Blog

Governments: Fostering Crises and Stifling Entrepeneurs? An Evening With Matthew McCaffrey

On the Monday of December 5th we were joined by Matthew McCaffery for a low down and discussion of the famous and influential ‘Austrian’ school of economics. A school that builds up it’s analysis of the economy from the ground up, highlighting the importance of entrepeneurship, and the motivations and actions of individuals in the shaping of the economy. Although of course, to give a brief summary risks misrepresenting it, so for more details of what this school is about, and for an idea of how it analyses the world, you’d do well to look at a few of Matthew’s publications: http://www.manchester.ac.uk/research/matthew.mccaffrey/publications . The Austrian school struck us as having pretty watertight and often quite radical arguments. Matthew had strong responses for all our criticisms, one response that stood out especially was the response to the central argument of Mariana Mazzucato’s book the Entrepeneurial State, put forward by someone in the back rows. For many of us in the room the book is very much a knock out argument that reaffirms an idea that state intervention has been the most important force in our economic progress. Let’s just say that Matthew’s response ‘sent us back to the drawing board’ slightly. As we were very happy to see at PCES, the school had some interesting analysis on the role of debt, finance and money in the economy. Things that we can reasonably say are not heavily featured in mainstream economics. Some of us came in with preconceived ideas about the content of the talk, assuming it might be perhaps slightly right wing and even slightly inhumane. This was not the case, a strong...

The Econocracy: Manchester Book Launch

Recently, Joe Earle, Cahal Moran and Zach Ward-Perkins presented the central arguments of their book, The Econocracy, to a packed room in Uni Place. Noone could debate that these three had really thought this all out. Challenges were met always with referral back to the core message of the student movement, one which appeared more than ever to be uncontroversial. The room seemed engaged and respectful of the message. Present were all kinds of people of different ages and voices, ranging from one man who semi-jokingly suggested that economics as an entity might reasonably be discarded of, given it’s apparent uselessness in understanding the world. We had an engineering professor who proposed most enthusiastically that there should be a charter, similar to most professions. Such a charter would likely see countless economists struck off following 2008 of course, the thought of which elicited a chuckle from the audience. This proposition did seem to have a certain strength to it somehow. It stood out when Francesca in the work of PCES, rather than satisfying our youthful urge to ‘smash things up’, we instead reason and establish a dialogue with, the economics department and university at large. Rather than just expressing our frustrations to the good pedestrians of Oxford Road. This observation seemed particularly meaningful given the composition of the room where we had economics professors, administrators and general serious-looking adults. I was talking to a social anthropology professor in front of me who was most vociferous about how he thinks that social anthropology is in a similar state to economics. He talked of there being very specific case studies with...

The Recent Trip to Edale

  The society’s recent trip to Edale was comforting. Set in the distinctly non-urban environment of the peak district, ‘delegates’ from societies similar to our own all came to the lodge. It was comforting to know that we were not remotely alone in our cause: there were groups attending from London to Aberdeen and most places in between. All sharing the same vision of a more pluralistic economics, providing great opportunities to bounce ideas off eachother. Similar to other events we’ve had, we got a sense that we are putting into practise the pluralism that we talk so much about, by actually getting together and holding reasoned debates on the subject. It was felt that we had created a hub that could cement the movement nationwide and internationally by providing a kind of informal headquarters. This cementation is vitally important of course, when groups such as ours campaigning for curriculum reform are constituted of students who, of course, graduate after 3 or 4 years. Thus, the Rethinking Economics hub helps towards ensuring that the movement does not run out of steam. There should always be an organized voice for students expressing their discontents at the way they are being taught. And more broadly there should be that voice that challenges an established approach to economics that has been shown to be limited in its utility for understanding the world. Let’s not forget that this society and movement in general only really started post-crash, the ‘crash’ being in 2008, when many of us currently in the society were about 12. This weekend gave us a real sense of how far we have come...

Podcast on New Book The Econocracy

The Econocracy: The perils of Leaving Economics to the Experts is a new book from Rethinking Economics, available from the Manchester University Press website as well as book shops such as Amazon, Waterstones and Blackwell’s. One of the co-authors, Cahal Moran – who is currently Chair of PCES – did a short podcast with Martin Bamford at Informed Choice Radio. The topics discussed include the book, the student movement and Brexit. Have a listen!  ...

What You Won’t Learn In An Economics Degree: The Workshop

On the evening of Tuesday the 27th of September, the society held a workshop to discuss topics that we believe should be studied as part of an economics degree. We had tables discussing the recent Rio Olympic games, tax havens, the role of the IMF and World Bank and the possibility of a basic income. The debates got heated at times, with people polarising on either side of the argument, disagreeing at times on the most fundamental premises of eachother’s argument. These topics stimulated a discussion of questions that cut to the very numb of economic thought. Questions like: who creates wealth? What motivates people? And who deserves this wealth? In discussing these topics themselves and getting such well thought out and articulate responses from students, many of them first years, to us here at PCES confirmed our conviction that economics should be more pluralistic, quite because people are capable of making valuable contributions to these debates, despite not being a qualified economist. While there was much disagreement over the topics themselves, there was no disagreement over the importance of discussing them and what can be gained by the very process of debating them. One student said that: ‘I think this makes you better at thinking’, and she wasn’t the only one who picked up on the critical thinking development. Others picked up on the communication and arguing skills that would be developed by this kind of approach. These are the kind of skills that really help you out in the working world as we’re sure a lot of major employers would agree. Sadly, we did seem to be...

Gender Challenges by Bina Agarwal

I had the pleasure of attending the launch of Gender Challenges earlier this month. Gender Challenges is a monumental three-volume compendium of selected papers written by Bina Agarwal over three decades and published by Oxford University Press. This impressive body of work examines gender inequality in different countries and communities, relating to agriculture, food security, property, land rights, and the environment, and how policy makers can tackle them. Bina, a Professor of Development Economics and Environment at the Global Development Institute of the University of Manchester approaches these issues from a gender perspective and challenges mainstream assumptions in the social sciences and policy. She rightly uses both qualitative and quantitative analysis. The issues are not simply presented as economic ones. Bina uses many disciplines from the social sciences and also law to examine gender inequalities and suggest workable solutions. Reading the work, what first struck me was the variety of ways women are affected globally and the inadequate one-size-fits-all approach of policy makers in these countries. The first volume looks at agriculture, technology and food security and covers her writings from 1981 to today. In the early years, agricultural growth was made possible by the Green Revolution but women’s role was ignored. A key assumption questioned by Bina is the idea that women are less efficient than men in farming, and the attributing of the gender wage gap to productivity differences rather than to gender discrimination. These assumptions are also challenged by her using data from an experiment with potato-digging equipment which found that women are more efficient than men in doing the same job: they took 69 hours...

Calling all economics students, your department still doesn’t listen

It is that time of the year when 3rd years receive emails from their departments to tell them to fill in the NSS survey. The NSS helps the university to get an idea of the delight or disdain that you have had from your 3 years of studying economics. It is therefore imperative that students fill in the survey. Our opinion still remains that the dismal science is not seeing the change that is necessary to create economics students that are fit for purpose. Ask yourself the following questions: What have you learnt from your economics degree? Have you been exposed to economic history in your degree? Are you confident in communicating your economic knowledge to different groups such as the public, academics and fellow students? Has your curriculum made any mention of theories such as endogenous money, cost plus pricing or the financial instability hypothesis, all heterodox theories which have a good degree of empirical support? Has the assessment challenged you at university or do you find that you memorise a model and regurgitate it in an exam? Have you been encouraged in tutorials to think critically about the subject? The reaction of the department in the last academic year and since their dreadful 2013/2014 NSS results has not been good enough. Proposed new modules which would take students’ concerns into account were a case of all talk and little action. Consultations with students have become token gestures where opinions are monopolised and students’ pleas fall on deaf ears. Take the current course restructuring as an example. In student consultations the message was clear from students represented by PCES,...

Britain’s Future in the EU

The PCES held our first event of the second semester on the topic of “Britain’s Future in the EU”. We felt that the economic arguments needed clarifying for such an important decision for the UK. The event seen us joined by Dr Swati Dhingra, a lecturer at the London School of Economics and John Springford, from the senior fellow from the Centre for European Reform which is a think tank that wants to make the EU work better. Both were in favour of the EU, though this was not by choice but rather necessity, with speakers from the Brexit side of the EU being either unavailable or unwilling to speak at our event. The event began with Dr Dhingra talking about the economics of the single market, stating that the “economic consequences of leaving the EU are less contentious than the political ones”. The focus was on the referendum of the past and what we have learnt from it through the data. Consumers, businesses and workers have benefited from when the UK joined the single market in 1973 through a decrease in prices for consumers, the easier access to the European market for businesses and the rise in wages for workers. The analysis then moved on to UK trade, centring around the EU being the UK’s biggest trading partner when looking at exports . It was argued that the comparable advantage that the UK has in services and the growth of the services industry and that in the years to follow the EU services industry will grow which will lead to further increases in exports to the EU . Leaving...

Why Oh Why Can’t We Have Better Post-Crash Commentary?

Allison Schrager has written an article in Quartz about the global student movement to reform economics education, entitled “The single most important thing an economics course can teach you”. The article does not answer the question in the title, which might be forgiven as a publishing error except that it doesn’t seem to have a point at all. Instead, Shrager’s approach is to throw everything possible at the student movement and see what sticks. Unfortunately, the result is a prime example of almost everything wrong with the way some economists have responded to this movement: it’s full of inaccuracies about what we believe, repeats popular caricatures of any challenge to economics, and is unnecessarily harsh. We would expect a professional economist to produce something better than this. Schrager’s working hypothesis is that the student movement is “ignorant” about economics and has a “sloppy, inaccurate portrayal of mainstream economic theory”. She suggests that we have “barely studied the subject they think needs radical change”, and that we are “are already getting [diversity in economics], they just don’t know enough to realize it”. It’s interesting that she seems to know more about our education than us, and we wonder what she thinks we’ve been doing on economics degrees, if not being exposed to economics. In any case, if we are apparently coming out of economics degrees with little knowledge of economics, then whose fault is that? What’s worse is that the sole piece of evidence Schrager can muster to back up her assertions is that in our report, we allegedly “call out the mainstream, top-tiered “Chicago Journal” which isn’t an economics journal)”. Firstly, even if we grant this error,...

What Is Post Crash Economics (and Why Should You Care)?

The Post Crash Economics Society (PCES) is a group of economics students who believe there is something missing from our education. Economics is a central issue in the modern world and yet what we are taught is disconnected from the economics we hear about every day: recessions, inequality, immigration, the NHS, austerity and the digital revolution. Instead of studying these crucial issues and the different perspectives on them, students only learn about the neoclassical school of thought. This means economics graduates are ill-equipped to deal with the problems faced by the world today, which is why PCES are campaigning for reforms to the curriculum so that it is more pluralistic, critical and connected to the real world. PCES set up in 2013 in response to the lack of change in the curriculum following the 2008 financial crisis. This crisis had caught economists, policymakers and politicians completely off guard, with the most widely used economic theories at the time unable to account for even the possibility of such an event. The effects of the crisis are still being felt today by everyone – economics students or otherwise – with GDP only recently having returned to its post-crisis level, 7 years on. Yet our education made little to no mention of the crisis and how it had happened, focusing instead on toy theories and repetitive mathematics. We realised that there was a problem with our economics education, not only in its failure to account for the crisis but also in its failure to address the kind of important economic issues we had expected an economics education to address. We produced a report outlining these problems in detail. Economics...

PCES Event: Can People’s QE Fix Britain?

Last week, PCES hosted a panel debate on Jeremy Corybn’s proposed ‘People’s QE’ (PQE), which would see the Bank of England (BoE) create money electronically and use it to fund public projects such as infrastructure spending, or possibly send cheques to peoples’ homes, in an effort to stimulate the economy. Speaking on the panel were Frances Coppola, former financier and well-known blogger; James Meadway of the New Economics Foundation (NEF); and Chris Giles of the Financial Times (FT). The full talk is available in the embedded video below: Giles opened with a brief but interesting discussion of PCES in general, saying that he believes orthodoxy should always be open to challenges – even if the alternatives aren’t necessarily better. Leading on from this he said he welcomed these kinds of debates about ‘unorthodox’ monetary policy, but thought that PQE was not a good proposal. He argued that Corbyn and other PQE adherents such as Richard Murphy had not made it clear exactly when PQE would be needed – in recessions or as a permanent policy – and he argued that they PQE conflated a number of different issues such as the need for stimulus in a recession; the need for improvement in Britain’s infrastructure; BoE independence; and the debate over unorthodox monetary policy. He finished by pointing out that in many ways conventional QE had achieved many of the goals of PQE, allowing the government to finance its deficits with BoE-created money. Coppola agreed with many of Giles’ points, although she stressed that conventional QE hadn’t been benign and could have been carried out better, since the BoE admitted that it has benefited the wealthiest, asset-owning...

12 Questions Every Economics Student Should Ask About Their Education

PCES have put together 12 questions that we think every economics student should be able to at least have a go at answering (and ‘no’ doesn’t count as an answer!). We think these get to the heart of the shortcomings of undergraduate economics education: a lack of real world understanding; a lack of pluralism or even awareness of different schools of thought; a lack of critical engagement with the material and a lack of interdisciplinary knowledge. If you are an economics student reading this, we’d love to hear your answers to these questions! 1. Do I have a good idea of how, in practice, banks, firms and government organisations such as the Bank of England work? 2. If tomorrow my boss sent me some data on oil markets and asked me to produce a report on global demand and supply for oil, would I have at least a half-decent idea of where to start? 3. Am I confident in communicating my economic knowledge to different groups such as the public, academics and policymakers, both in written form and verbally? 4. Am I able to offer a solid, perhaps theoretical interpretation of major historical events such as the Great Depression or 2008 crash? 5. Actually, do I even know the historical details of these events? 6. Have I been shown a real world situation to which a theory I have learned can be applied? Which evidence was presented to support this? 7. Has my curriculum made any mention of theories such as endogenous money, cost plus pricing or the financial instability hypothesis, all heterodox theories which have a good degree of empirical...

Guest Post: Economics Has Lost its Way

This is a guest post by Simon Ogus, founder and CEO of DSGAsia, a firm which provides independent Asian economic and political analysis. He has a PhD in economics  from SOAS and has been researching the economies and markets of the Asian region since the mid-1980s. Albert Einstein, a proper physicist if ever there was one, and certainly no social scientist with a bad case of physics envy, once remarked that: “Not everything that can be counted counts, and not everything that counts can be counted.” One might have thought that after decade upon decade of one-in-ten-thousand-year events occurring, ahem, rather more regularly than every ten millennia, the economics profession might be willing to display just a little more humility in questioning its increasingly quantitative foundations. But, then again, as Upton Sinclair wrote in “The Jungle”: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” The idea that the Queen raised that nobody saw the crash coming is, frankly, self-serving humbug from an academic, bureaucratic and conflicted private sector analytical cabal for whom such a claim is extremely convenient from a backside-covering perspective. Plenty of analysts did point out the madness of what was happening (or more accurately was being allowed to happen) but the more independently-minded were largely shouted down and accused of being cranks that just did not understand the beauty of the newest manifestations of finance. Après la deluge, the revisionist claim has been that, “apparently,” it was not that the models were wrong, but just that they just needed to be perfected; analogous to arguing that...

On Pluralism: A Response to John Kay

John Kay recently wrote an article about the campaign for pluralism, criticising those who want to include heterodox economics in the curriculum on the grounds that “no one would cross a bridge built by a heterodox engineer”. However, he is wrong to make comparison between economics and harder sciences like engineering or medicine. These disciplines, though undoubtedly influenced by politics, ethics and culture, study phenomena which can be subjected to controlled and repeated experiments, the results of which can be generalised to uncover regularities and even laws. Economics, on the other hand, is a social science, and social interactions can have different results depending on the context and motivations of the entities involved. For example, research shows that attitudes toward taxation and the state change the effect an increase in tax has on economic activity. Social reality also changes: the monetary system of the 1890s is very different to the monetary system we have today. This means that although they might like to believe otherwise, economists have not and cannot uncover the ‘true’ model of the economy. Kay’s article would benefit from some substantive discussion of what he calls heterodox economics. He references Jean Tirole’s dismissal of other schools of thought to support his argument, but as a response to professor Tirole’s statements by the French Association for Political Economy pointed out, major advances in academia – even in the hard sciences – are often made at the margins of disciplines, where people are more willing to challenge central assumptions of the mainstream. Since the mainstream is unwilling to recognise these advances, they can remain undiscovered for a long time. The...

Food for Thought #4: Worker Cooperatives

Worker Cooperatives With the concept of inequality returning to economic and political discourse, people have been exploring both new and old ideas to deal with this age-old economic dilemma. However, much of the debate is focused on redistribution – Thomas Piketty’s main suggestions were to increases taxes, especially wealth taxes – and as such there has been little discussion of the sources of inequality and how we might solve the problem of inequality at a fundamental level. Worker cooperatives could be one such solution. To see why worker cooperatives might reduce inequality, at least in theory, one must remind themselves of Marx’s theory of surplus value. Regardless of whether you subscribe yourself to the labour theory of value or subjective theory of value, it’s reasonable to suggest that the amount of value created during production is often a lot greater than the amount those workers actually receive. This ‘surplus value’ is retained by those who own the enterprise, often in the form of profits. There is also a lack of incentive for the workers employed to work any more efficiently than they need to be to remain employed. Although many firms now offer some form of commission or bonus to more productive workers, this still does not represent the total amount of value, nor does it deal with the lack of incentive for others within the business. Worker cooperatives can potentially resolve this. Worker cooperatives are firms which are owned and managed by their workers, those who have an internal relationship with the firm, unlike investors, customers or the state all of which hold an external relationship with the inner dealings of the firm. As owners of the...

The Wrong Kind of Curriculum Reform

Manchester’s economics department has quietly proposed a radical reorganisation of its undergraduate degrees’ structure. Whilst you might expect us to be celebrating, this is the wrong sort of radical. This blog post will take you through the proposal and explain our opposition to the move. All quotes throughout this post are taken from a document circulated to students involved in the consultation. The proposal At the heart of the proposal is the division of economics undergraduate students into two ‘streams’. The division will take place in the core modules: microeconomics, macroeconomics and econometrics. The majority of students – which will be supplied largely by the BAEcon degree – will study the first stream. This stream will be more applied in its approach, with there being a focus on real-life examples. This is designed for students who wish to apply economic principles to a range of problems, for example as private sector economists. A minority of students – coming largely from the BEconSc degree – will study a more ‘technical’ stream. It will “take a more quantitative approach and go into more technical detail on how to derive and produce answers”. The proposal continues that this stream is aimed at those who intend to “go onto a career in academia or in a specialised technical field, such as in central banks, some government departments, or financial markets”. Why is this being proposed? Briefly, the diversity of mathematical abilities in second year classes at Manchester causes issues for lecturers and this proposal aims to address that. By grouping together those who are better at maths and those that are weaker, the idea is...

Economics is for Everyone: Organising an (un)conference – balancing work with more work

For a project that began over six months ago, with numerous skype calls discussing lofty goals and a somewhat ambiguous vision, it certainly feels surreal to be sitting at the end of day two of Boom Bust Boom Bust thinking ‘how hasn’t something gone wrong?!’ I quickly remembered we still have a day left, so there’s still time. Barring any last minute calamities, however, I can honestly say that organising this event has been an absolute pleasure and a hugely rewarding experience too. There were times when I questioned my involvement; perhaps completing the third year of a Politics, Philosophy and Economics degree was enough for the time being. Making the transition from outlining our goals to actually getting things done was such a time, and recurring dreams of a conference going wrong in bizarre ways made me question whether I was in too deep. Small triumphs throughout the planning process kept me going though. Composing press releases and cold calling journalists bore fruit when ‘Boom Bust Boom Bust’ got mentions in the Guardian and Times Higher Education. Every ‘retweet’ and ‘share’ was like a mini-victory when promoting the event through social media. Advertising for volunteers, at first with little success, seems so worth it now that I can see the (un)conference being staffed by helpful and enthusiastic students – students I hope will become more involved with Post-Crash Economics in the future! Now that the day is actually here, it’s great to be able to reflect on some of my favourite moments. A workshop on curriculum change was an opportunity to catch up with old friends from the...

Economics is for Everyone: Paul Mason – a quick reaction

Paul Mason gave a stimulating talk based on his new book “Postcapitalism – A Guide To Our Future”.  The delivery was fast and non-linear, so I might have misunderstood some key aspects.  With that caution here is my reaction. Paul covered a lot of ground, but his central thesis seemed to be that the information revolution has meant a de-coupling of the economy from material usage (as when software is manufactured, commodified and consumed), with a parallel accelerating reduction in the cost of information infrastructure (storage, processors, etc. etc.).  The weakening of labour power, under the dual onslaught of neoliberalism and changes in the organisation of production, means that the site of exploitation, and of struggle, is no longer the factory, but (as the Italian autonomists of the 1970s prematurely diagnosed) society in general. The growth of peer to peer economic relations and the contradictions of both neoliberalism (no more than 50 years old) and capitalism (500 years old) means a potential exit from the latter.  Moving from is to ought, he sees the State taking responsibility for residual or legacy operations of economy-society while markets deal with other aspects.  Was he suggesting peer-to-peer as a third domain?  Somewhat confusingly, for me, he also said that neoliberalism has made labour so cheap that the threat of automation for many products has at least been delayed. There is no denying many of the phenomena reviewed by Paul Mason, but somehow his notion of a non-Jacobin (i.e. non Statist-socialist) escape from capitalism did not convince me.  For one thing he never defined capitalism, and I think he only mentioned its core...

Economics is for Everyone: BoomBust – Towards A Post-Crash Economics

‘Economics is for Everyone’ is a timely slogan, and one that underpinned the programming of the three day Boom Bust Boom Bust PCES Conference in Manchester this week. Offering an important intervention in a profoundly dialogic project of forging alternative narratives about the financial crisis and its aftermath, panels considered the necessity of transparent approaches to the discipline of Economics on both the academic page and lived stage of twenty-first century society. The need of discussion, improved financial literacy and linguistic awareness, as well as open plutocratic debates about the manifold methods for approaching the new financial era united debates across the first day.   Major highlights from the first twenty-four hours – and events that attracted literally hundreds of participants – included a public lecture by Paul Mason, and the premiere of Terry Jones’ new docu-film BoomBust. Acting as ‘unofficial’ keynote for the first day of this ‘unconference’, Channel 4 News Economics Editor Paul Mason offered a preview of his forthcoming book Post-Capitalism (Penguin, Autumn 2015). Via a wide-ranging and intellectually ambitious survey of ways forward from the failure of the neoliberal economic model, Mason interrogated the rise of technology, the hyper-networked individual and critical responses to the conditions of a fifth supercycle in which the dying outweigh the buying, and ‘work’ becomes an unstable concept.   Paul popped up again later in the day as part of the premiere of BoomBust at Z Arts in Hulme. Presented by Python Terry Jones and produced and directed by Bill and Ben, the film shares the PCES aim of forging an Economics that is open for all. The film itself...

Economics is for Everyone: Managing Freedom and Accountability in State Education

After decades of tribal war, the political mainstream has reached a consensus on a new model of schooling that will drive forward ‘standards’ of education: the Academy. Since April 2014, the academies have come to comprise over half of English secondary schools and have governance at the heart of the initiative. The aim is to give civil society greater freedom and control, making their actions flexible and accountable. So far so good? The problem with this kind of political speak is that words like ‘freedom’, ‘accountability’ and ‘flexibility’ can mean a variety of things and could, coming from the mouths of different people, can even be directly contradictory.  As such they should be taken as questions, not answers. Freedom to do what, or from what? Accountablity to whom? Flexibility for what purpose? It is when asking these questions that some of the problems with the model come to light. Freedom. Despite giving head teachers and governing boards more control over school hours, curriculum and budgets, the political agenda still dictates the purpose of education. In other words, you’re still being told what to do; you’re just no longer being told how to do it. And it’s now on your shoulders if you get it wrong. Accountability. The model follows a general divestment of work from the political sphere to the economic sphere. As governments have given a marketised civil society the role of educating (while still dictating the agenda), the political issue of what education is for gets swept under the rug. The focus on making our children more skilled and employable becomes self-evident, it’s just a question of...

Economics is for Everyone: the (un)conference begins

We are a group of economics students who started a campaign to reform undergraduate economics education in 2013. Along the way we realised, just how important economics is. Nearly 6 out of 10 unemployed young people polled said anxiety had stopped them from sleeping well and 41% said feeling anxious about unemployment stopped them from leaving the house. 40% of families are ‘too poor to play a part in society’ and can’t afford things like a weeks’ holiday in the UK a year or a second hand car. Our economic circumstances influence who we are, how we feel and what we do. We also found that despite its importance many people feel unable to follow, let alone take part in economic discussion and that economics is widely viewed as a technical subject best left to the experts. We believe that to participate in democracy, all citizens in the UK must have a basic knowledge of economics and the confidence to use it. Understanding a bit about economics and fostering a civil society in which it is vigorously discussed not only enables democracy to function effectively but can help us feel more in control of our lives. Our (un)conference is just a first step towards this goal. We are trialling a Crash-Course in Citizen Economics and hope that it might in the future provide a model for a course which can be run for the public by academics and students at universities across the country. All of our events are designed to be accessible and interactive. But this is an experiment in democratising economics and we know there are areas...

PCES Events: “This House Believes That Mainstream Economics Has Failed”

Toward the end of the Easter term, PCES hosted an debate in conjunction with the Manchester Debating Union (MDU) over the proposition “This House Believes That Mainstream Economics Has Failed”. Defending the proposition were supposed to be Frances Coppola, associate editor at Pieria, and James Meadway of the New Economics Foundation. Sadly, James couldn’t make it at the last minute due to being caught up in traffic in London, which left the defending side one short. Fortunately, PCES’ own Catriona Watson stepped in to argue against mainstream economics, though with only an hour or so to prepare her argument. In opposition were Dr Andrew Lilico, Executive Director and Principal of Europe Economics, and Dr John Ashcroft, Chief Economist at the Greater Manchester Chamber of Commerce. The vote beforehand was slightly in favour of the motion. Coppola opened, commenting that her critique concerned mostly macroeconomics: the DSGE and VAR models used to by economists and central banks on the run up to the financial crisis which failed to see them coming. She argued that one of the major failures of these models was the inability to take finance as a fundamental part of capitalism, often omitting it altogether, or at best adding it as a secondary concern. The models falsely saw money, debt and finance as a largely inconsequential ‘mask’ over the ‘real’ economy, causing them to miss the trouble brewing in the financial sector. Lilico then opened for the opposing team, stating that what he saw as the 4 major pillars of economics had remained in-tact following the financial crisis: the Modgliani-Miller theorem, the Capital Asset Pricing Model (CAPM), the Black-Scholes formula for option pricing and the Efficient Markets Hypothesis...

Food for Thought #3: Jobs Guarantee Program

Jobs Guarantee Program The fall of Old-Keynesianism in the 1970’s was also the demise of the notion of full employment, as it was believed that such a goal would be detrimental to price stability as general wages begin to rise. However, Modern Money Theorists such as Wray (2012) and Mosler (1997-1998), as well as others, have pointed towards a concept of ‘full employment with price stability’, despite this looking rather odd on your textbook Philips curve, which posits an inverse relationship between inflation and unemployment. The policy itself sees the government employing every unemployed worker who seeks employment. However, those in the program must accept a salary that is below all other private and public sector jobs, thus always giving them the incentive to move to new private sector jobs when they become available. For example, the ‘living wage’ could become the new minimum wage for private and other public sector jobs, whilst the current minimum wage (now referred to as the ‘basic wage’) would remain applicable only for those in the program. The ’employer of last resort’ (ELR) or ‘Jobs Guarantee’ (JG) program works as an automatic stabiliser. Governments spend more on facilitating this policy in times of recession, when unemployment is high, and spend less in the boom years, when unemployment is low. It is argued that this ‘reserve army of labour’ will prevent general wage levels becoming too high, as firms can always source new employment from a labour pool of workers on the basic wage. However, it is important to note that this may not be the case for high-skilled professions where demand outstretches supply. Nonetheless, for...

Arthur Lewis and Mainstream Economics

Following Arthur Lewis’ recent centenary, we reflect on his contributions to the field of economics and how they relate to the current campaign for pluralism in economics education. Arthur Lewis was an economist at the University of Manchester from 1948-1958 who made major contributions to development economics. His most notable contribution was the 1954 paper ‘Economic Development with Unlimited Supplies of Labour‘, which would later earn him the Nobel Memorial Prize in Economics. This paper, largely qualitative, sought to understand how capitalist development would take place in developing countries, particularly the newly independent colonies. It has formed the basis of many models in development economics ever since. Lewis’ model emulated classical political economy, which typically assumed that firms had an unlimited pool of workers available at subsistence wage. Lewis proposed that developing economies could be split into two main sectors: the ‘formal’ and ‘informal’ sectors. The formal (or capitalist) sector was characterised by typical capitalist institutions: wage labour, markets for produced goods, and investment and technological development. The informal (or subsistence) sector was characterised by personal ties, technological stagnation and a surplus of labour. For example, family farms might be able to lose labourers without reducing their harvest, while dock workers would typically be selected from a pool of willing labourers, with many being turned down each day. This effectively meant the ‘marginal productivity’ of a worker in the subsistence sector was zero: they could be removed without impacting output. This meant that labour could flow freely from the subsistence sector to the capitalist sector. Lewis sought to answer “the central problem in the theory of economic development”, which he saw as understanding “the process by...

The Fall of Pluralism with Pat Devine

    PCES recently hosted University of Manchester lecturer Pat Devine, who spoke about the fall of pluralism in economics education at Manchester. He began by talking about how the crisis has shaken the economics profession and revealed the limitations of using only one methodology to understand the world. He then moved on to discuss Manchester specifically. He said that although the core of economics education was already mainstream by the time he started teaching, the department used to employ both heterodox and mainstream economists. This meant that heterodox perspectives such as institutional, post-Keynesian, Marxist and Austrian economics were often discussed and were sometimes available to study in-depth as optional units. Devine argued that there was not necessarily a direct effort to shed heterodox economists from the department, but that the increasing consolidation of the discipline as whole, as well as the increasing demands of research, pushed the department further and further toward homogenisation. He also commented on the negative effect the increase in student numbers has had on the scope for discussion and open ended questions, since it’s far easier to have a debate with a handful of students, and to mark masses of exams where the answers are either ‘right’ or ‘wrong’. Overall, he seemed to believe that the fall of pluralism was an unfortunate consequence of broad institutional and political changes, rather than a consequence of bad faith on the part of mainstream economists. Whatever the case, it’s clear that the contemporary campaign for pluralism will require a broad and concerted effort to reverse the trends identified by...

Food for Thought #2: Modern Money Theory

Modern Money Theory With much of the current political and economic debate focusing on government debt and the necessity of austerity, one particular theory stands out in radically re-evaluating the role of money and debt. Modern Money Theory (otherwise referred to as MMT or neochartalism) argues that any government with its own sovereign floating currency is able to purchase anything in its own currency and can never go insolvent, although inflationary and political pressures may remain at work. MMT’s methodological approach is largely based on macroeconomic accounting methods of stocks and flows and sectoral balances. Put simply, if there exists only a public sector (the government) and a private sector (individuals and firms), then logically, if the government is in deficit (more public spending than tax collections), the private sector must be in surplus, and vice versa. A government budget surplus is thus detrimental to society. Furthermore, as long as there is demand for government bonds (in its sovereign floating currency) the government can remain in deficit whilst the private sector gains net financial assets. In reality, a third sector/balance exists: the foreign sector and the balance of payments. In this respect the public and private sectors could be in surplus whilst the foreign sector is in deficit, as well as other combinations of the three. However, MMT states that as long as there is a demand for domestic currency from foreigners, a current account deficit can continue indefinitely whilst at least one other sector remains in surplus. The assumption that government deficits and current account deficits can potentially become a blessing for private individuals and firms lies in stark contrast with the...

Post-Crash in the Royal Economic Society Newsletter

The most recent edition of the RES newsletter features an article by members of Post-Crash entitled “Economics as a pluralist, liberal education”. The article argues that as a social science, economics should embrace pluralism and interdisciplinary learning. An excerpt: Introducing students to multiple perspectives is vital because it reframes the way they think about economics. It goes from being about applying one universally established way of doing economics to recognising that different perspectives can give you different, valid answers. Within this framework students are asked to think actively about how to evaluate good or bad theory and how to come to reasoned judgements about the best answer. Politics, philosophy, sociology and even some economics courses manage to teach students a number of different approaches to analysing their subject matter. Students are examined on their ability to argue a particular position against the others, demonstrating a critical understanding of the issue and of more than one relevant perspective. Why would economics students be unable to do this? Read the whole thing...

Inconsistent Criticism: A response to Tony Yates

The morning after Aditya Chakrabortty’s BBC Radio 4 programme “Teaching Economics after the Crash”, ex Bank of England macroeconomist Tony Yates wrote a piece on his blog calling it “a distorting dramatization”, which allowed “multiple silly, uninformed critiques to go unchallenged”. He suggested that the BBC documentary was selective and biased and amounted to an abuse of trust of its listeners who expect Radio 4 “to explain things how they really are”. Yates is good at finding bias in things that don’t conform to his point of view. When the FT covered our Bubbles, Panics and Crashes module, he attacked their economics reporter as “one-sided”. Nevertheless, he provided useful ammunition for our critics who held his blog aloft to illustrate the shortcomings of the student pluralist economics movement. For those who want to discredit the documentary and especially the debate it highlights, his footnoted ex Bank of Englander critique was perfectly timed. We have no interest in rebutting his blog point by point, but we do wish to set a few facts straight. Crucially, Yates would like to make out the radio programme was a head to head between heterodox and mainstream economics. But as was suggested by the title, the programme was actually about students at eight universities in the UK and over fifty groups around the world calling for more pluralism and critical thinking in our economics education. It was therefore a study of an international protest movement, rather than a survey of all economics or even of financial crises. It deliberately gave students chunks of airtime alongside professors, of whatever persuasion. Yates insinuates that the University...

Food for Thought #1: Money and Alternative Banking Systems

This blog series will engage briefly with some of the contemporary, as well as older, theories, models and concepts in economics and political economy, and will draw on the potential advantages of these approaches. I hope this, as well as future blogs, will help spark a healthy debate on the alternative approaches to these fields, something which is regrettably rare in the lecture theatres and seminar rooms.  Money and Alternative Banking Systems On Thursday 20th November, for the first time in 170 years, MPs were invited to take part in a parliamentary debate on money creation and society, a topic which has remained stagnant since the rise of Monetarism – and the quantity theory of money it held gospel – in the 1970s. Such a debate, in part, was sparked by the Positive Money campaign group, which has long argued that under the current fractional reserve banking system, private banks have been given the concealed privilege of being able to create money out of what seems to be thin air. This process leaves banks unable to facilitate the majority of savers demands to convert their savings into money all at once (known as a ‘bank run’). In addition this process is heavily pro-cyclical, as banks tend only to extend credit, and thus the money supply, in times of good confidence, whilst creating a ‘credit crunch’ by reducing the money supply in times of low confidence. Such a process begins whenever banks credit the accounts of a borrower, by simply typing digits into a computer, and then destroying the money once it has been repaid.  (The whole process itself is rather mind-boggling, an...

Myth Busting: Post Crash and the NSS

Myth busting: Post-Crash and the NSS A recently published article about the University of Manchester economics department’s declining National Student Survey (NSS) results has brought to the surface concerns among members of the university community about our actions last spring. We hope this blog post will go some way to addressing these concerns whilst also putting to rest any misunderstandings. What we actually did in March It was fairly widely reported that we were coordinating some sort of negative response to the NSS but what this actually was appears to have somewhat got lost along the way. What we didn’t publicly tell students to do was to give a negative response because we “just don’t like neoclassical economics”. We asked students to reflect on the changes they had or hadn’t seen in the curriculum. This is clear from the post on our Facebook page, where we stated: “…we are asking you to please wait before filling out your NSS until after the university has made its decision regarding Bubbles, Panics and Crashes…If it decides to accept this course as a module it will be demonstrating its dedication to its students…If it rejects this module the opposite will be true…We hope you agree.” It’s also important to highlight that the economics department also embarked upon a campaign to get students to fill out the NSS, whilst highlighting the changes they had made that year to improve student experience This was seen, for example, in the large banners in the Arthur Lewis building (UoM’s social sciences block) and the eleven tweets from the department’s feed. We were providing the other side...

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