Ciceros Children: the worth of the history of economic thought and economic history for business stu

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Ciceros Children the worth of the history of
economic thought and economic history for
business students Alex Millmow

• ATEC 09, QUT July 13, 2009

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Purpose and scope

• What does the GFC tell us about teaching and
  learning economics?
• How does one teach economics at a time like
  this?
• Something about bringing back a historical
  perspective to the teaching of first year
  economics and economic majors
• Timely pursuit with the GFC and the great
  recession abroad
• The return of overt Keynesianism and the
  discrediting of neo-liberalism

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A good recession?

• Weed out the inefficient and the archaic,
  reducing debt-fuelled consumption
• serve as an educative rolelooking forward to
  Eco 101
• From the boom we never really had 1990-2007 to
  the boom were about to have??
• How will Gen Y cope with the spectre of graduate
  unemployment-AFR Story
• confusing times even for experienced economists
  about what caused the crisis, what to do about
  it why we did not see it coming and now
  explaining why Australia might just have a
  business recession!
• Last year it was all about containing inflation
  and rising petrol prices, now its coping with the
  economics of fear, deficit budgets and the fear
  mongering put out by libertarian think tanks

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How Going retro clarifies

• History might not repeat but it does rhyme Mark
  Twain
• Even the most practical man is usually in the
  thrall of the ideas of some defunct economist
  Keynes
• All Keynesians now But some intellectual
  sclerosis-hardening of the categories around
• And then, whose Keynes will it be? The
  expansionist, anti disinflationist Keynes, the
  measured market liberal or perhaps bastardised
  version?
• Niall Ferguson of the Ascent of Money Youve
  got this problem that if no one is taught
  financial history at any point, they are relying
  entirely on their own experience...risk models
  tend to work with just three worth years of
  data.
• Bernanke s muted conversion to Keynesianism
• Alan Greenspans epiphany and admission of a
  flaw in the model of liberalisation and self
  regulation.
• .

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Will the Mainstream change?

• Nope, business as usual!!
• Many economists refuse to leave their paradigm
• The GFC will be explained on anomalies like a
  breakdown in the principal-agent relationship,
  poor financial regulation, govt intervention and
  over savings caused by China
• Mankiws leading economic textbook for the 2009
  academic year has little changes except for some
  passages on leveraging and financial
  intermediation
• Despite what s in the press and bookshops
  research by Hodgson (2009 ) shows that the
  citation of Keynes and Minsky falling over the
  decades but Roubini, the seer of the GFC, rising.
  Hodgson concludes economists dont learn
• some unlikely support from Posner in his new
  book the failure of capitalism who sees
  economists asleep at the wheel and too
  complicit in turning to the Chicago school

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The contribution of HET to economics education

• We can argue that a knowledge of the history of
  relevant economic theories provide added and
  useful value to whatever theoretical and
  empirical studies are being made. American
  universities offer and teach more HET than we do
  especially at the high-class liberal arts
  colleges but the subject is taught in an easy,
  literal way with the focus on the narrative.
• An understanding of the history of economics,
  even some business thought theory adds to the
  weight of useful knowledge available
• We would return to having business graduates with
  an all rounder ability rather than just pure
  vocationalism

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The worth of HET to economics education

• There are six key contributions HET can make
  to better economics education and a foundation
  for both economic research and applied economics
  and business research

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The worth of HET to economics education

• First, HET is a pathway to understanding economic
  theory and its application.
• Here we use HET as a frame of reference, the
  historical circumstances in which theories
  developed showing how they were designed to
  with a actual problems
• Also it shows how economic theory developed and
  why some theories became dead ends, while other
  approaches were more successful

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The worth of HET to economics education

• Second, HET as orientation for the development of
  theory
• economists use theories of the past to frame
  issues of the future
• Akerlof (2007) example of using HET to track the
  development of macroeconomic theory and then to
  push that theory into a new direction. To know
  where we have come from, the need for some
  familiarity of the history of economics is a
  necessary knowledge base for anyone thinking
  about theoretical issues

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The worth of HET to economics education

• Third, HET as a conversation with economists of
  the past
• Empty formalism, ahistorical, autistic,
  tendencies within the eco profession, a tendency
  to reinvent the wheel with history seen as what
  happened last week
• No point in cutting off the insights of the past
• The GFC has brought comparisons with the great
  depression and brought the works of Keynes
  (demand failure) Hyman Minsky (asset boom and
  finance) and Irving Fisher( debt-deflation) into
  vogue

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The worth of HET to economics education

• Fourth, HET as a storehouse of theoretical
  approaches and deepening ones understanding of
  contemporary theory
• The joy of discovering neglected prophets and
  original thinkers. Take the example of recent
  best- selling biography of Schumpeter by Thomas
  McGraw. Using the example of great thinkers in
  economics to generate student interest. And now
  the return of Keynes the maestro, the Minsky
  moment.

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The worth of HET to economics education

• Fifth, HET as a literary approach to economic
  issues.
• Decline in the literary tradition in economics, a
  loss in the persuasiveness and rhetoric of
  academic economics due to overmathematisation of
  the discipline
• Where are the academic economists on the news?
  Can they write or spin a tale?
• Marshalls famous dictum about relegating the
  mathematical proofs to the appendix
• The ability to write well in economics becoming a
  lost art

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The worth of HET to economics education

• Sixth, HET as a training ground for applied
  economics
• Those with some appreciation of HET are able to
  access a wider range of perspectives and answers
  and are better able to think outside the narrow
  confines of the ruling paradigm
• Most American university depts offer a course in
  HET, Only Half of Australian economic departments
  do
• The proposed University of Ballarat experiment