On criticising the existence of mainstream economics

I’m very grateful to Unlearning Economics (UE) for writing in a clear and forceful way a defence of the idea that attacking mainstream economics is a progressive endeavor. Not criticising mainstream economics - I’ve done plenty of that - but attacking its existence. The post gets to the heart of why I think such attacks are far from progressive.

It is very similar to debates over whether economics teaching should devote considerable time to the history of economic thought and non-mainstream ideas, and whether economists have much too much power and influence. More critical thinking, real world context and history - yes. This is what the CORE project is all about. But devoting a lot of time to exposing students to contrasting economic frameworks (feminist, Austrian, post-Keynesian) to give them a range of ways to think about the economy, as suggested here, means cutting time spent on learning the essential tools that any economist needs. As Diane Coyle and I argue, economics is a vocational subject, not a liberal arts subject.

Let me start at the end of the UE piece.

“The case against austerity does not depend on whether it is ‘good economics’, but on its human impact. Nor does the case for combating climate change depend on the present discounted value of future costs to GDP. Reclaiming political debate from the grip of economics will make the human side of politics more central, and so can only serve a progressive purpose.”

Austerity did not arise because people forgot about its human impact. It arose because politicians, with help from City economists, started scare mongering about the deficit. We had ‘maxed out the nation’s credit card’ and all that. That line won not one but two UK elections. Opponents of austerity talked endlessly about its human impact, and got nowhere. Every UK household knew that your income largely dictates what you can spend, and as long as the analogy between that and austerity remained unchallenged talk about human impact would have little effect.

The only way to beat austerity is to question the economics on which it is based. You can start by noting that none of the textbooks used to teach economics all over the world advocate cutting public expenditure in a recession. You can add that governments have not tried to do this since the Great Depression of the 1930. If necessary you can add that the state of the art macro used by central banks also suggests cutting government spending in a deep recession will have harmful effects. You can explain why this happens, and why a Eurozone type crisis can never happen in the UK.

That does not dilute the human impact of austerity. What it does is undercut the supposed rationale for austerity on its own terms: mainstream economics. Having mainstream economics, and most mainstream economists, on your side in the debate on austerity is surely a big advantage.

Now imagine what would happen if there was no mainstream. Instead we had different schools of thought, each with their own models and favoured policies. There would be schools of thought that said austerity was bad, but there would be schools that said the opposite. I cannot see how that strengthens the argument against austerity, but I can see how it weakens it.

This is the mistake that progressives make. They think that by challenging mainstream economics they will somehow make the economic arguments for regressive policies go away. They will not go away. Instead all you have done is thrown away the chance of challenging those arguments on their own ground, using the strength of an objective empirical science.

Where UE is on stronger ground is where they question the responsibility of economists. Sticking with austerity, he notes that politicians grabbed hold of the Rogoff and Reinhart argument about a 90% threshold for government debt.

“Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies? Why are R & R still allowed to comment on the matter with even an ounce of credibility? The case for austerity undoubtedly didn’t hinge on this research alone, but imagine if a politician cited faulty medical research to approve their policies — would institutions like the BMA not feel a responsibility to condemn it?”

I want to avoid getting bogged down in the specifics of this example, but instead just talk about generalities. Most economists would be horrified if some professional body started ruling on what the consensus among economists was. I would argue that this instinctive distaste is odd, as UE’s medical analogy illustrates, and also somewhat naive. I would argue that economists’ laissez faire view about defining the consensus (or lack of it) has helped the UK choose Brexit and the US choose Trump. I personally think economists need to think again about this.

However to do so would go in completely the opposite direction from what most heterodox economists wish. It would greatly increase the authority of the mainstream, when there was a consensus within that mainstream. It would formalise and make public the idea of a mainstream, and inevitably weaken those outside it.

Economics, as someone once said, is a separate and inexact science. That it is a science, with a mainstream that has areas of agreement and areas of disagreement, is its strength. It is what allows economists to claim that some things are knowledge, and should be treated as such. Turn it into separate schools of thought, and it degenerates into sets of separate opinions. There is plenty wrong with mainstream economics, but replacing it with schools of thought is not the progressive endeavor that some believe. It would just give you more idiotic policies like Brexit.