There's more than Keynes though

Rethinking economics

Attempts to broaden debate in university economics departments should be applauded, writes Michael Roberts

Can economics ever become ‘pluralist’? 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, the few that there are in the UK and US 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 around. In July, it 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 and 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 a £3.7 million grant 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.1

The Core project has produced an antagonistic reaction from rightwing commentators. The prolific 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 both Core and Rethinking Economics, left 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”.2  And that is true.

The reality is that Rethinking Economics and Core are dominated by Keynesian ideas with hardly any look-in for Marxist ones. It is 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 now suggest otherwise.

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 mindset’ of mainstream economics. As if the issue was a psychological one. Mainstream economics is closed to alternatives because there is a material interest involved. But Chick and Dow seemed to think that it is just a question of market-supporting economists changing their mindset - for their own good, because austerity and neoliberal policies are actually bad for capitalism itself.

More recently, leading left 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 that 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 Müntzer.

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 is called ‘Rethinking capitalism’ - described as “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 is 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.3

But, looking at all this, 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 Lords4  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 Mazzucato the very limited proposal for a UK national investment bank to replace the European Investment Bank when the UK leaves the European Union next year? It was Tory Lord David Willetts - and, as keynote speaker, Liberal leader Sir Vince Cable! Cable was quoted approvingly as saying: “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, selling it off for a price at least £1 billion below market value - yes, “selling the family silver”. I am not sure the IIPP will get far with its aim of increasing the state role in innovation and investment by relying on these people for support.

And Keynesian ideas are central for Jeremy Corbyn’s key advisors. 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 will be debating with Ann Pettifor on what to do about finance at Momentum’s ‘The World Transformed’ event taking place during the Labour Party conference in Liverpool in late September. Like me she has pointed out the risk that this policy entails for the world economy when profitability is still low and debt is high.

Pettifor’s conclusion is 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 my 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 - 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.

My favourite textbook offering a Marxist alternative to neoclassical and Keynesian schools is Competing schools of economic thought by Lefteris Tsoulfidis. Then there is Contending economic theories by Richard Wolff and Stephen Resnick and the new two-part work 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 will require a rethink!

Michael Roberts blogs at https://thenextrecession.wordpress.com/


1. www.theguardian.com/business/2018/aug/04/economics-students-dangerously-poorly-educated?CMP=Share_iOSApp_Other.

2. https://twitter.com/jdportes.

3. www.ucl.ac.uk/bartlett/public-purpose/programmes/rethinking-capitalism-new-elective-module-ucl-undergraduates.

4. www.ucl.ac.uk/bartlett/public-purpose/news/2018/jun/iipp-holds-patient-capital-and-industrial-strategy-workshop-uk-parliament.