Economics is widely known as the “dismal science”, and the description rings true, so dismally has classical economics performed over the past century or more. (Marx, of course, was right.) One bright spot is that the new generation of students seems unwilling to stick with the mistakes of the past.
Economics students at the University of Manchester had been wondering (in their own words) “whether economics undergraduates were being taught the right things in the light of the 2008 Financial Crisis”.
A good question. They were being taught the dismal theories of the discredited economists who had played their full part in blowing up the bubble that burst so disastrously in 2008. People like Robert Lucas, awarded the Nobel Prize for Economics, who in 2003 said the “central problem of depression-prevention has been solved”. Unchastened by reality, he said in 2011 that the big threats to the US recovery were Medicare and higher taxes on the rich.
Then there’s Robert Merton and Myron Scholes, from Harvard and Stanford, Nobel laureates both. Along with Fischer Black, who died before he could collect his Nobel, they founded the “science” of derivatives. In 1970 there were no derivatives traded on the markets. Then Black and Scholes published an infamous equation “explaining” how it could all work. Merton came in later. By 2004 the notional value of derivatives traded globally was $273 trillion.
These bourgeois economists helped cause the crash. They’ve been heaped with prizes. They’ve been rewarded as befits loyal servants of finance capital. And they’re still on the syllabus in universities around the world.
The Queen asked at the LSE why no one saw the crash coming; no one could answer her. No wonder the Bank of England called a conference on the subject, “Are economics graduates fit for purpose?” (As if the Bank itself were actually fit for purpose!)
No wonder, too, that the students at the University of Manchester this year set up the “Post-Crash Economics Society”. They believe “that the content of the economics syllabus and the way it is taught could and should be seriously rethought”.
What is surprising – and a tribute to the students – is how seriously their challenge to economics orthodoxy is being taken. Prominent (non-neoliberal) economists have flocked to their banner. The students put their finger on a problem that no one wanted to talk about but that could no longer be dodged.
One echo has been the development in a project headed by Wendy Carlin, a professor at University College London, to introduce a new first-year curriculum for economics students. According to reports, it will include in-depth study of economic history and the way financial markets can undermine economic stability.
“The pressure for change from students, faculty, business and policy makers, along with new developments in economics, makes this an auspicious time to seek improvements in what economics students learn, and how they learn it,” said Carlin.
The students, then, have been teaching their teachers a well-earned lesson. Not so dismal after all.
Actually, the term “dismal science” was coined by one of the most dismal bourgeois economists of all time, Thomas Carlyle, better known as a (pretty dismal) historian. He used the term to attack John Stuart Mill for saying that abolishing slavery would lead to an improvement in the lot of the slaves. Carlyle, dismal as he was, argued strongly and, as it turned out, totally wrongly that emancipation would be bad for the slaves.
Getting things wrong has been a theme among bourgeois economists for quite a time, it seems. ■