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Towards an Economic Tutorial

by ARGeezer Wed Sep 15th, 2010 at 08:39:50 PM EST

In Sven's Paris diary Fran asked, regarding ET goals:

What would a good alternative, to the current system, look like? and, later:So what and where should our society move towards? Once this is defined, we can start brainstorming how this can be done.

I responded, in part with the following assertion:

The core of our current problems lies in the capture of governmental power by economic elites. The style and method might vary from country to country, but that is the essence of the problem.

It follows that the solution is to break the money link between economic power and political governance any way we can!

I identified spreading awareness of this problem and goal as The first step and then noted:

The second step is to publicly critique what currently passes for the official economic theory. None of the theories commonly taught in universities acceptably explain the functioning of the existing system. There are better approaches available. They are not being pursued because the existing theory has been found to be useful as propaganda for the existing economic elites. This has to be drilled into the popular mind.

To which Fran responded:

What are these better approaches? I think that would be also important to spread - if they know and understand more about these other/better approaches the more they will demand them and also vote for those people who will most likely implement them.

I responded and Fran suggested that response be turned into a diary so others could more easily find it. See below:
  Update [2010-9-17 1:39:24 by ARGeezer]: To include diaries by Migeru on Keynes.

Update [2010-9-18 11:58:50 by ARGeezer]: To include a diary by Migeru about and on-line text of works by Thorstein Veblen.

Update [2010-9-18 23:7:49 by ARGeezer]:: To include posts by Bill Mitchell per the recommendation of Bruce McF.

Update [2010-9-19 15:16:58 by ARGeezer]:: To add Propaganda by Bernays.

Update [2010-9-22 0:27:18 by ARGeezer]::: To add THE LOST TRADITION OF BIBLICAL DEBT CANCELLATIONS by Michael Hudson and Our Best Economic Minds are Failing Us by Michael Hirsh.

Update [2010-12-30 10:16:20 by ARGeezer]: To include links to Rob Parenteau and 3 Sector Financial Balance analysis.


The problem for the general reader is providing them with an understanding of Mainstream Economics in all of its current bizarreness so that they can see the problems and appreciate the alternatives. Robert Heilbroner's The Worldy Philosophers is a readable and informative, if inadequate, introduction, but it does introduce the reader to the major economists and give some idea of their contributions. Perhaps someone can suggest a better but comparably readable introduction.

Much of the nature of contemporary economics derives from the circumstances of its creation. The best single work I know on this subject is Karl Polanyi's The Great Transformation which I am currently re-reading. It was written in 1944 and is simultaneously an economic history and a history of the economic thought of Europe from the Renaissance to 1944 focusing strongly on England, site of the first industrial revolution and the first social transformation from a traditional society to a market driven industrial society. Polanyi emphasizes the inherent nature of economies being embedded in the social structure of the society in which they operate and he illuminates the history of economic thought by illustrating the social and economic history that was the context for the development of that thought. (I find on Amazon that The Worldy Philosophers and The Great Transformation are frequently sold together. I cannot think of a better pair of books as an introduction to this subject.)

Polanyi has been studiously ignored by those in the academic mainstream of economics and political science, though he is well respected by sociologists and anthropologists, though many would quibble about the dated nature of the work he cites. I found him to be eminently readable, though my re-reading is going slowly. This is because I have learned so much more about economics and economic history since my first reading that I am pausing after each page or paragraph to let another of his continuing profound insights sink in and find its place amongst all I have subsequently learned. (I am considering a diary on Polanyi, the classical economists and the historical and social context of their work.)

Steve Keen is the most interesting contemporary economist of whom I know. His site, Steve Keen's Debtwatch, has a enormous amounts of information, including Power Point presentations of his Introduction to Economic Thought course and other courses. He is producing work that is a distinct improvement over the existing version of Mainstream Economics. Amazingly, (to a non-economist), mainstream economics does not include time in their calculations, which are based on equilibrium analysis. So, if it is necessary to consider developments over a period of time, the approach is to do an equilibrium analysis of conditions at two different times. The only economic model for which research monies are provided in the USA is the Dynamic Stochastic General Equilibrium Model, or DSGE, which, despite the term "Dynamic" in the title, is an equilibrium model which analyzes all economic decisions as though they are made by a single rational actor. (Four trenchant critiques of the DSGE approach found here.) Keen, on the other hand, has developed models that are based on ordinary differential equations which include time as a variable. Further, his models include multiple sectors, such as a labor sector, a banking sector and a business sector. Keen also published a book, Debunking Economics, which is available for $10.00 in electronic form at his site, though it might be preferable not to start with the debunking before having a rudimentary idea of what is being debunked.

Some of my diaries on Henry George and Neo-Classical Economics, on Steve Keen and his work, and on other critiques of Mainstream Economics might be of some use to one who has not previously delved into what is, in its current form, truly "The Dismal Science."

Another single work which puts the development of economic thought into perspective, but which goes into much more detail is Nitzan and Bichler's Capital as Power. They come out of a Neo-Marxist background but base this work on the insights of Thorsten Veblen and Lewis Mumford. Mumford describes the "social machine" that has existed since the first river based civilizations and that has enabled rulers to organize the population for production. Veblin was a sociologist who had basic insights into social and economic organization in the USA, including The Theory of the Leisure Class, The Theory of Business Enterprise and Absentee Ownership and Business Enterprise in Recent Times. Veblen stresses the role of "strategic sabotage" both of your own company's production and that of competitors so as to maximize profits and the agency problem that arises when businesses are not run by their owners, among other factors. Capital as Power is a recent work and brings the reader up to the present while also surveying the history of economic thought as it pertains to the reorganization of society in terms of the requirements of capital.

Links to some of my diaries, (with highly informative comment threads):

Mainstream Economics vs. the rest of the world

Henry George and Neo-Classical Economics

Steve Keen's Dynamic Model of the Economy

The Con of the Decade, (conservatively)

Systemic Fear, Modern Finance and the Future of Capitalism

A link to recent critiques of Mainstream Economics by four eminent economists.

An Aug 16, '10 Salon Comment: Bank Profits a sign of economic sickness, not health

A list of archived comments on ET containing references to Rob Parteneau and 3 Sector Financial Balance analysis is here , but the link on his name above provides both parts of his long article in New Economic Perspectives.

Links to short articles that illuminate important aspects of economics:

THE GREAT SLUMP OF 1930 John Maynard Keynes. 1931 The basics of macro economics, debt-deflation and the roles of consumer and capital investment and spending explained almost totally non mathematically in three pages! The clearest simple explanation I have found.

Keynes, Recovered Jonathan Kirshner reviews three works about Keynes in Boston Review.

John M. Keynes: Proposal for an International Currency Union The description of Keynes' proposal is 5 pages long. Also attached are several papers discussing alternative approaches to international currency clearing arrangements.

The J.M. Keynes Homepage at The New School A concise survey of Keynes' life and work with a major bibliography and link fest at the end.

An Interview With Paul Samuelson The Atlantic Wednesday, September 15, 2010  The creator of modern US economics explains why economists do that vodoo that they do so well.

Commercial Banks as Creators of "Money" James Tobin. Legendary US Economist from Yale. Very readable treatment of money, though written before the rise of the Shadow Banking System. (Systematically miss-writes "Widow's Curse" as "Widow's Cruse" :-)  ) pdf  

The Debt-Deflation Theory of Great Depressions Irving Fisher. (14 pages + charts and graphs) From the St. Louis Fed site. A very readable classic that is particularly relevant today. (pdf)

The Financial Instability Hypothesis Hyman Minsky Seven pages. (pdf)

Finance and Economic Breakdown: modeling Minsky's financial instability hypothesis Steve Keen Thirty pages. Read the Minsky paper first. Keen's discussion of the background is more demanding on those unfamiliar with 20th century economic thought than is his presentation of his modeling.

ECONOMICS IS NOT NATURAL SCIENCE by Douglass Rushkoff. About 12 screens. A reprise of World Economic History over the last 1000 years. The problem: Plus ça change, plus c'est la même chose. George Dyson's review at the top is also worthwhile.

Our Best Economic Minds are Failing Us by Michael Hirsh. A summary of many of the critiques of the current state of economics that is especially notable in that it appeared in Newsweek. The article is dated 9-16-'10. It is also a summary of a new book by the author.

Related online books

Propaganda 1928 Edward Bernays. From the book cover: "The nephew of Sigmund Freud, Edward Bernays (1891-1995) pioneered the scientific technique of shaping and manipulating public opinion, which he called "engineering of consent." During WW I he was an integral part -- along with Walter Lippman -- of the US Committee on Public Information (CPI), a powerful propaganda machine that advertised and sold the war to the American People as one that would "Make the World Safe for Democracy." A foundational work.

Neo-classical Economics as a Stratagem against Henry George by Mason Gaffney 137 pages of text plus 20 pages of references and bibliography. (pdf) Very readable history of economic thought from Henry George to the mid '80s. NCE deconstructed.

THE LOST TRADITION OF BIBLICAL DEBT CANCELLATIONS 1993. 86pp, text - 45pp, Appendices, Glossary and Bibliography - 41pp Michael Hudson. This paper is based on research done as a Research Fellow at Harvard University's Peabody Museum in Babylonian economic history, and was originally published by the Henry George School of Social Science. Most bible scholars do not know that the passages in the Pentatuch and elsewhere in the scriptures were a vital, living part of these religions and cultures, in some cases up to less than a few hundred years ago. Classical and neo-classical economics, if not science, triumphs over scripture!

The Economic Consequences of the Peace, 1919. John Maynard Keynes brilliant analysis that reads like the history of the 15 years that followed.

THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY J.M. Keynes' classic in online full text.

The Theory of Business Enterprise 1904 by Thorstein Veblen. Full on-line text of Veblin's little known classic.

The Engineers and the Price System, 1921 Thorstein Veblen. A collection of articles published in Dial magazine in 1919 discussing the role of sabotage, inefficiency, salesman ship public tolerance and the current and possible future role of engineers vis a vis the Captains of Industry in an absentee owner economy, all in the light of the ongoing Soviet Revolution in Russia.

Links to diaries and comments on economics by Migeru

Keynes and the monetarization of economics*** Any brave soul daunted by digging in to Keynes' General Theory will be comforted by the first few words of this diary by Migeru: "I am trying to read Keynes' General Theory and I find it rather hard because it is a technical book written for professional economists..." :-) Yes indeed! But Mig points out some of the stumbling blocks along the way and lights our paths.

Keen on Keynes Amusing and insightful

Pulling Keynes' teeth "The State of Long-Term Expectation" Long quote and interesting discussion.

The Credit Bubble theory of the Business Cycle (I: Veblen) Why Veblen comes up in so many diaries and comments. Once again check the comment thread.

Links to diaries on economics by Bill Mitchel, courtesy of Bruce McF:

Billy Blog -- alternative economic thinking. Home Page Content changes frequently.

Archive for the ‘Debriefing 101’ Category The antidote for Mainstream Economic Nonsense from a Modern Monetary Theory, MMT, Perspective. Updated regularly.

Fiscal sustainability 101 – Part 1 Not what the deficit hawks say. Having full employment by doing socially useful things?

Fiscal sustainability 101 – Part 2 Forget Arbitrary Debt/GDP ratios. Many economists' minds may be on a Gold Standard, but countries aren't. Foreign creditors are not going to provoke a calamity.

What Causes Mass Unemployment Insufficient government spending when the private sector stops spending?

Will we really pay higher interest rates? In which it is revealed that all of the arguments for "fiscal constraint" are neo-liberal rhetoric designed to prevent the government from engaging in social spending because the neo-liberals don't like it.

Display:
Outstanding.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Thu Sep 16th, 2010 at 04:37:23 AM EST
I would very much appreciate your adding a section with links to Socratic Economics and other valuable threads. If you don't have time, I will do so myself -- eventually and not as well as you would do it.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 16th, 2010 at 02:09:19 PM EST
[ Parent ]
Plus Keynes plus Veblen plus Galbraith...

Will do.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Fri Sep 17th, 2010 at 05:23:53 AM EST
[ Parent ]
Add them directly to the text, if you wish.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 17th, 2010 at 11:01:29 AM EST
[ Parent ]
Nice one, geez.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Sep 16th, 2010 at 07:27:41 AM EST
What is helpful for me in regards to economics is to look at cultures with radically different assumptions regarding economics.

As a Yank the easiest one for me is to look at the Native Americans, and the fact that they had no concept for ownership of land. This is not to say they did not identify strongly with the area they inhabited, and fought to defend it. But the idea that words on a piece of paper could define and transfer the literal ownership of Mother Earth was simply not possible. In our culture the idea of land ownership is so deeply embedded in people's psyche's that they cannot conceive of anything different.

In a similar way the idea that wealth is to be accumulated and hoarded, and that wealth is the equivalent of power is a damaging core belief at the root of our economic system. Imagine a culture where the greatest sign of wealth is to have enough to share with those who have less. Imagine a culture where political leadership comes not from wealth, or force, but from those of clear mind and wise heart. Imagine a culture where spiritual leadership is derived from one's genuine connection with the Spirit World. (Yes- there's an old John Lennon song in there, but the guy had some insight).

Our economic system is rooted in money, power (coercion) and ownership, the sum total of which is greed.

by US Blues on Thu Sep 16th, 2010 at 07:58:01 AM EST
the Native Americans...had no concept for ownership of land.

This is common in traditional cultures, be they hunter-gatherer or a mix of settled agriculture combined with hunting and limited trade. Polanyi uses examples from cultures described by Margret Mead, Bronislaw Malinowski, Radford-Brown and others to make that point at the beginning of his book. In some of the cultures described men worked hard on their gardens but gave the first and best fruits of that garden to their sister's families.

Where there were clear concepts of ownership, as in medieval Europe, they were profoundly different from "modern" concepts. The peasants were bound to the land in late antiquity, as the Western Roman Empire was collapsing, as the land was useless without labor to exploit it. The "owners" of the land were the nobility who came to have military obligations to their liege lord and the duty to protect their peasants, however self servingly they came to perform that duty. They could not sell their land for their own financial benefit nor were they able to divide the land between their heirs.

The common laborer in England was bound to the parish but, since the time of the Elizabethan Poor Laws, guaranteed minimal income and support until the reforms of 1832. The old system had been working acceptably at the time of Adam Smith's publication of The Wealth of Nations in 1778 and so Smith did not see unemployment as an issue to discuss or explain to any great extent. Within twenty years rural poverty had become a major problem which the gentry addressed by providing aid to the unemployed in return for them providing labor to willing employers. This was the infamous Speenhamland System, so named for the place of its origin, a paternalistic system of outdoor relief that, by subsidizing labor and by the manner of its enforcement ended up driving down the price of labor, demoralizing and degrading rural labor, as diligence and excellence were punished rather that rewarded, retarding the development of a labor market and preventing the organization of labor unions.

It was with the baleful effects of the Speenhamland System at the front of their minds and in the absence of a functioning market in labor that Bentham, James Mill, Malthus and Ricardo grappled with the issue of the role and nature of poverty and labor in a modern economy. Observers from Ricardo to Edmund Burke agreed that Speenhamland had to go. But the manner in which this was done, essentially "cold turkey", was traumatic for a generation of the working class in England. They just repealed Speenhamland but did not replace it with anything. It was a giant social experiment, a leap in the dark. And that is one reason why Polanyi describes Classical Economics as a utopian system. It also provides the context for John Stuart Mill's description of the British East India Company as constituting "a vast system of outdoor relief" for the younger sons of the landed gentry.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 16th, 2010 at 10:36:28 AM EST
[ Parent ]
... view of current events and the neoliberal fictions of mainstream economics can be found at billyblog, the blog of Bill Mitchell of the University of Newcastle (NSW) and COFFEE: the Center of Full Employment and Equity.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Sep 16th, 2010 at 05:43:45 PM EST
I may add a blog roll section specifically oriented to the economic tutorial subject. You undoubtedly have been following Bill Mitchell for a long time and have much more familiarity with his past posts. If you could provide links to specific posts that would be helpful to this topic I would be grateful. I am particularly interested in some of the MMT posts and the explanations as to why the US government CAN spend to create jobs in this environment. If you could provide such a list, I would add them to the body of the diary, at the end, in a specific section. Thanks, Bruce.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 16th, 2010 at 07:26:49 PM EST
[ Parent ]
... as Debriefing 101

His posts are quite long, so I will cite only two:

What Causes Mass Unemployment

Will we really pay higher interest rates?


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Sep 18th, 2010 at 02:28:31 PM EST
[ Parent ]
Great diary, thank you.

fairleft
by fairleft (fairleftatyahoodotcom) on Thu Sep 16th, 2010 at 07:09:58 PM EST
for this diary - AZGeezer, I put it on my Hotlist - looks like it will keep me busy for a while. :-)
by Fran (fran at eurotrib dot com) on Fri Sep 17th, 2010 at 12:40:48 PM EST
I will bookmark this for later reference.  There is no way I can dedicate enough time to read it now.  In case you haven't included this article, here's a link:  Our Best Economic Minds are Failing Us

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Mon Sep 20th, 2010 at 08:23:07 AM EST
... that the only people who are economists are the mainstream economists recognized by fellow mainstream economists. The reason that the "rethink" is going slowly is because really doing it would mean abandoning a lifetime of work invested in tools that are not up to the task at hand, and handing primacy over to a  rabble at a bunch of third and fourth tier schools.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Sep 20th, 2010 at 01:04:06 PM EST
[ Parent ]
... I mean the author of the article at Newsweek.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Sep 20th, 2010 at 01:04:54 PM EST
[ Parent ]
Although I identify myself as an economist, my degree is really in Development Studies (from IDS, U. of Sussex).  Talk about being looked down upon!  When I tried to transfer to a US institution, they literally laughed me out of the interview.  Such "multidisciplinary" degrees aren't very serious, they implied,... and much less from European institutions.  There is an acrimonious divide across the Atlantic that seems a part of what you all are discussing here.  I have been teaching international business, which is also frowned upon by academics from some notable US institutions.  Authors like Dunning are similarly categorized by these self appointed guardians of the creed as not serious, flimsy and unsophisticated. Unfortunately, I am suspecting that some European schools have been succumbing to the American influence - or so I have been noting through my recent participation in academic conferences overseas.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Mon Sep 20th, 2010 at 05:50:51 PM EST
[ Parent ]
The ideological purity of the Party must be protected from dissidents and outsiders.

While I appreciate the idea of a collection of useful economic concepts, it's still worth pointing out that NCE is entirely, completely and wholly a class propaganda exercise.

It has no substance worth criticising. It's purely an intellectual ad campaign run and managed by useful willing academic idiots whose shabby medium-net-worth lifestyles depend on supporting and promoting it.

More - if you look into the history of NCE you'll find that many of those idiots were groomed for their places from their undergrad days, and sponsored by benefactors who needed to insert same pet useful idiots into academia.

Debunking it isn't enough. In fact there's nothing to debunk, because as a system it's such a collection of nonsense that no one who isn't stupid, brainwashed or bought and paid for can ever take it seriously.

The only way to put a stake through its heart is to beat it at its own game. Create a cadre of dissident undergrads, pay to put them through college, get them to debate their more compliant and mercenary peers, and gradually chip away at the so-called top jobs.

Add a media campaign of disapproval from other authorities - physicists could do worse than to take this on as a challenge - and you might be able to clean the stables in a generation or two.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 20th, 2010 at 06:33:21 PM EST
[ Parent ]
Well, of course it answers to the class interests of the capitalist class.  That is a given.  Aside from that, however, there is another aspect that bears mentioning.  Let me put it in the form of an anecdote about something a NCE professor once told me which left me absolutely dumbfounded:  When discussing a particular version of a standard model we had just derived, he went over and over again about the "elegance" of it.  As a student, I was more interested in the application of the model in solving problems (even if it were problems strictly of the capitalist).  To make a somewhat long story short, I pointed out what I surmised were several flaws and shortcomings, to which he replied that it really 'didn't matter'.  It was the sheer "beauty" of the model that was important irrespective of its practical applications.  I was astounded and the sheer anti-intellectual nature of his remark.  For the life of me, I couldn't figure out what place such a 'discipline' could have in the pursuit of knowledge or science of any stripe.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Mon Sep 20th, 2010 at 09:05:46 PM EST
[ Parent ]
I couldn't figure out what place such a 'discipline' could have in the pursuit of knowledge or science of any stripe.

If your discipline, in its dominant form, is highly useful as propaganda but practically useless as a social science then perhaps one is well advised to stress its formal elegance. Marketing is another business related discipline that has no real relation to Mainstream Economics. It cannot. Marketing requires engagement with real people in the real world, even if primarily to manipulate those people.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 20th, 2010 at 10:55:55 PM EST
[ Parent ]
There is a risk ~ indeed, there has been experience ~ that if there is no anti-scientific study of the economy occupying that place, a scientific study of the economy will take its place.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Sep 20th, 2010 at 11:29:20 PM EST
[ Parent ]
ThatBritGuy:
Create a cadre of dissident undergrads

how? teach your children well?

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Tue Sep 21st, 2010 at 03:24:06 AM EST
[ Parent ]
I think JakeS is doing that as we speak...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Tue Sep 21st, 2010 at 05:27:52 AM EST
[ Parent ]
Only for a fairly wide definition of "benefactor."

One thing that strikes me is how young people are when they begin studying economics: The age distribution has more in common with that seen in natural science and mathematics than with the rest of the social sciences. I'm not sure that this is an entirely good thing. Natural sciences, engineering and mathematics are disciplines with few grey areas compared to economics. And there is a certain healthy lack of humility in teenagers that is perhaps more conducive to disciplines in which it is possible to be precisely right than to disciplines in which one can only aspire to be vaguely right, lest one be very precisely wrong.

I'm actually starting to think that formal mathematical economic models shouldn't be taught to undergraduates at all: Teach the undergrads an equal mix of anthropology or sociology, economic history (including a history of economic thought), econometrics and engineering, so they come to understand both how to build models properly and what sort of assumptions you can reasonably make about human societies.

Then throw the mathematical models at them in their third or fourth year, when they have the intellectual foundation to understand them.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Sep 21st, 2010 at 02:52:10 PM EST
[ Parent ]
I'm actually starting to think that formal mathematical economic models shouldn't be taught to undergraduates at all

That's throwing out the baby with the bathwater.

Mathematical Models are a powerful investigatory tool.  And they aren't the problem.  I think there are three main problems:

  1.  educational failure to instruct the student how to construct a Formal Model, the limitations of Formal Models, and the failure(s) of Formal Models

  2.  equating all Formal Models with Mathematical Models

  3.  disciplinary (Economics) disdain for any Formal Model that is not a Mathematical Model


Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Wed Sep 22nd, 2010 at 01:11:24 PM EST
[ Parent ]
I'm not suggesting postponing all mathematical models - only all mathematical models of the political economy. The thing is that when you start university, you won't have any experience with formal models - mathematical or otherwise - worth talking about. So you have to start with simple models. And the political economy has almost no simple systems that are amenable to mathematical modelling. Meaning that if you want to model the political economy mathematically as a first- or second-year student, you will have to resort to toy models that are not even wrong.

So the introduction to formal models of the political economy should not be through mathematical models. The introduction to formal models of the political economy should be through the same type of formal models used in other social sciences - after all, the social sciences are the ones who have specialised in developing models of social phenomena. Then, after people are comfortable with both mathematical models and formal models of the political economy, you can cross the two in a productive manner.

A side benefit of teaching economists mathematical modelling through engineering would hopefully be a greater appreciation for both the power and the limitations of engineering: It is clearly not adequately obvious to many economists which feats of engineering are trivial and which are impossible even in theory. Witness the frequent assertions to the effect of "if we throw enough money at the problem, we can re-create an entire coral reef ecosystem out of whole cloth - it just so happens that our political priorities are elsewhere at the moment."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 22nd, 2010 at 02:02:06 PM EST
[ Parent ]
... which was a close run thing, by the way, a matter of a hiring freeze in the last few years before a key vote in the department became emeritus and lost his vote ...

... most of the orthodox students had come straight through out of undergraduate economics and most of the Institutionalist and Post Keynesian students had come by some other route.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Sep 22nd, 2010 at 07:51:16 PM EST
[ Parent ]
Well, the top tier schools COULD just hire some of the economists who possess the requisite tools but which, as a result of the political selection procedures of the top tier schools, are now relegated to outer darkness in 3rd and 4th tier schools.

Mason Gaffney is an emeritus at UC Riverside. What tier would that be? And, likewise, what tier would York University in Canada be? Or The New School in NYC? And I presume that his "non serious" approach might be a reason that Bill Mitchel heads an academic institute instead of chairing a department, or am I wrong? And Steve Keen's school?

But it would seem that the University of Missouri, Kansas City is a haven for competent economists and related professionals such as Bill Black. Does UMKC at least make the second tier? Except by their approach, how is this tier ranking determined. I am so confused.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 20th, 2010 at 02:05:44 PM EST
[ Parent ]
RE: Tiering and The New School.

Tiering is informal and subjective. There is no real process, but there are established schools and research institutions which are pretty universally recognized as being top tier, and then there's another list of contenders. Beyond that, there's the majority of schools which everyone pretty much agrees aren't even contenders as centers of intellectual thought: Even if they may have good programs and place good graduates in tenure track positions, they're followers and not leaders in thinking. Usually what sets the difference is the economic and other resources of the sponsoring institution to attract the top talent, both in PhD students and in faculty.  

Harvard, MIT, Stanford, U Chicago, Johns Hopkins, Minnesota, Berkley, etc. are in the category which just about any economics, policy studies, or business school hiring committee for faculty would agree to being a top tier place for scouting talent, and there are ranking orders within that category too. I doubt if anything from Australia really meets that category or even makes the contender list, and only some really famous places from the UK might meet still meet it (Oxford, etc.) in economics. I would consider UKC Missouri to be a contender, but not a sure-thing in for that category. What you're really looking for is the existence of a stable community of thought leaders rather than mostly a community of followers with a few occasional leaders who occur by chance and quickly lose them to the top places. The top tier schools are those that are constantly producing the leading thoughts in a wide variety of areas, and the contender schools are those that do so but in more narrow ranges.

The New School, with which I have some affiliation, would probably fall in the contender category.  It is smaller and has less resources (and is obviously looked down upon by its two NYC top tier rivals, Columbia and NYU), and its research emphasis is on seeking alternatives to dominant agendas, almost irregardless of what the dominant agendas are. As a result, it is somewhat of an outcast by design regarding economics (and, by corollary, in the standard-setting in-group by design regarding anthropology, philosophy, critical theory, art, and fashion), even though it has a tenure track placement rate in economics comparable with the top tier schools (one standard for determining how well a program is viewed within the academic community), and it is obviously a thought-leader on alternative economics, particularly Marxist, Keynesian, Welfare, and the institutional critique, as well as providing novel methodological approaches which incorporate qualitative research designs.  

Compare the New School with its ideological opposite, the George Mason University, which also has a strong placement rate and can attract top faculty but that is nonetheless is considered, even in economics, to be too uncritically biased in support of the neoclassical approach to ever be considered a full member of the tier 1 club, irregardless of the number of Nobel Prize winners it can get on staff.

by santiago on Mon Sep 20th, 2010 at 04:06:59 PM EST
[ Parent ]
Capturing the hiring process is a big part of how the mainstream excluded people who knew what in the hell was going on in the economy that did not pass through the math modeling filter.

Bill Mitchell was head of department, and then his long time research partner was head of department. CofFEE is a much better base of operations than an academic department is ~ he can see to it that graduate students will acquire the skills they need and get an ongoing stream of projects to keep working while completing their studies.

This is the 90's era Dusansky and Vernon ranking, where of course publication in high ranking journals and citation by publications in high ranking journals are key to high rankings and the more selective a journal is, the better, which means that the journals that most economists try to get papers into is a big driver.

If the fact that their editorial boards are full of people from the high ranking schools makes the whole thing seem recursive, well, of course its recursive. They are the best schools because all the best journals publish their work, and they are the best journals because their editorial boards come from all the best schools.

For example, in that list, UC, Riverside is behind UC San Diego, Berkley, LA, Irvine, Davis and Santa Barbara, just in the UC system.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Sep 20th, 2010 at 04:10:40 PM EST
[ Parent ]
Having read more of Bill Mitchell recently, I am especially glad if he has a secure position. Does he still teach? It seems that the "tests" he poses on his blog are for blog readers, sort of out of long academic habit. Do they still teach History of Economic Thought or some equivalent in Australian Universities?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 22nd, 2010 at 03:57:44 PM EST
[ Parent ]
... but funding and mentoring graduate students through CofFEE is even more critical.

If people in an approach get graduate students through, they are in a position to grow ... otherwise, not. That is, indeed, part of the ebbing of the influence of the American Institutionalists, since so many went to work for the government in the New Deal and WWII, while so many of the neoclassicals stayed in the academy because they had very little useful to offer.

Then the post-WWII funding of the econometrics boom (Rand, DoD, etc.) was used to generate a larger cohort of neoclassically-trained economists into the post-WWII boom in academic positions.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Sep 22nd, 2010 at 07:57:03 PM EST
[ Parent ]
... considers itself a Top Ten research university in Australia (by careful selection of criteria) ... that is in a country where status is viewed in terms of the Group of Eight ~ Five Sandstone Unis (Sydney, Melbourne, Adelaid, QLD, UWA) together with Monash, UNSW and ANU (Tassie is a Sandstone by pedigree but not in the Group of Eight).

Its more generally ranked around 12th, and that more on Medicine and Engineering than on disciplines like Economics.
 

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Sep 20th, 2010 at 04:24:02 PM EST
[ Parent ]
Of course no disrespect is intended for The New School, Bill Mitchell, Mason Gaffney etc., who I view as actually being on the right side of the contemporary issues dealing with business capture of academia and academic thought. The problem is wide and deep.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 20th, 2010 at 06:20:37 PM EST
[ Parent ]
That is precisely what the article suggests.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Mon Sep 20th, 2010 at 05:23:04 PM EST
[ Parent ]
The Center for Economic and Policy Studies at the New School for Social Research, the University founded by Thorstein Veblen himself, among with a few others such as John Dewey, when some of them refused to take a loyalty oath to retain their teaching positions at Columbia University during the heady days of nationalist fervor of WWI, provides both an antidote to the neoclassical dominance of the field as well as providing an extraordinarily useful summary of the history of economic thought.

I suggest that the New School's "History of Economic Thought website," which appears regrettably, to be a still a not-quite-finished project, be added to your list of resources.

See my comment to your question above regarding the "tier" of the New School.

by santiago on Mon Sep 20th, 2010 at 03:09:15 PM EST
The New School's "History of Economic Thought" website.
by santiago on Mon Sep 20th, 2010 at 03:11:31 PM EST
[ Parent ]
Eric Hobsbawm is one of my favorite Brittish historians and a long time faculty member at The New School. And I am aware of the schools distinguished pedegree, breaking away from J.P. Morgan's Columbia University around the time of  WW I. They also led the way in offering interdisciplinary PhDs, such as in History and Antrhopology, bringing social theory to bear on the discipline of history, which has suffered from a grotesquely "nominalist", "deny that there is any underlying explanation", "just the facts" approach.  

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 20th, 2010 at 06:30:26 PM EST
[ Parent ]
... a blog definitely isn't working. BTW, I found already some interesting links in it.

Better would be a wiki. We have one even it's unused with the exception of some stuff I entered long ago.

http://wiki.eurotrib.com/index.php/BeyondPonziEconomics

Otherwise I would appreciate such an adventure. For example a while ago I found http://www.neweconomics.org/projects/new-economic-model. But sadly enough until now it's just a smoke screen. Nothing really done.

harnoes

Make it as simple as possible but not simpler (Albert Einstein)

by harnoes on Mon Sep 20th, 2010 at 03:44:11 PM EST
The Henry George School is still around and so is the Schalkenbach Foundation.

Both or either might be a good source of information since they've been doing "economic tutorials" for almost a hundred years.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Mon Sep 20th, 2010 at 06:36:53 PM EST
I'd suggest another 2 titles for the canon:

Counting for Nothing:  What Men Value and what Women are Worth by M Waring

The Subsistence Perspective:  Beyond the Globalised Economy by Mies and Bernhold-Thomsen

Both address the impact of the global capitalist system on women and children, ways in which industrial/capitalist "development" in many cases increases rather than redressing patriarchal inequities (and iniquities);  and both propose concrete, practical alternatives to finance capitalism and globalised commodity trading.

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Wed Sep 22nd, 2010 at 01:56:40 PM EST


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