Until we ditch the old textbook, we'll never face up to the challenges of the modern world—or move beyond neoliberalismby Howard Reed / April 13, 2018 / Leave a comment
Published in May 2018 issue of Prospect Magazine
When the great crash hit a decade ago, the public realised that the economics profession was clueless. The claim that “boom and bust” had been solved came crashing down, along with about 7 per cent of national income.
Philosophers sometimes define science as an endeavour that makes verifiable predictions, so the failure to see major shocks coming makes this a very dismal science. But there are still more fundamental problems which precious few economists acknowledge, and even the most radical have thus far made only modest progress in solving.
After 10 years in the shadow of the crisis, the profession’s more open minds have recognised there is serious re-thinking to be done. Behavioural economics, which takes the trouble to watch and learn from how real people interact in experimental settings, has moved from the margins to become a speciality that can win Nobel prizes. Under the auspices of the Institute for New Economic Thinking, Adair Turner has been floating radical ideas about the government printing its way out of debt. The “Rethinking Economics” initiative has brought together students unhappy with the old textbooks and academics willing to debate what they teach. This is all very much to the good.
But the truth is that most of the “reforms” have been about adding modules to the basic template, leaving the core of the old discipline essentially intact. My view is that this is insufficient, and treats the symptoms rather than the underlying malaise. The real problems go to the theoretical core of modern economic theory—the so-called “neoclassical” paradigm.
This has underpinned the academic discipline for well over a century, and has more recently come to warp public policy too. Its tentacles reach far and wide—from our universities, which are now run on economistic lines that do not deem the humanities worthy of a teaching subsidy, to the bewildering structures of the NHS internal market.