New group wants to revolutionise the way economics is taught throughout the world

Not for the first time, students are revolting. But this time, as the saying goes, it’s different.

A rebellion by economics undergraduates at Manchester University is rattling teacups in faculty common rooms far beyond the campus. And their insurrection has won the backing of the incoming chief economist of the Bank of England, Andy Haldane.

The students are complaining about the way economics is taught and studied. They argue that Manchester, along with virtually every other academic institution around the world, has granted a monopoly to a single economics “paradigm”.

Boiled down, this is predicated on the idea that individuals in an economy will tend to behave with their financial self-interest foremost in their mind and that people generally have an unchanging view of where that interest lies. Further, it maintains that free markets are, in the main, the optimum way to ensure resources are efficiently distributed.

Mainstream academic economics, the critique continues, is dominated by theory and equation-heavy mathematical models. The students say this puts scholars in an intellectual straitjacket, discourages critical thinking and creates a “monoculture” of professional economists who all adhere to the same (questionable) basic principles.

The Manchester undergraduates have formed the Post-Crash Economics Society to put pressure on the university to offer classes on theories outside the mainstream, including schools associated with the political left, such as Marxism, as well as the libertarian right. They also want to grapple with the work of theorists of financial crashes such as Hyman Minsky and modern “heterodox” economic thinkers.

The society published its manifesto this week, with an enthusiastic forward from Mr Haldane. The document makes clear that the ambition of the Manchester students extends beyond refashioning their own university course. Their explicit goal is to propel a revolution in the discipline profession of economics itself.

Yet the old guard seem to be digging in. The economics department at Manchester this month rejected a proposal by the students to add a module on financial crashes to the undergraduate course. And Simon Wren-Lewis, economics professor at Oxford University, wrote a blog this week criticising the group’s radical objectives. Professor Wren- Lewis, one of the foremost economic critics of the Coalition’s austerity policy, is no reactionary. But he argues that mainstream approach, properly applied and understood, has proved its worth.

So who is right? The central value of economics lies in the extent to which it facilitates our understanding of the world. If non-mainstream approaches can help achieve this end then the students are right and they should, of course, be studied.

The trouble is that time is a scarce resource. Undergraduate degrees are only three to four years long. So the debate hinges on the questions of balance and merit. How much fresh material, if any, should be introduced into courses and how much of the conventional approach should be retained?

There are areas where the basic axioms of orthodox economics have proved their worth. The UK housing market is a good contemporary example. Demand is outstripping supply so prices are rocketing. But there are also areas of life where the mainstream approach has manifestly failed. The financial crisis showed the dominant theory of smooth efficiency in highly-liquid financial markets, for instance, to be nonsense.

The disgruntled students have a point when they argue that the academic economics profession became closed-minded in the years leading up to the financial crisis. Many senior economists assumed that  the major debates of the discipline had been settled. Some humility is now in order.

The task for economists is to give up on the hubristic quest for comprehensive models of economic life and to work out where different, eclectic, approaches are helpful and where they aren’t. John Maynard Keynes, who yearned for the day when economists would be as uncontroversial and as useful as dentists, would have approved of this problem-solving orientation.

But what are the prospects of such a reformation? We have an interesting test case here. The introduction of tuition fees created a market in higher education. Students can now vote with their wallets if they feel they are not getting what they want. If sufficient numbers press for change in the economics syllabus, or flock to institutions that offer it, the market should eventually respond. At least, that’s what orthodox economic theory tells us…