In the last weekend of June, we attended the Rethinking Economics Conference organised at UCL by the grassroots student association of the same name. Rethinking Economics is a global network of students that, together with other student associations from around the world, crafted the open letter that formed the International Student Initiative for Pluralism in Economics in May 2014. The London conference brought together frustrated academics and students from numerous countries to debate the sorry state of the economics academic discipline. Adair Turner and Ha-Joon Chang made keynote addresses on either end of two days that sought on the one hand to rethink standard concepts and research methodologies, while on the other to introduce marginalised perspectives by largely heterodox-leaning economists. Curriculum reform, admitting pluralism, was the overarching objective of the conference, which clearly sought to displace neoclassical economics from the royal box of economic investigation.
By Marc Morgan
Students of the economic science from now 30 countries are leading a much-awaited intellectual rebellion against the current teaching establishment. ‘The International Student Initiative for Pluralism in Economics’, of which I myself am a participant, has gained much international press coverage, and the support of notable academic economists, including Robert Skidelsky, Ha-Joon Chang, Thomas Piketty, James Galbraith and Steve Keen, among others. This grassroots student movement has a simple objective: to broaden the economics curriculum in terms of the theories and methodologies that are taught, so that students receive a ‘pluralist’ education in the discipline.
This hardly seems to be a matter of contention for an outside observer. It is self-evident that proper mastery of a subject should involve acquaintance with the multiple theories that have defined its existence. This should be especially the case for subjects with no linear progression in the explanation and thus prediction of its objects’ behavior (i.e. those subjects within the social sciences – economics, sociology, psychology, politics). In the sphere of the social sciences, there is no ‘creative destruction’ in the theoretical process, as there is in the natural sciences, where new theories build on from old theories, eventually replacing the old theories. This means that there should not be only one way to learn economics. Relying on just one theoretical lens from which to look at the world severely limits what can be observed, explained and hence anticipated. This is emphatically conveyed in the overwhelming majority of economists, trained exclusively in the neo-classical school of economic thought, who failed to foresee the latest financial crisis.
By Marc Morgan
If one picks up one of the latest editions of The Economist newspaper (May 3rd – 9th 2014), a well-respected and influential publication in the business, economics and politics spheres, one would not be surprised of its content. But one should be worried about the increasing intellectual hostility the publication displays. On the front cover of this edition, leashed and perched over a globe of the world stands a bald eagle, the national symbol of the United States of America. It has its gaze fixed on the East, as it watches it burn. The headline reads ‘What would America fight for?’, which is the title of the edition’s lead story. In it, the editors appear disillusioned with the superpower’s present lack of war appetite.
This state of affairs is one that is meant to haunt all of us (where ‘us’ refers to America’s allies, thus ‘us’ in the West). America is portrayed as failing on its duties, they being the protection of the West’s (now ever more depleting) global hegemony. This is because ‘the most basic issue of a superpower’ is its ‘willingness to fight’. Of course, in passing, it must be mentioned that one must digest The Economist’s analysis with kilos of salt, which is never good for one’s health. Through its self-serving journalistic lens, the particular view of the world that it portrays is an increasing threat to equality, true liberty and meaningful democracy. Not to mention peace.
By Marc Morgan
“If I have seen a little further, it is by standing on the shoulders of giants.” (Isaac Newton, 1676)
A simple idea, embodied in a proverb, has been at the core of mainstream economic theory since the conservative-libertarian economist Milton Friedman popularised it in 1975. This is that “there is no such thing as a free lunch”. Essentially what this proverb intends to say is that one cannot get “something for nothing”. The first reference to this idea originated in 19th century US saloons whereby free lunches were offered to customers who purchased at least one drink. The foods, being high in salt, would entice customers to consume more drink, usually beer. As such the “free lunch” carried a hidden cost, namely the price paid for each extra unit of drink, which effectively ended up paying for the lunch. In economic terminology “no free lunch” represents the trade off (or opportunity cost) that must be made between two things that one values.
By Marc Morgan
Earlier this year, formal records were released under the Irish Freedom of Information Act which revealed the intertwined relationship between the Irish Government and the Irish Financial Services Centre (IFSC). These records become known to the general public on Monday October 8th in an article by The Irish Times. The relationship between the two parties has been, and continues to be, played out within the IFSC Clearing House Group, a lobbying group, chaired by Martin Fraser, the secretary general of Government. The group comprises of civil servants from state agencies like the Industrial Development Agency (IDA) and Enterprise Ireland, as well as representatives from the principle financial corporations in the country; JP Morgan, Citigroup, State Street, Barclays, KPMG, Bank of America, Bank of Ireland, among others. Meetings between the two parties take place in Government Buildings, so it is no surprise that the Government’s policy bears striking resemblance to the Group’s position in two related areas: tax incentives for the financial industry and the stance on the EU’s proposal of a European-wide financial transactions tax (FTT).
By Marc Morgan
In our economically centred world money is the primary conditioning factor of life. Its abundance guarantees an individual a higher quality healthcare and education, a dignified employment, and the possibility of following whatever personal pursuits an individual may have. Wealth is the turning of money from income to asset; from something you receive to something you accumulate. Therefore, the more money at the disposal of an individual the wealthier that individual can become.
by Marc Morgan
A complement to From Dr Keynes to Financial Bloodletting
“I work for a Government I despise for ends I think criminal” (John Maynard Keynes, 1917).
This would certainly be Keynes’ position today if he were unfortunate enough to work under the current British Government, or any EU government for that matter. The criminal ends can be attributed to contemporary ‘financial bloodletting’, whose practice can indeed be heralded as criminal. The earlier piece which Antoine Cerisier and I wrote deals broadly with the ideological change from Keynesianism to neo-liberal ‘austerianism’ that occurred in the latter half of the 20th century. But what was Dr Keynes’ idea, which gave rise to ‘Keynesianism’ and which has now been replaced by financial bloodletting? Read More
“There is no alternative” (Margaret Thatcher)
“Doctors often invent diseases which do not exist” (Eugène Ionesco, Rhinocéros)
Bloodletting was a common medical practice until the late 19th century, involving the withdrawal of blood from patients to prevent illness. Despite its inefficacy, this custom was very popular in Europe, the United States and the Middle East for more than 2000 years. Leeches were often used to remove so much blood that patients usually fainted; some died from this dangerous and ignorant treatment. Crooked doctors who practised bloodletting were often mocked and condemned by French playwright Molière in his 17th century theatre plays. In 21st century public policy, the medical removal of blood gave way to what could be described as financial bloodletting – or in other words, neoliberal austerity measures. The analogy seems a bit far-fetched but is worth looking into. Like bloodletting, austerity remains a common practice despite poor social and macroeconomic results around the world: recession, poverty, debt increases. Like bloodletting, painful solutions are considered more efficient; the more patients suffer the better. Replace blood with welfare and leeches with spending cuts and the analogy is complete.
by Marc Morgan
On May 31st Ireland grounded further its position as the poster child of the EU. In a referendum on whether to ratify the Union’s ‘Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union’, otherwise known as the Fiscal Treaty, the Irish people voted 60% in favour of the new European provisions thereby becoming the first country to ratify them. However, the ‘Irish people’ might well be an overstatement since only half of the electorate went out to vote in the referendum .
By Marc Morgan
A traditional Ponzi scheme “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” (U.S Securities and Exchange Commission)
A ‘theoretical Ponzi scheme’ is a theoretical fraud that involves the belief in something because others believe in it.