Mentors Archives

Why do we need to transform economics, and how do we do it?

In a profoundly invigorating keynote speech, Professor Jayati Ghosh, Chairperson of the Centre for Economic Studies and Planning at the of Jawaharlal Nehru University, urges young economists to to take initiative and transform their discipline. Outlining eight problems with the status quo, and providing five clear ways to combat them, she inspires the next generation of economists to forge alliances, gather strength, and most importantly: be bold.

Keynote Lecture to UNCTAD-YSI Summer School 2020

By Jayati Ghosh | It’s truly a delight for me to be able to address the UNCTAD-YSI Summer School. This is not only because these are two groups that I have huge respect for and sympathy with. It’s also because the theme of this Summer School (“From the Transformation of Economics to Economic Transformation: Pathways to a Better Future”) is something very close to my heart, something I and some of my colleagues have been grappling with for decades. It’s really quite energising to realise that there are so many young people willing to engage in this project. So I am going to treat this as an opportunity for me to think through some of the concerns I have, in the hope that all of you are going to be the ones taking forward this transformation.

Mainstream economics, why do I not love thee? Let me count the ways.

First, a lot of it is simply wrong: that is, it is misleading about how economies work and the implications of economic policies and processes. For decades now, a significant and powerful lobby within the discipline has peddled half-truths and absolute falsehoods on many critical issues:

how financial markets work and whether they are or can be “efficient” without regulation;
the role and nature of fiscal policy and the implications of austerity;
what impact the deregulation of labour markets and wages actually has on employment and unemployment;
how patterns of international trade and investment affect livelihoods and possibilities of industrialisation and diversification;
the distributive effects of different macroeconomic policies;
the extent to which private investment responds positively (or not) to policy incentives like tax breaks and subsidies or negatively to increased government spending;
the effects of multinational investment and global value chains on producers and consumers in particular countries;
the ecological damage created by patterns of production and consumption;
whether tighter intellectual property rights are really necessary to promote invention and innovation;

And so on—I could go on and on, these are just some of the more evident examples, and you can probably think of many more if you just take the time to do so. But if these are so wrong, why is this not widely known, and how are they so widely propagated? This is done through a fearsome combination of explicit and implicit controls within the discipline (which I will talk about) and without in the wider world through media and by imbuing policy circles with these mistaken notions.

Some of this comes from the second major problem I have with the discipline: too much of it is in the service of power.

And the power that it increasingly serves is that of large capital and its supporting states: effectively the power of kleptocracy, at national and international levels. Many of the theoretical premises and empirical investigations of mainstream economics are conducted in ways that either divert attention from more critical issues, or assume them away, and thereby produce “results” and associated policy recommendations that reinforce existing power structures and imbalances. Therefore notions of exploitation of labour by capital and the unsustainable exploitation of nature by forms of economic activity, of labour market segmentation by social categories that allows for differential exploitation of different types of workers, of the appropriation of value, of the abuse of market power and rent-seeking behaviour by large capital, of the use of political power to push economic interests including of cronies, of the distributive impact of fiscal and monetary policies—all these are swept aside, covered up and rarely brought out as the focus of analysis. The deep and continuing concerns with GDP as a measure of progress are similarly ignored, and despite the conceptual and methodological flaws in its calculation, it simply continues to be used as the basic indicator to track, just because it’s there. All these slights of hand occur at the global level with regard to the international economic and financial architecture; they happens within countries at the level of macroeconomic policies; and they are evident in a lot of microeconomic analysis and in the development industry that claims to focus on poverty reduction.

Once again, you will all be able to find many more examples of this tendency from your own study and experience—but the problem is that often these tendencies to reinforce underlying power imbalances are not immediately evident unless we actively look for them. They are reinforced because they are simply assumed away in the modelling and not accounted for in empirical analysis. And then the discussion on theoretical models or econometric results is shifted onto a purely technical arena, that moves away from their relevance to the actual world or their viability in explaining economic phenomena.

This is related to the third big problem: the tendency to underplay the significance of assumptions in deriving analytical results, and most of all in presenting those results to a wider audience especially in policy debates.

Talk to most mainstream theoretical economists, and they will tell you that they have moved far away from the early neoclassical assumptions like perfect competition, constant returns to scale, full employment, etc., which bear no relation to actual economic functioning anywhere. But these assumptions still persist in the models that are explicitly or implicitly used to undergird far too many policy prescriptions, whether on trade and industrial policies, or macroeconomic policies or “poverty reduction” strategies. These are what give rise to so many of the myths that the next sessions are going to debunk. But because they are repeated so constantly, and because this repetition is done not only by the media but by people in authority, they get taken as axiomatic.

For example, across the world, there were Finance Ministers and other leaders who took it for granted that a public debt level of more than 90 per cent would result in a financial crisis—even though the empirical research that supposedly generated that result was quickly exposed as deeply flawed to the point that the result not only contained spreadsheet errors, but also vanished completely if just one country’s data were removed. While on that topic, it’s interesting to note that many of the governments in advanced countries, which had earlier refused to entertain the possibility of larger fiscal deficits to deal with unemployment because they would add to public debt, completely changed track when confronted with the pandemic. Suddenly large deficits were okay and rising levels of public debt were not a problem—not because the economics of this had actually changed, but because large capital and even finance capital now found it to be necessary.

Being in the service of power requires the enforcement of strict power hierarchies within the discipline, and a system of marginalising and disincentivising alternative theories, explanations and analysis.

This gives rise to the fourth problem: the power structures within the profession that reinforce the dominant (mainstream) thinking, even—and possibly especially—when it is less relevant and applicable.

One way this works is through the tyranny of “top journals” and their gatekeepers. Academic jobs, as well as jobs as economists in other organisations, are dependent on the applicant’s publications; these publications are “ranked” according to the supposed quality of the journal they are in, in a system that openly and aggressively keeps out journals that publish articles from alternative perspectives; promotions and further success in the profession depend on these markers, which in turn continue to disincentivise those who would like to extend their analysis or break away from this mould. Certainly, for young economists, there’s no doubt that professional incentive structures are heavily loaded in favour of staying firmly within the mainstream.

The fifth problem could have emerged from this: because of these pressures and incentives, many of the brightest minds are diverted away from a genuine study of the economy, to try to understand its workings and their implications for people, into what can only be called trivial pursuits.

Too many so-called “top” academic journals contain esoteric models that provide additional “value” only by relaxing one small assumption or providing a slightly different econometric test of some earlier versions. Yet in most cases they leave out some critical aspects that would actually provide a better understanding of the economic reality, because it would make it harder to model or because it might generate inconvenient truths. Since economists mainly talk to each other (and then proselytise their findings among policy makers) they are rarely forced to interrogate this approach. Instead, at the “apex” of the discipline, the more mathematically sophisticated the approach, the better it is taken to be. So economic forces that are necessarily complex, muddied with the impact of many different variables and reflecting the effects of history, society and politics, cannot be studied while recognising all this complexity. Instead they have to be squeezed into a mould that will make them mathematically tractable, even if this means that they cease to have any resemblance to the actual economic reality. This has gone so far that even some of the most successful mainstream economists have railed against this tendency—but with little effect so far on the gatekeepers of the profession. Given the seriousness of the economic and other problems facing humanity, and the importance of developing economic analysis and strategies to confront them, this is probably much worse than Nero fiddling while Rome burnt; it amounts to spending the time looking for little pieces of tinder to fan the flames.

This lack of interest in other disciplines has meant a major and growing impoverishment of economics, leading to the sixth concern. The lack of a strong sense of history (which should imbue any current social and economic analysis) is a major drawback.

Recently it has become fashionable for economists to dabble in psychology, with the rise of behavioural economics and the “nudgers”. But this too is very often presented ahistorically and without a sense of the varying social and political contexts that affect how people actually behave and respond in particular circumstances. Over several decades, this also led to a shift in the discipline away from trying to understand evolutionary processes and macro tendencies to a focus on the particular, to microeconomic patterns and proclivities that effectively erase the background and context that shapes economic behaviour and responses. And of course, the underlying and deeply problematic underpinning of methodological individualism remains: it is unfortunately still taken for granted, because (unlike those who began the study of political economy) so few economists go anywhere near a philosophical assessment of their own approach and work.

The short-termism and indeed short-sightedness, not just of some economists but also of the discipline as a whole also deserves to be highlighted, as the seventh problem.

It is true that John Maynard Keynes famously said “in the long run we are all dead”, but he also thought about “economic possibilities for our grandchildren”. But most contemporary economists, despite paying some lip service to issues like climate change mainly because they have to, display hardly any concern for issues that stretch into the future. The most egregious example of this is the inadequate factoring in of ecological damage and climate change concerns into assessments of policy choices and future trajectories.

How can economists keep doing this, making such huge blunders and ignoring so much essential reality? Partly because of the eighth problem: arrogance.

Economics is a very arrogant discipline, even though this is completely unjustified. Most mainstream (and male) economists are especially and appallingly arrogant, whether consciously or unconsciously so, and are either openly or subtly into hierarchies. This arrogance is just one of the reasons that Claudia Sahm (the macroeconomist who formerly worked with the US Federal Reserve) declared that “economics is a disgrace”. There is a marked sense of superiority and unwillingness to engage with and learn from other areas of knowledge, especially other social sciences and humanities, which are brushed aside as “soft”. Several economists who have done so and thereby hugely enriched their own analysis and their contribution to broader economic insights, have been displaced from standard Economics departments and relegated to Sociology or Politics, joining the “second division” teams rather than the front runners of the discipline in terms of perception.

There is of course a strong machismo to all of this, and so it is no surprise that a macho ethos permeates the mainstream discipline, just as an atmosphere of clever aggression dominates a lot of mainstream economics conferences. Male domination (similar to chimpanzee societies) has very much been part of this as well, whereby males compete aggressively with one another but also bond together and gang up to dominate over females. Some strong young women with voice in the profession are just beginning to make inroads into this—and more power to them! —but the spread of patriarchy is still vast and deep. It’s not just machismo, of course: the adverse impact of relational power also affects other socially marginalised categories, whether according to class, race, ethnicity, language, and so on. And then there is the huge impact of location: the mainstream discipline is completely dominated by the North Atlantic, whether in terms of prestige, influence or the ability to determine the content and direction of what is globally accepted in the discipline. Just as an example, all the 84 prizes awarded by the Swedish Central Bank Prize in memory of Alfred Nobel (falsely called the Economics Nobel Prize) have gone to economists resident in the North, and essentially living and working in the US and Europe. The North Atlantic still dominates in publications and in setting the research and policy agenda. The enormous knowledge, insights and contributions to economic analysis that are made by economists located in the Global South are largely ignored, almost certainly by those in the North, but even (sadly) by economists in other parts of the South. There is an even worse tendency in development economics, of treating the South as the objects of study and policy action (with its economists often becoming glorified research assistants in international research projects), while “real” knowledge is supposedly created in the North and disseminated outwards.

And finally, there is the proclivity of economists to play God. In perhaps no other discipline is there so much power to engage in what can only be called social engineering, couched in technocratic terms so as to make it largely incomprehensible to ordinary people who are told and persuaded that rigid economic laws make particular economic strategies the only possible choice. Increasingly, this attitude verges on or collapses into the unethical. The recent craze in development economics personified by the randomistas exemplifies this. There has been a lot of valid outcry and disgust about some Randomised Control Trials being conducted (inevitably) on poor people in the developing world, that have involved cutting off water supply to see if that incentivises bill payments, or checking whether poor parents will send only their better performing children to school once they are informed about their results. Clearly, quite apart from the numerous methodological problems with such studies, this shows the extent to which at least some economists have completely lost moral compass, and the strong class/region forces at work whereby the poor, and especially those in developing countries, can be experimented on in this way. The rot goes beyond those conducting such studies, to the research funders, the international organisations, the editors of journals and the university teachers who put such studies into their course material.

But I want to remind you that while such RCTs and the underlying neo-colonial attitudes they carry are certainly objectionable and distasteful, that this is only the latest example of economists playing God, trying out their pet theories of what will make economic processes change, often regardless of the impact on human lives. Think of the shock therapy so blithely imposed on Eastern Europe and the former Soviet Union, and the human tragedies they generated as well as the oligarchies they ultimately gave rise to. Think of the structural adjustment measures in Africa that reduced public health spending and created systemic fragilities that cost so many lives in previous epidemics like Ebola and have rendered health systems completely unfit to deal with the current pandemic. You get the idea: this is not the first time that economists have played with the lives and livelihoods of masses of people, secure in the knowledge that there will be no impact on their own safely distant lives and no accountability for their prescriptions.

So here’s the thing—economics is too important for the present and future of humanity to be left in this appalling state.

It’s certainly true that economics is too important to be left to economists, and that greater genuine economic literacy is required through society to enable people to call the bluff on supposedly technocratic decisions that only favour particular groups. But even within the economics discipline, we simply cannot let one stream, which is currently unfortunately the mainstream, dominate and colour everyone else’ views on how economies work. Fortunately, this is not the only stream: and over the course of the next few days you will be exposed to some of the finest minds who have made important contributions in developing realistic and applicable analyses of economic phenomena. It’s sad that we still have to refer to them and to ourselves as “heterodox” and “non-mainstream”, but that only reflects the power imbalances in economics and in economies, that I have already talked about.

So how do we change all this?

At first sight it appears almost impossible: the structures are so entrenched; the vested interests are so strong; there is so much at stake for global capital and the ruling powers that they will most certainly resist efforts to change. Let me also be honest and admit to you that I speak to you from a position of relative failure, as someone who has tried for nearly four decades but without much success, to make a dent in this power structure and to change both the content and the direction of the economics discipline to a limited extent. The need for drastic change in the discipline has never been so drastic and so urgent. We are facing major existential crises as a species; the global economy was already limping and fragile and is now effectively devastated by the latest blow of the pandemic; environmental threats are already translating into awful reality; inequalities that seemed impossibly large have grown even more, creating societies that will soon become dysfunctional to the point of becoming unliveable. All this requires urgent, major economic action. Yet mainstream economics persists in doing business as usual, as if tinkering at the margins with minor changes will have an impact on these fundamental problems.

The good news is that there are apparently winds of change blowing. The world— and the world economy—may be in an unbelievable mess, but we have more economists, especially young economists, recognising this and thinking about how to avert the immediate dangers and transform the future. There are movements that have been led by students, demanding that the discipline and the pedagogy change, like Post Autistic Economics that transformed into Real World Economics. There are hundreds of you who have registered for the Summer School from across the world, suggesting that there is a real intellectual hunger for change. The Young Scholars Initiative and similar groups have huge potential, and I’m hoping that many of you who are based in developing countries will also get more involved in International Development Economics Associates (IDEAs) to take that network forward in raising the voice and enabling exchange between economists based in the Global South.

It’s clear from my earlier interactions with YSI and some young dynamic economists who are at the forefront of these movements, that you don’t really need advice from people like me. Nevertheless, let me offer whatever little insight I have gleaned from my years of trying to do this.

First, something I think you all already know: diversity matters.

Diversity of gender, of race, of class background, of ethnicity and so on: these are essential to enrich the discipline and have now been widely commented on. Currently there is a raging discussion on social media about this, with expected pushback from those accustomed to their privileged positions. But there is also the aspect that is often overlooked, diversity of location, which I mentioned and which is also necessary for enriching the discipline. So I request all of you, in your own work, search out readings by scholars and economists from different parts of the world, even if your teachers have not made you aware of them. Fortunately, the internet now makes this much more possible than ever before. Be mindful of whom you quote or refer to when writing up your research. Don’t look only for “empirical validation” from Southern economists while taking your theoretical knowledge from the North: many economists based in the developing world have made far more insightful and profound contributions to economic understanding, even if they have not found a place in the so-called “top” journals and rarely find their way into reading lists.

Second, remember to be respectful of diversity of approaches, which is really what being “heterodox” is all about.

Recently there has been some discussion about whether this is a useful term at all, and a tendency to be slightly shamefaced about it, which I believe is completely misplaced. To me, a heterodox approach is defined by pluralism, which means that I may adopt a particular theoretical framework to understand how the economy works, but I should be willing to learn from other different approaches. The whole point is that we should be willing to engage with diverse perspectives and draw insights from one another without getting locked into sectarian squabbles. This doesn’t mean that we can’t have arguments, which are of course essential; only that we should try to be as inclusive as possible and encourage diversity in as many ways as possible.

Third, —and this is really important—don’t let identity substitute for analysis.

It’s essential to hold ourselves and our work to the highest standards of rigour and careful, systematic research. This rigour need not be mathematical, but it must be logical, and it must be empirically grounded and aware of history.

Fourth, don’t be too purist and don’t obsess about classifying everyone into their own little methodological boxes.

Try to make allies, across other disciplines, in wider society and also among mainstream economists who are beginning to see its limitations. In searching for and finding allies, it’s also necessary to make ourselves easily comprehensible as well, and not create a miasma of verbiage or formulas that can obscure the argument. In this regard, I have a simple “grandmother rule” for my students: you can be as complicated, nuanced and sophisticated as you like in your work, but ultimately you must be able to state your basic argument in words comprehensible to your grandmother (who is usually a very smart woman, even if she is not as educated in economics). Try it: it’s not as easy as it sounds.

Finally, be bold!

Don’t be afraid to ask awkward questions of anyone, don’t let anyone slap you down using the well-worn techniques of the socially powerful, don’t be intimidated by institutional hierarchies and power structures. The more fearless you are, the more you accomplish; and the more other people whom you can persuade to be fearless with you, the more unstoppable you will be. And also, I think, the more fun the whole process will be.

So here’s hoping that you will indeed be unstoppable and that this Summer School becomes another step in forging alliances and gathering strength to transform the discipline of economics and make it once more the moral yet worldly philosophy it was originally intended to be.

About UNCTAD | UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964. The organization is governed by its 194 member States and is the United Nations body responsible for dealing with economic and sustainable development issues with a focus on trade, finance, investment and technology. It helps developing countriesto participate equitably in the global economy. UNCTAD carries out economic research, produces innovative analyses and makes policy recommendations to support government decision-making.

UNCTAD YSI Summer School | Entitled “From the Transformation of Economics to Economic Transformation: Pathways to a Better Future”, this year’s summer school took place from August 15-23,2020. It’s aim is to connect the intellectual challenge of rethinking economic analysis to the practical challenge of building a healthier, more resilient, more equal and greener future for all.

Meet Gonçalo Fonseca, creator of the history of economic thought website

Every so often, we highlight one of the senior scholars that has supported the Young Scholars Initiative as a mentor. We share their perspective on the discipline, their past experiences as a young scholar and their thoughts on New Economic Thinking. This time, we talk to Gonçalo Fonseca, Research Fellow at INET and creator of the ever-expanding History of Economic Thought Website. His research is on the intersection of the history of economic thought and economic theory.

Were you always interested in economics, even at a young age?

Not really; I did read a lot as a kid, but not necessarily economics. I grew up in Zambia, where people hardly had anything. But then at 18, I moved to New York, to attend the New School. I actually started off as an Africanist, doing African studies; mostly politics, history. There actually wasn’t much economics offered at the undergraduate level, but one way or another, African studies inevitably leads to questions of development. So when Gunseli Berik allowed me to sit in on her graduate-level economic development class, it blew my mind; she opened the door, and from then on, I was in. I delved deeper into economics, Alice Amsden and Tom Palley being perhaps the strongest influences among many great professors I have had. I continued my graduate studies at Johns Hopkins, studying under M. Ali Khan, then returned to the New School to finish my Ph.D. with Duncan Foley.

Was it tough being a young scholar?

In the early days, I did experience a lot of the same challenges that young scholars today express; economics is a restrictive discipline, and I felt that too. Young people tend to be very anxious, particularly about choices that might affect their careers. They tend to see their futures too narrowly, thinking that there is only one path, or that they have to do things one way, or everything will go wrong. But I managed to do my own thing. I ended up giving myself a lot of leeway; perhaps more so than other people. I let myself chase shiny objects; I let myself pursue my interests. Partly because nobody told me what the path was, or was supposed to be! So I just did what made sense to me. I allowed myself to get immersed in things. And I developed myself broadly by combining my New School education, where the teaching was more unconventional, with my training at Johns Hopkins.

What is your advice to young scholars?

Chase the shiny objects! By which I mean pursue things that really interest you, or that really irritate you, that you’re really furious about, or dissatisfied with. Really pursue them, so that they can become yours. As strange as it sounds, if you can find one small thing that’s really yours, you will always be the reference for it. Don’t be the nth person working on a generic problem. Be the point person working on the thing that really interests you, and become the expert in that. Economics may seem unforgiving, but it’s not. There is leeway! Even in conventional departments. It’s valued when someone is really knowledgeable about something that they care about. It takes a little courage to get there. But it’s worthwhile.

My experience with students is that they are very curious and engaged with the world. And it takes years to beat that out of them. So the key is to retain that curiosity and to follow it. Don’t let publications be the only metric that matters to you. Don’t make the publication the goal. Make the goal that you contribute to the field.

But don’t get mistaken. It’s chasing shiny objects, and it’s fun, but it’s hard work. I’m really trying to understand something. What people are trying to say. How they fit with others. All that is work; lots of not sleeping, and pain. It’s like building anything else.

A lot of it is going to corners you didn’t expect to. Topics you didn’t think you were interested in. Stuff you didn’t imagine you cared about. Realizing hold on, there’s something here. And poking at it, and then getting lost, overwhelmed, start bringing your own narrative on it; you make it yours. And there’s really something to learn from everyone.

As a general strategy, in order to understand something, you have to be able to explain in plain English. To reach that, you really have to go deep and try to get a perspective and understand how it fits in its context. It’s work, but it’s very pleasurable. Once you get a grip on it, you get the “ah..” But before that, you may be frustrated. I’ve made myself learn obscure math just to be able to understand something, in order to understand something related to that. And once you have it, you’ve made it yours. It’s an armament.

Your point touches on the importance of being able to explain something to others, on teaching!

Yes, I’ve been teaching economics as long as I’ve been learning economics. Once you’re teaching something, you can start to really understand it. Already in undergrad, we’d organize with classmates to teach each other. Then we TA’d, and taught entire courses. At that point, it is harder to cut corners. You can, but you’re not doing yourself any favors. Especially once you start teaching people who don’t have a background in the subject, it forces you to think about it systematically. And the more you work on that, the more it becomes yours. This is why teaching is vital.

And it doesn’t even matter what the topic is. I have taught everything from econometrics to philosophy, and every time, I am happy, because I get to learn something; there’s something to learn from everything.

Who is the best teacher you’ve ever had?

Ali Khan, at Johns Hopkins. He taught mathematical economics, which is something people can easily get lost in. And he was very systematic. So I took a lot of tips from how he teaches. And what I always keep in mind is that my students are not there for me; I’m there for them. A lot of them have made sacrifices to be able to study, and they deserve the best. You can make a big difference if you manage to inspire those who are taking their first economics course. Even if they do not end up being economists, their understanding of the economy, civically, is very important. Similarly, I love being a mentor to young scholars in YSI.

How did the History of Economic Thought Website come to be?

It was actually a favor…! Heilbroner was teaching a course at the New School, while I was at Johns Hopkins. He was assigning a lot of reading, much of which was actually available online; it was just that nobody had put anything together. These were the early days of the web.. 1997. So one of his students, who was a friend of mine, asked me if I could gather these readings in one place online. She knew nothing about coding and I didn’t either. But she asked me if I could figure it out, and I did! And then it grew. From excitement, and because once you’ve covered this person, you know you should also cover that person, and then you just keep going. It became a lot bigger than I thought.

It was pre-Wikipedia, so it was a new thing to let one piece link to another and then another. Which is fantastic, because it means things don’t have to be linear like a book. The purpose is for it to be non-linear, so that you can roam, see what thoughts connect with what theories, what mentors connect with what students, what approaches there are between various groups.

What makes the History of Economic Thought such a powerful field, for you?

Many reasons. For one, it’s beautiful. But more importantly, it really helps you understand the theory. It can help you understand why a theory developed one way or another. It can allow you to see things more clearly, and help you understand the reasons why it’s structured the way that is. Because economics is not leveled or settled. And it’s not just models! At the end of the day, economics is constructed by people. It’s driven by people, and the questions they have. Their interests, the relationships they have, whether those are relationships of mentorship or rivalry.

Sometimes, the math in economics obscures this. But math in economics is like the notes on the page for music. Music is what you hear from a violin. The notes on the page are not the music. So some people condemn mathematics. And they shouldn’t. You can’t get mad at the mathematics in economics, just like you can’t be mad at sheet music. You can only be mad at whether the tune sounds good or not. By studying the History of Economic Thought, you get to see the full picture. You hear the full tune; and then you can decide for yourself.

Take a look at Gonçalo’s History of Economic Thought website! If there is another new economic thinker that you’d like to see featured here, let us know! Share your thoughts in the comments below, or email us at contact@economicquestions.org

Meet Arjun Jayadev, Senior Economist at INET

Every so often, we highlight one of the senior scholars that has supported the Young Scholars Initiative as a mentor. We share their perspective on the discipline, their past experiences as a young scholar and their thoughts on New Economic Thinking. This time, we talk to Arjun Jayadev, Senior Economist at INET and Professor at Azim Premji University in Bangalore. Arjun works on Macroeconomics, the Economics of Power, Finance and Distribution.

How did you get involved in the subject of economics?

I would say somewhat by accident. I liked economics, I did well in economics, but I was planning on getting a master’s and return to India to become an IAS officer. But I got to grad school and unlike many people, I really enjoyed my first two years immensely. That was partly because I had done my undergraduate by correspondence, so I hadn’t had any teachers for economics there. So when I got to UMass Amherst, where we had fantastic teachers and a really amazing curriculum, I really started having a great time. Plus, it appealed to me that economics as a discipline is “on the edge of science, and on the edge of history”, as Hicks puts it. I really felt that at UMass. Also, there was a great openness and ability to do many different kinds of courses and adopt and explore different perspectives. So I took classes for about 4 years! And the path afterward turned out to be surprisingly smooth. I think partly because I came from heterodox school and there’s actually a demand for heterodox economists and not such a large supply, I had a number of offers. So the market really worked for me. And after grad school, I lucked out to be in a great department (UMass Boston). I did what I really wanted to do, and it never felt like I was chasing publications.

That is unusual! How do you explain the horror stories we hear from other people?

Partly, I think it depends on what kind of program you’re in. If you’re at a “top program”, you’re learning things at a very advanced level, which can be really tough and not seem relevant to the social issues you are interested in. But what is probably worse is if you’re at a place that is not a top program but is trying very hard to be one. Because then you’re constantly trying to emulate something which you’re never going to feel good enough at. I think those are the programs that really grind the graduate students; they make them jump through hoops. Which is awful not just during those two years, but also in the long run. Because having gone through that is what later makes people extremely resentful if you criticize their work or they feel that their work fails to explain the world. They come to feel that since they’ve gone through hell for it, it must be worth something. On top of that, they end up in a crowded field, where it’s difficult to be seen. Whereas if you’re willing to stand outside the mainstream, at a program that is not trying to compete with the top, your experience may be better, and you may actually be seen more easily. Of course, your chances of being ‘accepted’ in the economics mainstream is very low indeed, but that’s not the purpose of taking an alternative path anyway.

How do you see your role as teacher and mentor?

For me, it’s very important that the students feel like they are participants in the process, from very early on. I’m their guide, but I want them to feel responsible for the research; it needs to be their ideas and their sense of understanding. I also try to help them deal with the concept of prestige; many young people struggle with this. Students I have seen fall into a trap of constantly thinking about the way a job market paper is going to go, how people think of you, and get swamped with the corrosive hierarchy that’s associated with that. And then it becomes very hard to look at your paper as a genuine scientific inquiry. Instead, it becomes a vehicle to attain some kind of status, and of course that is determined by so many other things than the quality of your paper.

I also really enjoy teaching–especially undergraduates. Due to the incentive structures in the field, many people view teaching as something to get out of the way. But if you have a class of dozens of young students in front of you, that is actually a significant group of current and future academics to be distributing your work to, and something to take delight in.

What differences do you observe now between young scholars in India versus the US?

Significant differences, but perhaps most interestingly, in the way that they go about their work. The grad students that I meet in India tend to be closer to something real in the world than those in the US, in the sense that they are dealing with a concrete problem that they wish to understand (say, irrigation in a particular state) rather than the problem being an instantiation of a larger theoretical or empirical approach. In North America, I think the job market makes it such that you have to write a paper in a particular way so people are trained first in the general way of going about answering questions and the topic at hand is answered in that general framework. The flip side of that is that the technical training that you receive in the West is extremely strong. That skill is much stronger in the US than it is in India. And the intellectual center for economics is still in the US, which makes the flow of ideas really go only one way.

What are some of the challenges you see in the area of new economic thinking?

I do think one of the challenges is that those outside the mainstream have a tendency to remain insular and critical. Which is okay to an extent–critical perspectives are important–but the most exciting things I think are positive impulses, where you are pursuing interesting questions and gaining new insight about the world; I think the focus should be there.

Another issue is that in mainstream economics, at least for development, micro, and labor, there are things like identification, which people coalesce around as a technical way to prove mastery. It allows for a clear understanding of the problems that students can be taught to solve, and once they do that, they can be considered capable and certified. The equivalent is much harder in alternative frameworks. Students there are not always sure how to approach their work. I have seen people working very hard but not be able to produce because they were not sure what their “craft” really is. There are not a lot of models to emulate. So they often fall back to producing something that is primarily ‘critical’ which is less useful.

How do you see the discipline progressing? Would you encourage someone to enter?

There are some areas of economics that are still very problematic; where there seems to be pure self-referentiality and no engagement with the world. But others have made a lot of progress and are valuable. Fields like micro, development, or labor have become incredibly productive and useful in the past 20-25 years, and I would really encourage people to enter that-at any place. In general, there are a lot of interesting people you learn a lot from; many of whom were not widely known in my student years. Social media helps with this, though it is a double-edged sword. In terms of pedagogy, there is slow but meaningful change. In terms of the field, the aftermath of the continued economic and political crises since 2008 have led to many different voices coming through. Places like INET have allowed those people to surface, which certainly improves the climate for new people coming in. I feel very positive about that, and there is no doubt that at this moment in time is one in which economists can fulfill very important roles.

If there is a specific new economic thinker that you’d like to see featured here, let us know! Share your thoughts in the comments below, or email us at contact@economicquestions.org

In the Spotlight: William “Sandy” Darity

William “Sandy” Darity’s work is the proof you need that the American dream is just that, a dream. The promise that anyone who takes initiative and works hard has an equal chance at success is not true. A close look at data on income and wealth reveals an inherently unequal society. Our recent post on racial inequality points out how for example, race affects the payoffs of a college education. For a much more comprehensive view of this issue, we can dive into Darity’s work.

Darity currently serves as the director of the Samuel DuBois Cook Center on Social Equity at Duke University, where he teaches Public Policy, African and African American Studies, and Economics. The focus of his work is inequality, examined through the lenses of race, class, and ethnicity. He also has analyzed policies that would help fix the legacy of racial injustice in America.

Darity rejects the neoclassical view that “markets” will arbitrage away discrimination over time, and champions a different approach called stratification economics. This strategy uncovers the stories of inequalities by looking at economic variables by different strata. Your chance at success in this society differs based on your race and gender. Examining economic variables by different groups offers a much clearer picture than the abstract “representative agent” models would depict.

As a young economist at Brown and MIT, Darity thought that studying economics would teach him why these inequalities are created and persist. Yet he found, like so many of us now, that studying economics is often more focused on math than society. Thankfully, once degrees are conferred PhD economists can pursue different lines of thought. His work today is a bright light for not only understanding how these inequalities are created and persist, but for understanding how we can fix them.

For example, the piece Umbrellas Don’t Make It Rain: Why Studying and Working Hard Isn’t Enough For Black Americans shows the broken logic behind the idea that more years of education results in higher earnings. Think about a rainy day, he argues. A lot of people might be holding umbrellas, but that doesn’t mean that the umbrellas caused the rain. Similarly, people with higher educational attainments have higher levels of wealth. Yet, it does not mean they accumulated the wealth because of the education.

Often times, working hard at an education or job is just not enough. Darity shows that white families with an unemployed family head have double the wealth of black families with a family head working full time. That’s a difference of $21,892 to $11,649. It’s not because of their educations, either. Black household heads with a college degree have two-thirds of the net worth of white household heads who never finished high school. Data like this suggests that education is not enough to correct these inequalities. This is just a taste of an enormous list of Darity’s publications that help us understand discrimination, prejudice, and inequality.

Darity hasn’t just looked at the problem, he has proposed bold solutions. Two policies which he advocates for are Baby Bonds and the Job Guarantee. The Baby Bonds idea would endow every newborn American with a trust that grows and they can access when they turn 18 years old. Everyone would receive this trust but to reduce wealth inequality those with lower levels of wealth would be given larger endowments, While this idea strengthens future generations, the Job Guarantee proposal fights inequality immediately. Guaranteeing every American access to employment at a living wage with benefits, the Job Guarantee could create a more equitable system.

Economic justice will be a necessary component for achieving racial justice in this country, and Darity’s work helps not only understand the problem but also the solutions that we, as citizens, can help promote. If you’re itching for more, check out this piece on INET, his articles at HuffPo & NYT and be sure to follow him on Twitter @SandyDarity. I’m sure we’ll hear from him there when his forthcoming book on reparations comes out. I can’t wait to read it!

In the Spotlight: Stephanie Kelton

If you want to be at the cutting edge of economic policy-making, listen to Stephanie Kelton. She explains how a government spends, and how confusion about debt and deficits have held America back. Shaking up democrats and republicans alike, she shows there is nothing inherently dangerous about a large budget deficit. We should aim for a balanced economy, not a balanced budget.

Her encouragement of ambitious fiscal spending is rooted in Modern Money Theory, which reveals the true nature of money as a creature of the state (discussed in detail here). So long as a government is sovereign and has its own central bank, Kelton shows, it is the sole issuer of its currency. Being the sole issuer of its currency, it can never run out of money, and it will never fail to meet its debt obligations. It’s completely able to spend as needed.

Kelton is always quick to respond to the most common points of critique. Is she arguing for the government to run infinitely large deficits forever? No. She is advocating for the government to determine its spending level based on the state of the economy. Spending should be high enough to facilitate full employment, and low enough to keep inflation in check. The spending level should be chosen based on the impact it has on the economy. Not based on whether it allows for two columns to sum up nicely in Excel.

Over the past couple of decades, this school of thought has gained significant momentum. Kelton, who teaches at the University of Missouri Kansas-City, gained traction in the world of finance and more recently broke into Washington, where she served as Bernie Sanders’ chief economic advisor during his campaign. Providing the economic backbone behind Sanders’ plans to raise the incomes of the 99%, the vast potential of Kelton’s approach to fiscal policy gained recognition. Kelton still works with Bernie to further his movement and mobilize support across the globe.

It is worth keeping Kelton’s message in mind as the Trump presidency unfolds. Judging by this article in Politico, Trump plans to cut taxes on the wealthy, and “make the deficit great again.” Considering Kelton’s stance on the matter, such a move should be recognized as problematic because it worsens income disparities, not because it worsens the budget deficit. We should judge Trump on the impact he makes on the economy, not on his ability to balance the books.

Kelton’s message can also provide a powerful weapon against the republican majority that the democratic party will soon be up against. Her advice for democrats is as follows:

“Democrats face a difficult road ahead. Having failed to recapture the Senate, there may be few opportunities to advance progressive goals — e.g. raising the minimum wage or boosting infrastructure spending — without compromising other core values. Democrats may be tempted to give Republicans a taste of their own medicine by hollering about budget deficits as cover for obstructionism. That would be a mistake. Instead, they should stand firm against cuts to programs like Medicare and Social Security, exposing the truth about the government’s ability to sustain these programs indefinitely. And when they fight efforts to deliver huge tax cuts for those at the very top, they should make it clear that their opposition is not based on the budgetary impact but rather on the social and economic effects of widening income and wealth disparities.”

If you’re curious for more, be sure to follow Kelton on Twitter, and keep track of the blog she runs with Bill Black. You should also have a look at her crystal-clear presentations. Click here for a talk on the role of government, here for her ideas on inequality, and here to hear about her thoughts on the Bernie Sanders movement. And if you want to know how all this applies to the Euro-zone, this piece she wrote with Randall Wray is a great resource.

In the Spotlight: Pavlina Tcherneva

If I ask you to picture an economist, chances are you’ll visualize an older white male who makes you feel bad for failing to understand mysterious diagrams. Those certainly exist. But so does Pavlina Tcherneva. Chair and Associate Professor of the Economics Department at Bard College, Pavlina spearheads the group of faculty that convinced me (daughter of graphic-designer-dad and dancer-mom) to get a degree in Economics, and then another.

Pavlina’s Work in a Nutshell
Pavlina is comfortable in many unconventional territories of economics. She can tell you why the government should be your backup employer, why the federal budget really need not balance, and what money really is. Besides the US and her native Bulgaria, she’s consulted policy makers in Argentina, China, Canada, and the UK. Her work has been recognized by a wide range of people; most recently by Bernie Sanders, who used her graph to illustrate his point on inequality.

Current Research
Pavlina’s current research focuses on the “Job Guarantee” policy, which recommends the government acts like an employer of last resort by directly employing those people looking for work during economic slowdowns. In 2006, she spent her summer in the libraries of Cambridge, examining the original writings of Keynes. She offered a fresh interpretation of his approach to fiscal policy, and got a prize for it, too. Today, she investigates what the policy can do for economic growth, the unemployed, and in particular: women and youth.

Path to the Present
If you’re feeling inspired, take note: Being like Pavlina doesn’t happen overnight. In her case, it began with winning a competition that sent her to the US as an exchange student. She then earned a BA in math and economics from Gettysburg College, and a PhD in Economics from the University of Missouri-Kansas City. Her undergraduate honors thesis was a math model of how a monopoly currency issuer can use its price setting powers to produce long-run full employment with stable prices.

As a college student, she helped organize a conference in Bretton Woods around this idea, which became the inaugural event of what has become known as Modern Monetary Theory. Then, there were a few years of teaching at UMKC and Franklin and Marshall, and a subsequent move to the Levy Economics Institute and Bard College several years ago. In the midst of all that, she was a two-time grantee from the Institute for New Economic Thinking (INET) in New York. Today, Pavlina lives in the Hudson Valley, together with her husband and daughter.

Eager for more?
If you’re curious about the Job Guarantee policy, here is both a 15 minute video, and a 150 page book. To understand Pavlina’s take on the Federal Budget, this article goes a long way. And to figure out what’s the deal with money, read this chapter of her book. Her work on inequality was featured in the New York Times, NPR, and other major media outlets. She has articles published by INET, Huffington Post, and over a dozen works on the SSRN.