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vol. 2, no. 8, A Detailed Proposal for a Complementary Currency for Greece, by Alan Harvey. Austerity has delivered obvious suffering to the Greek people and serious burdens to the Greek state, trials that do not need to be enumerated here. The mechanics of austerity drain money and the goods and services it will buy from the economy. Austerity follows from the rule of the primacy of debt, enforced by misguided, coercive and often bizarre policy programs. The SYRIZA government in Greece is pursuing anti-austerity, pro-recovery policies to the extent it can. There are three primary strictures it faces. The Hellenic Republic cannot (1) use exchange rates to multiply the domestic currency relative to the international currency; (2) employ the fiscal policy demanded by its situation for want of spending power; and (3) use monetary policy, as that is in the hands of the European Central Bank.
vol. 2, no. 7: A Critical Self-Study on Reform of the Teaching of Economics, from Willamette University. With the overriding goal to instill in its students the capacity for critical inquiry into economic issues, a small liberal arts school located in Salem, Oregon, conducted a self-study of its presentation in curriculum. The results emphasized pluralism and the history of economic thought. The Willamette (pronounced “wil-LAM-mit” as in “gah-DAM-mit”) self-study is a model for how to take apart a curriculum and put it back together with specific goals in mind. The 50-page report on the entire process is available as a PDF here. Below are edited excerpts of some of the key elements.
vol. 2, no. 8: Report on How to Change the Teaching of Economics, panel moderated by Neva Goodwin, with Keith Harrington, Jigar Bhatt, and Helen Scharber. A panel was organized by the New Economy Coalition and presented at Tufts University . It did not directly address the issue of what’s wrong with what is now taught in economics courses; it started from the assumption that quite a lot is wrong. Nor did it prescribe exactly what should be done to improve the curriculum. Instead it asked: “Suppose we agree on what should be taught in economics curricula, how can such change be brought about?” It focused on the forces that now act as barriers against incorporating different content in economics courses, as well as strategic approaches for overcoming these barriers.
vol 2, no 5: The Simple and Useful Side of Dynamical Analysis (Part 2 of 2): Chaos, by Ted Carron. This second part outlining the main ideas of dynamical analysis covers nonlinearity, limit cycles and chaos (aka complexity). Economics is replete with imperfectly cyclical time series. Without Chaos, it is presumed that any imperfections – even the apparent cyclicity itself – result from external random factors. Prior to Chaos Theory, this view was difficult to counter, because only strictly repeating cyclicity could be modelled mathematically. Nonlinear chaotic systems enable a mathematical and logical description of systems using a small number of intuitively satisfying formulae. The idea that the majority of all the complexity we see in the economy might be explained by just a few simple equations is naturally very appealing, since it allows us to describe systems where effects derive from a few primary causes.
vol 2, no 4: The Simple and Useful Side of Dynamical Analysis, (Part 1 of 2) by Ted Carron. Our view of the world would be made richer and more humane by an appreciation of the metaphors available from the ideas in nonlinear dynamics. This first of two articles describes, at a non-mathematical level, some basic dynamic concepts and different aspects of equilibrium. The second article will deal with cycles and chaos (now less romantically called ‘complexity’). Dynamical analysis is the description of sometimes fiendishly complex dynamic behaviours in terms of a small number simple, ‘graphical’ components. This is a crucial notion for dynamic economists, because the behaviour of nonlinear dynamic systems varies hugely depending on initial conditions, so the full nature of the system cannot be understood just by watching it in action in a simulator. Dynamical analysis gives us a language with which to identify and describe the overall nature of a dynamic system. Surprisingly, the language of dynamical analysis is very accessible and can be usefully understood with no maths at all.
vol 2, no 3: Neoclassical Man and Dynamic Uncertainty Woman: A dynamic economic gaze heuristic, by Cameron Murray. Why is dynamics more appropriate to economics than the statics preferred by the Neoclassical mainstream? One answer is that it better describes what real world economic actors actually do, particularly in the context of uncertainty. In this article, I want to show that, due to uncertainty, human behaviour is dynamic and differs radically from the homo economicus behavioural assumptions almost universally applied in economic analysis. Further, such behaviour can be identified as the mechanism which connects price and investment dynamics in economic systems.
vol 2, no 2: The Oil Price Collapse: An Endogenous Shock, by Alan Harvey. It has been flying chickens in the barnyard on Wall Street for two months now, as falling oil prices came out of the sky like a redtail hawk, scattering analysts and leaving investors concerned, confused and clucking. As with Great Financial Crisis, the unexpected has quickly been labeled “exogenous.”... Instead, the oil price crash is best seen as what we are going to call an “endogenous shock” – a violent event not expected by the mainstream, nor explained by its model. Like the debt bubble that expired in 2008, the oil and commodities decline was wholly predictable in nature if not in timing.
vol 2, no 1: Reforming Economics: A Response to Karl Whelan, by Unlearning Economics. Karl Whelan (“Thoughts on Teaching Economics After the Crash”) has a thoughtful comment on the debate over pluralism and economics education.... I appreciate his honest engagement with the project and agree with a fair amount of what he says. Nevertheless, I think his piece is also characterised by some common misconceptions about heterodox economics and pluralism in economics education which need correcting. I will also note, as I do throughout, that Whelan has been more than ready to acknowledge the shortcomings of his piece. But this should not mean those shortcomings are not worth exploring in further depth.
vol 1, no 8: Action at the AEA in January, by Keith Harrington, Adbusters, Kickitover.Org. As the largest annual gathering of economists in the U.S., and a magnet for media attention, the AEA conference in Boston the first week of January is the perfect location to light brush fires in people’s minds, stoke debate, and inspire new flare ups of campus activism. PLUS: Economics Education: Soft-CORE Reforms or Radical Pluralism? Aside from outright repression, one of the most predictable establishment responses to a revolutionary challenge is an effort at co-optation. Without ceding any real power, authorities respond to discontent by offering mild reforms couched in the language of opposition movements. ...
vol 1, no 7: Superiority or Elitism? The Standing of Economics in the Social Sicences, A Summary Review. A new study finds that, compared to other social scientists, economists consider themselves elites, smarter than others, not needing to explore outside their discipline, worthy of being listened to first when it comes time to fix things; and this view may actually be accepted those other social scientists, who place themselves and their disciplines at the fringe looking in. Other findings suggest that a dominant view, or party line, is more widely shared within Economics than in other social sciences. It is enforced by a more strict hierarchy and by a narrower control group, associated with elite institutions. Prestige and compensation may ratify economists’ standing in the profession as much as competence or demonstrable results.
vol 1, no 6: Rebuilding Economics, Three Steps to Clearing the Ground, Unlearning Economics. ... But economists have shown that if you start with some not-too-unreasonable assumptions about human behaviour, then you can derive relationships that are functionally equivalent to maximising behaviour. Thus the names of the theories and their pop interpretation should not be taken too literally, as these are not the criteria on which the theories stand or fall. Unfortunately ‘not-too-unreasonable’ is not the same as ‘correct’. I believe that three relatively simple violations in the core assumptions of standard Walrasian theory prevent it from being a workable model of individual behaviour.
vol 1, no 5: Structuring the unstructured: A pluralist economics mud map, Cameron Murray. ... organising the jumbled schools of economic thought into a coherent pluralist curriculum faces both a social and a technical challenge. These two challenges go hand in hand to some degree, since the teaching within any discipline largely reflects the sociology of its practitioners. Social conventions are reflected in teaching, and teaching reinforces those social conventions.
In economics and the undergraduate courses where the majority of students get their complete economics training, this means uniform domination by the neoclassical approach – mirroring its dominance in mainstream journals and research activities. Even the now decades-old behavioural and experimental school is all but ignored in core economic textbooks, reflecting a contested ....
vol 1, no 4: Love, High School, and Learning Dynamics Early, Ted Carron. Dynamics, especially nonlinear dynamics, offers a more useful and humane view of causality than the one we learn in high school – useful not only in economics, but also in the way we interpret all complexity.
Whatever else education does, it expands the pool of metaphors available to us when trying to understand the world. The ‘facts’ and ‘skills’ we learn fade away, usually as we walk out of the examination hall, but the underlying ideas persist, available as metaphors to process the world. This applies quite as much to the study of mathematics as it does to that of history and science, and we are unlikely to encounter mathematical concepts anywhere outside a maths class.
One of the most ubiquitous ideas, implicit in many subjects, is what Harvard’s Graduate School of Education refers to as ‘linear causality’: the idea that everything that happens does so as a result of some preceding event. ....
vol 1, no 3: Not My Idea of a Simplification, Unlearning Economics. If you’ve been paying attention to the debate over the state of economic theory and economics education, you’ve probably seen the introductory economic models defended on the grounds that ‘all education starts with simplifications’. This is often combined with comparisons to physical sciences, where simplifying assumptions are also made: as Rehle & Jeny point out in their textbook Advanced Microeconomics, “In the physical world, there is ‘no such thing’ as a frictionless plane or a perfect vacuum.” The idea is that economic models, such as the economic model of the perfectly competitive market, serve as pedagogical tools to introduce students to the idea of modelling, as well as key ideas, and serve as a platform from which we can launch more complex analysis.
In principle, this argument is valid. We cannot introduce students to the most complex models from the outset, so we need to drop layers of complexity in earlier classes, hoping that studying them will still help students gain critical thinking skills and under- standing. It is my contention that economics education simply does not achieve this. Introductory economics classes make key ideas more difficult, not easier to understand. ....
vol 1, no 2: The Failure of Reform, Alan Harvey. This new weekly has taken as its scope the exploration of reform in Academia, business, Finance and policy; what the issues are and how to get it done. The present piece is intended to lay out that scope and incidentally display the editorial bias of Inside.
To say that economics is broken is also to say that reform has, to this point, failed – failed to provoke debate and failed to deliver resolution of key questions on debt, how money is created, how the real economy is connected to the financial economy, and more. It has failed to communicate to the public and politicians, and so has failed to affect policy in any meaningful way. Perhaps “failure” is too harsh, but in our view the need for reform is urgent, not simply for the intellectual integrity of the discipline, but for the survival of a civil society. And reform too late is not meaningful. ....
vol 1, no 1: The Challenge of Reform, Cameron Murray. The challenge of reforming economics cannot be overstated. Modern mainstream economics has remained dominant in our universities and governments despite overwhelming evidence against most of its core principles, and despite decades of attempted revolutions. The concept of a static equilibrium and the ‘representative agent’ method of aggregation are just two notions that have been repeatedly shown to be internally inconsistent; not just by outsiders, but by many of the leaders in the mainstream. Yet they continue to dominate the discipline.
The core remains unchanged.
Outdated and economically irrelevant concepts still fill the pages of introductory textbooks. From there they fill the minds of each new generation of students, who pass on these ideas to the next generation of students, and across society more broadly. Breaking the feed- backs in this system is necessary to transform the discipline. ....