You Bastards! Give me back my subject!!!

The Storyville Episode Inside Job on BBC2 laid it all bare.

Some of you may be aware that I hold a degree in economics. But I was never a straight-forward ‘run of the mill’ economics student. I never went into the complex econometric models because I was too disturbed by the assumptions that many of them were based upon.

My personal definition of economics is that it is the study of how limited resources are distributed within a society of unlimited wants. No mention of money, finance or markets in that definition.

It’s been nearly a decade since I graduated – what value does that degree have ten years on? It was one of the reasons why I was pondering whether to go back over the subject in light of recent events. This is because I feel that so much of what I covered has found out to be completely bankrupt or corrupt, or both.

The mindset of several of the students I was with reflected the ‘minimum effort-maximum output’ approach of “if it’s not on the syllabus, I’m not studying it.’ Many trundled down a mainstream approach while I wandered off down an environmentalist route having stumbled across a 1993 article written by Herman Daly. It was the accumulation of little things combined with what I saw as the failure of economists to address injustices that really rubbed me up the wrong way at the time. And now we know why. They had been bought out by the banks – and Inside Job excruciatingly caught them with their trousers down as it shone the light of transparency over who was bankrolling them and through which revolving doors they were walking through.

Since the crisis broke several years ago, I had been waiting for a mainstream economics textbook to be published that would cover the financial crisis in a detailed but understandable manner – i.e. not trying to cover it all up with algebra and overly-complex mathematical theories. We lampoon astrologers for trying to predict the future yet give lots of credibility to economic forecasters about what’s going to happen and when. When The Queen is asking you in public why none of your profession saw the biggest crisis in its history coming, your profession is in trouble. Why didn’t they see it coming? Was it because too many of the big names had their heads too deep in the trough? Was it because others lacked courage? Was it because the private funding institutions were unwilling to provide research funding to those whose research interests undermined the paymasters? Oh – I’m still to find that mainstream economics textbook that explains the financial crisis. But hey, I guess you can’t put the term “conflict of interest” into an econometric mathematical equation.

In my final year of university I had a number of strong disagreements with several of my economics professors. One was completely dismissive of the issue of economic inequalities, to which I felt he was living in a neo-liberal bubble, and the second was over me calling for the costs of production and transport to be incorporated into the price of goods and services. He didn’t take too kindly to me acknowledging that this would mean that his wine from Europe would be a little more expensive given my call then – as with now – for a tax on aviation fuel and shipping fuel to be levied to compensate for the environmental damage done by these activities.

That’s not to say all of my tutors were bad. There were some that I really rated and probably would have intellectually got more out of if I hadn’t fallen ill during my time there. These were the people who understood that people and the planet were at the centre of economics, not mere commodities of it. It was in one conversation I made the case for big restrictions on party-political donations by businesses – in particular big business. Regulators are responsible to politicians elected by the people. The politicians set the frameworks within which markets are supposed to operate. But the dependence  party politics has on big money donations means that the incentive is for politicians to come up with “pro-business” policies (which may not be pro-market). A tax break here, a subsidy there, a concession somewhere else…how about restrictions on and/or the break up of big businesses? How about preventing some of the big mergers and takeovers? After all, competition is good, isn’t it?

(As an aside, this would also mean significant reforms for trade unions – with a significant level of decentralisation in structures & the spending of membership contributions to Labour. This would ensure that Labour politicians would have to make more of an effort to engage with ordinary grassroots trade union members and would be far less dependent on individual trade union leaders).

Sticking in the economics subject area would have meant banging my head against a brick wall even longer, hence why I switched over to history – the subject of my heart after graduation. The really sad thing about my economics degree is that almost none of the core concepts that were taught were of any real use during my career in the civil service. It was the messing around with computers and spreadsheets that turned out to be the most useful – in particular some early insights into the number-crunching of data sets, and some things around statistics that make me an advertiser’s nightmare.

There is a crisis of economics – the subject of economics. The ongoing financial crises are testament to this. The conflicts of interest are testament to this. The complete and utter inability of those that constructed the system that got us into this mess are testament to this. Why do we still have a Nobel Prize for economics given the mess that we find ourselves in?

Economics professors were – and are still being bankrolled by the people such as the like that got grilled here.

So yes, I want my subject back.


11 thoughts on “You Bastards! Give me back my subject!!!

  1. Great post. I had my econ degree 20 yrs ago and had the same
    Dissatisfaction with the field. I drifted to political theory.
    What was telling for me was the reaction of classmates
    To the film wall street. One actually used the scene with Gecko saying “greed
    Is good” in the senior seminar. Nome of them realized it was
    A morality play writ large! And that Stone was condemning
    Gecko not praising him.

    I spoke about the republican ideals of the common good and the need
    For a just political system and a just economic system so that economics
    Would serve the interest of the citizen. Needless to say many classmates
    Thought i was a socialist or a communist. 🙂

    I have not seen the movie (saw clips) or the storyville episode Iplayer perhaps)
    Yet it struck me that it was history repeating itself. In particular
    It was as if they had learned the lessons from Enron but inside of hiding the risk and debt inside the firm they externalized the risk into the general public. So where will it be in 20 yrs. What is sad is no one has yet to go to jail for any of this beyond the low level players. Reading the lehman’s reports you have to wonder if
    They were criminals or just incompetent?

    What is particularly distressing is how easily and completely the academics
    And their institutions were seduced by the money. It is as if they had never read
    Plato’s 7th epistle. The one interview about the stability of iceland was priceless.
    You could tell the guy had not done his research as he said it was all ok. He probably thought he was getting away with it to get $124k for the paper, little realizing that he was legitimating a larger scandal. Such a sad indictment.
    Excellent post always a pleasure to read.


  2. Are these economists in Science Faculties? If so, their scientific failure to heed questions and indeed evidence does require a major re-think by the Faculties where it concerns not only rank but jobs. It is one thing to have a duff theory, it is quiet another to fail to account for the unexplained. Action must be taken by the entire field of economics as a whole to ensure independence of thought, proper methodologies are adhered to, but also within universities themselves. Fraud and corruption, where proven, must be dealth with and seen to be dealt with (particularly when you look at how severly students are dealt with if they copy and paste!). Where issues are identified as incompetence, then procedures already in place must be followed.

    Who will approach the universities and ensure proper action is taken? That may well lie with the graduates of these Economics departments and with University Councils (presumably, at your institution all graduates are members of Council)

  3. I’m sure there are many other people who share your experience of studying economics – I know I did. Economists should have important things to say about the world, but mostly they don’t because the subject is too fixated on arcane mental gymnastics.

    I think you’re right to be angry about what Inside Job exposed. One of the most worrying things is that it is clear that there is no political will in the US (nor, really, in the UK) to tackle the problems through regulation. The US political system is so heavily compromised by the influence of big finance.

    It is also clear that some prominent economists were financially induced to support and provide academic justification for deregulation. But I don’t think that is the whole story. The reason many conventional macroeconomists did not see the crash coming is because they think about the world from within their models. And if your models are based upon assumptions about equilibrium, rapid market adjustment, efficient allocation of resources then a crash like the one we are experiencing is quite literally unthinkable – it does not compute. You have to look outside of conventional economics to people like Steve Keen, or indeed Rajan who was not in academia at the time, to find economists who were arguing that there was a real problem with the financial system.

    The lack of ethical system governing the work of economists is startling. All other social scientists have a code of ethics. Not only does economics not have one but has argued repeatedly that one is not necessary. George DeMartino is trying to advance the case for a professional ethics for economists. Their conclusions and policy recommendations will, if adopted, affect millions of lives. Great care is needed. The rapid liberalisation following the collapse of east European communism – prescribed by economic consultants from international organisations – led to dramatic reductions in life expectancy in some countries as infrastructure collapsed. These policy prescriptions matter in the way that is less applicable to those made by sociologists, political scientist etc. Yet I don’t think DeMartino is making much headway: senior figures in the discipline continue to argue that there is no need for a professional ethics.

    I wrote this post when the film first appeared in the UK, it is very much in sympathy with yours: (Economists, implicated)

  4. I would personally recommend a book called ‘Economyths’ by David Orrell

    To save you reading the entire book there are relevant quotes from it here

    David Harvey had this to day in ‘The Enigma of Capitalism and the Crisis of Capitalism’

    Universities continue to promote the same useless courses on neoclassical economics or rational choice political theory as if nothing has happened and the vaunted business schools simply add a course or two on business ethics or how to make money out of other people’s bankruptcies. After all, the crisis arose out of human greed and nothing can be done about that.

    The current knowledge structure is clearly dysfunctional and equally clearly illegitimate. The only hope is that a new generation of perceptive students (in the broad sense of those who seek to know the world) will clearly see this and insist of changing it.

    The great betrayal of the intellectuals who became so complicitous with neoliberal politics from the 1980’s onwards has first to be reversed before any meaningful alliances can be constructed with the deprived and the dispossessed.

  5. There is one further point I’d like to add to this prompted by shodanalexm.

    As a scientist, I received no formal training in ethics as an undergraduate. No one asked for one. In many respects we didn’t need a course in ethics. None of us were willing to take money, lots of money to work for the global corporations or the smaller companies hoping to sell technology to them. I’m thinking of a couple of technologies here such as the terminator seeds sold by an agriculture corp. No one. We understood it was our responsibility to think through the responsibilities of our own actions, our own work as best we could before taking the next step in any aspect of our work. Those virginator seeds were easily predicactable to cause massive misery, economic disaster to the farmers who bought them, were weapons of controlling the entire global food stock. The ability to have that level of control not just on poor farmers, but all farms, in all nations was worse than anything Hitler could have done to the people on this planet if he had not been stopped.

    ‘so if corp A does that… that means they could hold those families to ransom… hand over all your money or starve…’ That was all it took. The obvious question was ‘Do I want to participate in a project that will lead to anyone having the ability to starve others just because they can? What’s the chances that forevermore no government would wipe out laws that ensured this didn’t happen? It will happen somewhere at somepoint, most certainly… best not create the ability then, not without a guarantee of a means to ensure it is impossible for that technology to be used as a weapon against people..

    Not one of us went to work for any research group or corporation that whiffed of such skulduggery. Not one of us was willing to participate, not for career advancement, not for a decent living and not for great wealth. We didn’t need an ethics class. We knew from history the power we had to benefit life on earth and to destroy life on earth.

    Economics has a similar history. The Great Crash is to economics what Hiroshima is to science.
    No ethics classes are essential… they would be helpful but are not essentail in my view for basic decision making. So please, don’t think those economists who took the money are naive individuals who didn’t understand, didn’t think. One or two is believable, but the vast majority in an entire acadmic field. I don’t think so. Mass beligerance and a refusal to think about potential disaster, a model that refuses to acknowledge workers with no means of earning a living die? An ethics class to spell that out to our brightest and best A-level students, soon to be graduates that, possibly, that might be a problem with the model? Noooo

  6. My definition of economics “how to get the impossible to appear possible to those who don’t have to pay for the consequences.”

    I am slightly puzzled by your definition. Why is it “unlimited wants”?

  7. My name is Nicola and I’m an economist.

    I’m afraid to say that many of the author’s points are still true – you can still find economists who are very much old school. However, a lot of economists are very different (environmental economists, for example, call for the costs of natural resources to be included in national account and costs of goods and services.)

    Economics sits in an awkward spot at the edge of social science. We yearn for the relative certainty of mathematics and physics. At the same time, economics has its roots in philosophy and sociology. I’m convinced that the reliance on models and econometrics is a move to differentiate economics from other subjects such as political science and management.

    These aren’t new criticisms. McCloskey has been criticising economics since the 1980s with the Rhetoric of Economics:

    Economics is not a profession in the strict sense of the word. There is no accreditation board or essential degree that qualities you as an economist like professions such as accountancy. Anyone can call themselves an economist. Perhaps economics should be a profession? It would require Ellie’s ethics classes. I’m sure there is a cartel model to analyse the possibilities…

  8. A friend of mine has a daughter who is struggling with economics at university now. Apparently, the change in teaching from that which was done pre-2008 is that on Day 1 the tutor says, ‘A few flaws have recently come to light, but you won’t understand them unless you study the theories themselves.’ Then on, as before. This is doubly treacherous to the students, in my view: for one, it means they have to go on learning the same stuff that has led to the mess we are in, and, to compound it, they still have to become ‘insiders’ by respecting and learning from the very people who set it all up, have failed to provide an explanation and behave as though they are blameless and worthy to continue to teach. It is not only the students who are being cheated, but the rest of us, too, as we shall be saddled with the output of their courses, yet another generation of ‘economists’ claiming still to know what is best for us, how the world works, and why they are the ones who understand!

    Fortunately, at a personal level, I think my friend’s daughter may change course.

  9. As a non economist, I’d be interested to know if you were ever taught anything about the Austrian School or was it all Keynsian consensus stuff? In this lecture [ ] Hayek effectively dismisses the hubris of economists overreaching themselves. I know his approach does not lead to your preferred flavour of policy but as Hayekians certainly wouldn’t have been in favour of the policies that guaranteed the house price bubble of which subprime mortgages were a part they surely don’t deserved to be dismissed on the basis of recent events?

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