Tuesday, 23 June 2015

Liberté, égalité, fraternité

This is a short(ish) review of the INET Paris Conference (8-11 April 2015 at the OECD).  INET announced that Clive Cowdrey, of the Resolution Foundation, has joined their Governing Board. To get an idea what this means for INET, watch his speech about inequality at the Opening Plenary here (32:45 to 41:50).

My personal opinion is that INET are sucessfully challenging the orthodoxy. At times, however, this can be slow and inward-looking, especially when the grounds of the debate themselves are unchallenged. My conference notes include examples of speakers referring to 'negative equilibrium real rates', the 'Bernanke-Summers debate', 'QE being better than nothing' and 'the transition to markets (as) the challenge ahead' - as if the agenda were only set by the world's media.

However, I didn't go to hear familiar debates, but to hear new ones. Andrew Sheng joked about adding 'tragédie' to the conference title 'liberté, égalité, fraternité'... to spell 'LEFT'. In that vein, he spoke about central banks 'not knowing how to reduce their balance sheets' and the spillover costs of QE to developing economies. He concluded by arguing that central banks have minimal control of 'final settlement' in the markets. Given there is so much media rhethoric about returning to normal, the illusion of central bank control needed to be challenged.

On that same, LEFTish theme, Lord Turner discussed fiscal policy, suggesting we should not accept slow growth but consider 'debt write offs, defaults or monetizations' with explicit and permanent government deficits financed by the central bank. On Greece, Lord Turner thought that 'exit or restructuring are inevitable'. Given almost everyone in the UK talks about balancing the government's books, this puts Lord Turner somewhere alongside the Greens, SNP and Plaid Cymru.

Gerald Epstein's research strikes me as a little odd, given the general public are in little doubt that central banks have been captured by financial interests. However, the ensuing discussion led me to this post by Rob Parentheau, where he describes Eurozone QE as 'a mutual assisted suicide pact with finanzkapital in the eurozone'. Presumably, there is no Hippocratic Oath to prevent the doctor/economist/finance minister administering long bouts of intolerable pain.

INET finally had a panel on Africa and capital flight. The problem was defined by Vera Mshana: 'Africa loses more from capital flight than it receives in aid'. The chief beneficiaries of these flows are European banks, who are often closely entangled with corrupt regimes according to Léonce Ndikumana. Surprisingly, data on who might, or might not be, considered corrupt is co-ordinated by Reuters via World Check. The panel were passionate about making the system better and, as the discussion reminded us, much of the capital flight from Africa is a consequence of profit-seeking and transfers to an offshore parent company.

In summary, this was a good conference, provided you avoided familiar names and re-hashed debates. With the Resolution Foundation on board, the direction of future research looks promising.

Tuesday, 16 June 2015

"We should all be pluralist now"


At the first QAA meeting to discuss the UK economics curriculum, a senior academic said that "we should all be pluralist now". After 15 months, the review of standards against which UK degrees are peer reviewed is drawing to a close. The revised subject benchmark statement for economics (SBSE) will be published this summer, in time for the 2015-16 academic year.

During the consultation, I finished my PhD and took up a Senior Lecturer position at De Montfort University. However, I continued to work with the committee, along with Joe Richards from Rethinking Economics, and to push for a statement that meets academic and student calls for greater pluralism.

Below are my comments after the last meeting, on 1st June 2015. The final decision on wording lies with the committee chair, and RES Executive Committee member, Eric Pentecost. I am broadly in favour of the changes agreed so far, on the basis that it is better to publish than delay another 12 months, and be stuck with the more narrowly defined 2007 SBSE QAA.

I collected a lot of material during this process. Where these are in the public domain, I have added them to an open Mendeley project. I also archived the ISIPE student letter materials and correspondence from their Basecamp project, including the supporters list: this material is available to ISIPE members on request. I have early correspondence from setting up Rethinking Economics, and was given a copy, by Robert Skidelsky, of his correspondence regarding INET and the CORE project. If you are interested in using this material for research, please get in touch.

Although I am no longer a PhD student, I am actively involved as a Trustee for Post-Crash Economics... the campaign for pluralism goes on!

Post-Consultation Draft SBSE Comments
Neil Lancastle
1 June 2015

Nature and context of economics

This section is improved by dropping the word ‘scarce’; re-wording to include ‘phenomena’, ‘past and present’ and ‘evolve’; including finance (‘financial stability and instability’) and distribution as dynamic analyses; adding ‘historical, political, institutional, social and environmental contexts’; ‘evidence-based’ and including 'qualitative data analysis'.

I preferred the previous wording ‘the study of economics requires an understanding of resources, agents, institutions and mechanisms’ to ‘various interpretations of commonly observed economic phenomena exist, due to observational equivalence, and hence explanations many be contested’. The new sentence would be improved without the middle phrase, ie: simply ‘various interpretations of commonly observed economic phenomena exist, and hence explanations may be contested’.

The addition of ‘ethical’ as a context would deal, in part, with consultation suggestions to emphasise ethics.

The additional wording ‘methodology of science’ seems unnecessary.

Section 2.3 is much improved, and suggests interdisciplinary thinking.

The aims of degree programmes in economics

This section is improved with the bullet point ‘to foster an understanding of alternative approaches…’ although I prefer the wording ‘different and frequently contested ways…’

There are other improvements: appreciate ‘the criteria for simplification’; including the word ‘welfare’ and adding the bullet point ‘to develop in students an ability to interpret real world economic events and critically assess a range of types of evidence’.

Subject knowledge and understanding

This section is much improved, in particular dropping the phrases 'core' and ‘a coherent core’; including a study of ‘financial cycles… the role of money creation, banking and the financial system’; and removing the repetition of numeracy skills in multiple paragraphs.

I would prefer ‘understand different methodological approaches’ rather than ‘appreciate different methodological approaches’.

Subject-specific skills and other skills

This is much improved by the addition of Section 5.2 on skills that employers value (evidenced research, communication, economic history and context, pluralism, interdisciplinary synthesis, critical judgment, proportionality and awareness of limitations).

The transferable skills have been improved by the inclusion of ‘psychological biases’; expected re-wording by the chair of the sections around equilibrium, dis-equilibrium and dynamics; inclusion of ‘conflicts of interest’; and a bullet point on markets and market failure.

The subject-specific skills would appear to be common to other subjects (abstraction; analysis, deduction and induction; quantification; and framing)…I don’t think it makes sense to delay publication, but perhaps the QAA can advise on a more appropriate section heading.

The section on numeracy is improved: it is written in simpler English, and includes critical thinking about the sources and selective use of data. The more general wording would seem to address the consultation suggestion to encompass big data and new data sources.

Teaching, Learning and Assessment

This section is improved by including ‘use of practitioners’ as a teaching approach; and by the broadening of 'context' to include historical, political, institutional, international, social and environmental (but see above regarding ethical context).

Benchmark Standards

This section is improved by replacing ‘economic theory and’ with ‘economic theories (and) interpretations’; and by the broadening of 'context' to include historical, political, institutional, international, social and environmental (but see above regarding ethical context).

Monday, 23 March 2015

The Boom Bust Boys

I've seen the new film Boom Bust Boom at two private views: with an audience at De Montfort University and again at SOAS: there was a third private view as part of the excellent INET 2015 Conference "Liberté, égalité, fragilité" (blog post to follow).  The film is great fun... an overview of a Minskian alternative to neoclassical economics, the debate about reforming economics education, and a reminder that private credit is behind almost every bubble. However, at both private views the audience highlighted the film's superficial analysis of power. Ben Timlett, one of the co-directors, liked the suggestion from the SOAS audience to include a puppet of Marx.

The issues of power and gender are endemic to economics. When we were collecting signatures for the ISIPE open letter, we had a real problem finding senior economists to represent our campaign. The early signatories were 90% male, based mainly in Europe and the US. We were so concerned that we began a campaign within the campaign to make our supporters list more diverse. As Daniel Kahneman said in the film, we might not find it easy to de-bias ourselves as individuals, but organisations should be able to. This lack of diversity exists across academia, with only 11% of UK economics professors being female. Things are a little better at Reteaching Economics, with over 40% female members. To borrow the slogan from another campaign, reforming the economic system 'has to be about more than white men' and the film might have done more to counteract these biases.

With these caveats, the film does a great job of outlining a Minskian alternative to neoclassical macroeconomics; discussing the history of financial crises from tulips to railways to sub-prime mortgages; and giving a very accessible critique of neoclassical models. All done with cartoons and puppets, interspersed with interviews, including a double act between Hyman Minsky (the puppet) and his son, Alan. For this Minskian alternative, things are not as bad as Paul Mason suggested when he wrote that 'the radical, pro-Minsky faction is at a disadvantage because it does not possess a complete alternative model of capitalism'. There are plenty of stock-flow consistent Minsky models with debt, including my own, and this modelling tradition has depth and breadth. However, the problems within economics cannot be solved by new models alone.

The film made some useful policy recommendations, including a reminder by Andy Haldane of the need to separate the dangerous (speculative, Ponzi) activities of banks from their steady (hedge) activities. There could have been more discussion of the nature of crisis today, which Kahneman wryly observed 'hasn't ended yet'. The role of offshore finance could also be explored more deeply. Like Kindleberger's 'Manias, Panics and Crashes', the film identifies the role of private credit in forming bubbles, but might have dug into Eurodollar markets, financialisation and offshore credit markets. Creditor-friendly regulators bailed out these powerful, private interests, sowing the seeds of present crises.

Would I recommend this film?  Yes. The cartoons and puppets are great fun; it makes a useful contribution to the debate about alternatives to neoclassical economics; and it is a reminder that private credit is behind almost every bubble. The film is very accessible, to a non-technical audience, which has to be a good thing. Perhaps the solution is to follow up with a second film that analyses the power and politics behind private credit: central banking, offshore finance, gender, tax avoidance, inequality, austerity and so on. Minsky is ignored, not because everyone is swept up blindly by euphoria, but because it is in the interests of those in power to keep the bubble going.

Saturday, 31 January 2015

It's out! The revised UK economics curriculum

Update 4/12/2015 
There was a final review meeting on 1st June 2015, after this Blog post was written. My summary of these discussions is available here. Some changes were accepted  in the final version of the SBSE, available here, in particular:
The phrases 'due to observational equivalence' and 'methodology of science' were dropped
Different methodological approaches are 'understood' rather than the weaker 'appreciated'
'Psychological biases' are included
'A range of evidence' is critically assessed, and methods are 'critically understood'
Despite intense lobbying, 'ethics' was not accepted as an acceptable context alongside 'historical, political, institutional, international social and environmental'. Instead, ethics is a subject area that is 'linked to'.

It's out! The UK's subject benchmark statement for economics (SBSE), against which the quality of UK economics degrees is judged, has been published online. The QAA can withdraw degree awarding powers and the right to be called a university if it is not satisfied with standards and quality. This draft 2015 SBSE appears nine months after Rethinking Economics represented student voices at the QAA committee. The QAA have a survey to gather comments from 'anyone with an interest in higher education in the UK' including students, academic staff and graduate employers.

This brief post is to review changes since the 2007 SBSE, by mapping them against student calls for theoretical, methodological and interdisciplinary pluralism.

Theoretical pluralism

There is a new statement that ‘various interpretations of commonly observed economic phenomena exist, due to observational equivalence, and hence explanations may be contested. It is therefore important that economic phenomena are studied in their relevant historical, political, institutional and international contexts' (Section 2.2). Resources are no longer 'scarce' (Section 2.1) and economics is more modestly described as 'a social science' rather than 'a key discipline in the social sciences’ (Section 2.3). The phrase ‘a coherent core of economic principles’ has been replaced with the more open-minded 'relevant principles' (Section 4.1) and the threshold levels required by students refer to 'economic theories and interpretations' rather than just a single 'theory'. Finance and income distribution have been reclassified as dynamic analyses (Section 2.2.) and the subject specific skills include 'market failure' and 'conflicts of interest' (Section 5), perhaps in recognition of Minsky and Marx.

Methodological and interdisciplinary pluralism

The problems with abstraction have been highlighted, with students expected ‘(to appreciate) the specific assumptions that guide the criteria for simplification’ (Section 3.1). Students will be assessed on their ability to use 'evidence and knowledge of institutional and historical context' (Sections 6 and 7). In terms of their role in the broader academy, economists are said to engage with a wider range of disciplines, including ‘finance, international relations, law, ethics and philosophy’.

What is left out?

There are notable absences, and this list is not exhaustive. Although governments were accepted as economic entities, financial institutions were not; and legal and ethical contexts are not included (Section 2.2). The relationship with mathematics and management remains muddled: mathematics is used and management is informed (Section 2.3). Evidence is evaluated and assessed, but never critically. The role of government and the System of National Accounts were rejected as topics, as was re-wording to encompass qualitative and mixed methods. Students are asked to 'appreciate history (of economic thought)' but not to understand it; and there is no requirement to appreciate or understand ethical issues.


Monday, 14 July 2014

UK economics curriculum: an open reply to the QAA

To: The Quality Assurance Agency for Higher Education
Southgate House
Southgate Street
GL1 1UB 

15th July 2014 (revised 31 July)

Thank you for the opportunity to suggest further changes to the QAA subject benchmark statement in economics (SBSE). I think the draft needs significant further work for four reasons: repetition; insufficient critical and open thinking; insufficient pluralism; and a need to re-prioritise to reflect employer surveys.

The SBSE could merge sections 4. 'subject knowledge and understanding' and 5. 'subject specific skills and other skills'. Finance and accounting (QAA, 2007) have a single section 3. 'subject specific knowledge and skills'.

There is wording in the both finance and accounting that emphasises critical and open thinking: 'a capacity for the critical evaluation of arguments and evidence'; 'the ability to analyse... unstructured problems' as well as an emphasis on presentation, communication and information technology skills. The SBSE could use similar wording.

The main thrust of the document is 'to abstract and simplify' (2.5) and 'the study of factors that influence income, wealth and well-being'. It could instead emphasise 'the empirical grounding of the subject; being question motivated not tool motivated; and address issues such as growth, distribution and the environment' (personal notes from QAA meeting). The need to discuss the purpose of economics was made in the original INET curriculum proposal (Skidelsky, 2011). For example, topics that come up with student groups include climate change, inequality, unemployment, banking, power, gender, profit retention and tax avoidance.

A lack of theoretical pluralism is apparent in section 4.1 'a coherent core of economic principles' and 5.4 'key concepts'. The SBSE could use similar wording to the finance statement section 2: 'study pursued from a variety of perspectives, including but not restricted to, the behavioural, ethical, economic, sustainable and statistical/mathematical'.

Please note my surprise that finance and employment are considered to be 'static analyses'.

In my view, sections 2.5, 4.3, 5.4, 5.6 and 7 confuse the priorities given in the employer surveys:

The Economics Network Survey of 2012 places 'communication of economic ideas' and 'analysis of economic, business and social issues' ahead of 'abstraction' and lists 'social costs and benefits' as the most important subject-specific knowledge.

The SBE Survey of 2013 prioritised data manipulation, money and banking, financial economics, economic history, cost-benefit analysis, competition, behavioural economics, history of economic thought and financial history. These were ahead of advanced mathematics and mathematical packages. These priorities are either missing, or inconsistent, in these overlapping sections.

Where the committee have proposed changes I support these: the new bullet on 'historic and policy contexts in which specific economic analysis is applied'; engagement with finance, ethics, philosophy and international relations; a new bullet to communicate with 'non-specialists/non-economists'; brief mention of case studies; removal of the word 'scarcity' and inclusion of the words 'phenomena', sectors' and the 'pluralist perspectives/interdisciplinary synthesis' mentioned earlier.

Can you note my disappointment that it took so long to circulate the draft after the 18th March committee: as a result, even these minor revisions will not be available for the 2014-15 academic year.

Thank you for agreeing to widen the consultation to 'gather a full range of perspectives'. I hope that this will include academic groups (WINIR, PKSG, AHE and so on) as well as student groups (PCES, Rethinking Economics, CSEP, GURWES and so on) and other employers (in finance, consultancy and non-profit).

With best regards,
Neil Lancastle

Summary of comments from other committee members
1.  The statement needs rewriting to show how economics has changed since the crisis, to encourage a more pluralist approach to teaching, and to encourage critical inquiry by students.
2.  The statement needs to include economic and financial history, behavioural economics, real world case studies, banking, and the skills and topics prioritised by employers.

Economics Network. (2012). Economics Graduates’ Skills and Employability.
SBE Survey. (2013). Teaching Economics after the Crisis: The Results of the Society of Business Economists’ Members’ Survey of January 2013. Available from Society of Business Economists.
QAA. (2007). Finance. http://www.qaa.ac.uk/en/Publications/Documents/Subject-benchmark-statement-Finance.pdf
QAA (2007). Accountinghttp://www.qaa.ac.uk/en/Publications/Documents/Subject-benchmark-statement-Accounting.pdf
Skidelsky, R. et al. (2011). Three year economics undergraduate curriculumhttp://ineteconomics.org/sites/inet.civicactions.net/files/INET_undergrad_economics_curriculum_UK.pdf

Wednesday, 11 June 2014

There are alternatives

More on the lack of public support from CORE for the student letter, calling for 'more open, diverse and pluralist economics'. However,the student letter has been signed by a diverse group of academics and economists (see below). 
This was sent to the FT on 3rd June but not published, hence the Blog.


Dr Alvin Birdi’s hope that the CORE curriculum will ‘prioritise empirically important questions’ is welcome. However, he is wrong to dismiss criticism from those outside the project as ‘off the mark and unhelpful’.  Dr Hugh Goodacre’s is not the only dissenting voice; Kate Raworth thinks that ‘to be honest I don’t feel it [CORE] bodes well’ and Ha-Joon Chang and Jonathan Aldred write that ‘teaching undergraduates economics as a series of interconnected debates at best risks needlessly confusing students and at worst actively misleading them...this is unfortunately the view taken by a leading group of curriculum reformers among mainstream economists – the CORE project group’.

There are occasions when CORE members engage with those on the outside calling for alternatives. Andy Haldane wrote a supportive foreword to the report by students at Post-Crash Manchester, but they were dismissed by Diane Coyle as failing to ‘recognise the breadth of the courses available’ and by Simon Wren-Lewis as being 'fundamentally misguided’.

More generally, the CORE steering group and CORE contributors appear united in their dismissal of alternative curricula: not a single one appears to have signed the ISIPE open letter. Surely someone from CORE has an encouraging word for the students? After all, the letter is signed by a diverse group of academics and economists, many of whom leave helpful comments: Ann Pettifor, Stephanie Blankenberg, Molly Scott Cato, Robert Pollin, Michael Ash, Achim Truger, Arne Heise, Doyne Farmer, Thomas Piketty, Lord Robert Skidelsky, Alan Kirman, Ha-Joon Chang, James Galbraith, Peter Mooslechner, Lars P. Syll, Victoria Chick, Geoffrey Harcourt, Marc Lavoie, Geoffrey M. Hodgson, Sheila Dow, John Komlos, Paul Davidson, Steve Keen, Engelbert Stockhammer, Jean-Paul Fitoussi, Matheus Grasselli, Gary Dymski, John Weeks, Ken Binmore, Malcolm Sawyer, Mathew Forstater, Ozlem Onaran, Stephen Fazzari, Sheri Markose, Tae-Hee Jo, Thomas Palley and Yuval Millo. 

Best regards,
Neil Lancastle

Postgraduate student in finance and economics, University of Leicester

Wednesday, 28 May 2014

Spinning from the CORE

What have the CORE steering group and the ISIPE student letter got in common? The short answer: nothing.

If you scan the list of supporters (last scan, 5th October 2014) you find that not a single steering group member has publicly supported the ISIPE call for 'a more open, diverse and pluralist economics'. Some of us have received private messages of support, but it would be fantastic if someone like Diane Coyle (chair of the steering group and acting chairman of the BBC trust) or Eric Pentecost (chair of the Royal Economic Society's CHUDE committee) were to sign the letter.

Especially when 'CORE in the news' includes ISIPE press coverage with the phrase 'we try to link to all the mentions of the CORE project in the media'. Anyone would think this was the 'citation cartel' and 'invisible college' that Victoria Chick referred to at the Post-Crash Manchester fringe event.

Outside of CORE, a growing body of voices are stating publicly that the CORE curriculum is too narrow. Kate Raworth wrote on her blog that:

'CORE’s twenty modules are works in progress...but to be honest I don’t feel it bodes well... it’s only when we reach Module 17 that we learn about ‘The economy of the Earth’... and in the outline of the whole curriculum there doesn’t appear to be any room to discuss whether or not unlimited economic growth is theoretically, technically or socially possible".

Hugh Goodacre wrote in the FT that:

'Far from introducing a wider range of viewpoints, [CORE] excludes any method or theory other than the same old simplistic platitudes about equilibrium and disequilibrium and all the rest of it. It aims to justify to first-year students the fact that their further curriculum will centre overwhelmingly on mathematical models constructed on that basis, and far from welcoming student discussion in its formulation, consultation on the course by students and dissenting staff was rigorously denied'

Ha-Joon Chang and Jonathan Aldred, writing in support of the student campaign in the Observer, point out that 'in Cambridge, like every other elite university, the undergraduate economics curriculum has remained almost the same'.

These comments suggest little has changed since this survey of undergraduate economics programmes published in 2012. The original INET UK Economics Curriculum Committee, led by Lord Skidelsky, found that courses in microeconomics emphasised theory and mathematics; macro courses relied heavily on New Classical thought; and only two out of twelve universities discussed economics from a qualitative perspective such as history of economic thought, economic history and philosophy of economics.

Why are there still so many dissenting voices? It has been suggested in a Reuters Blog that students 'underestimate the scale of the intellectual scandal'. Looking at the press coverage, it seems the campaign also underestimates the scale of the intellectual spin. As Imre Lakatos might put it, the CORE has a  'protective belt' or positive heuristic which is more flexible and 'forges ahead with almost complete disregard of 'refutations' (Lakatos, 1980: p51).