Educating economists

Yesterday I attended a conference organised by the Economics Network and hosted by the Bank of England on the subject of revisiting curriculum reform in economics (the talks from that event were collected, with other contributions, in What’s The Use of Economics?)  Revisiting because it is three years since the conference I organised in the same location that kicked off the process of reform.

The new conference focused on practicalities, the hows, whereas the first was more about the whether and why. While there was substantial agreement among the participants yesterday about the kinds of change needed – more real world engagement , some interdisciplinarity, openness to different ideas – it’s fair to say there isn’t a consensus about what to put in a new curriculum. The ideals among different participants in the debate range from incremental reform to a substantial and serious revamp to a whole new, heterodox curriculum explicitly not centred on any ‘mainstream’ approach. It would be a healthy outcome to have more variety between the offers of different economics departments than the conformity that exists at present, so this range seems fine to me – although I do think employers of economists will continue to require a set of basic skills and knowledge which are currently delivered by the existing ‘mainstream’.

There was – among others – a session on the first year of experience of teaching the CORE course whose creation was led by Wendy Carlin. The development of the basic material was supported first by INET and Friends Provident Foundation is now supporting the work that will enable its wide use by many teachers and students, including independent learners. INET is now instead funding Robert Skidelsky with Ha-Joon Chang and others to develop a fully heterodox alternative.

There was also an excellent session on what students ought to learn about data, with contributions from Richard Davies on online big data, Jonathan Haskel with a very interesting business school perspective including the use of case studies (modern and historical), and Steve Pischke on teaching econometrics to undergraduates who will probably not go on to masters degrees but will head out into jobs. Pischke made some important points about any teaching of undergraduates: given their high school experience, they are not used to independent critical thinking and are uncomfortable with ambiguity and judgements.

All this and much more. The event was recorded so I’ll post the link when it’s available. The Twitter hashtag was #revisitecon.

I came away feeling very optimistic about the way the debate has moved in three years from a question about whether any change was possible to much more detailed practicalities.  There are plentiful barriers to changing the curriculum and the approach to teaching economics, but there is a broad alliance and plenty of momentum for reform in the UK now. It would be interesting to know what is happening in other countries?

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Innovating for good

Yesterday I read this Project Syndicate comment by Kermal Dervis arguing that the returns to publicly-funded R&D have been essentially privatised – a point also made by Mariana Mazzucato including in her new volume, Mission Oriented Finance for Innovation. The comment includes some interesting suggestions such as a publicly-owned venture fund, although Nesta’s Stian Westlake has pointed out that there are some problems with the broader argument. I’d add to his list the basic argument about the diseconomies of centralised decision-taking when you’re talking about ideas, something amply demonstrated by20th century experience.

In particular, Stian argues, and I completely agree, that it is both necessary and hard to account for the full social welfare effects of publicly-financed innovation – these go beyond the financial return. The discussion yesterday on Twitter sent me back to Creating a Learning Society by Joseph Stiglitz and Bruce Greenwald. This is a book I’ve yet to work through properly, and it’s quite a demanding tome. Looking today at the key chapters only underlines the challenge of thinking through social welfare – and therefore policy implications – of innovation in the modern economy. For starters, ‘knowledge’ has the characteristics of a public good and a natural monopoly. Innovation requires accounting for risk, in imperfect capital markets – and there’s pure uncertainty too. There are complicated dynamics, path dependence, and probably instability.

It leaves me thinking (a) we’re a long way from being able to make definitive policy recommendations about how to boost innovation, although I’m sure it includes state as well as market activities. And (b) there’s a lot of work economists need to do on standard welfare economics, which has a dusty 1970s (or earlier) feel to it.

Electoral ammunition for voters

Who knows whether a better understanding of the issues changes how people vote – it seems unlikely. Understanding is still important, though: the more voters can tell when politicians are spouting nonsense, the less incentive there will be at the margin for the latter to announce stupid policies in the heat of an election campaign.

OK, perhaps I’m being delusional. But I’m working up to commending a new book (which I’m part way through) by Vicky Pryce, Andy Ross and Peter Urwin, It’s The Economy, Stupid: Economics for Voters. Between them the three authors have unmatched experience of working inside the sausage machine of government policy, as senior economists at BIS (Pryce), the Treasury (Ross), and working with departments such as HMRC and DWP (Urwin). The book covers the macro issues (austerity, productivity and growth, Europe) and micro/social policy issues (health, environment, discrimination, immigration).

Writing a book of this kind is tricky when partisan feelings and emotions are running high. It strikes on the whole a successful balance between being neutral and setting out the evidence/logic on the various topics. After all, the truth is not always non-partisan. There are also issues on which reasonable economists disagree, such as the strength/weakness of the case for HS2, or the extent and timescale for the necessary reductions in CO2 emissions if we are to avoid catastrophic climate events. The first chapter makes a strong case for the importance of economic assessments of policies and for the role of economists in government, and yet I think it could have been a bit more reflective about the way economics has come to dominate policy choices. (Maybe that comes further on than I’ve read so far.)

With this caveat, any UK voter trying to make sense of the economic claims and counter-claims – there will be a lot of that with this week’s budget – would be well rewarded by reading this book. It will also last as a useful read on the issues for students of economics from AS level onward, as it’s very clearly written –  just as you would expect from such experienced writers of policy briefs – and includes lots of references for further reading. Inevitably, it doesn’t cover all possible subjects, but it’s a shame that those most relevant to young people – housing, student finance, and the full implications of demography and the pension bill for public spending on younger people – are missing.

There are some other terrific economic resources for voters too. Two that stand out are the IFS Election 2015 briefings and the  CEP’s Election 2015. NIESR has looked at the macro implications of the parties’ fiscalplans. The Manchester Policy blog covers a wider range of issues, not just economics, and Manchester this week launched a free Election MOOC (aimed at 6th formers but suitable for all). How marvellous it would be if we all got ready to meet our candidates during the next few weeks by lining up our questions and factual ammo from the book and these excellent resources.

Pinkoes, bards, and librarians

I’m reading at the moment Jean Seaton’s terrific account of the BBC in the late 1970s and 1980s, Pinkoes and Traitors. One note took me this morning to Keynes’s Essays in Biography. It’s best-known for his description of Lloyd George at the Versailles peace conference: “This extraordinary figure of our time, this syren, this goat-footed bard, this half-human visitor to our age from the hag-ridden magic and enchanted woods of Celtic antiquity.”

I happened to read instead today the essay on Mary Paley Marshall, wife of Alfred, first female lecturer in economics at Cambridge, creator of the Marshall Library. She sounds a wonderful person – Keynes describes the deep intellectual partnership between husband and wife. I liked best, though, the bit about the library: “It was an essential part of Marshall’s technique of teaching to encourage his pupils to read widely in their subject and learn the use of a library. To answer a question on price index numbers, a 3rd or 4th year student would not be expected just to consult the latest standard authority. He must glance right back to Jevons and Giffen, if not to Bishop Fleetwood; he must look at any articles published on the subject in the Economic Journal in the last 20 years; and if he is led to browse over the history of prices since the Middle Ages… no harm will have been done.” Hence Mary’s donation of Alfred’s books  and her endowment of the Marshall Library. She was its Honorary Assistant Librarian until nearly 90.

It’s a delightful tribute – how nice to read Keynes being so warm and generous. I see there’s a (well-reviewed) new book about Keynes out – Universal Man by Richard Davenport-Hines.

No doubt the role of history of thought will be one of the subjects for discussions at next week’s Economics Network conference on teaching economics.

Theory of unemployment reconsidered

The news of Edmond Malinvaud’s recent death at the age of 91 caught up with me yesterday. It sent me back to his book The Theory of Unemployment Reconsidered, published in 1977 and based on his earlier Yrjo Janssen lectures. The subject of the lectures was how – if at all- to reconcile different theories of large-scale involuntary unemployment. To simplify, the mid-1970s were a time of Punch and Judy macroeconomic debate, monetarists then Real Business Cycle advocates versus Keynesians, supply shocks plus rigidities versus demand shocks.

The book notes that a successful theory needs to explain why quantities, not wages, adjust in the labour market, and why wage/price moves are asymmetric (sticky downard but not upward). Malinvaud took labour and goods markets together, and explicitly recognised the need to think about disequilibrium outcomes. “In each market, the short side decides on the amount transacted and the long side is rationed,” he wrote. He argued that depending on which side was rationed in which market, different macroeconomic regimes would prevail, either Keynesian unemployment or classical unemployment or a regime of ‘repressed inflation’, “when both prices and wages are so low that individual assets have a large amount of purchasing power, and when people choose leisure to such an extent that the demand for goods, which may be high…, cannot be fully met.”

It’s a slim book – and not his best known – but made a big impression on me at the time (my copy is dated 1980) simply because it seemed intuitively true that different kinds of (disequilibrium) states of the world could prevail, with different dynamics and different policy implications. But Malinvaud’s approach was pushed to one side by the juggernaut of the political victories of monetarism and the later  academic consensus about equilibrium DSGE models, albeit with frictions. As regular readers know, I subsequently moved away from macroeconomics, and looking back now over The Theory of Unemployment Reconsidered it seems to me just as abstract – including with regards to time – as all macro. But that’s another post.

Here is an interview Malinvaud did with Alan Krueger in 2003.

Edmond Malinvaud

Edmond Malinvaud