This chapter makes the academic, educational, practical and political case for pluralism in economics. It uses case studies of macroeconomics, the environment and inequality, to demonstrate that academic economics must open up to new ways of thinking.
This chapter sketches out the contours of econocracy, its relationship with the academic discipline of economics and how it has developed in the twentieth century. It then shows in more detail how democracy has been undermined and the idea of the citizen as an active participant in political discussion and collective decision making been lost.
One hundred years ago the idea of ‘the economy’ didn’t exist. Now, improving ‘the economy’ has come to be seen as one of the most important tasks facing modern societies. Politics and policymaking are increasingly conducted in the language of economics and economic logic increasingly frames how political problems are defined and addressed. The result is that crucial societal functions are outsourced to economic experts. The econocracy is about how this particular way of thinking about economies and economics has come to dominate many modern societies and its damaging consequences. We have put experts in charge but those experts are not fit for purpose. A growing movement is arguing that we should redefine the relationship between society and economics. Across the world, students, the economists of the future, are rebelling against their education. From three members of this movement comes a book that tries to open up the black box of economic decision making to public scrutiny. We show how a particular form of economics has come to dominate in universities across the UK and has thus shaped our understanding of the economy. We document the weaknesses of this form of economics and how it has failed to address many important issues such as financial stability, environmental sustainability and inequality; and we set out a vision for how we can bring economic discussion and decision making back into the public sphere to ensure the societies of the future can flourish.
This chapter uses evidence from a curriculum review of seven universities across the UK to show how the philosophy which underpins econocracy is being passed down to the next generation of economic experts. The curriculum review analyses 174 economics modules using the course outlines and exams to illustrate that economics students are taught to memorise and regurgitate a narrow body of subject matter not think independently or critically.
This chapter argues that we need new political and economic institutions which are participatory, inclusive and accessible and sets out some ideas about how this can be achieved. These can be the catalyst for the development of a popular democratic culture of public participation in economic discussion and decision making.
Chapter 5 sets out a vision of a pluralist, critical and liberal economics education. However, it also shows how higher education has been reshaped in ways which makes positive reform increasingly difficult and set out a number of practical reforms which could be implemented within the current system.
This chapter covers the leading theories of the markets. The dominant theory
of the Efficient Market Hypothesis distracted regulators, market
participants and central bankers from paying attention to market prices as
signals or from recognizing the existence of bubbles in the housing market,
as Alan Greenspan admitted. The behavioural theorists shift the emphasis
away from examining trends in the market data and developing models to
explain them, to the behaviour of investors in the market, or rather to the
factors influencing their behavior. There are two building blocks of
behavioural finance: one is that in an economy where rational and irrational
traders interact, 'irrationality can have a substantial and long-term
impact on prices'. The second building block is psychology.
Swedburgh's paper is important in that it points out that trust
underlies the smooth, or one might say, efficient functioning of the
Under its dramatic headline, 'Mayer Lehman's chaotic bankruptcy
filing destroyed billions in value', the Wall Street Journal proclaimed
that a 'less hurried Chapter 11 bankruptcy filing would have preserved
tens of billions of dollars of value'. International derivative
contracts were not the only problem. Its collapse resulted in over 75
separate and distinct bankruptcy proceedings immediately, and affected
thousands of financial market participants through its wide range of
contracts. It is important to focus on the procedures set out by
International Swaps and Derivatives Association (ISDA) and to consider what
contribution the Master Agreements were able to make to sorting out the
enormous number and the wide range of derivatives, running into trillions of
dollars. In the aftermath of the financial crisis, regulators turned their
attention to capital, liquidity and supervision, in order to prevent the
failures of what then became known as 'systemically important financial