New Economy Journal

Economics: For Better or Worse?

Volume 2, Issue 1

March 3, 2020

By - Professor Frank Stilwell - Professor Emeritus in Political Economy, University of Sydney

Piece length: 2,613 words

Cover image by VanveenJF, via Unsplash
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Eminent economist Professor Frank Stilwell reflects on 50 years experience working in university economics education and research. Student interest in economics courses is as low as it's ever been, and this, he says, is because the economics being taught doesn’t describe the real world. He describes 50 years of attempts to reform economics, why these attempts have failed and the conditions he believes are necessary for their success.


[1] What’s wrong with economics?
[2] Mainstream Economics Has Been Repeatedly Challenged
[3] Defending Economic Orthodoxy
[4] An Alternative Approach
[5] How Progress Can Occur

[1] What’s wrong with economics?

What’s wrong with economics?

Many people seem to be wondering. A subject claimed by its practitioners as the ‘queen of the social sciences’ is widely seen as partly culpable for the contemporary problems of financial crisis, excessive debt, unsustainable growth, ecological stresses and deepening social inequalities. Perhaps the roots of this issue lie in economics education.

Speaking at a conference of economics and business teachers last May, a departmental head at the Reserve Bank of Australia pointed to some fundamental reasons for concern among the economists themselves. Enrolments in HSC Economics are only about a quarter of what they were two decades ago. University economics enrolments have flatlined over the same period, while other subject areas, including business studies, banking, finance and management, have surged.

The Reserve Bank speaker expressed deep disappointment at these trends, pointing also to the falling proportion of women in economics classes. “Economics is relevant to us all,” she said, “It can help us better understand the choices involved in many personal decisions we make, and better understand the economic conditions and policies that affect our lives.”

Well, maybe. It depends on what type of economics is on offer, doesn't it?

Economic theorising is typically quite abstract, using mathematical formulations, but based on assumptions that are inconsistent with observable features of the real world. Much mainstream economics presents an idealised image of a pure market system, ignoring the complex character of real markets in operation. The large corporations, whose power dominates and constrains the most significant market transactions, don’t appear in the analysis. Moreover, where are the class interests, social conflicts, environmental constraints and periodic crises that recur in actually existing capitalism? This is the unrealistic kind of economics that, notoriously, failed to anticipate the Global Financial Crisis, leading even the Queen of England to publicly ask why economists had got it so wrong.

Perhaps it is time to acknowledge the deep and longstanding crisis within the economics discipline itself. Could it be that the diminished student interest is a symptom, not the cause?

[2] Mainstream Economics Has Been Repeatedly Challenged

Student disquiet with economics education is nothing new. Discontent has simmered for the last half century, throughout my career as a university teacher. The most recurrent complaint, other than of generally boring lectures, has been the lack of congruity between what students are required to learn and what is observable 'out the window' in the real world. One study of graduate economics students in leading US universities revealed that only 9 percent rated a thorough knowledge of the real world as important for their success. Some students, particularly those good at maths, enjoy the elegance of the subject’s theoretical models but others are dismayed at its lack of relevance. The general grumbling has periodically welled up as waves of more vocal and organised concern, criticising the obsession with modelling techniques and lack of direct real-world relevance.

One such wave occurred in the 1960s and early 1970s, particularly in the UK, Australia and the USA, and led renowned political economist J.K. Galbraith to write that he judged as well as hoped that the assault on mainstream economics would prove decisive. In the event, it didn't produce any general ‘clearing of the decks,’ although it did result in some alternative, more critical programs of economics education being set up in a few universities, including the University of Sydney - of which more below.

Another strong wave of protest occurred in the early 2000s, particularly in France where the Movement for Post-Autistic Economics was formed, eventually triggering an official investigation into economics education in France and some mild curriculum reforms. Following the Global Financial Crisis of 2008-9, dissent again swelled in many countries, as perplexed students expressed concern that 'business as usual' seemed to prevail in their economics classes as if nothing much had happened. At Harvard, students walked out of lectures by leading mainstream economist Greg Mankiw. At Manchester University in the UK, the disappointed students formed the Post-Crash Economics Society, and its membership and organisation quickly spread nationwide. The dissident student movement subsequently went international with the formation of the International Student Initiative for Pluralism in Economics (ISIPE), pressing for the study of critical alternatives alongside the economic orthodoxy.

Meanwhile, some progressive economics academics continue pressing for change too. The Union for Radical Political Economics (URPE) had been formed in the US during the first wave of dissent in the 1960s. The Australian Political Economy Movement (APEM) was formed shortly thereafter and, like URPE, held numerous conferences, produced newsletters and established a journal, the Journal of Australian Political Economy, which is still being regularly published. APEM also paid for one of the Post-Crash Economics student activists to come from Manchester on a speaking tour of Australia after the GFC. The Association for Heterodox Economics had also become an enduring focal point for dissidents in the UK, and similar organisations proliferated in many other countries, including the Society for Heterodox Economics in Australia. So there has been no lack of attempts by dissident economists to draw attention to the need for change and to develop progressive alternatives. The formation of the World Economics Association and the International Initiative for Political Economy represent significant attempts by dissidents to liaise and organise globally.

The lack of an alternative to the orthodoxy is not the issue. Rather, the problem is that the mainstream economists have been reluctant to engage seriously with the concerns expressed by dissident students and that minority of professional economists wanting to drive change. Faced with critics and proposals for alternative approaches to economics education, their dominant response has been to pull up the drawbridge.

[3] Defending Economic Orthodoxy

The economists’ self-defences have varied, ranging from the vapid claim that 'students need to be well schooled in the basic principles of mainstream economic theory before they can engage with real-world issues' to the more subtle argument that 'mainstream economics' and 'orthodox economics' are misnomers because the economics curriculum already exposes the students to competing theories.

The former viewpoint comes down to little more than lecturers saying 'this is what I studied as a student, so you have to go through the same process before you can call yourself an economist.’ It entrenches neoclassical economic theory as a set of more-or-less timeless verities, and students who don't appreciate it can just go elsewhere – and many do, taking business studies or other social science subjects where less 'suspension of disbelief' is required.

The latter viewpoint is more sophisticated because it claims, in effect, that economics is already pluralist. This is because, alongside the traditional focus on the rational self-interested decision-making of homo economicus, students may be exposed to electives such as behavioural economics and have opportunities to engage in experimental economics. UK economist, Diane Coyle, has even claimed that this so-called internal heterodoxy makes economics a “soulful science”.

However this defence of the discipline is deeply unsatisfactory. In most educational institutions, the 'internal heterodoxy' usually only enters the curriculum in senior undergraduate years, following a thorough schooling in standard neoclassical principles. Even there, the assumption of methodological individualism remains pervasive, as does the emphasis on techniques rather than critical inquiry. Study of economic history is rare, as is the study of the history of economic thought which might open students’ eyes to the contest of ideas and interests that is ever-present in real economics. Indeed, as the dominance of the orthodoxy has become more entrenched, many universities have abandoned programs in economic history and teaching the history of economic thought.

The effect of this blinkered economics education is that serious consideration of contemporary challenges of economic inequality, insecurity and unsustainability remains marginal. Class conflicts are ignored because anything that smacks of Marxist political economy or even mildly critical views on the capitalist system is considered beyond the pale. The systemic roots of insecurity in labour and capital markets remain largely unexamined. Although environmental constraints on economic growth may be introduced into the economic modelling, constrained maximisation remains the central mindset. The analysis of environmental degradation is treated as an ‘externality’ rather than viewed from an ecological, institutional and historical perspective that would bring the origins, use and abuse of economic power into the spotlight. Similarly, the inequalities of class, gender and race remain only a shadowy presence since the focus is on the ‘representative economic agent,’ homo economicus, rational economic man and stalwart of methodological individualism. It seems that serious engagement with contemporary real world challenges is all 'too political' for an economics curriculum.

The reasons for this implicit conservatism may be found in the sociology of the profession. Investigations show – and my personal experience confirms – that most academic economists are not particularly right-wing in their personal values and electoral behaviour. However, as a profession, they are effectively the guardians of a standard economic tool-kit that embodies particular values and a particular way of seeing. Some economics educators talk of ‘learning to think like an economist.’ This leads to distinctive views about what matters. The primary focus is on the market economy and its efficiency, not on class conflicts, power relations and inequity, nor on arenas such as public provision, the commons and nature which are profoundly distorted by commodification. By defending their orthodoxy, even expanding it on the fringes to embrace a little 'internal heterodoxy,’ the main effect of orthodox economics education is to reproduce and police an ideology masquerading as science.

This claim by economists to some sort of scientific status for their discipline is fundamental. Economists have typically seen themselves as superior to other social scientists because of their emphasis on the deductive method, the use of mathematics in theory construction, economic modelling and purported empirical testing. One famously wrote of economics providing the ‘universal grammar’ for the social sciences, as if everything could be reduced to supply and demand, self-interest, incentives and equilibrium states. To concede that there are other agendas and paths to progress in developing useful knowledge about the real world would evidently be a step too far. To the extent that economists are concerned with student enrolments and their public image, the solutions are to be found in window-dressing rather than fundamentally changing the product.

The most significant attempt at reform is the Curriculum Open-Access Resources in Economics (CORE) project. This has been driven by economics teachers who want to increase enrolments by making the subject more attractive to students, bringing more ‘realism’ into courses and at least some recognition of the institutional and historical context in which economic processes operate. CORE seeks to persuade economics teachers to adopt its teaching materials. At the end of 2019, it claimed that lecturers in 310 universities across 63 countries were using its materials and that two-thirds of them were basing courses on the CORE textbook The Economy. Not surprisingly, views of its significance and usefulness vary. Some enthusiasts think it can make the teaching more palatable and produce better student results. Critics, on the other hand, contend that it falls far short of challenging the appropriateness of the core economic assumptions, theories and models and does not provide alternative interpretations of ‘what is going on out there.’ Sugar coating the pill is not an adequate remedy.

[4] An Alternative Approach

A more fundamental alternative exists. It involves teaching economics as a pluralist subject, exposing students right from the start to different ways of seeing and understanding economic phenomena. This typically means beginning an economics education by considering the major contemporary challenges, such as recurrent economic crises, growing economic inequality, economic insecurity and the ecological stresses caused by the relentless pursuit of capital accumulation. Then comes consideration of the different ways in which economic systems and problems can be viewed. There are many such lenses – neoclassical, Keynesian and post-Keynesian, Marxian and institutionalist, feminist, evolutionary and ecological, for example. These different schools of thought have emerged, historically, in different contexts and need to be understood as different ways of looking at the world. Which is best for understanding particular current problems and policy issues? Students need to be invited into this arena of controversy as quickly as possible, so that they can then proceed step-by-step to see the range of interpretations and perhaps draw unsettling conclusions.

This is the sort of alternative that was introduced at the University of Sydney in the 1970s. Following years of struggle by students and dissident staff, challenging the standard economics curriculum, the University authorities eventually agreed to allow a new Political Economy program to be introduced, enabling students to choose between the alternative streams (or to do both). The Political Economy program, now administered by a separate Department of Political Economy, has since been chosen and successfully completed by about 17,000 students. They have typically found it interesting, sometimes enlightening and even life-changing, and have gone on to successful careers in many fields where the capacity for critical enquiry and effective communication is valued.

So why isn't this alternative more widely embraced? Again, the sociology of the profession is relevant to understanding the obstacles. For reform to occur from within, there would need to be a critical mass of economists in numerous universities who recognise the limitations and biases of what they have been doing for so long. They would have to be willing to devote substantial effort to course re-design and their own re-education – because most have had no systematic exposure to the alternative political economic perspectives. For the most part, they are reluctant to do this. As an economics lecturer at another Australian university recently said to me, although many of his colleagues might concede that the core content of their undergraduate program should be made more diverse, interesting and relevant, that was unlikely to happen. He likened it to trying to turn around a big ship on the ocean. This is a comfortably familiar analogy, of course, but what if the ship is headed for the rocks?

[5] How Progress Can Occur

Recognising what is wrong with economics education is one thing; getting major change is evidently quite another. In my judgment, the pressure for the latter is more likely to come from outside rather than to emerge from within. Practitioners of related disciplines in the social sciences – including sociology, anthropology, political science, geography, history, development studies and environmental studies – could be players. Many of them recognise the importance of economic issues in their own disciplines and research, and they could be a progressive influence for change, perhaps by fostering their own political economy course options in their own departments or interdisciplinary programs. Employers of graduates could also exert significant influence, to the extent that they prefer economics graduates with some understanding of how the world actually works and the challenges that businesses and governments now have to face.

There are some encouraging signs. A new, independent School of Political Economy has recently been set up, offering online as well as face-to-face course instruction in Melbourne or Sydney. The political economists at the University of Sydney have an active blog called Progress in Political Economy that features frequent articles on contemporary developments. Groups like New Economy Network Australia, Economic Reform Australia, Prosper Australia and the Association for Good Government also offer alternative perspectives. There’s plenty ‘going on out there’ for anyone interested.

More generally, it is the prevailing material conditions that matter. If, as seems likely, the years ahead bring deepening economic, environmental and social stresses, further financial crises and increased inequalities, this will shape the context within which economic debate operates. The pressures for radical educational change have evidently not yet reached a tipping-point, but this is far from being a situation of ‘stable equilibrium.’

Further reading:

  • J. Butler, E. Jones and F. Stilwell, Political Economy Now: the Struggle for Alternative Economics at the University of Sydney, Darlington Press, Sydney, 2009
  • Coyle, The Soulful Science: What Economists Really Do and Why it Matters, Princeton University Press, New Jersey, 2007
  • B. Klein, Is there a Free-Market Economist in the House? The Policy Views of American Economics Association Members, The American Journal of Economics and Sociology, Vol. 66, April 2007
  • Stilwell, Teaching Political Economy: Making a difference? Studies in Political Economy, Vol. 89, 2012
  • Journal of Australian Political Economy, especially issues no. 75, Winter 2015 (on ‘Heterodox Economics: Challenging the Orthodoxy’) and no. 80, Summer 2018 (on ‘What’s Wrong with Economics?’)

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