Street School Economics

A guest post from Dr Gail Bradbrook, an activist based in Stroud who is active in the Transition and Tax Justice movements and sees economic literacy work as a way to pull these concerns together

A few years ago I began my own journey towards economic literacy. I’ve long been concerned about enabling a more equal, sustainable world and yet how that related to changing the economy was a mystery. I had a pile of vague words and notions in my head, sound bites and ideas, half of them myths. They didn’t connect.

With that comes a sense of disempowerment. Perhaps my longings for justice were just silly in the face of basic economic theory. Perhaps the economy emerged from our human nature and wanting it to be different is an exercise in naivety. It’s certainly convenient if lots of us feel like that and if we remain so cloudy in our understanding. Perhaps it’s no accident that many of us do?

Street School Economics was borne of a personal desire to understand more. Dozens of books, hours of videos and courses later, I have pulled together information and sources on: the Street School website.

As well as looking at some of the basics in economics, such as markets, wealth and money, it also covers some key ideas such as debt, the limits to growth and inequality. A whole raft of solutions are offered, from the actions individuals and communities can take, to the policy solutions that are waiting to be actioned. I hope it’s a resource that people will find useful.

So the idea is to take economics on the streets, to listen to people’s thoughts and give information. So far we have begun to create some kind of ‘art presence’ that will catch the eye. We’ve just decorated a marketing stand we had, but you could use other structures. The presence has contained words which might reflect the kinds of ideas, queries and blockages that a person may have in their mind already, for example: ‘Why not let the banks go bankrupt?’ or ‘I’d rather keep my head in the sand’ or ‘We can deal with debt by giving everyone some money’.

We let people browse and if they want a conversation you can ask what they know about economics. Consider what is the one thing you’d like them to take away? For me it is that this economy has been chosen and there are different types available . . .   we might chose an economy that has the goal of maximising happiness and minimising harm. You can have a table with 'mini lessons' on – we laminated the pages from the Prezi on the site. We had leaflets to hand out and also include leaflets from relevant campaigns or local initiatives.

Obviously the idea of this work is to give people enough knowledge to demand something better. There are other ways to promote economic literacy and we are just starting to pull a network together of those interested in spreading this thinking- be in touch if you want more information (gail.bradbrook AT btinternet.com). We could demonstrate outside economics departments, others have run cafe economiques and lecture series. What else should we try, how do we build a movement?

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Keen as Mustard

I spent some time last week at a very interesting conference in Edinburgh called
Just Banking. The conference was addressed by Adam Posen, of the Monetary Policy Committee of the Bank of England, who joked that he had been aware that, in our company, he would rapidly metamorphose into Margaret Thatcher, which was a relief since he was more used to being seen as a dangerous radical. His presentation was workmanlike and gave us useful information. But his proposals were typical of those who cling to market ideology even in the face of its utter discrediting. His most powerful proposal was a counter-cyclical, inversely proportional property tax, to counteract property booms, which he rightly identified as a key factor in this crash. The much more efficient solution of informal political control of housing finance, as prevailed Before Thatcher, could not be countenanced. Disappointingly, Posen failed to answer questions about quantitative easing, even though they were factual and could have no possible impact on market sentiment.

More cheeringly, I was lucky enough to have dinner with Steve Keen, a key critique of the dominance of neoclassical methods in economics. Keen is most famous for his book Debunking Economics and it became clear during our chat that his revulsion against neoclassical methods and theories goes back a long way, all the way to his students days, in fact. He is now involved in a bitter battle with the powerful neoclassical orthodoxy, for which I pay tribute to him. He has gone beyond being ignored and laughed at and has reached the stage of being fought, bitterly, personally and viciously.

In spite of his utter rejection of the nonsense of neoclassical models and assumptions, Steve Keen is still committed to the importance of maths in economics, and his own presentation in Edinburgh was mostly taken up with the high-speed presentation of a mathematical model. At the point where the whizzing models, which were calculating in real time on his slides, began to make me feel physically sick, I stopped trying to understand. Because I believe that the 'political' is just as important as the 'economy', this sort of methodological exclusion makes me nervous, so later during dinner I questioned Keen about this reliance on maths.

His response was an interesting one. Economies, he argued, are complex systems and our minds cannot encompass the complex and dynamic relationships between the different variables that comprise them. In Keen's opinion only Schumpeter was smart enough to be able to correctly work out all the complex feedback loops and interactions that are present in economic systems without the use of maths. Others such as Marx and Keynes tried, but it led to mistakes in their theory. Mathemetical modelling of systems enable us to avoid these mistakes.

I must say that I enjoyed this argument, but am not convinced by it. In my view, an understanding of the spiritual value of life and the ability to mediate between humans and the natural world are far more useful qualities for an economist than complex maths, hence my paper 'The Economist as Shaman'. This is not to rule maths out: in many cases it is, as Steve argued, efficient and useful. But maths should also be the servant of thoughtful, philosophical economists; it should never be the master of human social or political motivation.
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Inside Job II

Following up on Charles Ferguson's 2010 film about the role of academic economists in propagating and protecting a financial system that was and is socially and environmentally destructive, a paper was published in the Cambridge Journal of Economics earlier this year that explored the links between academics and financial interests.

In the paper the authors focus on the conflicts of interest faced by a group of prominent financial economists. They assess 'the links among academic economists, private financial firms such as banks and hedge funds, and public financial institutions like central banks and the International Monetary Fund for a sample of 19 prestigious academic economists.' They review the statements and opinions given by these economists in newspapers and other media to assess their dual role as 'independent' experts and advocates for finance. They explore the frequency of conflicts of interest and whether the academics made these conflicts public.

Of the financial economists they chose to study, the authors found that nearly 80%, or 15 of the 19, worked with private financial institutions in some capacity. Of these 15, 13 did not disclose these connections in their academic publications. The paper deals with the situation in the US, and makes the surprising discovery that there are no standards of disclosure required of economists when they give testimony to political inquiries into banking and finance.

The authors conclude that there is 'cognitive capture' amongst a profession which is intended to offer neutral and objective commentary on economic matters. One might also call this a system of groupthink: the inability of economists who trained together and work together on what are assumed to be opposite sides of the public-private debate to challenge the hegemonic view of how banking and finance should operate. The authors propose a code of ethics for academic economists, and end with the swingeing statement:

'These same economists who mostly failed to warn of the increasing financial fragility and impending crisis also have developed a basic consensus view that favours more marketbased reforms and relatively less government regulation as a way of preventing future financial meltdowns. . . It was this crisis and similar ‘neoliberal’ understandings of economic theory, combined, in all likelihood, with
continuing material conflicts of interest for some economists, that led to loud, destructive voices for austerity. The voices of the rentier interests can be heard loud and clear in this call.'
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Economics in University: Teaching or Propaganda?

In spite of the utter failure of academic and professional economists to predict, explain or find solutions to the financial and economic crises sweeping the globalised, marketised world they have created, there is still little challenge to the narrow and one-sided way that economics is taught in our universities. In spite of the fact that economics is about complex human relationships, and is therefore bound to be the subject of debate and disagreement, there is no problem with university courses that only teach the neoclassical pro-market approach.

A list of universities that offer 'pluralist' components in their courses, that is to say that they include approaches other than the neoclassical orthodoxy, does exist, but it is short. The Association of Heterodox Economics is doing great work here, but it is unfunded and run by people who know that their commitment to dissent and debate will limit the success of their careers, their opportunities for promotion and publication, and their chances of finding research funding.

In the US, the website Remapping Debate is running a series of articles on the limitations and political bias of economics education in universities. In the latest Martha Starr, professor of economics at American University, makes the obvious point that it is not helpful to teach students about economics as though all the problems have been solved. Not only does this make it less likely that they will come up with new solutions, but given the mayhem they see all around them it is likely to be unconvincing. In any other subject this proposal of dividing up the curriculum between different schools of thought; only in economics could this seem dangerously radical.

This is not an internally focused debate revolving around a bunch of disgruntled academics. Politicians and policy-makers have generally studied one year of economics, which means that they have learned the biased system of thought and the mantras they repeat throughout their lives, limiting options and closing down debate. Teaching orthodoxy rather than reality is dangerous and is against the academic freedom which our universities should set as their highest standard.
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Economics Students on the Move

How our economy will be organised in the future relies heavily on how our future economists understand the world and its workings, as well as their values. Economics education is obviously, therefore, of fundamental importance. The movements to reform economics education, shifting it from the realm of theology into one of pluralism and genuine debate, have been followed with interest by this blog.

So it is with delight that I heard this morning of the revolt by Greg Mankiw's students. Manikiw is the author of one of the most widely used introductory textbooks, as described by Geofrey Hodgson:

'Gregory Mankiw’s Principles of Economics, in its five versions, has internationally been the dominant basic text for more than a decade. Also its author was chairman of President Bush’s Council of Economic Advisers from 2003 to 2005.'

Here is the letter his students at Harvard, paying $40,000 for the privilege of biased and distorted information, presented to accompany their walkout from his introductory economics class, according to a US blog:

'Dear Professor Mankiw

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.'

The students undertook this action to express solidarity with the Occupy Wall Street movement.

Mankiw is a populist, using his own blog to blandly reassure about the existing economic model, blithely ignoring its destructive impacts and its lack of connection with reality. The fact that his own students are alive to this and are following the example of students in Paris and Cambridge in calling for an economic education that takes seriously the problems of the world we live in is hugely encouraging.
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Debt is a Feminist Issue

The gendered nature of the globalised capitalist economy is evident at many different levels. Empirical studies of women at the top of financial corporations appear to be absent from the peer-review literature, but even The Economist has suggested that the causes of the 2008 crash were partly hormonal.

The figures for women’s share of the world"s resources, as collected by UNIFEM are a shocking catalogue of inequality. Perhaps the most striking statistic is that ’Women perform 66 percent of the world’s work, produce 50 percent of the food, but earn 10 percent of the income and own 1 percent of the property’. In many countries women face discrimination in terms of property ownership, as we did in this country until the passage of the Married Women’s Property Act in 1882.

The study of economics is also dominated by men.To quote from an academic study from York University, ’Women make up approximately 30% of the research/PhD students, 15% of the lecturers, 10% of the readers/senior lecturers and 5% of the professors. Males in standard full-time academic jobs are twice as likely to be at a senior level (above lecturer) than women (46% compared to 23%).’ In the 41 years that the Swedish Bank has been given a prize for economics, a woman has only won it once, and then she had to share it.

So the world economy is dominated by men, the corporations who control it are dominated by men, and those who study it and inform policy are also largely men. When these policies are implemented, at least in the UK, they are done so by a cabinet which includes only one woman, plus a token other without portfolio.

Since women have so little economic power, they can have had correspondingly little responsibility for the economic and financial crisis we are in. So how can it be just that they will bear the majority of the pain? We are not all in this together: women who care for children and other relatives are more likely to receive benefits that will now be cut. They will be left picking up the pieces for the broken society that results from the devastation of public services. They are disproportionately likely to work in the public sector and so more likely to lose their jobs.

In the 40 years since the implementation of the Equal Pay Act women have seen their influence and their control over property increase in the UK, but until we have equal access to economic power we will always be an easy target. Tweet

Economists: Pussycats with Claws?

An interesting debate has been taking place in the pages of the FT about the status and role of economists. I have a sense of divided loyalties, since I sweated blood acquiring the econometric expertise that enabled me to become a PhD in economics, while at the same time being quite convinced that the discipline itself is a political fig-leaf and its methods almost entirely unhelpful.

According to columnist Gideon Rachman:

'When things were going well for the global economy, the prestige of economists rose steadily. They were the gurus of the age of globalisation. Governments, consultancies and investment banks rushed to hire economists, who were thought to possess vital skills and information. Historians, by contrast, were treated as mere entertainers and storytellers. They were archive-grubbers, lacking in scientific method – good on television, but useless with a PowerPoint and no help in government or the boardroom.'

This is a rather naive interpretation. The same day this was written I met with a colleague who is a heterodox economist and was surprised to find himself invited to join a government advisory panel shortly before the election. This experience, and his conversations with other policy-makers, convinced him that the political class has never valued the opinions of the number-crunchers. Professional economists are used to provide evidence for the decisions they have already taken, and to provide ideological defence for the destructive economic system they promote. Examples abound, but those economists who defended the absurd financial shennigans in Iceland are an object lesson.

Rachman argues that economists might learn from historians in their approach to evidence rather than 'aping the physical sciences', a deplorable habit that Hazel Henderson aptly referred to as 'physics envy'. But surely Sheila Dow, a leading pluralist economist, is closer to the mark in suggesting that economics needs to sort itself out, define its territory, accept a plurality of approaches and analytical techniques and - most important of all - re-establish a connection with the real world. Tweet

Hope Dawns in Disagreement

Regular readers of this blog will know that a recurring whinge relates to the strict orthodoxy of economics - as taught in universities and advised to governments - and the hegemony which it exercises across the globe in these early years of the 21st century. But first the Queen questions what economists are up to, and now from the pink pages of orthodoxy themselves, comes evidence of the paradigm beginning to crack. When FT journalists bewail the lack of uniformity amongst orthodox economists then times are becoming interesting indeed.

Krugman's questioning of free trade - a concept that traditionally stands alongside economic growth as one of the twin pillars supporting the edifice of the neoclassical catechism - is clear proof that the economists are ruffled. While capitalism is endowed with what my Marxist-Lentilist friend refers to as a Protean ability to adapt, the process is not a painless one. And while it is taking place is the moment of the system's greatest weakness.

Alongside Krugman the article cites Robert Barro, whose work on growth convergence argues that countries and regions within those countries will naturally tend towards similar rates of growth in the medium term. Evidence has failed to support this theory, but that has not held back the eminent economist's career. He is now accusing those economists who support major public spending to prevent a Depression of turning to magic. Once this criticism comes out of the armoury, no economist will be safe. From white-coated scientists to snake-oil witch-doctors, they will lose their sacred status at a stroke. Or am I just attempting to dream new year hopes into reality?

Clive Crook, for that, dear readers, is his name, is most upset by the fact that the politics that has always lain behind the neoclassical hegemony is being revealed as the profession comes under pressure for having allowed massive financial and environmental crises to occur. The consequent cracks allow space for the barbarians to rush in to challenge the citadel. Tweet

Not a Common Occurrence

I confess it doesn't quite reach the level of the election of the first black man as President of the United States, but in my world the award of the Bank of Sweden prize for economics to a woman is a pretty earth-shattering event. The prize is frequently, but wrongly, referred to as the Nobel Prize for Economics. Nobel wouldn't have dreamt of endowing a prize for economics when he set his awards up in 1895. It is a latecomer - arriving only in 1968 - and an imposter.

The prize was given to Elinor Ostrom, whose work was summarised thus:

'Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.'

So what did Elinor Ostrom do to achieve this level of esteem amongst the five men who make up the nominating committee? It is surely an indication of the lack of confidence amongst orthodox economists that they have chosen not only an academic whose work could be claimed to undermine the central tenets of a market philosophy, but one who has never actually resided in an economics department. (If she had, she would, of course, have found it very difficult to carry out this sort of work.)

Elinor Ostrom is, and always has been, a political scientist. This is entirely appropriate in a year when politics has dominated the choice of prize-winners - and perhaps it always does. So what can we ascertain from the choice of this year's award-winner? Well first it should be said that Professor Ostrom obviously could not be trusted to take this weight of responsibility alone. She has been forced to share the prize with a rank outsider, Oliver E. Williamson, who, I cynically surmise, was chosen alongside her because some of the committee couldn't stomach awarding the prize to her alone. As a student of Ronald Coase, his work is in a tradition that directly opposes that of Ostrom herself, arguing that the assignment of clear property rights is enough in itself to deal with most environmental problems.

If the committee is representative of the economics profession then there is some evidence here of the sackcloth and ashes that many feel its orthodox members deserve. Ostrom's work is also motivated by concern for the environment, and particularly the depletion of natural resources, hence her focus on fisheries and natural environments. We wait to see whether the obvious connection between market economics and environmental destruction is translated into the freedom for those of us who teach the subject to adopt a heterodox approach. Tweet

Time to Account for the Asset Bubble

Opinions may vary as to whether the economics profession was asleep on the job, following Nelson's lead in watching the financial markets with only their blind eye, or engaged in some form of self-reinforcing mass delusion. My money is on the latter. For political reasons, the methods used in neoclassical economics are designed to abstract from reality rather than respond to it. This allows injustice and inefficiency to prevail while careers are made proving mathematically the superiority of capitalism.

But are the accountants doing any better? A paper you can find here (if you are suffering sleep deprivation and are seeking a rapid route to a few zzzzs) concludes that the techniques of following the flow of money through the economy that accountants use identified the problem. Meanwhile the 'equilibrium' models so beloved of neoclassical economists concealed the ballooning asset bubble.

But the accountants are not immune to criticism. Far from the Arthur Pooty stereotype who longed to become a lion-tamer in the Monty Python TV series, today accountants bestride the globe, creating value merely be defining it into existence. When is a liability an asset? It is within an accountant's power to turn one into another and effect a total dislocation of real economic value from accounting value.

You can find a nice summary of the paper on Steve Keen's blog. As one commentator there notes, 'I can’t help but feel capitalism needs this ignorance to function, if people knew the game no one would play.'

*Thanks to Paul Nollen for sending this paper. Tweet

Russian Orthodox Economist Runs Amok

I spent the weekend at a proper economics conference, one where people had different views which they discussed heatedly over coffee, where we used the phrase 'crisis of capitalism' rather than 'credit crunch' and where I saw barely any equations. Most economics conferences are halls packed full of socially dysfunctional people who generally sleep through each other's presentation which are incomprehensible and address irrelevant subjects through the medium of mathematics. So much for the neoclassical paradigm.

At the Association of Heterdox Economics conference you find Marxists and Austrians (followers of Hayek) discussing sustainability over lunch, while elsewhere institutionalists (followers of the North American economists who had the temerity to introduce social understanding into economic theories) and Keynsians consider how best to deal with the banks.

In other words there is debate, diversity and a sharing of views. There is exchange and learning. This is not how economics usually functions. Academic economics is not a discipline, far less the science it yearns to be. It is much more akin to a religion, a system of beliefs that are imposed with totalitarian strictness. You may not advance through their hiearchy unless you undergo the scourge of crucifixon by regression.

Some aspects of the conference were disappointingly predictable. Questioners, especially in plenaries, reconfirmed what I call the Cato Inverse Law of Verbosity: the longer it takes you to ask your question the less insightful the question is. I also learned the concept of the 'Microsoft moment' which I've found invaluable since. Analogous to a 'senior moment' it helps to identify the near-clinical sickness of the software we are forced to rely on - and provides an excellent metaphor for the state of the economics profession as a whole.

Green economics is one strand amongst the heterodox, who would do better to call themselves pluralists. In what other discipline do you have to define yourself as heterodox just for daring to ask questions and challenge orthodoxy? It reminds me of an email I received recently letting me know that my book called, unconfusingly, Green Economics, is to be found in the geography rather than economics section of Waterstones.

At one level this introverted, autistic behaviour by economists can provide a source for humour, but it is also desperately serious. The narrow and misguided focus of neoclassical economics has allowed the collapse of the world economy and the destruction of the earth. The call for a public enquiry into the economics profession that was made at the conference should become a campaign to demand that the public money that pays for research into this most important area of life should no be controlled by the cartel of market maniacs. Tweet

The Beautiful Game for Beautiful Minds

I enjoyed Larry Elliott's game of Fantasy Economic Football, if only for the entertaining mental image it conjured up of all the economists I have ever known in shorts. The scene would only be enhanced if they were forced to show their intellectual colours by choosing from the range of shirtwear available from Philosophy Football. Danny Blanchflower was sadly overlooked - the Monetary Policy Committee rebel who taught me briefly years ago before I was an economist.

Larry's problem may be that he is looking for his world-class players in the wrong place. Although the intellectual Premier League might be expected to be at Cambridge and Harvard, the control of publication, esteem and promotion by research assessment exercises of various types has in fact ensured the advancement of the mediocre while creative thinkers are showing off their paces in the intellectual equivalent of the Sunday morning leagues - campaign groups, think-tanks, lower level Universities and colleges, and within other faculties.

Who is an economist? Larry Elliott cites two contemporary examples, both of whom are academics. Yet the list of defunct economists he sets on a pedestal achieved their best work in a role that is more like that of a public intellectual. Unconstrained by the need to impress colleagues and succeed in a system of blind peer review they could think freely and address the important issues of political economy that troubled their times.

Larry is right - and I know this to my cost - that considering the world as it is, rather than as it can be represented in a mathematical equation, represents a serious handicap when trying to work as an academic economist. The 'world outside the window' holds you back from elegant theorising and professional advance. Making reference to the fleshy substance of human existence - far less, the gross and energetic mass of nature - disturbs and disorientates the tidy world of the econometrician. My own proposals for funding research into a re-embedded bioregional economy based around human interactions and natural resources are met with apoplectic incomprehension.

Academic economists could, in fact, learn much from playing more football - a venture into the outdoors would be salutary, not to mention the move from 'rational economic man' to 'emotional physical men'. The more open-minded might come to share Albert Camus's view, 'All that I know most surely about morality and obligations, I owe to football' Tweet

When is an economist not an economist?

I had a rather unpleasant experience last week at the Welsh Economics Colloquium, a gathering of research-active economists in Wales. I was only able to attend for the final day but had quite forgotten how detached from the real world many economic researchers are.

In fact, economists in Wales are fairly empirical (for which read that they do take the workings of the world itself into account), but the keynote address was by a Manchester-based economist who spent an hour of our time outlining a mathematical theory about optimal currency areas without mentioning the present financial crisis at all and with barely any relationship to the euro.

Having spent several years on the national steering group of the anti-euro campaign there were a wealth of questions I could have asked but the paper was so enclosed in its own theoretical bubble that there was simply no way in. This economist publishes in the highest-level journals, which only confirms my suspicion that they deliberately exclude any work that has any thing to do with reality because that reality proves the inapplicability of the theories of conventional economics.

As Mark Blaug put it: 'Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing.'

The level of response to my own presentation - about the excellent potential of Wales as a green economy - was much lower than I would encounter in a political setting, or from those involved in the Transition Town movement. It barely rose above the level of guilt-tripping - 'Why do you live in Stroud and work in Cardiff?' being an example question. The arch-theoretician asked a question so abstract that my mind failed to comprehend it. I do remember that it began 'If you had been alive a million years ago, when the temperature was 10 degrees hotter than it is now . . .'

Over the years I have moved from claiming venehmently that I am not an economist, to feeling comfortable using the title 'green economist' to actually thinking that maybe I might be an economist. After this experience I feel sympathy with Hazel Henderson's revulsion from the economics profession. Too many economists are happy to draw large salaries, paid for by people shovelling chips in McDonalds, for creating work that has no value and no relevance. Tweet