Economics as the economists quote it “Is the queen of social sciences”. However in this modern world the mainstream economists, who happen to be devoted followers of neo classical economics, believe that the solution to all problems lies in the very core of their school of thought. On the contrary Post Crash Economics Society “(Which is) a group of economics students at The University of Manchester who believe that the content of the economics syllabus and the way it is taught could and should be seriously rethought”[1] What caused the birth of this idea in their minds as well as many others is the fact that the neo classical model which dominates most of the academic curriculums in universities around the world, does not cater to or explain reasons for serious problems like recessions, unemployment, bubbles and market crashes. They mention the Global Crisis of 2008 and how many of the mainstream (neo classical) economists failed to comprehend the situation. The very initiation of this crisis was when BNP Paribas a French bank, halted withdrawals from three of its hedge funds, which drove past all regulations coherent with the neo classical theory of free markets. This further led to a liquidity crisis (lack of conversion of assets to a liquid medium; cash) for the investors of the fund leading to a recession. Furthermore what aggravated this situation even more was the U.S housing bubble, something again what the neo classical theory is blind to. The classical economists believe that the markets always rightly give the price values to assets which are the houses in the U.S housing bubble case and thus they believe bubbles do not even exist. It was this Global Crisis resultant of the housing bubble as well as evaporation if liquidity that accelerated the demand for more regulated and controlled financial markets in times of recession. The economists are so adamant in absorbing the neo classical theory which they follow as a faith that they do not want to deviate from it in order to develop theories more suited to the current status quo “Economics ought to be a magpie (collector) discipline, taking in philosophy, history and politics. But heterodox (deviating) approaches have long since been banished from most faculties, claims Tony Lawson” [2]. Initially economists drove the engine of the classical economics theory on the basis of assumption and now have even backed it up with fancy mathematics which has really taken the theory away from reality.
Paul Krugman, who is a Nobel Prize winner censured this change from reality to the Economics dressed up in mathematical equations which does not work in the real world “As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad (dressed) in impressive-looking mathematics, for truth.”[3]. All of the articles constantly revolved around the need for diversity in the courses taught in economics based academia. The students from Manchester University who have seen students graduate and become economists with no idea of any school of thought but classical economics are longing for diversity in their academic curriculum too as they don’t want to be trained just for city jobs but they need an insight about how events are really interconnected and the implications of this linkage. “At the moment an undergraduate, graduate or even a professional economist could easily go through their career without knowing anything substantive about other schools of thought, such as post-Keynesian, Austrian, institutional, Marxist, evolutionary, ecological or feminist economics. Such schools of thought are simply considered inferior or irrelevant for economic “science” ”[4] Students and economists all over the world need to have this approach in order to counter economic mentioned in the very beginning of this text. We need to drift our current macroeconomic theories from classical economics towards more realistic approaches like those of John Maynard Keynes, who is not radical in his approach but suggested a revival of the current capitalism based economics. He suggested government intervention in market economies. He was only more against financial markets and Paul Krugman states him in the following way “He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention — printing more money and, if necessary, spending heavily on public works — to fight unemployment during slumps (economic downtrend)”[5]. All of the schools of thought quoted above along with a in depth study of the History of Economic Thought can provide a lot of exposure to previous downturns to broaden the thinking spectrum of current economics students as well as economists. Also governments should support critical analysis of the previous theories instead of incentivizing neo classical economics by giving research funds to those institutes only which follow classical economics as the last reading “Mainstream economics is in denial: the world has changed” suggests. Thus, only an approach like the one mentioned above can train economists to be alert enough to be ready for all that comes their way and also polish their skills in managing labyrinthine problems like recessions and unemployment as well as all other hazards mentioned above.
References
[1]Post Crash Economics Society
http://www.post-crasheconomics.com/
[2] Mainstream economics is in denial: the world has changed
http://www.theguardian.com/commentisfree/2013/oct/28/mainstream-economics-denial-world-changed
[3] Economics students aim to tear up free-market syllabus
http://www.theguardian.com/business/2013/oct/24/students-post-crash-economics
[4] Economics students need to be taught more than neoclassical theory
http://www.theguardian.com/commentisfree/2013/oct/28/economics-students-neoclassical-theory?commentpage=1
[5] How Did Economists Get It So Wrong?
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html
