Occupy Wall Street has thrown off many sparks. A little one landed in academic economics. On November 2, a group of Harvard students walked out on Greg Mankiw’s intro economics course — according to the professor himself “about 5 to 10 percent of the class stood up and quietly left.” Later that day, the Harvard Political Review posted an open letter the dissenters had written to Mankiw:
We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice.
The main complaint of the dissenters, expressed in every paragraph, was bias: “There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.”
A trope began in the comments thread below: it was ironic that these undergraduates had walked out on Mankiw, a leading light of the New Keynesians, apparently thinking that he was an anti-Keynesian. Had they waited until the second semester, when Econ 10 turns to macroeconomics, they would have found the class steeped in Keynes, learning from a guy who said in 2008: “If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes.”
Professor Mankiw, naturally, was given space to defend himself and his course not in the Harvard Political Review or the Crimson, but in the New York Times. He learned his first economics from the famous, blockbuster textbook of Paul Samuelson, whose “own politics were decidedly left of center,” and he turned out just fine. His text is widely seen as the successor to Samuelson’s and he sees himself as following Samuelson’s path, representing the mainstream. “If my profession is slanted toward any particular worldview, I am as guilty as anyone for perpetuating the problem. Yet, like most economists, I don’t view the study of economics as laden with ideology.” Funnily enough, when the first edition of Mankiw’s text came out in 1997, the Economist welcomed it as an antidote to the bias of Samuelson: “Mankiw’s aim, unlike Samuelson, is to elucidate rather than advocate.”
In April 1973, most of an audience walked out on Paul Samuelson. It was not a coordinated walk-out but an aggregate expression of the preferences of many individuals. At that time he was the most famous living economist, a Nobel laureate, author not only of the dominant introductory textbook but the template for all introductory textbooks, and dean of the liberal technocratic economics that had framed policy debate since the 1940s. He was an establishment Democrat, having been adviser to Kennedy and LBJ, and he wrote a regular column for Newsweek, communicating to a popular audience his take on the unsettled economic landscape of the decade. The neoclassical-Keynesian synthesis — “bastard Keynesianism” as Joan Robinson called it — was fraying as unemployment and inflation climbed together. Samuelson was more closely associated with the Phillips curve — the idea of a trade-off between inflation and unemployment — than Bill Phillips himself. He and everything he stood for were under attack from two sides.
Everyone remembers the man on his right — Milton Friedman — whose columns alternated with Samuelson’s in Newsweek. The challenge from his left is less familiar. But in the early 1970s Samuelson felt it sufficiently to revisit that “minor post-Ricardian” Karl Marx and write papers in major journals on the “transformation problem” — ultimately dismissive, but serious. In April 1973 he came to speak at the University of Sydney and found a department riven by ideological tension:
Samuelson had spoken elsewhere about the radical challenge to economic orthodoxy that was developing in the USA and internationally, providing his own rebuttal of the dissidents’ arguments. Many students and staff at the University of Sydney would have been interested to hear him on that theme. Instead, influenced by Professor Simkin who chaired the event, Samuelson talked on an abstract topic in mathematical economics that was neither interesting nor intelligible to most of his audience. It was as if this distinguished economist were illustrating the very problem with which the dissidents were concerned. When he started his lecture, the largest lecture theatre in the Merewether Building (where the Faculty of Economics was located) had been packed; by the time he was finished it was nearly empty. [Gavan Butler, Evan Jones and Frank Stilwell, Political Economy Now!, Sydney University Press, 2009, pp. 8–9]
It turned out to be a foreshock. Four months later at Sydney 200 students boycotted their normal economics lectures for a day of protest and began collaborating with dissident academics to design and fight for an alternative curriculum. It was the beginning of a long and bitter campaign that would over the next few years escalate from petitions and teach-ins to occupations and a university-wide strike. “Political economy,” as the movement was known, achieved alternative classes, then a major, and finally — years later — an independent department.
What happened at Sydney was part of a much wider, international movement. Greg Mankiw, in his New York Times apologia, wrote that the walkout of his own class triggered nostalgia for his own 1970s undergraduate days “when the memory of the Vietnam War was still fresh and student activism was more common.” Harvard itself was an early battleground in the struggle for space for radical economics. In December 1969, a group led by young Harvard economist Arthur MacEwan stormed the business meeting at the American Economic Association’s annual convention to throw down a gauntlet: “Our conflict is a basic conflict of interests. The economists have chosen to serve the status quo. We have chosen to fight it.” At the same conference eminent Harvard professor John Kenneth Galbraith presented a paper on “economics as a system of belief”: “[E]conomics has excluded socially inconvenient analyses, at least until some combination of pressure — the need for practical action, the social intuition of the nonprofessional, competent heresy within the profession — has upset the accepted view.”
In the next few years, radical economics flowered at Harvard, thanks to a coalition of undergrads and grad students and untenured faculty, with the tacit support of some of the established professors, including some big names — not only Galbraith, but Nobel prizewinners Kenneth Arrow and Wassily Leontief. By 1973 orthodoxy had asserted itself in the form of tenure denials to MacEwan, Samuel Bowles, Herbert Gintis, and Thomas Weisskopf. Only Stephen Marglin survived, having already received tenure before the storm. (He’s still there teaching critical courses in economics — the open letter to Mankiw complains that his alternative intro course is not available this year.)
Similar dramas were played out on campuses all over, and the fight for radical economics became a protracted war of position in the labyrinthine trenches of academia. Tenure is denied in one department, while another across town reaches critical mass: Bowles and Gintis were snapped up by the University of Massachusetts at Amherst, alongside Stephen Resnick and Richard Wolff, in a package deal deliberately creating a heterodox economics department. The Marxists, feminists and other radicals made common cause with others exiled from the kingdom of modernizing economics departments: the economic historians and historians of economic thought, the post-Keynesians, the institutionalists, even in some cases the Austrians. New conference circuits developed, and radicals tried to make themselves useful outside academia — to activists, to unions, to their communities. Journals sprung up, many of which are with us today: the Review of Radical Political Economics, Capital and Class, the Cambridge Journal of Economics, the Journal of Post Keynesian Economics, the Journal of Australian Political Economy. Fortresses rose — at Sydney, at Amherst, at the New School for Social Research — and fortresses fell — most regrettably, at Cambridge.
It would be a mistake to see the issue simply in terms of a battle of ideas, with mainstream economics wholly misguided, a delusional worldview. The radical critique has always been more subtle than that. The founding statement of the Union for Radical Political Economics (URPE), from 1968, did not criticize mainstream economics for being wrong, or for using misguided techniques or methodologies — in fact, it went out of its way to acknowledge “the value of some of the tools and concepts of modern economics.”
Mainstream economics is both an ideological bastion of capitalism and a genuine social science. As Julio Huato put it in a talk to the membership meeting of URPE this past October, “the ideas of the economists would not be as consequential, as practically important, in fact as harmful as they are, if they simply were a bunch of absurdities without connection to the society we live in.” There is, to be sure, an awful lot of plain bad economics out there, from the doctrine of Ricardian equivalence to real business cycle theory. Abstraction is necessary to all science, and especially social science, but the wide streak of formalistic rationalism in economics effectively shields a lot of theoretical economics from any encounter with evidence.
But many economists are genuinely interested in how the economy actually works, and there are heavy pressures on economics to be useful. A large proportion of the profession works outside the academy, and much of the discipline is shaped there — in central banks, treasuries, international regulatory bodies, and financial institutions, where practical considerations reign.
The figure of Mankiw exposes a strange cultural dissonance in a certain liberal view of economics. He is on the side of the devils: chair of the Council of Economic Advisers under President Bush, then official adviser to Mitt Romney. He is on the side of the angels: a self-proclaimed Keynesian, scourge of the conservative New Classicals, “saltwater” economist fellow to Paul Krugman, and card-carrying member of the reality-based community. As he put it in a politely devastating take-down of real business cycle theory in 1989, when it was still in the ascendant, “One theory may be more ‘beautiful,’ while another may be easier to reconcile with observation . . . Without such evidence, their theories will be judged as not persuasive.”
Mainstream economics is a bulwark of the center, not the right. At least since the great march of economists into the state during and after World War II, its heart has been technocratic. The rise of “rational expectations” and the revanchist New Classicals in the 1970s and 1980s was really an aberration — and its impact outside of academia was shallower and more fleeting than many realize. The movement of mainstream economics and policy back towards neoclassical-Keynesianism long predates the crisis; in fact, in some respects, it never went away. When Willem Buiter said in 2009 that the past thirty years of academic macroeconomics had been “a costly waste of time,” and Paul Krugman called it “spectacularly useless at best, and positively harmful at worst,” they were repeating a line that had been common among central bankers for years. A Reserve Bank of Australia paper noted in 1999 that the 1990s had seen macroeconomic analysis return to where it was circa 1971: “the intervening years had led to some refinement of the analysis, but the expectations-augmented Phillips curve had returned and once again was at center stage.”
That puts the wrong turn, according to the technocrats, somewhere between Milton Friedman and Robert Lucas — or really, somewhere during Milton Friedman’s own career. Friedman’s monetarism was a mistake. His politics may be gauche. But the Friedman of the “natural rate of unemployment” and the “expectations-adjusted Phillips curve” was not at all a mistake for the technocrats. In fact, he represents the apogee of the technocratic neoclassical-Keynesian synthesis rather than a rejection of it. Brad DeLong, doyen of the liberal econo-bloggers, is quite explicit about it: “Friedman completed Keynes.”
There is no surprise, then, in a New Keynesian being Bush’s chief economic adviser. We are all Keynesians still. If economics is back where it was at the turn of the 1970s, so, in a sense are its critics. The chief complaint raised in the founding document of URPE was not that mainstream economics was delusional, or biased to the right, but that it was technocratic. It framed the economy as a technical problem to be solved with the correct application of scientific principles by policymakers. It had nothing to say about the truly burning problems of the day — “the economics of the ghetto, poverty in the American economy, international imperialism, interest-group analysis, the military-industrial-university complex . . . ” — because they were not amenable to mere policy solution. The point of radical economics was to address itself to new agents: not policymakers but “the social movements of our day,” who “need an economic analysis offered in a sensitive manner.” Economics must change to “reflect the urgencies of its day”, integrate with political science, sociology and social psychology to “break out of the bonds of narrow specialization,” and move beyond the piecemeal treatment of “tiny fragments of large interrelated problems.”
Professor Mankiw’s response to the burning problem raised by his dissident students fits the pattern: “Widening economic inequality is a real and troubling phenomenon, albeit one without an obvious explanation or easy solution.”
If economics is more monolithic than most social sciences, it is less so than it seems from the outside. Radicals should think of it as terrain, not the enemy itself. Many of its strategic points favor the enemy, but parts of it are open for contest. Occupying economics is about widening and shoring up the space in which radicals can survive, so as to develop analysis aimed at social movements. It is not about politicizing economics, because economics has always been politicized.
What are the prospects? Some signs are better than at any time since the 1970s. Radical and heterodox economics have hung on for many years in isolated departments and across networks of lonely researchers. For years, conferences ended with gloomy plenary sessions on the future of heterodox economics, the attendees edging towards retirement, likely to be replaced by game theorists and experts in behavioral finance. The crisis that broke out in 2007 brought a new lease on life, new associations, new journals, and even a $50 million fund from George Soros. At the same time, it plunged many universities and the states and endowments that fund them into trouble. At the height of the struggle in economics in the mid 1970s, an American Economic Association committee was charged with investigating cases of alleged political discrimination in dismissals and tenure denials. Its chair, Kenneth Arrow “explained that there was great difficulty in determining whether dismissals resulted from political beliefs, the quality of a professor’s work, or the recession, which had forced some colleges to lay off faculty.” The same forces are at work today amid a much more precarious situation, especially for junior faculty.
The Mankiw walkout seemed to come from nowhere, the students apparently not plugged into the existing alternative economics networks. But it cheered those networks immensely. If it happened at Harvard, it could happen anywhere. What happens next will depend on the links being forged right now between disaffected students, tenured old-timers, and young grad students and faculty prepared to stake their careers on a new wave of critical economics. “The mainstream,” writes Duncan Foley, “dialectically produces its own negation.”