Crusades and Failures of the Rethinking Movement

In a beautiful piece recently published by Rethinking Economics, my fellow Glasgow-schooled friend Max Schröder neatly summarises some major short-comings with mainstream economics. He describes the incredible overhaul of scope for economics sometime in the 19th century, from the issues of wealth creation/distribution to the issues of mathematically-dressed up utility-maximization and profit-maximization. Furthermore he scolds economics for not taking her sister social sciences into consideration and ridicules the Gary Becker-style approaches of analysing blatantly non-economic aspects of life such as marriage through the lens of utility-maximization.

His description about the 19th century overhaul is roughly correct, but hardly novel (see for instance Waterman 2012: 424-425 for an overview). Just as much of the 'student movement' aims to reshape economics, Schröder's illusion of novelty is much-exaggerated and it often misses the point entirely. Critiques of models, assumptions, mainstream practices and conclusions have always accompanied the economics profession, as these students are sometimes rather good at pointing out. The most significant contributions of, say, Post-Keynesians date to early/mid-20th century through Keynes, Kalecki, Robinson, Kaldor, Pasinetti, Garegagni etc. To point to the "open minded and pluralistic discipline that existed about a century ago" I think is deluding oneself and succumbing to Rosy Retrospection. Austrian scholars fall into the same trap, idealizing the University of Vienna at turn of the century. The problem is not the material, but the attitude. The willingness to engage in honest and genuine debates.

But That's What Rethinking-Movements Aim To Do, right?

Well, nominally yes. Though very little in practice. I have two problems with these movements of indignant students-turned-crusaders calling for a complete overhaul of the discipline:

1. They often have little patience for ideas that don't conform with their worldview.
2. Their knowledge of economics is hopelessly narrow.

Firstly, the allegedly open-minded pluralist approach applies very much once the crusader has paid his anti-market/pro-government membership fees. The convention is, as the overwhelming majority of students do, almost by definition to categorise any form of positive approach to markets as "mainstream". This goes even for prominent scholars such as Lavoie (2014), categorising Austrians as conservative mainstream even though they haven't been for a century or more. I'm sure most Rethinking people would firmly put fierce mainstream critics such as McCloskey in the 'Mainstream' box since she favours markets. If rethinking groups really cared about pluralism and novel approaches they would quickly incorporate more strands, drop their anti-market prerequisites, and start looking towards the incredible riches of the blogosphere (even some reading of 21century social democracy blog would enlighten them immensely since it actually deals with, and engages in debate with, pluralist approaches across the spectra).

I remember discussing econometrics and minimum wages with a student involved with the Manchester group last year, who detested those pesky free-marketer economists whose econometric research showed that minimum wages lowered employment: "If you do the econometrics properly, you find the opposite result!", he indignantly proclaimed, ignoring the absolute avalanche of empirical and theoretical work of various strands that minimum wage discussions have poured out. Such attitudes, all-too-common among the movement, amounts to nothing more than replacing one set of blinders with another; instead of ex-ante demanding that minimum wages reduce unemployment, The New Economic Science is required to produce the opposite result. Any discussion of plurality, of various approaches, of contrasting results and the more modest approach the movement shows in the media was conveniently forgotten.

That feeds into my second point: The knowledge of economics is hopelessly narrow. If Rethinking ventured as far as the blogosphere they would quickly realize that profit-maximizing models or perfect competition or smoothly-shaped monotonic functions are pretty much absent - it's not what economists do or what they believe. They could look towards mainstream macro professors incorporating endogenous money in their undergraduate IS/LM models ("That's impossible!" yells the indignant crusader. "Watch me", I'm sure my Sydney professor would respond). They could even open some mainstream journals from time to time, and find discussions such as Colander (1995) critique of AS/AD, Mankiw's defense of mainstream, Romer's (2000) alternation of IS/LM, Woodford's (2010) model of financial intermediation or Stiglitz's (1993) account of Keynesians. To name a few. Or the severe critique coming from comrades on the left (see Shaikh 2016).

Or maybe they wanna learn from more familiar scholars sympathetic to their cause, such as Manchester Economist Dyane Coyle:

The report also mistakenly equates pluralism with the specific views of heterodox economics, rather than the open-minded willingness to analyse economic issues from a range of alternative perspectives (including heterodox ones). There is an obvious logical fallacy in the labelling – and dismissing – of any non-heterodox views as the ‘neoclassical mainstream’

Or Roger Farmer at his blog 'Economic Window' almost ridiculing the Post-Crash report by quoting themselves:

On Page 23 of their report, the Manchester students cite John Stuart Mill

"He who knows only his own side of the case doesn’t know much about it. His reasons may be good, and no-one may have been able to refute them; but if he is equally unable to refute the reasons on the opposite side, and doesn’t even know what they are, he has no ground for preferring either opinion.” 

John Stuart Mill, On Liberty

My advice to students is this. Continue to question everything you are taught. Lobby for classes on alternative approaches: But also take the time to absorb those ideas that are in the mainstream. The very best mainstream economists were the radical students who questioned authority when they were undergraduates. It is those economists who you must engage if you are to make meaningful changes that will advance our understanding. That takes hard work, perseverance, and patience.

To be sure, on his most lucid days, even Lavoie produces useful charts, like this one:

If students, like Schröder, continuously attack the far-right (and irrelevant) edge of the chart (See Becker or Utility-Maximization), while ignoring the rest - and most importantly the light-green area where the interesting debates occur - the rethinking movement, if successful, is doomed to replace one set of blinders with another.

Schröder is absolutely right when he points out that

If economics is to guide us through the complex challenges faced by our globalised world (e.g. climate change, demographic change, and migration), it cannot afford to be blind to the invaluable insights and inputs from other disciplines, or afford to ignore challenges from within itself.

 Unfortunately and ironically, movements such as Rethinking Economics has a pretty poor track record of actually achieving that.