Rethinking Rethinking economics

Can economics ever become ‘pluralist’?  Namely, will the universities and research institutes in the major capitalist economies expand their teaching and ideas to cover not just mainstream neoclassical and Keynesian theories but also more radical heterodox themes (post-Keynesian, Austrian and Marxian)?  If you look at the list of study courses that are considered heterodox by Heterodox News, there are not many in the UK and the US and are concentrated in a just few colleges – with the big names having no such courses at all.

Rethinking Economics, a pressure group of academics and students was launched over four years ago to turn this round. Now in July, Rethinking Economics said Britain’s universities were failing to equip economics students with the skills that businesses and the government say they need. Following extensive interviews with employers, including organisations such as the Bank of England, it found that universities were producing “a cohort of economic practitioners who struggle to provide innovative ideas to overcome economic challenges or use economic tools on real-world problems”.  Moreover, the group said, “when political decisions are backed by economics reasoning, as they so often are, economists are unable to communicate ideas to the public, resulting in a large democratic deficit.” 

There are efforts among some academics to broaden the outlook of economics graduates. The Core project was adopted by 13 UK universities last September and has won £3.7m from the Economic and Social Research Council.  As the Guardian put it: “the developers of the programme also claim it has freed itself from neoliberal thinking, which judges markets to be self-adjusting and consumers and businesses to be operating with the same information. The world is full of asymmetric power and information relationships, and Core reflects this.

The Core project has produced an antagonistic reaction from right-wing commentators.  The prolific right-wing British political blogger, “Guido Fawkes”, tweeted: “The left in the universities are trying to rehabilitate Marxist economics to poison the future. Very concerning that they got £3.7 million of taxpayers’ money to do it”.  One strong promoter of Core and Rethinking Economics, the leftist economist, Jonathan Portes, responded to Fawkes that he was sure that none of the contributors to the Core programme were Marxist and “I’m obviously not a “Marxist”.  And that is true.  

The reality is that Rethinking Economics and Core is dominated by Keynesian ideas with hardly any look-in for Marxist ones.  It’s true that Sam Bowles is one of the main coordinators of the Core textbook project and he considered himself a (neo?) Marxist in the past – but his recent comments on Marx’s theories at the 200th anniversary suggest otherwise now (see here).

I am reminded of that first London conference of Rethinking Economics.  At that meeting, leading radical economists Victoria Chick and Sheila Dow told us that reform of society would be impossible until we can change the ‘closed mind-set’ of mainstream economics. As if the issue was a psychological one. Mainstream economics is closed to alternatives because there a material interest involved. But Chick and Dow seemed to think that it’s just a question changing the mind-set of other economists that support the market – for their own good because austerity and neoliberal policies are actually bad for capitalism itself.

More recently, leading leftist economists in the UK held a seminar on the state of mainstream economics, as taught in the universities.  They kicked this off by nailing a poster with 33 theses critiquing mainstream economics to the door of the London School of Economics.  This publicity gesture attempted to remind us that it was the 500th anniversary of when Martin Luther nailed his  95 theses to the Castle Church, Wittenberg and provoked the beginning of the Protestant reformation against the ‘one true religion’ of Catholicism.

The economists were purporting to tell us that mainstream economics was like Catholicism and must be protested against, just as Luther did back in 1517.  But as I commented then, is a revolution against the mainstream really to be painted as similar to Luther’s protestant revolt?  The history of the reformation tells us the protestant version of Christianity did not lead to a new pluralistic order and freedom to worship.  On the contrary, Luther was a bigot who worked with the authorities to crush more radical movements based on the peasants, led by Thomas Munzer.

Don’t get me wrong: attempts to expand economic ideas beyond the mainstream can only be good news and the content of the Core project is really stimulating and educational.  But it seems that, for Rethinking Economics and Core, the mainstream economic ‘religion’ is just neoclassical theory and that it is neoliberal economics that must be overthrown. They have nothing to say against Keynesian economics – indeed variants of Keynes are actually the way forward for them.

Take the new course at University College London for undergraduates. It’s called Rethinking Capitalism – a new elective module for UCL undergraduates.  Run by Mariana Mazzucato, the director of the Institute of Innovation and Public Purpose (IIPP) and author of The value of everything, it’s a great initiative, with guest lecturers including Branco Milanovic. . The module aims to “help students develop their critical thinking and make the connections between economic theory and real world policy issues. It will provide an introduction to a range of different economics perspectives, including Neoclassical, post-Keynesian, ecological, evolutionary, Marxist and institutional economics theories and how their different assumptions link to different public policies.”  But looking at the BASC0037 Rethinking Capitalism. I am sceptical that students will hear much about Marxist economic theory within its ‘heterodox’ approach.

Keynesian theory dominates in Rethinking Economics and so do the policy conclusions arising from Keynesian ideas in wider left circles.  Take the recent seminar organised by the IIPP in the UK’s House of Lords to discuss the financing of innovation (badly needed given the poor performance of the British capitalist sector in productivity growth).  But who did the IIPP line up to discuss with Mazzacuto the very limited proposal for a UK national investment bank to replace the European Investment Bank when the UK leaves the EU next year?  It was Tory Lord David Willetts, and as keynote speaker, Liberal leader Sir Vince Cable!  Cable was quoted approvingly to say that “The current enthusiasm for ‘selling the family silver’ (ie privatisation)) has its roots in bizarre Treasury accounting conventions.”  This was very rich hypocrisy coming from Cable, who when in coalition with the Conservatives, presided over the privatisation of Royal Mail, Britain’s state-owned postal service, selling it off for a price at least £1bn below market value – yes, selling the ‘family silver’.  I’m not sure that the IIPP will get far with its laudable aim of increasing the state role in innovation and investment by relying on these people for support.

And Keynesian ideas are central to the opinions of key advisers for the leftist Labour leaders in Britain.  In a recent article, Ann Pettifor, director of Prime Economics, blamed the economic crisis in Turkey and other ‘emerging economies’ on ‘orthodox economics’, in particular the move by central banks to hike interest rates and ‘normalise’ monetary policy. I’ll be debating with Ann Pettifor on what to do about finance at this year’s Momentum conference taking place during the Labour Party conference in Liverpool in late September.  I too have pointed out the risk that this policy entails for the world economy when profitability is still low and debt is high.

Pettifor’s conclusion was that “it was time to ditch economic orthodoxy” and….”revive the radical and revolutionary monetary theory and policies of John Maynard Keynes” as the way to avoid another global crisis.  But regular readers of this blog will know that I have shown Keynes’s ideas were far from radical, let alone revolutionary.  And they certainly would not avoid another global crisis.  And thinking they would do so would be a step back for the labour movement and its leaders.

One key point is that capitalism is not just a monetary economy as Keynesians think; it is a money-making economy.  You can print money indefinitely, but you cannot turn it into value under capitalism without the exploitation of human labour.  When you sift through the body of ideas in Core, one thing stands out: the failure to analyse modern economies with a law of value and a theory of exploitation for profit.  Profit and exploitation do not appear in the body of Core work (except for fleeting references to Marx).  And yet this is at the heart of capitalism and is the soul of Marxist theory.

Are there textbooks that do offer a Marxist alternative to neoclassical and Keynesian schools?  My favourite is Competing Schools of Economic Thought by Lefteris Tsoulfidis.  Then there is Contending Economic Theories by Richard Wolff And Stephen Resnick.  There is the new two-book textbook on Microeconomics and Macroeconomics by Ben Fine and Ourania Dimakou.  And of course, there is Anwar Shaikh’s monumental Capitalism (which the dedicated can dip into if they have their brains working!).  These should be on the curriculum of Core and Rethinking Economics courses. Maybe they will be.  But it may require a rethink.

27 thoughts on “Rethinking Rethinking economics

  1. I do not think we should employ the dichotomy mainstream/ heterodox economics. The distinction employed should always be bourgeois/socialist economics. Marx of course put socialist economics on a scientific basis. When ‘leftists’ dismiss Marx they do so as to abandon socialism (Bernstein, Deng Hsiao-ping etc.), and they always start by debunking the validity of his analysis of value. Of course there are those whom Marx himself called ‘bourgeois socialists’ i.e. those who regret not that capitalism creates a proletariat, but it creates a revolutionary one. Such ideologues aim to soften the rigours of the capitalist mode of production so that the proletariat and other exploited classes will abandon their antagonisms towards bourgeois society.

    Useful critique of Core’s Unit 1 on Critisticuffs.

    1. Marx also distinguishes between scientific and vulgar economics. I have on occasion read bourgeois economists commenting ironically on Marx’s condemnation of vulgar economics i.e. as ‘that of the people.’ But the adjective ‘vulgaris’ even in Roman times had the connotation of ‘commonplace’ i.e. lacking any merit or originality.

      In any case the distinction does not originate with Marx. J.S. Mill for example in his ”Some Unsettled Questions of Political Economy”, written in 1829 and 1830, which Marx regarded as containing his only original contributions, remarks often of the scientific character of Political Economy, thanks to the work of Ricardo. Mill too speaks of its laws, exchangeable value etc. ”But he ( Ricardo) more frequently employed it ( value)… denote cost of production; in other words the quantity of labour required to produce an article; that being his criterion of cost.”

      Mill also speaks of ‘the VULGAR notion of the nature and object of political economy’ in professing to teach in what manner a nation may become rich! Rather it must lay down its ‘laws of motion’ as with the science of mechanics (Pp 83-84 of the Kessinger Reprint).

      Also fascinating is Mill’s discussion on Pp 108-109 of laws and tendencies.

      ”Thus if it were stated to be a law of nature that all bodies fall to the ground…..the real law is that all heavy bodies TEND ( his emphasis) to fall; and there is no exception, not even the sun and moon.’

      ” The resistance of the atmosphere ( I am not a physicist, but I think Mill’s argument about the atmosphere is here invalid )…does not prevent, it retards the fall of all bodies whatever.”

      Apparently the moon is constantly tending to fall towards the earth due to gravity, but is missing it due to its tangential velocity. It will finally crash into the earth 65 billion years from now, when in any case the earth will have become uninhabitable. Not that it will take capitalism so long to achieve this end!

      It is not difficult to see the parallels with Marx and the Tendency for the Rate of Profit to Decline. I guess Mill will not be added to the Core’s Reading List any time soon!

  2. An accurate analysis, I think. I’d also note that other counter-hegemonic approaches to economics are similarly marginalised, including ecological economics, which like Marxist approaches, fundamentally questions the grounding assumptions of all other systems of economic thought.

  3. Pew Research issued a report in 2015 showing that half of humanity, or 3.6 billion humans, survive with an income of $5 a day or less — see the last graph — —- Capitalism is a failure. In the U.S. $136 a day is the average /day/human ( shows annual income of $16.2 trillion, population of 325 million, with a disposable or after tax income per capita of $45,000 or so, which lowers it to $123 a day/human. Table 2.1) And of course in the U.S. about 27% survive on maybe $24 a day. That would be 140% of poverty and between 25% to 30% of U.S. citizens survive an income below 140% of the official poverty threshold. Many researchers find 140% of poverty the line between poverty and low income. Surviving on $5 a day seems impossible, mostly likely it’s a starvation income. What we have is a very conscious dismissal of moral reality. Bringing all humans to a decent level of livelihood is feasible, but there lacks a will to achieve it. And there lacks a will to achieve it in the U.S. among its own citizens. I think the Suisse Bank report on World or Global Wealth shows $250 trillion in savings. It would be simple to take 2% a year or more and distribute that to health care, education, housing, public infrastructure and so on in the non-developed world. Why not? There is a false sanctity about money and an absolute taboo on taxation. Exploitation has to be countered with another attitude that would create the institutions that would eliminate gross inequality. Economic rules can be shaped to bring a healthier social outcome, and taxation and redistribution can bring up to a decent minimum standard what the institutions fail to achieve.

  4. A relatively minor correction, but I didn’t say quite what you said I said. Nor do I have any direct connection to either CORE or RE, and I don’t think I could be described as a “strong proponent”, if only through lack of detailed knowledge, although I do think they’re both broadly good things. My main point (admittedly it was twitter!) was that Fawkes had confused the two and was claiming RE had got huge amounts of money from ESRC, which was clearly bullshit; to the extent that the economics “establishment” has endorsed/funded anything, it’s CORE (as I understand it, it turned out later Guardian had got that wrong – you repeat the Guardian claim, and you might want to check that). I think your blog, like Fawkes, rather conflates the two – CORE clearly is a fairly mainstream project, RE less so,

  5. The Roosevelt administration’s lasting “Keynesian” reform was “military Keynesianism”: state fiscal support for a permanent war-time level of military production (in the US of course, but recently infecting formerly social democratic neoliberal NATO allied states). Clever marxist presenters at the various conferences need to have studied Swift or, better yet, Groucho Marx, to deal effectively with the opposition.

    Keynesianism and Neo-liberalism are convertible coats of the bourgeoisie, worn according to the weather, like democracy and fascism.

  6. An excellent article – you put your finger on CORE’s core weakness.
    I might be being pedantic, but I wonder if your treatment of Luther is a little ahistorical, a bit like emphasizing Cromwell’s suppression of the Levellers, or Washington and Jefferson’s support of slavery without seeing that the revolutions they led were in general historical terms, progressive. Luther’s breaking the hold on minds of Catholic mediaevalism was an important part of laying the foundations of the bourgeois revolutions that were to follow in Europe. As Marx said, he “turned priests into laymen, because he turned laymen into priests.”

  7. Thanks for the round trip. Gallop poll in USA shows majority 57 vs 47% prefer socialism. Five years ago the overall majority of 18-34 year olds wanted socialism. Of course there is socialism and socialism which is why the Labour Party slogan is forward with socialism rather than forward to socialism. Obviously they believe socialism can exist alongside capitalism. So the need for united front work to engage the Keyensians.

  8. I think the matter with Economics is much more deeper, but at the same time simpler, than “mainstream vs heterodox”.

    Economics nowadays is a pseudoscience. Keynesian or not-Keynesian, it is all bs. Marx is the only scientifically valid extant Economics model and should be the only one taught at any stage of any given educational system.

    So, the matter is rather simple: if you want science, Marx; if you want pure ideologism, everything else (including 99.9% of the 20th Century economists who call/called themselves Marxists, but are/were actually de facto double agents trying to destroy Marxism from within, e.g. Baran & Sweezy, David Harvey).

    To say Economics needs “pluralism” when you have Marx at hand is the same thing to call for pluralism in Biology (to include Creationism and Lamarckism) when you have Darwin. Even opinions have limits: I can say the Earth is flat — it doesn’t make it an opinion, just flat out propaganda and/or bad faith.

    1. “(including 99.9% of the 20th Century economists who call/called themselves Marxists, but are/were actually de facto double agents trying to destroy Marxism from within, e.g. Baran & Sweezy, David Harvey).”

      ”de facto double agents” Stuff and dangerous nonsense!

      ”To say Economics needs “pluralism” when you have Marx at hand is the same thing to call for pluralism in Biology (to include Creationism and Lamarckism) when you have Darwin.”

      Obviously the good comrade VK does not pay much attention to biological controversies. There were many gaps in Darwin’s “The Origin of Species”. The biologists are still arguing. Even those who share the same basic approach have sharp disagreements cf “Thinking about Evolution” Vol. 2 Cambridge 2001. But perhaps for VK such distinguished scholars are de facto double agents for creationism!

      1. When I say “Darwin”, I’m obviously referring to Neodarwinism. I know the original “Origin of Species” is already outdated. But that’s not the case of Marx’s Capital.

        Thing is: we must not throw out knowledge we already know is true just because of political correctness. This is not a case of different valid scientific opinions over an unsolved problem: it is a case of science vs superstition.

      2. ”I know the original “Origin of Species” is already outdated. But that’s not the case of Marx’s Capital.”

        It is not outdated; it is incomplete, as with Marx’s Capital.

      3. Marx’s Capital is not incomplete as a theory. The book promises to show how capital, in its essence, works, and it delivers it.

        Contrary to Darwin — whose work had to be completed by genetics, epigenetics and ecology — all of the academics who claimed to have completed Marx’s theory (e.g. Tony Norfield) actually only applied it to specific cases.

        That Marx died before editing books 2 and 3 don’t change the fact he finished his theory. But even this wasn’t his most important contribution anyway (it was the creation of the “material dialectic method”, which can be used in all human sciences).

        As Gramsci once stated, Marx laid it all out there, even if only in a brute state.

      4. ”Marx’s Capital is not incomplete as a theory.” Yes, it is

        The Books on The State, Foreign Trade and The World Market were never undertaken. cf Rosdolsky ( Pluto Press,1977) P56 for Marx’s original plan.

    2. Your list of “double agents” could go on to include Rosa Luxemburg, Lenin and Trotsky, Samir Amin, Istvan Meszaros, John Smith, Castro and Guevara, Chavez, Mao, and Ho Chi Minh: most of the leading thinkers of a living marxist tradition and just about every leader of an actual revolution. There is no last word in science or revolution.

      1. I’m strictly talking about post-war Western academics. Politicians and revolutionaries don’t count.

        Chávez was not a Marxist and never claimed to be, so he’s out of the equation (he read Mészáros, so you can say he’s a Marxist by association, but he never posed as a Marxist economist, so you can’t acuse him of bad faith).

        Same thing for Che Guevara (who revealed in an interview he was the only one in Cuba who had already read Marx at some degree; and that even he only read one or two things, so that rules out Fidel Castro too).

        István Mészáros was the exception who proved the rule for the late 20th Century Marxism. But even his contribution was merited in the fact that he was very orthodox (if you read his Beyond Capital, he basically only quotes Marx directly in German, from the MEGA).

        Mao and Ho Chi Minh were Asians, so they are out of the Western Marxism equation.

        I don’t consider Luxemburg, Lenin and Trotsky part of the “20th Century [Western] Marxism”, so they too are out of the discussion.

        In the West, we can safely say Lenin was the last one who truly read (what was available in his time) and understood Marx. Gramsci could have been the second, but he spent most of his time in prison and so only had time to essentially read and understand the “young” Marx. More importantly, he was a loser (his Communist Party lost the war against the Fascists and moderates), not a winner, as Lenin was (the same can be stated about Luxemburg).

      2. For me your charge that Baran and Sweezy are “double agents” out to destroy marxism implies the same against almost anyone whose historical circumstances caused them to focus on imperialism (Lenin, etc.) or consumerism (Baran and Sweezy). Neither Baran nor Sweezy disputed the validity of the labor theory of value as operating within the capitalist system, but viewed it as temporarily repressed in the US of the 1950’s. The Monthly Review is editorially a marxist review, but open to non-marxist writers. It has influenced many marxist oriented anti-imperialist (Samir Amin, John Smith, etc.) and anti-capitalist ecological works (JB Foster and a host of others).

        Also, I think that we should be open to all egalitarian, historical/material based critiques of the capitalist system, even if clothed in idealism. For example Shelley and Blake, Martin Luther King, Mugabe, Chavez, Che, etc., etc. etc.

        It’s wrong in all kinds of ways to attack David Harvey’s honesty.

      3. I’m not talking about politics — in the political field, those guys made the damage they did (e.g. Baran & Sweezy publishing Böhm-Bawerk’s pseudo-science and stating he’s right) — I’m talking strictly about academics, science.

        Those guys (Lenin apart, from those you mention in your second comment) were simply wrong. And I’m not saying politically or ideologically wrong; no, they didn’t even pass the scientific test, they are objectivelly wrong.

        Marx’s theory simply explains everything. In 99 out of 100 cases, you would be right, but this is the 1 out of 100: we are talking about probably the greatest thinker that have ever lived until now, the first truly universal philosopher, in the pantheon of both the Eastern and Western schools of thought. I think it is simply egregious to discard such treasure of humanity simply because a bunch of Anglo-Saxon professors are feeling offended or want to climb the academic ladder at any cost.

        Now, I repeat, I’m talking strictly about the scientific field. Politics is politics: it is the raw struggle for power, the winner being decided by who has it most, not by who is with reason (as Cicero once well stated: legions trump the pen). The future will be shaped by power, not by reason: it that was the case, Marx would’ve already won (and, as history has shown us, he lost after the Gotha Program got out).

      4. ”I’m not talking about politics — in the political field, those guys made the damage they did (e.g. Baran & Sweezy publishing Böhm-Bawerk’s pseudo-science and stating he’s right) — I’m talking strictly about academics, science.”

        Sweezy edited Bohm-Bawerk’s ”Karl Marx and the Close of his System” ALONG with Hilferding’s refutation! (1949)

        Sweezy did NOT state ‘he was right’! He remarks in his Introduction: ”I shall not deal here with Hilferding’s refutations of Bohm-Bawerk’s specific arguments, beyond pointing out that he gives a good account of himself…” In short Sweezy praised Hilferding and condemned Bohm -Bawerk!!!

        Incidentally, Sweezy notes that as late as January, 1933 Hilferding wrote that the primary aim of the socialists was to fight the communists!

  9. This post seems to conflate quite a few things. Firstly, it equates neoclassical economics and neoliberalism, which is just not true and as I learned early on is a bad line of attack for critics of economics. Secondly, it equates CORE and RE, which is again not true. There may be little Marxism in CORE but there is as much Marxism as any other school of thought in RE’s pluralist reader. There are also chapters on worker cooperative and ecological economics which are ardently anti-capitalist (the latter chapter happens to be shite but we’ll save my problems with Clive Spash for another day). Meanwhile, there is only one chapter on (post-) Keynesian economics.

    You say there is a material interest for economists to continue believing their own theories but I’m not sure what this is. Academia, particularly in social science, may be far from a Darwinian model of good ideas triumphing but we’ve made a lot of progress in convincing economists of the need for new ideas, especially in the government, who have responded well to our campaign.

    I am a committed socialist but I can see (a) the pure intellectual value of opening up a discipline that can feel intellectually moribund and (b) the political/social value of adopting better economics in policy. Not to mention that from a purely strategic standpoint, socialists should surely favour any movement that wants to get Marx on the curriculum.

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