Thursday, July 25, 2013

Why the crisis didn't discredit mainstream (neoclassical) economics?

There are probably many answers to the question. I suggested before that the best way to look at it is from a sociological standpoint. The same people hold the same positions at the key 'respectable' universities, go to the same 'relevant' meetings, and award the same 'important' prizes. And research does build on previous research. Let alone that the economics profession, like the others, is there to protect and reproduce the status quo.

At any rate, in his new book Philip Mirowski, from Notre Dame, and a member of Institute for New Economic Thinking (INET; which has funded I should say several heterodox authors) dedicates, in part, his first chapter to the topic. He says about the INET meetings, which were supposed to display some of the changes in the profession after the crisis:
"[...] the first INET meeting at Cambridge University in 2010 bore some small promise—for instance, when protestors disrupted the IMF platitudes of Dominique Strauss-Kahn in Kings great hall, or when Lord Adair Turner bravely suggested we needed a much smaller financial sector. But the sequel turned out to be a profoundly more unnerving and chilly affair, and not just due to the caliginous climate. The nightmare scenario began with a parade of figures whom one could not in good conscience admit to anyone’s definition of “New Economic Thinking”: Ken Rogoff, Larry Summers, Barry Eichengreen, Niall Ferguson and Gordon Brown ... The range of economic positions proved much less varied than at the first meeting, and couldn't help notice that the agenda seemed more pitched toward capturing the attention of journalists and bloggers [oh my, I'm included in this one], and those more interested in getting to see more star power up close than sampling complex thinking outside the box. It bespoke an unhealthy obsession with Guaranteed Legitimacy and Righteous Sound Thinking."
I always thought naïve to think that the crisis would lead to the demise of neoclassical economics. In fact, in the US it was the Great Depression and the development of a certain type of Keynesianism (the Neoclassical Synthesis one) that led to the domination of neoclassical economics (before that the profession was more eclectic and if anything dominated, in the US, by institutionalists). But I had some hopes for INET to open dialogue with less crazy (sold out?) within the mainstream. The fact that Mirowski calls the second meeting a nightmare scenario does not bode well for the future of the profession.


  1. Here is something that may be of interest: Warwick University's Will Davies and Nate Tkacz of the Centre for Interdisciplinary Methodologies interviewed Mirowski (H/T @joncstone on tiwtter)
    it can be found here
    mp3 here:

  2. Reminds me of the masterful title of the 2011 book by Colin Crouch (recommended reading):
    The Strange Non-death of Neo-liberalism

  3. Quite right Matias. That's why people (like me) who think they have some good ideas on economic problems know better than to submit those ideas to economics academic journals. First there is the problem that only about one in a thousand people ever produces an original idea, and only about one in a hundred recognises an original idea as being original. Second, established members of a profession (as you rightly point out) don't want their comfortable or settled ideas being upset by new ideas: they might have to re-write their text books, amongst other things.

    Someone else with a similar view is Bill Mitchell who runs "Billyblog". He's an Australian economics prof, but I remember him saying he's tired of journals and finds it more rewarding doing his blog (amongst other reasons, perhaps, because he gets lots of daft / inspiring comments from me.


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