Thursday 23 November 2017

Review of “Rethinking Economics: An introduction to pluralist economics”

Rethinking Economics is a group campaigning for a pluralist approach to economics. They have put together a book which contains a collection of short essays introducing various schools of thought that you generally won’t hear about in a typical economics class. As I indoctrinate lecture students in mainstream economics, and have followed the progress of the RE group, I thought it was worth a read.

If you attend a lecture in economics at university, the chances are you will most likely be learning a neoclassical approach to economics. One of the first things I noticed when reading each chapter was how many schools of thought define themselves in contrast to neoclassical economics. As there is no chapter on neoclassical economics, I think this book is perhaps designed for someone who has already taken an introductory class. I think future editions would benefit from a chapter at the start of the book for individuals who are completely new to the subject as well as defining a few key things such as inflation, growth etc.

One of the arguments mainstream economics roll out against calls for pluralism is that you need to learn the basics first: by that they mean simple neoclassical models. If you are going to define heterodox schools of thought against the mainstream, then this kind of reinforces the mainstream’s point. Personally, I did find it helpful when the schools clarified their position against the mainstream.

A common theme throughout the chapters was that the main divergence from the mainstream tended to take the form of rejecting the use of mathematics. There a pros and cons in using mathematics to model economics which I won’t get into here. Mathematics, however, is undoubtedly a barrier to entry for the study of economics and I do often wonder how best to approach this. For example, if you were only taking one course in Econ101 what would you want students to take away? With so many Econ101ism’s that economists spend time trying to debunk (e.g. the labour market is not a simple supply and demand diagram!) this is undoubtedly a problem. It may actually be a good exercise for RE to set out how they would design an Econ101 course as it is extremely difficult in terms of what should go in. One initial problem for a more pluralist approach is the more schools of thought you put in, the less you will be able to deal with them in detail.

One major issue I had throughout the book was a lack of empirical evidence to back up arguments (other than the well-written Feminist economics chapter).  I am not sure if this is a feature of these schools of thought but given that one of the desires of RE is for “real world” application I found this somewhat lacking.

What I was perhaps most surprised with was how much of an overlap with what I think is known to most academic economists. For example, the institutional economic section cites Daron Acemoglu, the complexity economics chapter gives a detailed treatment of the work of Noble prize winning Robert Sheller, and there is a chapter on behavioural economics. Their approaches are certainly not neoclassical, and perhaps I have a more inclusive view of the mainstream consists of, but perhaps the heterodoxy is not so different after all?

This brings to me to my main concern about “schools of thought”: they become isolated and reclusive. For example, some Post-Keynesians are annoyed that a lot of what they have been saying to do with finance and animal spirits are now in vogue within the mainstream. But if you totally reject the methodology of the mainstream, and define yourself by being outside the mainstream, organise conferences around your school of thought, you eventually end up talking to yourselves. At the same time the mainstream needs to become more of a broad church and accepting of other approaches (which I think it is doing). There is undoubtedly a trade-off here in terms of innovation through competing schools of thought and lack of effective communication/reinventing the wheel.

So what can a mainstream economist like me learn from this book (and RE in general) that even sceptics of pluralism can agree on? Firstly, students need the opportunity to be critical of the models we teach, and assumptions behind them, whether this is in the form of essays or discussion in class. Secondly, always give real world examples and data supporting/contradicting models. Thirdly, try and show where these simple models can go in the future (e.g. behavioural, complexity). Finally, you may not agree with everything that students in RE are asking for, but a lot of the students who attend these meetings are really interested in economics and should be encouraged.

For economic students all I ask is to be critical of everything: the mainstream, the heterodoxy, and even pluralism!

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