How has the crisis changed economics?
The Economist, an increasingly dogmatic apologist for the free market ideology, invited for its current issue, six academic economists to identify how they thought the financial crisis had changed the subject of economics. The answer is not a lot. So far as methods of teaching and research are concerned, nothing has changed, or is likely to change any time soon.
One academic suggests that much of what caused the problem has been understood for decades. Thus not much has to change, apart from perhaps ‘more attention should be paid to topics such as credit market imperfections.’
A French university professor takes the view that schools are likely to ‘fall back on easily-evaluated teaching methods at the expense of those that may yield greater relevance but are harder to assess’ and that courses would ‘be tailored even more to meet the demand of private sector employers,’ or, in other words, business teaching as usual.
An American professor quotes Roosevelt’s Great Depression assertion that ‘the economic fear to fear is fear itself’ and concludes that the solution is to take ‘the fear out of the economic equation … with simple fixes’. The fixes are unspecified, though he advocates the broadening of teaching ‘multiple equilibria’, which presumably is short hand for suggesting unregulated markets don’t always produce full employment, a revolutionary notion for The Economist to publicize.
An associate at Peking University challenges the suggestion that no one saw the financial crisis coming, pointing out that he did, along with others. He emphasises that ‘nothing in the current cycle seemed fundamentally different from what had happened before’ in previous cycles, and concludes that though ‘mathematical fluency is very useful, it should not be at the heart of economics instruction. That place should be reserved for economic history.’
Finally, an economics teacher suggests four specific changes, none of them exactly revolutionary, in his teaching curriculum: ‘more credence to the theory that asset prices sometimes experience substantial bubbles’, ‘that bank runs come in many forms’, ‘that tail events need to be carefully modelled’, and ‘that macroeconomics is in flux’.
So, that’s alright then! With one or two minor adjustments, despite the damage it inflicts on working people across the globe and the longer term global destruction it produces, The Economist’s myopic perspective on the real world, continues to be justified. At least by academic economists of a certain persuasion.