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Economic thinking for the real world

by Gustav Theile

Think about economics. What do you see? Rationality probably. Economic growth certainly. Profit maximization for sure. Self-interest must also be somewhere.

And numbers, numbers, numbers. If you ever took a course in economics, you’ll also see a couple of graphs with optimal solutions, some kind of Lagrange function, Cobb-Douglas and thousands of mathematical models. But let’s not get too nerdy.

Think about the economy. What do you see? Big corporations, probably. Banks, certainly. Secretary of commerce, for sure. Unemployment must also be somewhere. And people, people, people.

And that’s the point. Shouldn’t the way we think about the economy – which is ultimately what economics is – be centered on people and their livelihoods and well-being? Shouldn’t we approach the economy so that it benefits our lives and what we value? And shouldn’t we interpret our economy as human interaction instead of treating this sphere of our lives as where we suddenly turn into algorithms?

I think we should. I think we should change economics. And there are thousands of students around the world who agree with me – and a couple of professors, alumni, journalists and politicians too, for sure.

Together with all these students and with the support of some of these professors, we built the International Student Initiative for Pluralism in Economics, ISIPE for short. We are active in over 40 countries worldwide. We campaign for an overhaul of economic thinking. We aim to change our curricula and the entire discipline. We want pluralism.

This is where it gets a bit academic. Most social scientists agree that something like objective knowledge is hardly possible in the social sciences. Every theory, every hypothesis and even most data mainly provide a way to make sense of the world. This doesn’t mean there are no facts. But it means that they require theory to make sense.

Take wages. Some economists would see them merely as costs for firms and reflections of the price of labor on labor markets and the productivity of workers. Introduce a minimum wage and people lose jobs, because the price now exceeds their productivity. These economists are called neoclassical or “mainstream” economists. Others suggest that these wages are the basis of consumption and that this is what drives economic growth. A minimum wage, therefore, drives economic growth. These are the Keynesians or Post-Keynesians. Others would look at how these wages contribute to the well-being of people and what kind of reproductive activities within the household are necessary to go to work. They would be called feminist economists. Some would go ahead and ask what share of the productivity of the worker goes to the worker and what to the employer. A minimum wage increases the share that goes to the worker. These are the Marxists.

These are just some examples. But, to be clear, they are not about ideology. Sure, some academics certainly get ideological about their approach. And sure, some of these theories lead to different implications than others. I find it more fruitful, however, to treat these approaches as tools, as perspectives to make sense of the world. Every approach has its strengths and its weaknesses, and only if we consider different ways to see the economy will we ultimately understand it better.

This is important for economic policies. First, it makes them better. When we analyze possible impacts of an economic policy, we ought to take into account the complexity of our economic system and assess the impacts from different perspectives. If a policy makes sense from most of these perspectives, then it is probably a good idea to pursue it further. Second, it shifts our focus. Neoclassical economics has the fatal tendency to only look at growth and thereby neglect well-being, nature and justice. Growth doesn’t lead to well-being by itself. Growth is, in fact, often harmful. And justice is not only about economic inequality but also about the impact of economic policies on different sub-groups, ethnicities or the effects on how households and families distribute labor in the non-economic sphere.

So, this debate about pluralism in economics is not just academic. Economic thinking shapes economic policies and our lives. And this is what motivates us as a student initiative.

The International Student Initiative for Pluralism in Economics was founded in 2014. In the first months of that year, students from Denmark, Germany, England, France, Spain, the U.S. and Argentina who were already active in local or national activities came together in Skype calls and discussed how they could collaborate a bit more. The result was a decision that, first, we needed to reach out to the public. So we wrote an open letter for pluralism in economics. We then translated the document into several languages, contacted journalists and built a website.

Surprisingly, people were interested. We had coverage from Le Monde and The Guardian, from Der Standard and La Repubblica, from Süddeutsche Zeitung and El Pais. We were asked for interviews by newspapers, radio stations and even TV channels. There were public responses from pretty famous economists. Some of them were rather positive, like Thomas Piketty, who signed our letter, but most of them were completely negative. Just imagine that: Some of us were in the second year of our undergraduate degree programs, and somehow we had created something that elicited public concern and debate! Then you will have an idea of how overwhelmed we were.

Since then, we’ve had two General Assemblies to plan new projects and discuss how we want to work together. It teaches you a lot about diplomacy when you have around 80 people from 20 different countries in one room and somehow try to organize a discussion. Split into smaller groups, build committees, prepare documents on which your discussion is based, have a moderator and strict time limits. These are just some of the lessons we learned.

The main purpose of the international level for us is that it supports the local and national work and facilitates cooperation, best-practice sharing and sharing of resources and contacts to academics and journalists. Each year we also have a Global Action Day, when our local and national groups organize events such as panel discussions or write articles for newspapers. We conducted a study in which we analyzed whether the economics curricula around the world are pluralist. They are not, obviously. And they are more or less the same everywhere. Students learn a lot of math and statistics and the dominant school of thought instead. But hardly anyone would ever learn how to conduct interviews or field studies. Only a few learn in which historical and social context the dominant theories were developed, how certain theories became popular and why others vanished over time. They would never have to reflect on the ontological, epistemological and methodological foundations of their field and their theories. Instead, the content of their studies tends to be presented as absolute truth.

It is obviously a very naïve idea to believe that absolute knowledge about human nature, humankind or society is possible. If it were, the economists would have solved the problems of philosophy, which have been around since the dawn of man. Once discovered, these absolute truths would dictate future behavior. People wouldn’t be allowed to deviate from them. Obviously, this view of economic doctrine makes no sense whatsoever. These were some of the findings of this study, which we conducted in 12 countries in Europe, Latin America and the Middle East.

The main benefit of the international level is for me, however, that it supports and legitimizes the local and national work. Because, ultimately, we want to change economics curricula around the world. Decisions about these curricula are in most countries put within departments. The local groups are usually around 20 students who gathered in their university and tried to change their curriculum. It is a very easy thing for professors to treat them as renegades and ignore their demands. These students can claim now that they have the support of thousands of students around the world.

A lot has changed since then, though not nearly enough. Some universities have revised their curriculum. In some countries, we are in discussions with the national association of economists, and some of them had panels on teaching during their annual conferences to which representatives of our movement were invited. We frequently write articles for newspapers, are in contact with politicians and were part of a movie on the financial crisis directed by Terry Jones of “Monty Python.”

Our national networks organized conferences with several hundred participants. One of them started a journal. Others brought students and academics together for a summer school. Most important, however, is the local work. All these students who are part of our movement invest their spare time to organize lecture series, panel discussions, reading circles and seminars. They are elected student representatives or challenge their professors during lectures.

Our English network, Rethinking Economics, started a news website on economic issues which is free of the typical economic jargon. Our German network recently published a teaching website that provides introductions into the different schools of economic thought and collects online material about economics.

We are also more and more in contact with other civil society organizations. The cooperation with the German labor movement foundation is very fruitful. Recently, The Club of Rome has joined our efforts with the launch of a new project called “Reclaim Economics,” in which some members of our movement play leading roles. Then there is, of course, the World Council of Churches, with its seminar on the Ecumenical School on Governance, Economics and Management, out of which this issue developed, and which I would interpret as a seminar on theological motivations for pluralist economics.

This cooperation with churches may seem a bit capricious. What does religion have to do with the economy, after all? The most intuitive reason for me is this: Economics is based on a very peculiar anthropology, which is centered on the concept of rationality defined as individual maximization of self-interest.

Doesn’t theology offer a way out of that misery?

GUSTAV THEILE studies international business, Korean, politics and international literatures at the University of Tübingen in Germany. He is a co-founder of the International Student Initiative for Pluralism in Economics and has been involved with the pluralism in economics movement for over two years.