Archive for September, 2009

Academic Freedom

Cary Nelson, national president of the American Association of University Professors, has contributed a long article about the whole Neve Gordon affair.

The essence of his analysis and recommendation:

Indeed it has been clear from the outset, as [university president] Carmi openly acknowledged in an August 27th letter to Ben-Gurion faculty, that donor anger is a major factor in her attacks on Gordon. Inside Higher Ed reported that Amos Drory, Ben-Gurion’s vice president for external affairs, wrote to complaining donors to say “the university is currently exploring the legal options to take disciplinary action.” It is not the first time fund-raising priorities, not principle, have shaped administrative understandings of academic freedom, but that does not blunt the lesson that this represents one of the most severe threats to academic freedom.

Carmi’s own academic freedom, one may note, would have allowed her to reject Gordon’s views while asserting his right to hold them. That is, in effect, what Gordon recommended: “She has to cater to the people that provide the money, so a strong letter of condemnation of my views would have been fine with me. But there’s a difference between saying you disagree wit me, and threatening me.” Instead she mounted an international assault and sought to gut academic freedom in the process. While Gordon has job security, his vulnerability to myriad other forms of internal reprisal is obvious. There are many kinds of research support and institutional recognition that require administrative endorsement. More serious still is the message Carmi has sent to untenured and contingent faculty: exercise your academic freedom at your peril. The chilling effects at Ben-Gurion University have hardened into a deep freeze. There is reason for principled faculty to question the president’s ability to serve in her position.

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Certain ideas achieve hegemony in economics in a number of different ways: discursively (when particular ideas are taken as a kind of common sense), via journals (such that some ideas get published in “top” journals and others not), as a result of grants and other funding (that go to some economists and not others), pedagogically (when some ideas are presented in textbooks and the classroom, and others are not), and many other ways.

According to a recent article by Ryan Grim, based on an investigation by the Huffington Post, the Federal Reserve has succeeded in buying one wing of the economics profession, the one focused on the study of monetary economics:

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession.

FOLLOW-UP. . .

There was much discussion of monetary policy and the role of Central Banks at the Sibos conference in Hong Kong. One of the speakers was Joseph Yam, who is stepping down as chief executive of the Hong Kong Monetary Authority after 16 years:

He said there was a conflict between the private, short term interest of financial groups to maximise profits and the public interest of effective financial intermediation that provided support to the economy. “This conflict has not been talked about much, if at all, even in central banking forums,” he said.

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As I wrote previously, there’s a resurgence of interest in Marx. People writing about and giving lectures on him and his ideas (especially in relation to the current crisis). Unfortunately, many of the writers and lecturers know little about Marxian theory and recent scholarship on Marxian ideas (understandable, at least in the United States, given past history) or treat that theory seriously (unfortunate, especially when they don’t know much). So, Marx and Marxian ideas get set up—and then quickly knocked down.

That’s certainly the case with Professor DeLong’s recent lecture, “Understanding Marx.” He repeats much of the old nonsense (Marxian theory is based on economic determinism, class doesn’t have much to do with changing the world, and so on) and then reduces Marx to “six big things to say”—inevitably, 3 right and 3 wrong. What an injustice to DeLong’s students, who are simply not getting a view of Marx and Marxian theory informed by serious scholarship.

Let me focus on just one of DeLong’s points, concerning the labor theory of value. Here’s DeLong:

What I think is going on inside Marx’s head is something strange. To say that “the value relation[s] between the products of labour… have absolutely no connection with their physical properties” is simply wrong: if the coffee beans are rotten–or if their caffeine level is low–they have no value at all, for nobody will buy them. Marx says that the value of a good is something inscribed within it and attached to it–the socially-necessary labor time for its production—that then bosses people around. And it is the values–not the prices at which things are actually bought and sold–that are the elements of the real important reality. And those values: “appear as independent beings endowed with life and entering into relation both with one another and the human race.”

And his critique?

Now I have never found anybody who thinks this way.
Nobody I talk to believes that “values” are objective quantities inherent in goods by virtue of the time it took to produce them.

Now, there are lots of things that can be, and have been, said and written about Marx’s labor theory of value. But the idea that it can be simply dismissed because DeLong doesn’t know anybody “who thinks this way” betrays a lack of seriousness.

What DeLong doesn’t get is (a) Marx developed a critique of political economy, which was aimed at the mainstream economics of his day (which was based on the labor theory of value) and (b) different theories of value have different entry points and logics. So, analyzing the “language of commodities” from the Marxian perspective of labor and class is surely quite different from analyzing it in terms of the exogenous features of nature (preferences, technology, and endowments) presumed by neoclassical economists.

That’s what one does in teaching economics: explain the various theories (including their assumptions and logics) and sketch out their consequences (for the world of ideas and for society). That’s a task that appears to be too difficult for Professor DeLong.

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As the news of the decision to eliminate the Department of Economics & Policy Studies at the University of Notre Dame spreads, I am receiving reports of cutbacks in programs and centers at a wide range of universities. In some cases, the decision is couched in terms of financial exigency; in other cases, such as at ND, there is no mention of finances. In all cases, however, the result is the elimination of pioneering programs and a decline in the quality of higher education.

Just last night I heard about the elimination of the Cultural Studies program at the University of North Carolina-Chapel Hill and the the Center for Interdisciplinary Research in Philosophy, Interpretation, and Culture at SUNY-Binghamton.

The problem is, no one really knows what to do. Clearly, though, the university, as we have known it, is in crisis. Part of the problem is financial. Part of it is top-down university decision-making and the lack of faculty governance. The fact is, many spaces that do not conform to the most mainstream academic canons are being eliminated.

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The controversy surrounding Neve Gordon’s decision to support the boycott of Israel is covered in today’s Chronicle of Higher Education.

Rivka Carmi, the president of Ben-Gurion University continues to astound:

“If I had lived in South Africa when it was an apartheid country, I would have left,” she told The Chronicle. “I wouldn’t be able to live in a country that I believed was an apartheid state.”
“I don’t understand how he can carry on doing his job in an institution that he is damaging by his very public comments. I don’t understand how he can condemn the university and continue to take the salary that it pays,” Ms. Carmi said.
“There is an inherent contradiction between calling for academic boycotts and fulfilling the responsibilities of leading an academic department in research collaboration, publications, and international conferences,” she said.
Ms. Carmi said Mr. Gordon’s opinion essay had branded Ben-Gurion as a radical, left-wing university and was endangering potential donations, crucial for future development. Several major donors have written to say they will no longer support the university unless action is taken against him, she said.

Here’s Gordon’s response:

Mr. Gordon said he accepted that there was “tension” between his support for a boycott and his duties as department chairman, and he said he had considered stepping down. But he called Ms. Carmi’s comments “a form of harassment and intimidation.”
“My stepping down as department chair would have caused so much damage to academic freedom in Israel that we could not do it,” he said. “If someone has to lose his position as department chair because of his opinion, however controversial, it creates a precedent.”

And an outside observer:

Cary Nelson, president of the American Association of University Professors, said he was disturbed by Ms. Carmi’s attitude but encouraged by the debate it had aroused.
“The kind of statements that Rivka Carmi has made have an immense chilling effect on untenured faculty from exercising the same freedom of speech,” he said. “If Neve Gordon had been untenured and had written this op-ed and then came up for tenure, a president who says this oversteps the boundaries of academic freedom would seem implicitly willing to fire him.”

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Many people have sent email messages or posted online comments—including students and alumni (here, here & here)—expressing their concern about the decision to close the Department of Economics & Policy Studies at the University of Notre Dame.

I have received many questions about what is going to happen to me and my colleagues, which I have answered in private email messages. But I do want to clear up one common confusion publicly:  financial considerations play absolutely no role in the decision. Finances have never been invoked to explain the decision. Notre Dame has weathered the crisis better than many academic institutions. And eliminating the department saves, at most, the summer salary of the chair of the department.

This makes the decision at Notre Dame different from those at other academic institutions, both private and public, that are facing serious financial crises at the moment. The only conclusion is this is an academic witch hunt. The decision to close ECOP is both political and intellectual: it contravenes faculty governance and its effect is to undermine critical thinking and intellectual pluralism—at Notre Dame, in the discipline of economics and the academy as a whole, and in the larger world.

Economics—the discipline

Posted: 13 September 2009 in Uncategorized
Tags:

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from the Adbusters Kick It Over campaign. . .

Milton Friedman & Arnold Harberger [c. 1970]

Milton Friedman & Arnold Harberger (c. 1970)

As expected, the Chicago School has responded [Word doc] to Krugman’s critique—in the person of John Cochrane.

The essence of Cochrane’s response is that Krugman is now doing politics not economics—the age-old apology for those who think they’re doing “real economics” and the rest of us something else:

The only explanation that makes sense to me is that Krugman isn’t trying to be an economist, he is trying to be a partisan, political opinion writer.

And that economists need to use more, not less, mathematics:

the problem is that we don’t have enough math. Math in economics serves to keep the logic straight, to make sure that the “then” really does follow the “if,” which it so frequently does not if you just write prose. The challenge is how hard it is to write down explicit artificial economies with these ingredients, actually solve them, in order to see what makes them tick. Frictions are just bloody hard with the mathematical tools we have now.

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In the past 6 months, there have been three serious, full-scale indictments of neoclassical theory. The authors and the publications are mainstream enough so that many people—inside and outside the discipline—are having to take notice. The first is Patricia Cohen’s “Ivory Tower Unswayed by Crashing Economy”; the second, “The Last Temptation of Risk,” was penned by Barry Eichengreen; and the most recent, and probably the most read, is Paul Krugman’s “How Did Economists Get It So Wrong?”

While all three authors fundamentally challenge, and call for an alternative to, the way mainstream economics has been practiced in recent years—and therefore the way the discipline of economics and economic policymaking have been organized—they have different analyses and solutions.

Let’s start with Cohen. She recognizes that economists who did not fit within the neoclassical orthodoxy were marginalized:

For years economists who have challenged free market theory have been the Rodney Dangerfields of the profession. Often ignored or belittled because they questioned the orthodoxy, they say, they have been shut out of many economics departments and the most prestigious economics journals. They got no respect.

And while the crises of capitalism have led many to question the usefulness of neoclassical theory, the discipline itself has been slow to change:

Yet prominent economics professors say their academic discipline isn’t shifting nearly as much as some people might think. Free market theory, mathematical models and hostility to government regulation still reign in most economics departments at colleges and universities around the country. True, some new approaches have been explored in recent years, particularly by behavioral economists who argue that human psychology is a crucial element in economic decision making. But the belief that people make rational economic decisions and the market automatically adjusts to respond to them still prevails.

But she does recognize that there have long been alternatives to the neoclassical orthodoxy:

There are a handful of departments that have welcomed alternative theorists, like the University of Massachusetts, Amherst; the University of Massachusetts, Boston; the University of Utah; and the University of Missouri, Kansas City (where the Heterodox Economics Newsletter is published).

The same, unfortunately, cannot be said of Professors Eichengreen and Krugman. Perhaps that makes their indictments even more compelling for the mainstream, in the sense that neither of them even deigns to recognize the existence of heterodox economics or of departments where such theories are taught and practiced. What this means is the alternatives they offer are narrowly circumscribed by the pendulum swings that have long characterized mainstream economics—between (for Eichengreen) more rationalist and more empiricist approaches and (for Krugman) more neoclassical/”freshwater” and more Keynesian/”saltwater” approaches.

For Eichengreen, the “great credit crisis” caught mainstream economists unaware:

We now know that much of what we thought was true was not. The Great Moderation was an illusion. Monetary policies focusing on low inflation to the exclusion of other considerations (not least excesses in financial markets) can allow dangerous vulnerabilities to build up. Relying on institutional investors to self-regulate is the economic equivalent of letting children decide their own diets. As a result we are now in for an economic and financial downturn that will rival the Great Depression before it is over.

But the problem is not with the discipline of economics but, rather, with the way mainstream economics was appropriated:

One interpretation, understandably popular given our current plight, is that the basic economic theory informing the actions of central bankers and regulators was fatally flawed. The only course left is to throw it out and start over. But another view, considerably closer to the truth, is that the problem lay not so much with the poverty of the underlying theory as with selective reading of it—a selective reading shaped by the social milieu. That social milieu encouraged financial decision makers to cherry-pick the theories that supported excessive risk taking.

The solution he offers is to move away from mathematical modeling and turn in a more empirical direction:

The twenty-first century will be the age of inductive economics, when empiricists hold sway and advice is grounded in concrete observation of markets and their inhabitants. Work in economics, including the abstract model building in which theorists engage, will be guided more powerfully by this real-world observation. It is about time.

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Krugman also indicts mainstream economists’ fascination with mathematical modeling:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. . .the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

This physics-envy led them to fetishize free markets and forget about all other factors:

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

While Krugman puts most of the blame on the Chicago School/freshwater/neo-neoclassical economists, he argues that even New Keynesian/saltwater/neoclassical economists must shoulder part of the blame:

Their framework, unlike that of the Chicago School, both allows for the possibility of involuntary unemployment and considers it a bad thing. But the New Keynesian models that have come to dominate teaching and research assume that people are perfectly rational and financial markets are perfectly efficient. To get anything like the current slump into their models, New Keynesians are forced to introduce some kind of fudge factor that for reasons unspecified temporarily depresses private spending.

So, if both sets of neoclassical models are fundamentally flawed, where does Krugman see the solution? In a bit of tinkering around the edges:

Here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.

All three authors therefore recognize that neoclassical economics, in the way that it has been developed and practiced over the course of the past 30 years or so, is fundamentally flawed. The mainstream discipline, beholden as it has become to neoclassical theory, stands indicted. But only Cohen has the ability to see beyond neoclassical economics and to understand that there are many different approaches to economics—Marxian, Post Keynesian, feminist, institutionalist, and so on—that did not blind their practitioners to the real possibility of capitalist crises.

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It’s official: the University of Notre Dame has decided to eliminate the Department of Economics & Policy Studies. The existing faculty in that department have been encouraged to find a position in another unit, at ND or elsewhere.

No explanation has been given as to why such a move is necessary. What it means, however, is that the only department of economics that will remain at ND (currently the Department of Economics & Econometrics) is devoted exclusively to neoclassical theory (here is a history of the creation of the two departments).

Here are excerpts from the ECOP mission statement:

The mission of the Department of Economics and Policy Studies is to teach economics at the undergraduate and graduate levels and to conduct research in economics in a distinctive way.

The Department is distinctive in a number of ways, including:

  • It has a strong commitment to analyzing issues relating to socio-economic justice and ethics in economics.
  • Its faculty members have a strong interest in the development and use of alternative methodological approaches – such as post-Keynesian, radical and institutional economics- to the study of economics in addition to the orthodox neoclassical approach.
  • Its faculty members are concerned with the ethical dimensions of individual economic behavior and epistemological questions.
  • Its faculty uses broader political economy approaches emphasizing the roles of history and institutions, in addition to formal theoretical and quantitative analysis.

This distinctiveness is related to the Catholic identity of the University of Notre Dame and is reflected in the research activities of the Department’s faculty and in the courses offered to undergraduate and graduate students.

Here’s an excerpt from the ECOE mission statement:

Our mission is to achieve and to sustain excellence in research and teaching at both the undergraduate and graduate levels. We are a neoclassical economics department committed to rigorous theoretical and quantitative analysis in teaching and research.

The decision to eliminate ECOP is a blow to academic freedom. And, of course, ironic: the university is embracing neoclassical theory precisely when, in the context of the current crisis, that theory is being called into question and the conversation about economic issues and events, after a long period of neoclassical hegemony (and the economic and social disasters that have been the result), is finally opening up.

Here’s the story from today’s Observer (the student newspaper at ND):

Future of economics department uncertain

By: John Tierney

Posted: 9/11/09

The College of Arts and Letters plans to discontinue one of its two economic departments in the next two years, according to College Dean John McGreevy.

In the future, McGreevy said there will not be two economics departments in the College of Arts and Letters. Currently, the College houses the Department of Economics and Policy Studies and the Department of Economics and Econometrics.

McGreevy said any action he takes will ensure that the voices of the Economics and Policy Studies professors continue to be heard.

“We’re trying to create the best economics conversation we can have at Notre Dame,” McGreevy said. “There are lots of places around the University where we need economists,” including at the Kellogg Institute, the Kroc Institute and the Poverty Studies program.

He said the University has not made a final decision on what to do with the Department of Economics and Policy Studies, but that there will not be two departments in the future.

“What I’ve said in a meeting with both departments is that two departments is not the best strategy long-term,” he said.

The Department of Economics and Policy Studies was the primary economics department at the University until the creation of the Department of Economics and Econometrics in 2003, according to Professor of Economics and Policy Studies David Ruccio.

“The University decided in 2003 to create another economics department,” Ruccio said. “The majority of people in the existing department voted against the idea and the College Council voted against the idea.

“The people who wanted to create a new department went to the Academic Council and got a positive vote,” Ruccio said.

Of the 21 economics faculty members in 2003, 16 voted against the split and five voted in favor, according to Ruccio. The five members who supported the split went to the Department of Economics and Econometrics, which supports only neoclassical economic theory.

The 16 members who voted against the creation of a new department remained in the Department of Economics and Policy Studies, whose mission statement is to teach and conduct research in “a distinctive way” that is “related to the Catholic identity of the University.”

“Economics and Policy Studies has a more open or pluralistic approach to economics so lots of different theories are taught and used in research,” Ruccio said.

He said this pluralistic approach is especially valuable in the current economic crisis, when the neoclassical approach “has been most called into question.”

Ruccio said he believes his department “is going to be dissolved over the course of the next two years.”

Ruccio said that the different approach of the Department of Economics and Policy Studies helps “make Notre Dame distinctive.”

“Lots of universities only teach neoclassical economics,” he said.

Notre Dame is different “partly because of the Catholic tradition of social justice.”

“Now students will only get one approach and that’s a shame,” Ruccio said.

Without the Department of Economics and Policy Studies, “there won’t be a department that would be devoted to a conversation rather than a monologue on campus,” Ruccio said.

Students are less likely to be exposed “to a variety of different theories, when the department no longer exists,” he said.

“That’s especially true if Economics and Econometrics teaches all the intro courses,” he said.

Ruccio said the need for different approaches in economics stems from the concept of the liberal arts education.

In a liberal arts education, “students are exposed to critical thinking and the only way to do critical thinking is to be exposed to a variety of approaches,” he said.

McGreevy said that moves to other roles in the University could allow Economics and Policy Studies professors to have a larger impact.

“Our colleagues in Economics and Policy Studies have much expertise,” he said. “We’re asking where in the University they can have the most impact.”

McGreevy said the tenure of Economics and Policy Studies professors will be respected.

“We can’t be fired,” Ruccio said. “But from what we’ve heard, we have been encouraged to find another position either inside the University or outside the University.”