administrations were market zealots, but it is precisely by being market zealots that they diverge from mainstream economics. Fully a third of most introductory courses are devoted to the notion of market failure. Thatcher's privatisation of the railways, a natural monopoly, for example, runs against basic economic logic. Similar examples of economic ignorance can be levelled at claims of economic expertise made by the liberal party. You are erroneously placing responsibility for the perversion of economic arguments on the part of right-wing groups at the foot of the economics establishment. Moreover, the only effective remedy to the power of this perverted language is more economics education!
I took particular umbrage with the claim that we teach that: "markets are efficient. Supply equals demand. Private competition is best." We absolutely DO NOT teach this. We teach that perfectly competitive markets, which are extremely rare, tend towards Pareto-efficient outcomes, which may not be desirable because of their lack of equity. We teach that market failures are common, and that government should focus on these rather than doing more damage with price interventions in otherwise well-functioning markets, like most agricultural goods. We teach that supply almost never equals demand (transaction costs are real!) but that the notion of an equilibrium provides a baseline model from which you can calculate deviations and thereby estimate the cost of distortions and failures. We are indeed fond of competition, but only when there is competition! I feel like the thread that runs through most of development economics at the moment is the relentless struggle against corruption and vested interests who seek to exclude people from the economy and extract rents, typically by dampening competition.
The concluding claim that economics is held back by its ideology is ironic. Economics in general is not ideologically wedded to markets. We put out a book last year on hybrid policies that argued precisely that only sophisticated combinations of governments, markets and community could produce optimal policy outcomes, defined as minimal trade-offs across equity and efficiency, in tricky areas. The contributors are a who-is-who of Australia's economic mainstream. Forgive me, but it is you who are ideologically opposed to markets and in favour of government and community-based solutions, and equity rather than efficiency, hence your employment at a think-tank.
The field has already embraced context - Ostrom won the Nobel prize in 2009! Behavioural economics now has two, and "ethics and economics" is one of the fastest growing branches of experimental economics (and experimental philosophy). Development economics might as well be political science these days. The aid literature is all about social capital. My own field is alternatives to GDP as a measure of well-being, and our sessions at the last two American Economic Association Annual Meetings have been some of the best attended at the event, including by Nobel Laureates. The profession absolutely does not "apologise for inequality, selfishness and pollution". I don't know who you're talking/listening to, but I suspect it's Russ Roberts and other antiques. Look at the work being done by people under 60 and you'll see a whole new world.
Best wishes
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