01 May 2016 13:44:04 IST

A long-time ‘deskie’, Baskar has spent much of his journalism career on the editorial desk. A keen follower of economic and political matters, he likes to view economic issues from a political economy lens as he believes the economic structure of a society is deeply embedded in its political and social ethos. Apart from writing the PolitEco column for BLoC, Baskar writes book reviews and articles on politics, economics and sports for the BL web edition. Reading and watching films are his other interests, though the choice of books and films are rather eclectic.  A keen follower of sports, especially his beloved Tottenham Hotspur FC, Baskar is an avid long-distance runner.  He hopes to learn music some day!
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The ‘economics’ crises

After the 2008 recession, student groups the world over are demanding a shift in the way economics is taught in varsities

The collapse of Lehman Brothers in 2008 not only sent the global economy into a downward spiral, but also set off a crisis in the discipline of economics. Economists were widely criticised for not predicting the crisis — with even Queen Elizabeth of Britain famously chiding economists for having missed the signs.

There were some exceptions among the economists’ profession, however, who had warned of toxic assets in the banking sector and their impending danger. The most notable of these was Raghuram Rajan, who was then with the University of Chicago. As far ahead as in 2005, in a speech delivered at a high-powered gathering of economists in Wyoming, US, he had warned of an imminent crisis. But he was dismissed as being a ‘Luddite’. Most economists, despite their sophisticated forecasting techniques, were blissfully unaware of the impending crisis.

Ironically, one famous Nobel Laureate, at the turn of the last century, had even dismissed the prospect of the world ever getting into a serious recession. Funnily, even after the financial crisis hit the world, some economists stubbornly refused to take it seriously, saying it was just a temporary phase and that the economy would soon be back on the high-growth path.

In fact, Nobel Laureate Thomas Sargent hit back at the critics, saying they showed “woeful ignorance or intentional disregard for much what modern macroeconomics is about and what it has accomplished”. For good measure, he added: “It is wrong to say that this financial crisis caught modern macroeconomics by surprise”.

Students take charge

Despite this obstinacy on the part of certain economists, there was some serious soul-searching within academia, led in part by the students themselves. They said the courses being taught in universities were far removed from the reality of the actual world, which is why the economists were so ill equipped in predicting the crisis. The dominant paradigm — neo-classical economics — and the highly mathematical and often abstruse models developed were charged with being totally devoid of social and political content.

In 2011, Harvard undergraduate students had walked out of Prof Greg Mankiw’s class (his books on micro and macroeconomics are required reading in universities worldwide). They even wrote a letter to Mankiw, stating the reasons for their walkout which included the narrow focus of the course content and the lack of alternative perspectives.

The highly mathematical approach to economic theory was criticised for its lack of political and social content, which ended up equipping students with problem-solving skills but little knowledge of how the economy functions in the real world.

Cambridge University economists Ha-Joon Chang and Jonathan Aldred, in an article on The Guardian website, were devastating in their criticism of the current economics curriculum, saying it was only producing “idiot savants”.

They said there needed to be a revolution in the way economics is taught, where students are educated about the real world, history of capitalism, alternative perspectives of economics — including Keynesian, Marxist, Schumpeterian, institutionalist, behaviourist or developmentalist, among others. This was a better alternative— instead of narrowly focussing only on neo-classical free market economics.

Curriculum change

After the crash, several student associations sprung up, working as pressure groups in demanding a radical change in the economics curriculum. These include Post-Crash Economics Society, Rethinking Economics, and International Student Initiative for Pluralism in Economics (ISIPE).

The ISIPE was formed last year and is a collaboration of 82 associations of economics students from 31 countries, including India. Its members have analysed the curricula of universities in 12 countries to see how much time was spent on mathematics and how much on developing a critical perspective. They even declared May 5 as the Global Action Day for Pluralism. So there are some encouraging signs but it will take a long time to implement the proposals put forward by these student groups.

Perhaps the classic caustic remark by the late Joan Robinson (one of John Maynard Keynes’ famous students) could serve as a starting point for curriculum reform: “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists”.