Sure, the crash meant that people lost faith in economics. There’s even been some good work done on how, perhaps, we might think again how the subject is taught. More logic and reasoning, perhaps more data, and less of the maths of macroeconomic models for example. Macroeconomics being the bit of economics we don’t have a very good grip on at present.
But what is also happening is that every crackpot theory people would, politically, prefer to be true is now being advanced as something that must be taught to undergraduates. Which really isn’t the way to do it. We can – possibly should – introduce the chemistry students to phlogiston but only as an example of something which is wrong.
CORE is one of those new economics classes/courses and it is, sadly, making that mistake:
The society was one of 65 associations of economic students from 22 different countries, who in 2014, signed an open letter declaring that the teaching of economics had suffered a crisis. They called for more pluralism in economics education and to be better prepared to tackle a raft of modern issues, including climate change and food security. Only one school of thought—neoclassical—presides over economics, they argued. “This lack of intellectual diversity does not only restrain education and research,” they wrote. “It limits our ability to contend with the multidimensional challenges of the 21st century.”
That’s a particularly stupid criticism. The Nobel this year went to William Nordhaus who used standard neoclassical economics to prove that the carbon tax was the correct solution to that problem. Which is is too, the correct solution, as the Stern Review and every other economist on the planet agrees. The thought that we can’t use standard economics to deal with a modern issue like climate change is simply stupid. Not just ignorant but stupid.
Then there’s this:
It has prompted a near industry-wide period of soul-searching among economists to try and correct their errors. That effort has been helped along by the new era of big data, which has led economists to revisit the wisdom of some long held assumptions. Take the labor market. Recent studies prove that minimum wage increases don’t lead to higher unemployment but have a lasting effect on increases in incomes.
Hmm? What paper is that? Ah, yes, Michael Reich and friends. Having actually read the paper – look, sorry, that’s a rarity even among economists let alone journalists – what is found is the following:
The debate then becomes, well, at what wage does this become true? The argument then becomes intensely political, those to the Left of us arguing that it would take a much higher minimum wage to put people out of work, while those to the Right insist the minimum wage is already too high and is putting people out of a job. I am to the right of this point, despite the use of “us” there. But we’d all actually like proof. At which point we have the University of Washington study into the Seattle minimum wage hike. This says that hourly wages have risen and hours worked fallen. This isn’t a surprise at all. But the hours have fallen more, meaning that weekly incomes have actually fallen among those very low-paid people that minimum wage hikes are supposedly helping. A more recent study from Berkeley tries to refute this but also agrees that it doesn’t have and therefore hasn’t looked at detailed data on hours worked. So, obviously enough, the Berkeley study is missing the claimed effect entirely.
That’s not really a refutation of the standard neoclassical analysis of the minimum wage now, is it?
Which is what brings us to the real problem with these alternatives. They’re not in fact alternatives. Largely, they’re wrong, it’s just that people desire to believe them. And we’ve a name for this sort of thing. Assertions of desired belief are religion, not science. This new new economics really isn’t an advance on the old new economics, it’s a regression back to something much worse than that.