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Today’s idiot of the week is an edited version of a paper by Edward Fullbrook, published in issue 54 of the Real World Economic Review. The paper is entitled: “How to bring economics into the 3rd millennium by 2021”
In modern times no respected discipline has ever suffered such a radical and widespread decline in its public credibility as has economics since the Global Financial Collapse. Outside of economics itself, support for fundamental reform of economics has become nearly universal.
[Consider these headlines]
From the Financial Times : “How economics lost sight of real world” , “Academics languish behind the curve set by journalists” , “Needed a new economic paradigm” , “Sweep economists off their throne”
From Business Week : “Why Economics is Bankrupt” , “What Good Are Economists Anyway?”
From Atlantic Magazine: “Will Economists Escape a Whipping?” , “Why Economics Failed” , “Have economists gone mad?”
From the New York Times : “Seduced by a Model”
From the New York Times Magazine: “How Did Economists Get It So Wrong?”
From The Guardian : “Rescuing economics from its own crisis” , “The Nobel prize for economics may need its own bailout” ,
From the Foreign Policy Journal: “Bought-and-paid-for-economists”
From Newsweek: “Blame the Economists”
From the Vancouver Sun: “Economics: Dismal Science or Science at All?”
From the Korea Hearld: “Economics is a religion, not a science”
From the Huffington Post: “How the Fed Bought the Economics Profession”
From tpmcafe: “Should We Bury Macroeconomists at Ground 0?”
From Money Magazine: “How to rebuild a shamed subject”
Three years ago James Galbraith, in a piece for tpmcafe.com, wrote as follows:
The neoclassical trick is to insist that all “real economists” adhere to an arcane and limited set of techniques. The focus on conformity, on a bizarre hierarchy of journals, the dominance of the AEA [American Economics Association] at the annual meetings, all serve to define who is in the tribe, and their rank. Mainstream economics . . . is defined by who accepts the discipline of the cult.
The power structure of the economics profession:[in] six categories of institutions each with its internal hierarchy, These are as follows:
1. university departments,
4. classification systems,
5. economics introductory level textbooks, and
6. the discipline’s basic narrative, which structures its introductory textbooks and is, unless stated otherwise, presumed in most of the conversations that economists conduct among themselves and initiate with the wider world.
Contrary to everyday belief, the institutions currently filling these categories are together closed to major change and capable of resisting all attempts at serious reform. This intransigence and insuperability stems from the fact that as institutions, although independently constituted, they are interlocking and their characteristics inter-determined.
The interdependency between the hierarchies of the departments and the journals, including its determination of who teaches at and publishes in them, is much appreciated and often discussed. Similarly everyone in the profession knows that all of the economics associations in the world take at best third place to the American Economics Association, that it owns three of the five or six journals offering the most kudos and that virtually all of its officers are or have been affiliated with one or more of ten American universities. Because these three sets of institutions interlock so securely, attacking them individually, either from within or from out, will bring no results. Moreover, although the AEA has elections, the slates of candidates nominated by the existing leadership are traditionally rubberstamped by the members.
It seems likely that most economists, including heterodox ones, look upon the Journal of Economic Literature (JEL) Classification System as a neutral piece of intellectual equipment. But it exists as a powerful device for maintaining the status quo. It exerts power in three ways. It quietly conditions economists to approach economics and the economy through a hierarchy of boxes whose permanence rivals the Periodic Table of Elements. It quarantines the papers of dissident but hardy groups like Marxist, Austrians and Feminists. And it silently disappears papers that break all moulds, rather like the secret police in the middle of the night disappear dissenters in dictatorships.
The importance of economics’ introductory level textbooks tends to be under appreciated. In the United States alone more than a million young minds annually take a year long introductory course. For over 90 percent of them this experience is dominated by a textbook little changed from Paul Samuelson’s 1948 text Economics. With few exceptions, their textbook fundamentally shapes how they think about economics and economic issues for the rest of their lives. As such, these books are a powerful and long-lasting cultural and political force.
Gregory Mankiw, who’s textbook Economics is the current world gold standard in introductory level textbooks, wrote a short article for the New York Times titled “That Freshman Course Won’t Be Quite the Same”. (24 May 2009) But the title, mild as it is, overstates Mankiw’s case. The four changes he points to and which he emphasizes are the only ones needed are at best miniscule:
Robert Lucas in an article for The Economist is even more intransigent. He sneers at “people who have seized on the crisis as an opportunity to restate criticisms they had voiced long before 2008”, and he stands by what he calls the “main lesson” from the Efficient Market Hypothesis: “the futility of trying to deal with crises and recessions by finding central bankers and regulators who can identify and puncture bubbles.”
The most powerful institution of all in economics is the basic narrative that shapes the conversation called “economics”, including its textbooks, papers, departmental meetings, and perhaps most important of all, its dialogues with the rest of the world.
[For its inability to realize its own inadequacy, for its contribution to the latest enormous economic disaster, and for its intransigence in reform, we award the American Economic Association and the clueless orthodox economists, Idiot of the week.
[Fulbrook’s paper takes a look at]The vulnerability of the existing institutions
The American Economic Association has long reigned as the world’s undisputed supreme ruling body of the economics profession. In influence and membership it outranks all other economics associations. In 2009 the AEA had 16,944 members. That compares to the 3,300 members of the Royal Economics Society, perhaps the AEA’s closest rival.
However, membership in the AEA is in steady long-term decline. It reached a peak of 22,005 in 1993, since when it has been decreasing almost year by year. Its membership level is now below what it was in the late 1960s.
What does the AEA offer its rank and file members? Basically two things, journals and an annual meeting. Membership in the AEA includes a subscription to seven academic journals. Four of these are new publications beginning this year, introduced perhaps as an attempt to stop the loss of members. The traditional three journals, the American Economic Review, the Journal of Economic Literature and the Journal of Economic Perspectives, are generally regarded, along with perhaps two or three others, as the most prestigious economic journals in the world. Their prestige of course derives from many factors, but the overriding one is the size of their subscriber list, the 16,944 AEA members plus 3,383 institutional subscribers. The latter it should be noted are also year by year decreasing in number and even faster than members. Together they total to 20,327 subscribers.
I do not know what percent of those members are not based in the United States, but presume that their number is significant although not nearly as high as the 60 percent non-UK members for the Royal Economics Society. The AEA annual conference, traditionally the first week in January, attracts on average about 8,000 members. The meeting provides them with an opportunity to present papers, look for jobs and network in a pre-internet fashion.
There are two aspects of the way in which the AEA is constituted that make it highly vulnerable to having its power and influence in the wider world, including that of its journals, usurped by a new organization.
Firstly, what is most remarkable about the American Economic Association’s global hegemony in this globalist age is its nationalist character. Membership may be open to economists from all countries, but the organization is run and tightly controlled by a small and unchanging segment of American educational society.
The second aspect of the AEA that makes its pre-eminent position in the world highly vulnerable is its business model, which was invented in Victorian times when hard copy and postal services were the only options.
[Membership plus journal fees are vulnerable to a web –based internationalistic business model, says Fulbrook, whose paper then goes on to outlign a plan for launching a world association and attendant journals. That plan has been put into effect, in the form of the World Economics Association. If you are listening to this podcast and enjoying it, you are an economist. You should join and support the organization and its journals.
SUGGESTED CITATION: Edward Fullbrook, “How to bring economics into the 3rd millennium by 2020”, real-world economics review, issue no. 54, 27 September 2010, pp. 89-102, http://www.paecon.net/PAEReview/issue54/Kessler54.pdf
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