Students Call For Economics To Break From Free Market Theory

Students want courses to include analysis of the financial crash that so many economists failed to see coming. Photograph: Eddie Mulholland/REX

Economics students from 19 countries have joined forces to call for an overhaul of the way their subject is taught, saying the dominance of narrow free-market theories at top universities harms the world’s ability to confront challenges such as financial stability and climate change.

In the first global protest against mainstream economic teaching, the International Student Initiative for Pluralist Economics (ISIPE) argues in a letter to the Guardian that economics courses are failing wider society when they ignore evidence from other disciplines.

The students, who have formed 41 protest groups in universities from Britain and the US to Brazil and Russia, say research and teaching in economics departments is too narrowly focused and more effort should be made to broaden the curriculum. They want courses to include analysis of the financial crash that so many economists failed to see coming, and say the discipline has become divorced from the real world.

“The lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability to food security and climate change,” they say in their manifesto.

“The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. This will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated.”

The move follows a series of protests in the UK led by students in Manchester, Cambridge and London against academics who have been accused of acting as cheerleaders for the market-financial models that helped push the global financial system into the crisis.

Economics undergraduates at the University of Manchester, who formed the Post-Crash Economics Society, recently issued their own manifesto for reform with the endorsement of the Bank of England’s incoming chief economist, Andy Haldane. Haldane, who is currently director of financial stability, said economists had forgotten the links between their subject and other social science disciplines, which can give a broader and more accurate picture of how an economy works.

He said: “The crisis has laid bare the latent inadequacies of economic models. These models have failed to make sense of the sorts of extreme macro-economic events, such as crises, recessions and depressions, which matter most to society.”

In the decade before the 2008 crash, many economists dismissed warnings that property and stock markets were overvalued. US central bank boss Alan Greenspan was a leading figure who argued that markets were correctly pricing shares, property and exotic derivatives in line with economic models of behaviour. It was only when the US sub-prime mortgage market unravelled that regulators, policymakers and banks realised a collective failure to spot the bubble had wrecked their economies.

In his bestselling book Capital in the Twenty-First Century, the economist Thomas Piketty attacks mainstream economic teaching, accusing academics of believing mathematical models without looking at growing evidence that undermines the conclusions. Piketty’s look back over the last 200 years of economic development in search of lessons for the next 100 years is currently the best selling book on Amazon in the US.

He says academics have ignored evidence of growing inequality and its influence on GDP growth since the 1970s.

“For too long economists have neglected the distribution of wealth, partly because of the profession’s undue enthusiasm for simplistic mathematical models based on so-called representative agents,” he says.

The student manifesto calls on university economics departments to hire lecturers with a broader outlook and introduce a wider selection of texts. It also asks that lecturers endorse collaborations between social sciences and humanities departments or “establish special departments that could oversee interdisciplinary programmes blending economics and other fields”.

The manifesto says: “Change will be difficult – it always is. But it is already happening. Students across the world have already started creating change step by step. We have founded university groups and built networks both nationally and internationally. Change must come from many places. So now we invite you – students, economists, and non-economists – to join us and create the critical mass needed for change.”