What's wrong with economics?
Theories, scientific and otherwise, do not represent the world as it is but rather by highlighting certain aspects of it while leaving others in the dark. It may be the case that two theories highlight the same aspects of some corner of reality but offer different conclusions. In the last century, this type of situation preoccupied the philosophy of science. Our new book, A Guide to What's Wrong with Economics, however, addresses a different kind of situation: one where one theory, that illuminates a few facets of its domain rather well, wants to suppress other theories that would illuminate some of the many facets that it leaves in the dark. This theory is neoclassical economics. Because it has been so successful at sidelining other approaches, it also is called "mainstream economics".
From the 1960s onward, neoclassical economists have increasingly managed to block the employment of non-neoclassical economists in university economics departments and to deny them opportunities to publish in professional journals. They also have narrowed the economics curriculum that universities offer students. At the same time they have increasingly formalized their theory, making it progressively irrelevant to understanding economic reality. And now they are even banishing economic history and the history of economic thought from the curriculum, these being places where the student might be exposed to non-neoclassical ideas. Why has this tragedy happened?
Many factors have contributed; I will mention only three. First, neoclassical economists have as a group deluded themselves into believing that all you need for an exact science is mathematics, and never mind about whether the symbols used refer quantitatively to the real world. What began as an indulgence became an addiction, leading to a collective fantasy of scientific achievement where in most cases none exists. To preserve their illusions, neoclassical economists have found it increasingly necessary to isolate themselves from non-believers.
Second, as Joseph Stiglitz has observed, economics has suffered "a triumph of ideology over science".1 Instead of regarding their theory as a tool in the pursuit of knowledge, neoclassical economists have made it the required viewpoint from which, at all times and in all places, to look at all economic phenomena. This is the position of neoliberalism.
Third, today's economies, including the societies in which they are embedded, are very different from those of the 19th century for which neoclassical economics was invented to describe. These differences become more pronounced every decade as new aspects of economic reality emerge, for example, consumer societies, corporate globalization, economic induced environmental disasters and impending ecological ones, the accelerating gap between the rich and poor, and the movement for equal-opportunity economies. Consequently neoclassical economics sheds light on an ever-smaller proportion of economic reality, leaving more and more of it in the dark for students permitted only the neoclassical viewpoint. This makes the neoclassical monopoly more outrageous and costly every year, requiring of it ever more desperate measures of defense, like eliminating economic history and history of economics from the curriculum.
But eventually reality overtakes time-warp worlds like mainstream economics and the Soviet Union. The moment and place of the tipping point, however, nearly always takes people by surprise. In June 2000, a few economics students in Paris circulated a petition calling for the reform of their economics curriculum. One doubts that any of those students in their wildest dreams anticipated the effect their initiative would have. Their petition was short, modest and restrained. Its first part, "We wish to escape from imaginary worlds", summarizes what they were protesting against.
Most of us have chosen to study economics so as to acquire a deep understanding of the economic phenomena with which the citizens of today are confronted. But the teaching that is offered, that is to say for the most part neoclassical theory or approaches derived from it, does not generally answer this expectation. Indeed, even when the theory legitimately detaches itself from contingencies in the first instance, it rarely carries out the necessary return to the facts. The empirical side (historical facts, functioning of institutions, study of the behaviors and strategies of the agents . . .) is almost nonexistent. Furthermore, this gap in the teaching, this disregard for concrete realities, poses an enormous problem for those who would like to render themselves useful to economic and social actors.
The students asked instead for a broad spectrum of analytical viewpoints.
Too often the lectures leave no place for reflection. Out of all the approaches to economic questions that exist, generally only one is presented to us. This approach is supposed to explain everything by means of a purely axiomatic process, as if this were THE economic truth. We do not accept this dogmatism. We want a pluralism of approaches, adapted to the complexity of the objects and to the uncertainty surrounding most of the big questions in economics (unemployment, inequalities, the place of financial markets, the advantages and disadvantages of free-trade, globalization, economic development, etc.)
The Parisian students' complaint about the narrowness of their economics education and their desire for a broadband approach to economics teaching that would enable them to connect constructively and comprehensively with the complex economic realities of their time hit a chord with French news media. Major newspapers and magazines gave extensive coverage to the students' struggle against the "autistic science". Economics students from all over France rushed to sign the petition. Meanwhile a growing number of French economists dared to speak out in support and even to launch a parallel petition of their own. Finally the French government stepped in. The Minister of Education set up a high level commission to investigate the students' complaints.
News of these events in France spread quickly via the Web and email around the world. The distinction drawn by the French students between what can be called narrowband and broadband approaches to economics, and their plea for the latter, found support from large numbers of economics students and economists in many countries. In June 2001, almost exactly a year after the French students had released their petition, 27 PhD candidates at Cambridge University in the UK launched their own, titled "Opening Up Economics". Besides reiterating the French students' call for a broadband approach to economics teaching, the Cambridge students also champion its application to economic research.
This debate is important because in our view the status quo is harmful in at least four respects. Firstly, it is harmful to students who are taught the 'tools' of mainstream economics without learning their domain of applicability. The source and evolution of these ideas is ignored, as is the existence and status of competing theories. Secondly, it disadvantages a society that ought to be benefiting from what economists can tell us about the world. Economics is a social science with enormous potential for making a difference through its impact on policy debates. In its present form its effectiveness in this arena is limited by the uncritical application of mainstream methods. Thirdly, progress towards a deeper understanding of many important aspects of economic life is being held back. By restricting research done in economics to that based on one approach only, the development of competing research programs is seriously hampered or prevented altogether. Fourth and finally, in the current situation an economist who does not do economics in the prescribed way finds it very difficult to get recognition for her research.
In August of the same year economics students from 17 countries who had gathered in the USA in Kansas City, released their International Open Letter to all economics departments calling on them to reform economics education and research by adopting the broadband approach. Their letter includes the following seven points.
1. A broader conception of human behavior. The definition of economic man as an autonomous rational optimizer is too narrow and does not allow for the roles of other determinants such as instinct, habit formation and gender, class and other social factors in shaping the economic psychology of social agents.
2. Recognition of culture. Economic activities, like all social phenomena, are necessarily embedded in culture, which includes all kinds of social, political and moral value-systems and institutions. These profoundly shape and guide human behavior by imposing obligations, enabling and disabling particular choices, and creating social or communal identities, all of which may impact on economic behavior.
3. Consideration of history. Economic reality is dynamic rather than static - and as economists we must investigate how and why things change over time and space. Realistic economic inquiry should focus on process rather than simply on ends.
4. A new theory of knowledge. The positive-vs-normative dichotomy which has traditionally been used in the social sciences is problematic. The fact-value distinction can be transcended by the recognition that the investigator's values are inescapably involved in scientific inquiry and in making scientific statements, whether consciously or not. This acknowledgement enables a more sophisticated assessment of knowledge claims.
5. Empirical grounding. More effort must be made to substantiate theoretical claims with empirical evidence. The tendency to privilege theoretical tenets in the teaching of economics without reference to empirical observation cultivates doubt about the realism of such explanations.
6. Expanded methods. Procedures such as participant observation, case studies and discourse analysis should be recognized as legitimate means of acquiring and analyzing data alongside econometrics and formal modelling. Observation of phenomena from different vantage points using various data-gathering techniques may offer new insights into phenomena and enhance our understanding of them.
7. Interdisciplinary dialogue. Economists should be aware of diverse schools of thought within economics, and should be aware of developments in other disciplines, particularly the social sciences.
In March 2003 economics students at Harvard launched their own petition, demanding from its economics department an introductory course that would have "better balance and coverage of a broader spectrum of views" and that would "not only teach students the accepted modes of thinking, but also challenge students to think critically and deeply about conventional truths."2
Students have not been alone in mounting increasing pressure on the status quo. Thousands of economists from scores of countries have also in various forms taken up the cause for broadband economics under the banner "Post-Autistic Economics" and the slogan "sanity, humanity and science" (www.paecon.net). The PAE movement, or, if you prefer, the Broadband Economics movement, is not about trying to replace neoclassical economics with another partial truth, but rather about reopening economics for free scientific inquiry, making it a pursuit where empiricism outranks a priorism and where critical thinking rules instead of ideology.3
Against this background of accelerating momentum for radical change, 27 economists and 2 mathematicians, many of them internationally renown and representing eight countries and five continents, have come together to create this new book. It aims to provide you with three things.
First, it offers you some protection against the indoctrination process to which you are likely to be subjected as an economics student. There are many things that your teachers should tell you about the brand of economics they are teaching you, but, in most cases, will not. This book will make you aware of some of the many worldly and logical gaps in neoclassical economics, and also its hidden ideological agendas, its disregard for the environment and inability to consider economic issues in an ecological context, its habitual misuse of mathematics and statistics, its inability to address the major issues of economic globalization, its ethical cynicism concerning poverty, racism and sexism, and its misrepresentation of economic history.
Second, if you are brave you may want to bring up some of the points raised in this book in your classes. It is sure to make them more interesting. It may even provoke lively discussion and, for a while at least, convert the indoctrination process into an educational one. If it does you will be doing a good thing: we live in a time when bad economics probably kills more people and causes more suffering than armaments.
Third, this book is intended to appeal to your imagination and humanity by showing you how interesting and relevant, even exciting, economics can be when it is pursued, not as the defense of an antiquated and close-minded system of belief, but as a no-holds-barred inquiry looking for real-world truths.
Edward Fullbrook is a Visiting Research Fellow at the School of Economics, University of the West of England. He is the founder and editor of the Post-Autistic Economics Review. Among other books, he has edited The Crisis in Economics (Routledge, 2003) and Intersubjectivity in Economics (Routledge, 2002). This is the introduction to his new book, A Guide to What's Wrong with Economics (Wimbeldon/Anthem Press), and is reproduced with kind permission.
1. All the student petitions discussed are available at www.paecon.net.
2. Stiglitz, Joseph E. (2002) "There Is No Invisible Hand", The Guardian, December 20, 2002.
3. For further information about the PAE, see The Crisis in Economics: The Post-Autistic Economics Movement: The first 600 days, Edward Fullbrook (editor), London: Routledge, 2003.