Rethinking Economics
Last month, I travelled to New York City for the first ever Rethinking
Economics conference being held there. In short, the student organized conference
was orchestrated in an effort to critique what they call “Mainstream
Neoclassical Economics” and to bolster a change in pedagogical methods in
classrooms. Now, as an Austrian who views
himself in the minority, even in Austrian circles, the conference immediately
piqued my interests. What I experienced
at the conference was an agglomeration of talks and panels ranging from topics
such as agent based modeling, Post-Keynesian economics, to feminist
economics. In all, I found some sessions
extremely insightful, while others were quite dull and unimaginative.
The first day of the conference,
Friday, September 12th, started out quite well with a talk given by
two of Rethinking Economics’ founders, Yuan Yang and Thomas Vass. They provided a brief sketch of the group’s
history and how it was formed in response to their disenchanted experiences
while studying economics in undergraduate classes all the way up to their
doctoral classes. For example, during his talk, Vass explained how he began to
have doubts about some of the assumptions and usefulness of some models in his
undergraduate experiences only to be told that they would make more sense in
graduate classes, but of course, once he reached graduate classes and the same
doubts continued, he was told that they would make more sense while taking
doctoral classes. It seems to be a neverending spiral into uselessness. In all, Yang and Vass proposed three
questions which would be the themes of the conference:
Another major talk from the first
day’s sessions was the “Macroeconomics and Policy Making” panel, featuring Paul
Krugman, James Galbraith, and Willem Buiter. The panel was probably the most
attended session of the whole conference, filling up the NYU Tishman Auditorium
to nearly full capacity. Despite the
panel’s billed name, discussion on central bank policy, for example, was quite lax. In fact, it only really coming up
to any extent in the post panel Q & A session. Instead of talking about this central issue,
the speakers spent a large amount of time discussing climate change and how to
enforce particular taxes to mitigate it.
Also of note, throughout the panel, Galbraith would often make
exceedingly populist comments, for example railing that the banking profession
is replete with fraud and that bankers should be arrested. In all it was a painful panel to listen to.
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| James Galbraith, Paul Krugman, and Willem Buiter |
Out of the remaining sessions, there
was a hodgepodge dealing with inequality and mentioning Piketty more times than
a typical NYC cab driver honks his horn in an hour. Of course, these speakers
offered a myriad of typical prescriptions to “mitigate” the issue, such as
wealth taxation, guaranteed jobs, and other forms of redistributionism. In all, these talks were the least
enlightening to me and I felt as though they were a bit outside of conference’s
stated goals as laid out by the founders in their opening remarks.
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| Deirdre McCloskey |
Despite these rather pedestrian talks, there were a number of astute and insightful ones. For example, Steve Keen’s talk on Post-Keynesian economics was really centered on stressing the concept of dynamics in theory. I wish he could have talked a bit more about uncertainty with the Post-Keynesian framework, but sadly his talk was cut short due to time issues.
Another interesting presentation was
given by Philip Mirowski on Saturday evening.
Entitled “Should Economists be Experts in Markets or Experts in Human
Nature?”, it examined a wide array of literature and ideas on markets. Harking back to some of his previous works,
such as Against Mechanism or More Heat Than Light, Mirowski
pointed out that most of orthodox economics has been done in an attempt to emulate
physics and that, as he put it, its humanism is “palpably fake”. A large chunk of the talk focused on what
markets actually are and how they operate as institutions, even outside of
human action. For example, he mentioned
a 1993 paper by Gode and Sunder entitled “Allocative Efficiency of Markets with
Zero-Intelligence Traders”. I haven’t
read the paper, but essentially, as Mirowski described it, it centers around an experiment where, similar to
Vernon Smith’s market-clearing experiments with humans, “zero-intelligence”
robots were able to clear a double auction market. Mirowski sees this example of market clearing as evidence that its
occurrence in markets is more so attributable to the rule structures of the
market institution than the intentionality of those that comprise it. It almost makes me think of Hayek’s notion of
spontaneous order, where certain orders emerge unplanned, not of anyone’s own
design.
The next day brought two more
interesting sessions; The morning Austrian Economics session, and Peter Boettke
talk “What is Left out of Mainstream Economics Textbooks?”.
Led by Liya Palagashvili, the Austrian session was well
attended. After a brief and competent overview of some
major themes in Austrian economics, the floor was opened up to a group
discussion. I was a bit disappointed to
hear some of the attendees conflate Austrian economics with libertarianism or
other moral or preference positions. For example, a
question was asked on whether Austrians thought Bitcoin was good or bad. Another example was when one attendee claimed
that Austrian theory states that fractional reserve banking is fraud. Of course, such comments are grossly in
error as Austrian theory itself is wertfrei, or, said another way, value
free. One’s own
prescriptions or value judgments are outside the scope of the theory
itself. Thus, Austrian theory has
nothing to say on whether Bitcoin is good or bad or if fractional reserve
banking is fraud or not.[1]
Peter Boettke’s talk was an interesting look at the
distinction of what he calls mainline and mainstream economics. As he has explained in the past together with
Fink and Smith, the mainline tradition “... focus their scholarly efforts on
studying how … individuals, acting in their own self-interest, create complex
social arrangements under the division of labor that align individual interest
with the social interest.”, as compared
to the mainstream, who seem to follow
whatever is the current fashion in scholarship and that “Rather than focusing their scholarly efforts
towards studying the social arrangements that emerge to align individual and
social interest, mainstream economists focused their attention on modeling the
choice of cognitively perfect individuals in ideal situations, leaving no room
for institutional analysis and operative mechanisms to explain how markets work
given behavioral deviations from the hypothesized ideal man.”[2]
[3] In essence his talk was an appeal for
replacing homo economicus with homo agens.
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| Peter Boettke with his talk's title slide. |
In all, despite not being overly impressed with all
that happned at the conference, it offered a great ability to connect with
professors, students, and others who are interested in problems of rethinking
economics. It was fun chatting with both Mirowski and Boettke at the conference, as well as other students about a
myriad of topics. From discussing time
and uncertainty with Post-Keynesians, Stigler’s Coase Theorem with Boettke[4],
to the differences between Mises and Rothbard with fellow Austrians, the event
was worth the trip.
[1] Not even all Austrian economists qua moral theorists see it
as fraud either.
[2] Boettke, Peter J., Fink, Alexander and Smith,
Daniel J., The Impact of Nobel Prize Winners in Economics: Mainline vs.
Mainstream (October 26, 2011). American Journal of Economics and Sociology
71(5): 1219-1249; GMU Working Paper in Economics No. 12-43., 1220-1221.[3] For more on this, see Boettke’s 2012 work, Living Economics.
[4] See McCloskey’s article “The So-Called Coase Theorem” for more on this.
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