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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...

Mainstream Misconceptions, by Dr Terry Peach

­­ A lecturer from the University of Manchester, Dr Terry Peach, whose research area is primarily in the History of Economic Thought, comments on one of our recent panel debates and how economic thought came to be the way it is today. I congratulate the PCES for organising the debate on “How Should Economics Change?” As is so often the case, however, the occasion only really came to life towards the end, when the panel were pressed to explain why university students were not exposed to non-“mainstream” (or “neoclassical” or “marginalist”) schools of economic thought, if only to allow them to make an informed judgement about the relative merits of the different approaches. The question drew the following response from Professor Diane Coyle: “I find it slightly bizarre that there should be a reaching for 70 or 100 year-old historical models of thinking about the economy when the economy has changed so much”.  Professor Coyle’s position is doubtless shared by many “mainstream” economists, and it is the position itself that I challenge in the following comments, not any particular spokesperson on its behalf. “Mainstream” economics did not suddenly come into being ex nihilo. It was a product of “historical models of thinking about the economy” that were developed in the last quarter of the nineteenth century, which were themselves developments from, and reactions to, earlier “models of thinking”.  Keynes’remark is apposite: those who “believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist”. Although Keynes’ barb was directed at “practical men”, there seems no reason why we should exclude many contemporary economists from suffering...

How We Learned to Start Worrying and Stop Loving Economics

Felix Nugee of the Cambridge Society for Economic Pluralism (CSEP) has written a rather curious blog post (even the more curious given the name of his society) outlining how he “learned to stop worrying and start loving economics”. After reading it, one remains in the dark as to how Nugee was convinced, seeing as the post largely consists of unsupported assertions or deferrals to the arguments of others. For example, Nugee makes a series of unsubstantiated claims, such as the notion that it’s “very difficult to properly understand unemployment unless you start off thinking that each agent is utility maximising”, and that “it is the maths that [economics] uses in statistical analysis which makes it much more rigorous than other social sciences”. He claims he has experienced “multiple historical examples of how all of the macro theory worked i.e. Ricardian Equivalence”, without actually offering up any of this evidence for the reader. He approvingly lists a number of frameworks and models used in economics, such as cost benefit analysis, without actually giving reasons why we should believe they work. He returns to this theme later when he states that the idea “economists try to get involved with everything” is “rubbish”, then uncritically accepts econometrics as a tool that is “relevant to a broad range of topics”, again without examples. Nugee acknowledges that mainstream economics hasn’t done a good job of explaining the crisis, but doesn’t think this is much of a problem. This is because the crisis was a recent, unforeseen event which economists are still trying to understand. Nugee claims that it’s unreasonable to “expect an explanation of the most complex systemic collapse – whose...

What You Won’t Learn In An Economics Degree: Ecological Economics

The UoM Post-Crash Economics Society were lucky to have Kate Raworth from the University of Oxford present her work on Ecological Economics. Ecological Economics is perhaps one of the most important ways of thinking alternatively about the economy, and creates a real conversation about sustainability and the economy’s place within the ecosystem. To view the economy as an ever expanding source of resources and focus our ambitions only on economic growth is futile, as the economy is bounded by the limits of the ecosystem imposed by nature. Raworth’s depiction of an ecological model of economics raised the important question as to whether there is a counter design to the current system of debt, money creation, maximising shareholder return and increasing productivity in the pursuit of economic growth.  Such debates stem from the concept that we should not only consider whether such economic growth possible, but whether this type of exponential growth should even be desirable. It terms of an ethical argument, the earth’s resources have been depleted by industrialisation, investment in profitable industries such as oil and gas, and other processes that have taken from and polluted the environment to improve material conditions for humans. There is a trade off between too much environmental degradation and providing for humans. Raworth proposes the “Doughnut Model” that concludes our sustainable solution is a middle ground between the two: using the Earth’s resources both efficiently and cautiously. The inside limit of the “doughnut” is social foundation; the outside limit is the environmental ceiling; and to go beyond these respective limits would be detrimental to either human and economic needs or the balance of the...

CRASH, BOOM, POP! Money & Economics Exposed

Steve Keen and IDEAnomics have launched a project to create a graphic version of Steve Keen’s book Debunking Economics – which is recommended and on our reading list – to try and make economic ideas outside the mainstream more accessible. This looks like a pretty cool project which should give heterodox ideas more exposure among students and the general public. They have also created this short video outlining the content of the book and purpose of the project:   https://d2pq0u4uni88oo.cloudfront.net/projects/1383150/video-456089-h264_high.mp4   We wish them the best of...

Understanding Post Crash

It’s always good to see major publications engaging in the debate over pluralism in economics education, and after something of an ebb in media coverage, The Economist has produced a short piece on the student-led movement to reform economics education. This provides an opportunity to combat some common arguments/mischaracterisations we encounter in the press (though we do not wish to single out The Economist specifically): that we are ‘anti-free market’; that we as students are not qualified to criticise the discipline; and that we would be better off channeling our energy into disciplines other than economics. The article begins with this: Since the financial crisis, various student groups all over the world, from the Post-Crash Economics Society at Manchester University to the International 
Student
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Economics, have challenged the way the subject is taught by professors, believing it too beholden to free-market orthodoxy. [emphasis ours] This is probably the one mischaracterisation that, no matter how hard we try, we cannot shake. Neither our society nor the far broader recent student movement are concerned specifically with “free-market orthodoxy” and we have never said so. Instead, our critique is of economic theory, economics education and the role of economists in society. In fact, here at PCES we believe that economics and economists (especially in macro) currently focus too much on policy of all kinds, and too little on understanding the economy. It is a fallacy to assume that just because economists are preoccupied with policy, any attack on their approach is preoccupied with policy, too. This is not to pretend we are somehow ‘objective bystanders’ or that we do...

Brussels on Post-Crash

One of the key motivations for PCES has been a forward-looking desire for us, as graduates of Economics, to understand our social environment and, beyond this, to change  it. Following the economic crisis of 2008 enigmas such as unemployment, debt crises and threats of inter-generational inequality persist. Often as students we are left to accept these aspects of our economy without much thought or resolution, and so it was a privilege for PCES to be invited to attend the “Labour Economics after the Crisis” conference by László Andor, Commissioner for Employment, Social Affairs and Inclusion at the European Commission in Brussels last month. As the hub for EU policy-makers, the discussion over two days was enlightening on the matter of how economic theory influences the design and implementation of socio-economic policy. It was also an exposure to the power of institutions such as the EC, and their impact on the lives of people in the EU. The conference addressed key targets set for growth, youth unemployment, female participation in the labour market and job creation, and how these would be met through macroeconomic policy. The high calibre of speakers included Etsuro Honda, Special Adviser to the Prime Minister of Japan. Etsuro provided us with an analysis of Japan’s experience of reducing structural employment following the burst of an asset price bubble, and the movement to refocusing on “moral persuasion” to restore confidence in the Japanese economy. Japan’s experience was an intriguing start to the conference as a source of comparison for the EU. It highlighted the central issues an economy must focus on during recovery: the timing of policy,...

Our Rejoinder to the Department

A reply to the University of Manchester’s Economics department’s response to “Economics, Education and Unlearning” We would like to take this opportunity to thank you for responding to our report. It shows respect and will help us to build on our already constructive relationship. We agree that a point by point approach to our dialogue would not be helpful. But you also correctly recognise that this is a debate with “some way to go”, so we will now offer our thoughts on your response, before making proposals on how we can move forwards. – Existing Manchester economics modules are not representative of the diversity of economics We challenge your view that our academic environment is open and representative of the diversity of economics. We have reiterated that the subject of our concern is economics, by which we mean the work completed during economics modules. The need for greater debate and discussion is within economics, not in politics, philosophy, social anthropology or any other DA within the School of Social Sciences. This greater debate is needed to expose economics students to alternative perspectives such as Austrian, Ecological, Institutionalist and Post-Keynesian, which as our report showed are lacking from the curriculum. The academic environment we care most about is economics and to claim it is representative of the diversity of the subject is false. Beyond a plurality of economic perspectives, we appreciate that those on BAEcon can access critical thought and historical perspectives, for example, but this isn’t when they are “doing” economics from the list of modules you provided, as we have already made clear in our report. The department...

What Would We Like to See on the Curriculum?

A recent post by blogger Tony Yates presents an opportunity for us to give a brief clarification of what we would like to see on the economics curriculum, and to debunk some common myths that seem to circulate among mainstream economists about campaigns like ours. This will only be a whistle-stop tour of the kind of stuff we’d like to see taught; over time, we hope to develop a more comprehensive outline of a post-crash curriculum. Anti-Maths? Critics of economics are often thought to be anti-maths (with the underlying implication that they are simply not clever enough to understand maths or economics). However, although we believe mathematics on its own does not lend a theory credibility – and that contemporary economic models seem to have sacrificed too much relevance in the name of mathematical tractability – we are not at all anti-mathematics. In fact, a lot of the mathematics taught on undergraduate and even graduate economics courses is quite dated and simplistic (eg linear equations; stochastic, normally distributed shocks). This is the kind of stuff natural scientists abandoned when they realised how complex and unpredictable the world can be (see Phillip Mirowski on this). This is why we would strongly endorse a link up with our mathematics department to teach ordinary differential equations – as well as models which utilise them, such as Richard Goodwin’s model of class struggle – to economics students so that they may gain a better understanding of dynamic systems, rather than simply using comparative statics with unique equilibrium solutions. Economics students could also be taught basic programming packages such as MATLAB – mathematics and engineering students currently are – so...

Rethinking Economics with Galbraith, Krugman and Buiter

Here is an interesting panel debate with Jamie Galbraith, Paul Krugman and Willem Buiter. If you want to get to the panelists, skip to about 19 minutes. Also of interest is around 26 minutes, where Jamie Galbraith talks about “backwater economics”, which he contrasts to mainstream ‘saltwater’ and ‘freshwater’ economics. He acknowledges that backwaters may be “kind of dilgy” but states that, in contrast to the “sterile” mainstream schools, they are “where evolution actually occurs”. Thank you to our friends at Rethinking for organising such an excellent event and group of...

Classical economists: Engels on Malthus

Known chiefly as Karl Marx’ sidekick, Friedrich Engels was the other pioneer of post-Enlightenment communist philosophy. Engels and Marx worked together on nearly everything either of them produced – history had room to give only one of them the luxury of an ideological ‘-ism’, however. A work Engels did research and publish entirely on his own is The Condition of the Working Class in England in 1844. The Condition is a truly extraordinary text in its historical scope, detail and theoretical grounding. For Engels trawled and traversed through the city of Manchester, trying to understanding and grasp a sense of how the industrial revolution had crystalised capitalism into a specific type of modern society. He analysed factories, districts and living conditions in which factory workers lived, the wages paid out by the factory-owners or as Engels called them, the bourgeoisie, and fundamentally, the relationship between these owners and the workers employed by them. One chapter, ‘Competition’, from the book deserves particular attention in light of the previous blogpost on Malthus’ conception of excess population. Engels (p. 87) firstly describes how competition created industrial capitalism. The productive powers of industrial factories rendered the economies of agriculture obsolete, centralising capital in the hands of factory-owners and fostering innumerable ranks of inner-city factory workers, the proletariat, vying alongside each other for jobs inside the factories. Higher wages and higher profits ushered both worker and owner away from the farms in unison, towards the inner-city. We get a sense of capitalism’s revolutionary mobility here: the capacity to dissolve entire worlds into sands, forging new ones apace and without hesitation. Under capitalism, as Marshall Berman once described: all that is solid...

Classical economists: Malthusian myths and truths

Malthus is a thinker who’s ideas are often talked about in jest these days. His projections of human misery and starvation on the back of a population boom are used to justify his ridicule. Yet as this piece over at Grant McDermott’s blog describes, there is much more than what often meets the eye, when it comes to Malthus. For while Malthus did worry about humanity’s capacity to feed itself, this fear was not drawn up out of thin air, yet from Matlhus’ recorded, empirical observations at the time. Furthermore and contrary to popular opinion, Malthus was not blindly committed to the notion that population growth would exponentially outstrip food supplies. As Malthus himself wrote: “in no state that we have yet known has the power of population been left to exert itself with perfect freedom.” For more, check the original piece...

COS Talk at Manchester, and its relevance to PCES

Dame Nancy Rothwell, the President of Manchester University arrived at University Place yesterday to debate the purpose of education with hip-hop artist Akala, Steve Jones from the Manchester Institute of Education and Paul Cottrell, the former Head of Public Policy at the UCU, in talk hosted by Manchester’s Challenging Orthodoxies Society. The debate started with a brief talk by both Jones and Rothwell discussing the idea and varied success of university as an agent of social mobility, while also touching on the effect university should have on young adolescents, preparing to enter a career. A more relevant critique of Britain’s system of universities was promoted by the talks of Akala and Paul Cottrell. Both men, asked a number of crucial questions: is the pursuit of knowledge in our universities being marginalised by the managerial desire for profits and funding now provided by students? what are the implications of the lack of democratic infrastructures within our universities? and; how can we ensure that universities help foster the range of radical thinking and visionary ideas required to help make the world a better place? These are questions which hold a certain pertinency with regards to the Post-Crash movement, and the struggle of economics students in trying to improve the standard of the education they receive. For an education lacking in pluralism, in an open, honest discourse of battling classroom ideas is unlikely to produce students who can tackle, conceptualise and address the almighty variety of political problems and humanitarian tragedies around the globe. And an education deprived of the institutional oxygen of democratic practises is unlikely to produce students who may appreciate, understand...

An Introduction to Feminist Economics

Our next event in our lecture series “An Introduction to Heterodox Economics: What they won’t teach you in an Economics Degree” will be presented by leading Development Economist and Professor at the Delhi Institute of Economic Growth, Bina Agarwal. Bina will be presenting us an introduction to Feminist Economics, a discussion of the economic implications of gender roles that is mostly overlooked by Neoclassical Economics. INTRODUCTION TO FEMINIST ECONOMICS Bina Argarwal Tuesday the 1st of April 5-7pm University Place 1.219 There is great scope for bringing Feminism to economics. Gender inequality and women’s rights are a globally important issue. Diana Strassman refers to Amartya Sen’s research that says “100 million more women would be alive if they had access to basic resources”. Clearly this is an economically important result; explaining a loss so great should be one of the biggest focuses of economists who want to ‘make the world a better place’. Yet this can be blindsided by those only looking at the basic economic indicators such as GDP, which contains no such information about the gender differential. In less developed countries we know that women lack inheritance rights, property rights and working rights by law and culture restrictions, and so their contribution cannot be included by many standard economic indicators. This leads us to ask just how much information Economists and policy-makers are missing by not considering the implications of gender in Economic theory. A more in depth appreciation of Feminist Economics can help Economists ask the right questions about the roles of women, and lay the groundwork for much more gender-inclusive policy making , which can only...

‘100 Words On Heterodox Economics’

As part of the 100th issue of the Heterodox Economics Newsletter, 25 heterodox economists were asked to give their views on the matter in 100 words only , addressing the following questions : 1. How is heterodox economics different from mainstream-neoclassical economics? 2. What is the nature of heterodox economics? 3. What is the current state of heterodox economics (in your country or region)? 4. What should be done to advance heterodox economics? 5. Any advices for the future generation of heterodox economics? Paolo Ramazzotti, Professor of Public Policy at the University of Macerata, Italy writes referencing several historical economists: “I think there are various strands of thought within heterodox economics. This is one instance where variety is good. As far as I am concerned, I would emphasize that: The economy is interdependent with the social and natural environment. It is an open system. Economic relations are characterized by sequential interaction within a cumulative process (Kapp). As a result of the previous two items, we should conceive of the present as history (Sweezy). Many economists have only interpreted the world, in various ways; the point is to change it (Marx, who actually referred to philosophers). Economic inquiry should focus on the means to achieve a possible civilization (Keynes), one where the economy is re-embedded in society. When theorizing or assessing economic thought, relevance should prevail over internal consistency. Prior to answers there must be questions (Myrdal). I think there is more to heterodox economics than what distinguishes it from the mainstream.” Other contributors include Lefteris Tsoulfidis, Associate Professor of Economics, University of Macedonia, Greece and the Editor of Bulletin of...

Clive Spash: Environmental Economics

From the Vienna University of Economics and Business, last Tuesday, Clive Spash came to Manchester to deliver a talk on the environmental school of economic thought. After the recent, strikingly bizarre bout of flooding across the UK, nothing could really be more relevant than a discussion of how Economics, note capital E, economics as a discipline, ought to deal with an environment that spirals out of control in response to humanity’s very own development. Spash problematised environmental economics in the context of an academic struggle. For the dominant, neoclassical school he explained, perceives environmental issues such as pollution, toxic radiation fallout and rising sea levels to be mere ‘one-offs’, ‘externalities’ that pop-up occasionally as a product of market prices. In doing so, the neoclassical school has no way of explaining environmental problems as an inherence of our current economic system, as something that arises almost inevitably out of society’s methods of organising production and distributing resources. Spash went on to argue that an economics that can actually explain environmental issues as something more than mere anomalies absolutely needs to stand in direct opposition to neoclassical economics, in order to be able to truly confront and attack these issues rather than being coopted and diluted by the neoclassical hegemony, reduced once more to a sideshow, a picture on the wall for people to look at once in a while when searching for profit has become a bit boring. Mr. Spash talked of the global 1%, a minority of people that own 38.5% of the world’s wealth and questioned the intergrity of an academic Economics, neoclassical economics, that fails to directly...

Prices: Gerry Steele, poetry, signals and efficiency

Tomorrow in Manchester, we have Gerry Steele giving a talk on the Austrian school of economic thought. The Austrian school emphasises the importance of individuals in economic transactions, and in particular, the importance of a market price in allocating resources efficiently, and includes the notable theorists, Ludwig von Mises and Friedrich Hayek: here is a clip of the latter, explaining why price is so important to Austrians. We’ve also had a submission from a UK-based criminologist, Criminonymous, analysing the effect of the market price in the financial sector. The piece is economic comment in the form of a poem, exploring the nature of financialisation and argues that a violent ignorance lies at the heart of the City’s decision-making. If insanity is doing the same thing over and over again and expecting different results Then calamity is clearly what these guys are all about It doesn’t make you a Luddite to say that, with hindsight Our confidence in the ratings agencies was totally misplaced Does anyone else remember the way that they acted yesterday? They said to put your mind at ease with a few of these mortgage-backed securities Good enough for Lloyds TSB Endowment funds at universities And public sector retirees Whose pension funds don’t invest in anything rated under a couple of B’s Luckily, those A’s and B’s are usually estimated accurately Sí? And then, low on gumption, they made the false assumption That all Eurozone debt was equally fit for consumption Served on a plate with a scotch at a luncheon Whatever! Just triple-A it! It doesn’t matter of what it consists Or what it means for our...

A Response to Commentary on the Post-Crash Economics Society

We are glad that the coverage of our society seems to have renewed debate about the state of economics, economists and economics education. In particular, we appreciate the thoughtful response our lecturer Peter Backus has given to our society’s general aims and arguments, which we published a short while ago on this blog. However, naturally, we have some things to say in response. This post will be loosely based around the same structure as Backus’ post, but we hope it will also cover some of the general points people have raised about our society (NB: blogger Cameron Murray has also written a response to Backus). To start, it bears repeating that as a society we do not have political aims. We are not lobbying to get rid of central banks, overthrow capitalism, save the planet or what have you. We are not merely pushing to have “Marx and Keynes”, or any other thinker in economics, taught simply because we happen to like them. What we are instead looking for is to establish a reality based (inductively taught), pluralistic economics, particularly at undergraduate level. We want economists to acknowledge where there are competing theories which explain certain phenomena, and to draw attention to the pros and cons of the relevant theories. This is critical pluralism, not an “anything goes” smorgasbord of dead economists. What is economics? The first argument against us is that our demands suggest that as students, we are not really suited to studying ‘economics’ but to other, related subjects such as PPE, history or what have you. However, this is really more of a reflection of the problems with economics than...

An Open Letter From Peter Backus

Peter Backus, one of our lecturers here at Manchester, invites you to engage in an open discussion about the current standings of our Economics education. In this open letter to the PCES he has presented to us his personal opinion on the academic teaching of Economics. We believe an insight into such an alternative perspective can greatly nourish our understanding of the PCES debate, and we’d like to thank Peter for taking the time and consideration to share his ideas with us. I read, with great pleasure, the articles that ran in the Guardian a couple of weeks ago about the PCES here at Manchester. I was particularly impressed with the PCES’s response to the original article, which was designed to clarify the Society’s position, as it was not accurately depicted by the Guardian. The week before these articles ran, I gave a short talk at the MUTIS Finance Society Conference here at Manchester and I had an interesting chat with a student there. My talk was mainly about my time at university (1996-2000) when the stock markets did nothing but go up and how growing up in that world shaped my thinking. The student I spoke with said he thought it was an interesting thing to think about especially since that world is essentially the total opposite of the world in which your generation grew up, where economic Armageddon was all around you. This really struck a cord for me and a penny dropped for me about the PCES. I realised that you guys (meaning people around your age) really have no reason to put any faith in...

A satirical take on cost-benefit analysis

“Please know that this decision was not rash. In fact, it was anything but—it was completely devoid of emotion. I just made a series of quantitative calculations, culled from available OECDdata on comparable families and conservative estimates of future likelihoods. I then assigned weights to various “feelings” based on importance, as judged by the relevant scholarly literature. From this, it was easy to determine that given all of the options available, the winning decision on both cost-effectiveness and comparative-effectiveness grounds was to see other people. It’s not you, it’s me.   Well, it’s not me either: it’s just common sense, given the nature of my utility function.”...

“understanding the material conditions of our existance”

“…that’s what Economics is all about: understanding the material conditions of our existence, the jobs we do, the incomes we receive…things we buy…the role of governments in providing our rights…the right to avoid abject poverty- there is a challenge to understand the material conditions of our existence, so that we may make them better…we want to understand in order to change” -The opening of Frank Stillwell of Sydney University’s outstanding lecture series. On the failure of dichotomy in academic Economics, the dominance of the neoclassical school and the exact point of true economic enquiry. The first ten minutes are well worth a watch for anyone wanting to understand the problems faced by contemporary Economic academia, and why it is so important these issues are...

Lift off!

A Note from the Editors: Welcome people! You may or may not have seen our article in The Guardian last week: http://www.theguardian.com/business/2013/oct/24/students-post-crash-economics This article is key for us, and gives us a strong platform to appeal for support, and to raise a wider awareness of the problems we face as students of Economics. A brief rundown of these issues can be viewed in our Constitution, over here – http://www.post-crasheconomics.com/ We will shortly be releasing a report with the aim of broadly examining the education we receive at university, and outlining our own ideas of curriculum change, and how we as a society feel higher education can be improved. Please drop any comments on the Guardian article, or our work as a society on the bottom of this post, and if you’d like to get involved, get in touch or have any questions, fire an email over to: post.crasheconomics@gmail.com We’re also after writers, budding theorists, philosophers, mathematicians and just about anyone with any kind of angle on the economic world to join in our discussions! If you’d like to blog for us, drop any ideas you have over to postcrashblog@gmail.com In the meantime, please have a scout of this page and tell us what you think of our articles and blognotes so far: we’ve got a small piece on the banking system over here, a thorough brief of our up and coming reading group just here and a smart preview of one of our success stories, a voluntary undergraduate module at the University of Manchester that aims to take a look at alternative theories of economic crisis. We have plenty...

Second Reading Group: Organisations & Markets

The theme of the second reading group was Institutional Economics, which focuses on the role of laws, culture, norms and organisations in determining how economies and populations function. The reading was Herbert Simon’s well-known 1995 paper Organisations and Markets, which argues that in modern capitalist economies, organisations rather than markets are the dominant method through which resources are allocated. The first problem for our group was properly defining the word “institutions”, which can often feel like a deus ex machina invoked to explain away any problem. Your country is doing well? Good institutions! Not doing so well? Well, maybe you should improve your institutions! However, with a little help from Google, we came to a broad agreement on a definition: “an established rule, organisation or practice”. We could also add that institutions are generally “non-policy dependent”; they are more fundamental than specific rules or regulations. Simon’s paper argues that a large amount of organisation is required to coordinate the division of labour, and that these organisations play a crucial role in the allocation of resources. He asks what a Martian would see if they came to earth, and saw organisations as green circles, with market relationships as red lines connecting them. Would markets dominate, with green circles as islands in a sea of red, or would the green circles be large, with relatively few red lines connecting them? Simon argues the latter (and Ha-Joon Chang, in his lecture, said that 80% of transactions occur within firms in the USA). One member did not like the analogy as it seemed simplistic and did not fully prove Simon’s point – it would not...

Institutional Economics

In the last of our lecture series, our guest speaker Ha-Joon Chang gave a great emphasis on letting the spectrum of schools of economic thought “cross-fertilise” to promote the kind of heterodox Economics that will help us understand the complexity of the world better. Institutional Economics takes this notion of truly determining the mechanics of human behaviour one step further, integrating the findings of non-market study such psychology, sociology and cultural history in its explanation and predictions of how economic agents make choices. We are pleased to present the second of our lecture series with Geoffrey Hodgson, the Editor-in-Chief of the ‘Journal of Institutional Economics’ (Cambridge University Press). Taking Institutions Seriously: An Introduction to Institutional Economics Tuesday 22nd October, 6.00pm – Roscoe Theatre B https://www.facebook.com/events/596203287105066/ Professor Hodgson is an influential voice in the space of Evolutionary Economics for his analysis of Darwinism, expressed in the book “Darwin’s Conjecture” which brings light to how evolutionary principles have had an effect at the socio-economic level. Intriguingly, it is discussed that Biological phenomena such as variation, inheritance and “survival of the fittest” have consequentially revolutionised human decision making. It is the fascinating idea that the literal, undisputed Science behind “Social Science” could provide the basis for new predictive economic models; that your biological programming has an effect on your economic decision. Thoughts on Darwinism may be further discussed on the Darwin’s Conjecture Reading Group Blog. Institutional Economics points to how economic interactions are subject to the rules of tangible institutions of the law, government and also to the intangible institutions of inherent human nature and evolution, such as the institution of marriage and...

Banks

We’ve recently jumped across this rather interesting series of videos on website called Positive Money, aiming to strip away the layers of mystery that surround the banking system and roll out the very core of bankmoney as a real-life operation. A few key points are made: *The general idea of how money operates is known as the Money Multiplier Model. This model describes bankmoney as a kind of imaginary, unfurling thrust of growth, rooted in a tight seabed of reality known as Reserve Ratios, and tempered by the fraught hands of the Central Bank, the only bank with the legal authority to print and create real money. We each go to banks to deposit money safely and securely. However, banks need only retain a fraction of this money in the bank itself: this fraction is the Reserve Ratio. The rest can be loaned out and may find itself being spent in all kinds of wonderful ways. Some of it may eventually return to a bank to be saved once again…and is then lent out further, providing that tiny fraction, the Reserve Ratio, is still kept behind in the bank, as a measure of safety. *The Money Multiplier Model is not entirely accurate: Reserve Ratios are not as significant as the model assumes and indeed, since 2006, the Bank of England has operated a reserve-ratio scheme that is only ‘voluntary‘. Banks also have the luxury of electronic money, and through this, are able to conjure and manipulate their very own money supply, independent of any Central Bank: this is described as the traumatic excess of the electronic banking screen, the...

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