Chinese / English
Home >> Great Minds China Forum >>  1st Great Minds China Forum >>  The Difficulties, Challenges and Opportunities of Contemporary EconomicsThe Difficulties, Challenges and Opportunities of Contemporary Economics
Terry Peach:Pluralism in Economics

My position is clear: what I’m going to argue for is pluralism in the teaching of economics. I believe that economists should be exposed to different schools of economic thought as students if not as teachers. In addition, economists should be exposed to economic history. It seems bizarre to me that we think we can train economists who have absolutely no knowledge of the economic history of the countries they are discussing.

I do have a confession to make. I’m not really an economist. If I have to classify myself, it would be as a historian of economic thought. Does this qualify me for commenting on modern economics? I would argue it does not. Through studying the history of economic thought, one thing can be recognized is that economics has not developed in the linear fashion. It is not simply a case of progressing from relative error to relative truth. Often what we see in the history of economics is not straightforward progress; it is rather changes in direction. For example, I gave a public lecture in Beijing yesterday on Adam Smith. And in that lecture, one of the points I made was that his concept of welfare is a steric concept of welfare, ease of body and peace of mind. It goes back to Plato, and it is not the same as the utilitarian concept of welfare. One cannot say that the changing of concept of welfare was a matter of progress. It was a matter of change, of difference. Studying the history of economic thought may make one aware there are many cases of this thought.

You don’t need me or any other panel of experts to tell you that we are living through challenging economic times. It’s obvious. We do not need economists to tell us that the economy is in trouble. It is obvious. But in times of economic difficulty, we naturally turn to economists for guidance of how long this problem will continue, and perhaps guidance on policy measures that can alleviate the problems. I will take analogy with medicine. When we are ill, we don’t need a doctor to tell us that we feel unwell because we know we are unwell, but we will consult a doctor to diagnose our illness, to give a prognosis of the future course of the illness, and hopefully to prescribe a cure. Let’s suppose the illness we are suffering from is a very serious illness. In that case, we would be wise to consult more than one doctor. We would be wise to get a second opinion, even a third opinion.

Now, if we can bear the pain, let’s turn our minds back to the financial crisis of 2008. To apply the medical analogy, the patient, that is the global economy, was certainly unwell. Indeed, the patient has suffered a major trauma. There was blood all over the operating theater. But where was the doctor? More precisely, where was the doctor who could understand the patient’s medical condition? What about the doctor who could offer a second opinion? Of course, by doctors here, I mean economists. And there was certainly no shortage of economists. Economists are absolutely everywhere: university libraries, university departments, on television, on the radio, you can’t get away from economists. But with few notable exceptions, the economic profession at this time had almost nothing to say about the financial crisis. With some notable exceptions, they were taken completely by surprise. Economic crisis had been reasoned out of existence in theoretical models. And this is a true story in my department in Manchester. I asked the macroeconomics professor what he is discussing for crisis. His answer is “no, unemployment does not happen in my lectures”. I think this was a prevalent position. There was only one course in which the economic crisis will discuss, which was my course on history of economic thought. How did this bizarre situation come about? It will take me too long to explain the pathology behind this condition.

Clearly, in North American universities and British universities, tenure and the promotion is increasingly dependent on publication in a very narrow range of economic journals. If you don’t publish on those journals, you have no career. This process has accelerated, particularly over the last thirty years, with the result that economics departments in North America and the UK become more and more narrowly focused on mainstream economic theory. At the moment there is one group in England who oppose this, the students. That is a ray of hope. It was in the wake of the financial crisis, the students of Manchester established what they call “the Post-Crash Economic Society”, which is now gaining support all over the country. At least students are aware that the economics they are being taught in universities is falling short when it comes to giving them any plausible explanation for what is happening in the world that they live. Now it seems to me this is deplorable state of affairs, regrettable at the very least.

So my plea is for plurality, for not allowing economic departments to become dominated by a single theoretical approach. China has a long tradition in this regard. As I need hardly remind you, many thousands of years ago, China is the country that had 100 schools of philosophy. I think to ask for more than one school of economics to be represented is not to ask too much.


◆please indicate the source if authorized: National Economics Foundation

◆photo:National Economics Foundation