Learning standards in economics – Part 3

This is Part 3 (and the final part) of my mini-series of blogs – “Learning Standards in Economics”. In this blog I consider the way in which learning standards have evolved in the United Kingdom. I propose that they privilege the curriculum development in favour of a monistic approach – which biases programs to advance the competiive, neo-classical model as the way the real world operates. These standards deter universities from offering pluralistic approaches to economics that promote its broad social science qualities. The narrow monist approach, of-course, serves to reinforce the neo-liberal dominance in economic policy making. Such an approach has been one of the principle reasons the world is mired in financial and economic crisis and doesn’t appear to be able to find a way out. The policy framework being imposed by governments is closing the door to growth and increasing unemployment and poverty rates. It is based on the mainstream textbook models that dominate economics education. I hope the Australian exercise in developing so-called “learning standards in economics” will reject the neo-classical textbook monistic approach and come out in favour of a radical rethink of the way economics is taught in Australian universities. However, given the real politic that surrounds these exercises and the bodies that are key players in the development of the standards I won’t be holding my breath on that one.

The first two parts of this series were:

As I noted in Part 1, I am in the process of developing a new program in Economics at Charles Darwin University as part of my projects while working here for 2 years. But all new programs in Australian universities will eventually be interrogated by a new qualifications framework administered by the Federal Government’s – Tertiary Education Quality and Standards Agency (TEQSA) – which styles itself as “Australia’s independent national regulator of the higher education sector”.

There is a high likelihood that this will end up a repressive exercise reinforcing the dominant paradigm in economics – one that has failed to correctly understand the crisis and propose correct solutions to it.

There is now a Working Party set up to develop the standards in Australia and seems to have been “appointed” via the Australian Business Deans Council (ABDC) in liaison with the Economics Society of Australia. It should be noted that while the Economics Society sounds like a professional association it does not have that status. Unlike, say the accounting profession, there is no certification (thankfully) for professional economists, which means that the Economics Society does not have the same status as the body that oversees standards in accounting.

The ABDC also has no status in the profession other than to be a self-appointed body of senior staff (they call themselves executives) of “business schools” in Australia. The body describes itself thus (Source):

The ABDC is a national council comprising Deans, Heads and Directors of Australian University business faculties and schools. The council seeks to advance and promote business education and research and does this through collective representation of business faculties and schools and their needs to government, industry and the community.

In Australia, unfortunately, the economics discipline has been contained in what were traditionally Economics and Commerce faculties. So a mixture of traditional study (economics) with professional (vocational) study (accounting).

Due to some ill-considered decisions by Federal government in the late 1990s, the hierarchy of tertiary institutions in Australia – which offered universities (education) through to colleges of advanced education (mainly vocational training) and technology institutes (mainly trade and technical training) – was collapsed. So the CAEs were collapsed in universities and Economics and Commerce faculties were forced to incorporate “business studies”.

As governments bowed to the pressure of neo-liberal ideology ad deregulated and reduced oversight on the financial markets in the 1990s, the “business studies” programs attracted lots of demand from students thinking they would become high-powered managers or make millions in financial markets. Some did, most did not.

But internally, the traditional studies of economics were swamped by demand for business subjects and they started to sprout everywhere. The “education” content of these faculties fell dramatically as the “training” content increased.

It wasn’t long before the emphasis of the faculties changed and with that the naming of the faculties. So Economics and Commerce faculties became “Business Schools” and the managerial class took over inventing all sorts of titles for themselves with excessive bonuses to go with them.

Out of this sense of self-importance came bodies like the ABDC, which as they say operate to advance “business education”. I would call it “training” but that is another discussion. Unfortunately, given the way budget models developed (dollars followed student demand), economics started to wilt and under pressure from the “business” deans etc was steadily reconstructed as a service course in the business programs. The pressure has been to cull much of the content and narrow its focus to being about corporations rather than about society.

We have seen the demise of economic history, history of economic thought, comparative economic systems, economic geography, and more as departments have been pressured to offer more units in business economics (whatever that is) and managerial economics and strategy.

I was told by one of these business deans a few years ago that he wanted to cull the “social science” elements of the economics program in his faculty and that economists had to focus on topics such as “international business” whatever that is! Those trends are widespread.

The idea that economics should be part of a liberal arts tradition (which is more the US model) is a distant memory in Australia. There are exceptions – and the Political Economy group at the University of Sydney are such an outlier.

My proposal at CDU is firmly in the liberal arts tradition while at the same time emphasising technical capacities (I am an econometrician after all). So the fact that groups like the ABDC is driving the qualifications framework is not something that should rest easily with anyone interested in seeing economics as a broad social science rather than a narrow service course in business programs.

The reality is that once students are forced to do so-called business studies core subjects there is little room for an expansive treatment of economics in the standard “business” degree.

The – Economics Learning Standards Working Party – provide a link to the similar exercise completed under the aegis of the UK Quality Assurance Agency for Higher Education 2007Economics 2007.

The fact is that neo-liberalism has engulfed most nations and Australia tends to follow countries such as the UK and hasn’t had the courage to stand alone. There are similar developments in the so-called “research assessment” exercises where we followed the demonstrated stupidity of the British system. That is another blog altogether.

The other narrative that influences this discussion is the fact that within the economics profession the neo-classical paradigm (an empirically degenerate one in the terminology of Lakatos) still dominates. So students are subjected to material as if it is core knowledge rather than an artefact of historical debate and thought.

Students in macroeconomics are treated with contempt by the profession who still insist on holding out stories about the way the monetary system operates that do not remotely accord with the real world. My blog discusses these things every day.

So there is not only a diminution of the breadth of the content of economics down to the core going on. The core of economics itself is deeply flawed and of little relevance to world it seeks to inform. Taken together the likelihood of achieving what I would consider reasonable “learning standards” in economics is somewhat remote.

The UK Economics benchmark statement:

… defines the distinctive nature of the subject, the aims of a typical degree programme, the subject knowledge and skills of an economist, methods of learning and assessment and finally a description of two benchmark standards.

We then learn (in Section 2) what the “nature and context” of economics is and that “Economics is a key discipline in the social sciences” and:

Its subject matter engages with other subject areas such as psychology, politics, sociology, anthropology, geography, history and law.

It does indeed although the reality is that the mainstream of my profession rarely show any awareness of those other disciplines in their teaching or their research output. Studies of cross-citation among the social sciences regularly show that economists have the lowest (with psychologists) rates of cross-citation. The profession typically acts as if there are not other disciplines that matter.

We impose narrow a priori assumptions about human behaviour without reference to psychological or other behavioural disciplines, which appear to be violated by broader studies. Individuals do not act as economists assume they do.

And when we relax the narrow maximising assumptions about human behaviour, most of the essential results of mainstream economics fail.

So a sensible approach to economics is to seriously engage with the other social science disciplines, which makes the case for housing economics in “business faculties” rather weak. Why groups like the ABDC should be influential in determining the course of economics education, which has not shown a demonstrated intent to work broadly with the other social sciences is a question that should be asked.

I consider that economics should be taught out of Arts and Social Science faculties and formal programs in economics (leading to bachelor of economics qualifications) should not be swamped by core “business subjects”. Students might choose to integrate the broad social science content of an economics program with business studies but they should not have to do that if they prefer to avoid these subjects altogether.

The program I have proposed doesn’t require students to undertake any subject in the “business school”. The proposal allows students to do a maximum of about 25 per cent of a program in “business subjects” if they want. But they can also do zero per cent and fill up with subjects in history, philosophy, politics, place and space, culture, indigenous studies etc – in other words the broad social sciences.

There was an excellent edition of the – International Review of Economics Education – Volume 8, Issue 2, 2009 – focusing on – Pluralism in Economics Education – which I urge people who are interested in this issue to read.

I also recommend reading the article in the Australasian Journal of Economics Education – Vol. 3. Numbers 1 & 2, 2006 – Four Reasons for Pluralism in the Teaching of Economics – by Frank Stilwell.

In that publication we read:

There is a recurrent tension in the teaching of economics. The subject is typically presented to students as a means of understanding the essentially timeless economic principles shaping the world in which they live – or at least the market economy aspects thereof. Students are inculcated into ‘thinking like an economist’ (Mankiw 2005). What they get, however, is only a sub-set of a broader array of possibilities for understanding the economy in practice. So what is going on in orthodox economics courses may be considered to be ‘training’ rather than education. It is certainly effective, judging by research into how students’ outlooks are shaped by studying economics … Their personal values become more aligned with the individualist, competitive ideologies of the market economy.

There are many research papers now that show how students are indoctrinated in this way. But not only are students “shaped” into accepting the dominant ideology they are also fed a stream of myths and lies which is paraded as truth. This is very evident in the way macroeconomics is taught.

The fact that the mainstream macroeconomic models were in denial as the forces underpinning the financial crisis were pushing the system irrevocably to crisis is a testament of how useless the body of thought is.

Frank Stilwell tells us that:

Pluralist teaching is not a matter of simply presenting different schools of thought: it is about understanding how those competing bodies of analysis developed and how they relate to each other.

So why would a mainstream macroeconomist still teach the money multiplier, for example? It is clearly not a description of how the private banks operate or interact with the central bank. There must be a motivation by the mainstream economists for constructing the bank system in this fallacious way.

Think about what the money multiplier tells us – principally, that the central bank can control the money supply and, in tandem, with the equally fallacious, quantity theory of money, that control or lack of it, is the principle reason inflation arises. Further, it leads the narrative to eschew the direct “funding” of government deficits by central bank monetary base expansion.

Put those strands of thought together and the moral case – dressed up as authoritative theory – emerges – central banks should be independent (and unaccountable) and fiscal policy is dangerous and should be passively subjugated to inflation-targetting monetary policy.

It is a strong linked set of propositions that allows the real intent to be prosecuted – a reduction in activist government policy. Ideology triumphs. But none of the linked propositions are valid in a fiat monetary system.

Pluralist teaching would expose the inner motivations and lead students to understand the world in a different but more knowledgeable manner.

The International Review of Economics Education edition, cited above, carries an editorial, which argues that:

The contrast between the heterogeneity of the discipline and the homogeneity of our undergraduate pedagogy is striking … Given that economics is inevitably plural, there can be no neutral ground on which to stand, outside of the many competing paradigms, from which we can pronounce upon the legitimacy of these schools of thought, or the quality of what representatives of those schools say. The alternative, then, is either pluralism – a tolerant, critical conversation … or monism – what we have today: the hegemony of a particular approach. Other social sciences, by contrast, take a multiplicity of positions and methodological discussion for granted.

Pluralism doesn’t mean “legitimising cranks and cults, unproductive and damaging hangers-on that are parasitic on the discipline”. Rather it privileges sound theory that has empirical content.

In economics we have narrowed the focus not by rejecting the “knowledge” content of the past theories but by simply ignoring them.

There is … no cogent neoclassical critique of – for example – Marx’s labour theory of value, Keynes’s theory of aggregate demand … These contributions have not been refuted, they are simply ignored. And that ignoring, that ignorance, is not a passive failing, but an active process: the long drawn-out process of squeezing the history and methodology of the subject out of the curriculum is part of an organic process of quarantining and sequestering heterodox thought in the discipline …

This is why the process of developing “learning standards in economics” is worrisome and likely, to be, unsatisfactory given the way that process has been designed.

Much of the British standards (cited above) are so general that they allow for a pluralist approach. But when things get specific (Section 5), then the monist ideas start to seep in.

For example, we read:

Economic reasoning is highly deductive, and logical analysis is applied to assumption-based models. However, inductive reasoning is also important.

Economic reasoning does not have to be like this. Who said it was a “highly deductive” discipline? Neo-classical economics is like that but then misses most of the real world as a result of the “assumptions” that inform the analysis.

Those assumptions are typically not remotely applicable to the real world (as noted above about human behaviour) and so the deductions will be similarly flawed. Moreover the ideological values permeate the starting points of the deduction and that is almost never admitted. So the predictions become fact rather than logical extensions of an ideological position.

Take for example, the dot-points under the heading “The transferable concept” (page 4-5) where we are told:

From learning economic principles, the typical student acquires a facility with some key concepts that are present in most of the decision problems that they are likely to face subsequently in their careers.

These dot-points are all privileging the competitive, market-based bias in mainstream economics.

Where is there a description of the importance of understanding history, ideology, philosophy of science, power elites, public purpose, and other issues that dominate the way in which the economy impacts on our daily lives and the natural environment?

These “concepts” are all building blocks of the text-book competitive model. Some are tractable and have relevance. Others are typically meaningless in a real-world context (like marginal products) and only lead the narrative to implausible and wrongful deductions – like, mass unemployment arises because the real wage is too high.


Time is up today and I have to travel back to Australia.

I hope that the standards proposed in Australia will largely reject the neo-classical textbook monistic approach and come out in favour of a radical rethink of the way economics is taught in Australian universities.

However, given the way the profession works in Australia I won’t be holding my breath on that one. The second-best option is that the qualifications framework proposed is so general that a properly pluralist program can still be devised and will satisfy the bureaucratic sanctioning process under TEQSA.

That is enough for today!

(c) Copyright 2013 Bill Mitchell. All Rights Reserved.

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    5 Responses to Learning standards in economics – Part 3

    1. Willy says:

      To be a student requires trust, that ‘true’ knowledge will be revealed. One temporarily suspends their critical faculty in the faith a teachers understanding serves knowledge and your own best interests. Once you have made progress down this plank (money and years of your life you wont get back) and the nagging doubts become the end contradiction, what do you do? Admit you were deceived like the rest of the lemmings, and start over as a fool with less than you had? Or take the accolades, money and nestle yourself in the Big Lie yourself too invested in the deception. Thus the ‘society’ with it’s accolytes. It must be easy for gifted people who were never misled.

    2. larry says:

      Your comment about the University of Sidney, which suggests a favorable estimation of the political science program, may be right about the program. But recently Varoufakis condemned the atmosphere at the university, implying that it exhibited a kind of managerialism gone mad, thereby destroying the collegial atmosphere that had been dominant previously. I am having to read between the lines here. But given the steady encroachment of this perspective over the past 20 years or so – it has been a steadily destructive force in the UK for a long time now, noting what has happened to you and Steve Keen, such a conclusion does not seem to be unreasonable.

    3. larry says:

      A la Stilwell, pluralist teaching is absolutely essential when a discipline consists of competing schools as does economics along with other social sciences. Even ecology, which is a much better model for economics than physics which is totally inappropriate as a model for economics, has competing approaches. While ecology can implement experiments, practitioners feel that these need to be tested in the field. Neoclassical economists don’t appear to think that field testing is necessary at all. This renders their approach to the discipline unempirical. What empirical “tests” for instance were undertaken to assess the empirical character of the Black-Scholes-Merton formula? Why did they decide that the underlying distribution was a normal one? As Mandelbrot showed many years before they produced their formula that market distributions were far from normal, this feature of their formula, which is central to it, immediately renders it invalid.

      Bill obviously reads widely. What about the others?

    4. Senexx says:

      Thanks Bill.
      Though you only touch on it briefly this explains to me why Universities are stupidly putting economics as a subset of business. It should be Business as a subset of Economics.

    5. Robert says:

      Some universities have two economic departments. One for economists and one for the real world (ie. managing a business).

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