Response to Tony Yates’ critique of Teaching Economics After the Crash

Tony Yates has written a critical rejoinder to Aditya Chakrabortty’s Radio 4 documentary on student demands for changes to university teaching of economics. Yates’ contribution is welcome as a rare example of a mainstream economist publicly engaging with the issues raised by dissatisfied students. For too long, the response of the mainstream has been to ignore criticism. Yates’ willingness to enter into dialogue – even if motivated by unhappiness with the content of the programme – is encouraging. Further, it clarifies the view of (some) mainstream economists on the teaching debate.

Yates’ first complaint is that the programme is an opinion piece rather than a report in which equal space is given to each side. It is true that the bulk of the programme focused on the grievances raised by the student movement – this was after all the subject of the piece – and provided only brief slots for dissenting voices. Criticising the programme on this basis ignores the bigger picture of total dominance by mainstream economics – not only in academia but also in the media and public debate. The number of critical economists who appear regularly on television and radio can be counted on one hand. Chakrabortty’s programme and the student movement that pushed it onto the agenda are welcome, yet remain a drop in the ocean.

Yates might reflect on the following question: Were a programme broadcast that defined economics in the terms he believes – a rigorous scientific discipline systematically discovering objective truths and discarding past mistakes – would he object to such an equally one-sided narrative?  For decades, this narrative has dominated to the extent that, until recently, there was no publicly audible debate. It is to the enormous credit of student groups that they have raised the volume of critical voices such that Chakrabortty’s programme could be made.

The more substantive criticisms made by Yates relate to what he regards as manifold factual inaccuracies peddled by interviewees and allowed to go unchallenged – in particular, inaccuracies about the assumptions of mainstream economics.

There are two important problems with Yates’ argument.  First, Chakrabortty’s programme was explicitly concerned with teaching economics – teaching economics at undergraduate level specifically.  Yates’ response is mainly concerned with academic and professional economics in general and, in particular, the higher reaches of contemporary research programmes. Second, and more importantly, Yates condenses students’ calls for increased methodological pluralism into a debate between rational choice theory and its (neoclassical) alternatives. One of the first students interviewed by Chakrabortty complains about a “lack of alternative perspectives, lack of history or context, that could include politics . . . lack of critical thinking, and lack of real world application” in undergraduate degrees. Yates’ response entirely fails to address this key issue.

The “caricatures” of mainstream economics to which Yates takes offence include rational choice, rational expectations, perfect markets, quantifiable risk, and an ignorance of money, banking and finance. Yates argues that this characterisation fails to take account of recent innovations such as bounded rationality, asymmetric information, monopolistic competition, learning effects, uncertainty, sticky prices, credit frictions, and so on. Moreover, Yates has previously argued that a course based on these types of models could adequately replace the course on Bubbles, Panics and Crashes which Manchester University cancelled.

Putting aside, for the moment, issues of methodological pluralism and historical context, does Yates really believe that Farmer’s multiple equilibrium models, internal rationality in intertemporal optimisation, or search models of money and credit should be taught in undergraduate degrees? One of us (Jump) took an MSc on which John Hardman Moore taught. Even there, the “collected works of the Kiyotaki-Moore collaboration” didn’t make it onto the syllabus. One can hardly criticise a programme about teaching economics – and, by extension, those involved with the various student movements – for ignoring papers that most PhD students find difficult to follow.  Regardless of the validity of the approach, “crunching exotic nonlinear ordinary differential equations” is unlikely to become part of the undergraduate economics syllabus any time soon.

A squabble over the exact models taught is not, however, the real issue.  While true that, since the heyday of real business cycle models, the mainstream has pulled back from the most egregious extremes of asserting a world of continuous full employment and total policy ineffectiveness, subsequent modifications to general equilibrium models – sticky prices for instant price adjustment, internal rationality for rational expectations, asymmetric information for full information – are always assumed to be “frictions” and “imperfections”; deviations from some socially optimal baseline.  Arguing about which specific unrealistic assumption has been dropped in this or that model misses the wood for the trees. The students want to be allowed to engage with different methodological approaches to economics – not to be told that if they study for another two years they can learn the Bernanke-Gertler financial accelerator model instead of the Woodford version with “perfect capital markets”.

The methodological approach of neoclassical economics – equilibria derived from optimisation problems couched in ever-more complicated mathematical settings – is highly restrictive, ideologically loaded, and universally imposed on undergraduates. The result of the complete elimination of any other approach from the curriculum is that students spend all their time learning how to manipulate abstract mathematical models which appear to hold little relevance for the real-world problems they are interested in addressing – as is made clear from the interviews conducted by Chakrabortty.

An important consequence of this methodological narrowing has been the (almost complete) eradication of economic history and the history of economic thought from the undergraduate curriculum.  This is a point conceded by Karl Whelan who argues, in his response to Chakrabortty’s programme, that mixing the formal neoclassical syllabus with “broader knowledge” would produce more rounded students – a conclusion also reached by the RES steering group on teaching economics.

Yates admits that he doesn’t believe that “any of the monetary policymakers I worked for or read believed much of [the workhorse NK model].  They worked off hunches, gut instinct, practical experiences.” (This is ironic given that Gali and Gertler – key architects and advocates of the models Yates claims policy-makers weren’t using – believe the models were introduced because previous versions were so inaccurate that “monetary policymakers turned to a combination of instinct, judgment, and raw hunches to assess the implications of different policy paths for the economy”.) What are such hunches and instincts based upon?  Aside from personal experience, one imagines that historical knowledge of previous crises played a part here (e.g., Ben Bernanke). Re-introducing this type of material into economics teaching would, as Whelan argues, produce more capable graduates.  Moreover, knowledge of the way that theory has evolved alongside economic events would provide valuable context for the “exotic non-linear equations” – but it would also cultivate an awareness of the dramatic methodological narrowing within the subject.

One of us (Michell) put this point to Yates on Twitter – admittedly not the ideal medium for careful debate. His response was approximately the following: economic history and history of economic thought are irrelevant – at best, a fun diversion for bath-time reading. This is because economics continually progresses so that the history of the discipline only reveals things “either discarded or whose husks were bettered and extracted”. As an example: “I don’t need to read Keynes to understand the liquidity trap … Wallace and Woodford suffices”.

At this point, one arrives at the inevitable argument that, whilst increasing methodological pluralism in undergraduate degrees may be a good thing, “heterodox economics” is best consigned to optional modules, or discarded altogether.  This misses a point of considerable importance: academic heterodoxy in economics is, more often than not, associated with methodological disagreement.  This is most clear in the further reaches of Post Keynesian and Austrian economics – e.g. Shackle, Lachmann – and in Marxian political economy where historical analysis is central.

If, for example, one wanted to teach the economics of financial crisis, surely the history of financial crises and inductive theory are the correct places to start?  Kindleberger and Minsky are the obvious candidates – after which more formal models could be considered.  This is not to say that the various heterodox approaches do not have their problems, but they are useful springboards to a deeper understanding of economic phenomena. Such empirically-based study would surely be a better starting point than learning Euler equations – despite the fact that the standard consumption Euler equation is known to fail miserably when taken to the data – or the standard model of a representative firm’s investment decision – despite the on-going failure of econometricians to find a robust relation between short run capital investment and the real interest rate.

Let us finish by returning to Yates’ Whig-historical view of the liquidity trap – a view which encapsulates much of the problem with mainstream economics. In modern neoclassical parlance, the liquidity trap refers to a situation in which nominal interest rates are equal to zero and quantitative easing is ineffective because changes in the quantity of (base) money have no effect on the (rational expectations) equilibrium future inflation path. As a result, the central bank is unable to reduce the real rate of interest and stimulate spending. All this matters because the economy fails to bring itself back to equilibrium in a timely fashion due to slow price adjustment.

This is unrecognisable to any serious scholar of Keynes. The liquidity trap refers to a situation in which fundamental uncertainty about the future leads people to hoard cash in preference to other financial assets, no matter how cheap those assets become. At the same time, uncertainty means firms may not commit to investment even if interest rates fall to a point that would previously have stimulated spending. The stickiness or otherwise of prices and wages is irrelevant because changes in output and employment provide the mechanism by which saving and investment are brought into equilibrium.

This brings other contentious topics to the fore, such as uncertainty, animal spirits and the neoclassical treatment of money. Each of these is highlighted by Yates as used in the programme to unfairly attack mainstream economics – he does concede that money as a veil over barter is a fair description for the most part.

Recall the definition of uncertainty emphasised by Knight and Keynes: a situation in which the future simply cannot be predicted, in contrast to a ‘risky’ situation in which all possible events are known, along with the probability of each.  This differentiation is fairly basic, and has been textbook material in game theory since (at least) Luce and Raiffa.  Now consider one example using Yates’ favoured approach to modelling uncertainty in macroeconomics: The central bank, unable to determine which of its three Phillips Curve models is correct, uses Bayesian inference to decide which model to use. This is almost beyond parody – simply a branding exercise which conceals the fact that the model has nothing whatsoever to do with the true meaning of the concept. Other “Keynesian” features of modern neoclassical economics highlighted by Yates are similarly grotesque caricatures of the original concepts.

By not studying Keynes in the original – or any other important economist from more than forty years ago – students are prevented from discovering such inconsistencies and are forced to take at face value the distortions and misrepresentations of mainstream economics. They are prevented from understanding how historical circumstance plays a role in the development and acceptance of economic theory: the Great Depression for Keynes and the stagflation of the 1970s for Friedman, for example. They also – crucially – fail to appreciate that economic and political power matters: mainstream economic theory is “history as written by those perceived to have been the intellectual victors of key debates”.

Yates describes Aditya Chakrabortty’s Radio 4 documentary as “a distorting dramatisation, on account of allowing multiple silly, uninformed critiques to go unchallenged in the program. Yet presented as a reasonable, impartial take on what is going on in economics.” This is unfair to the students involved in the reform movement and misses the main point of the programme. While we would not defend every claim made in the programme, we strongly support the call for a widening of the economics curriculum.

Given the role of the profession in contributing to the 2008 crisis, and in justifying the inexcusable policy packages imposed in response to the post-crisis expansion of sovereign debt, we might – at the very least – display some humility when addressing the inevitable public backlash. Beyond this, we must act on student demands and address past failings by implementing a fundamental overhaul of the economics curriculum.


Rob Jump
Jo Michell



  1. Thanks. Interesting post.

    I’d be interested to hear how far you think something like the new edition of Carlin and Soskice, or the INET curriculum being developed, start to address some of these concerns (about decontextualised theory, if not pluralism).

    Also, I’m not sure I’d pitch the debate between ‘mainstream’ and ‘heterodox’ primarily at the methodological level. Some of the issues about eg risk vs uncertainty are ontological/epistemological. Focusing on methodology opens up the possibility of innovations in technique ‘taming’ the differences between schools of thought – but in ways that lose something important in the process, as you could argue happened when John Hicks translating Keynes into the IS/LM framework and lost the essence of animal spirits in the process. Keeping ontological distinctions in view makes that less likely.

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  2. Three points. First, to be clear the Panics and Bubbles module was not “cancelled” by Manchester University – it was never offered for credit but rather as a kind of “teach-in” by one member of staff.

    Second the paragraph from the article I have copied below is a misrepresentation of the nature of the typical economics degree taught in the UK. Yes, the students do economic theory (which is frequently, but not invariably mathematical) but they also do much more besides. Depending on institution, and the nature of the degree, this might include economic history, history of thought, economics applied to a variety of real world problems, econometrics, behavioural economics, political economy, institutional economics and so on. By all means advocate a different balance between mainstream theory (which is a much broader church than its critics tend to portray) and other types of theory but to claim that neoclassical theory is all that students have “imposed on” them in a typical undergraduate degree in the UK is just plain wrong. Students do much more than “manipulate abstract mathematical models”. (However, believe it or not, those who successfully do learn to perform such manipulations often find it a useful exercise with plenty of real world payoffs, both intellectual and material.)

    “The methodological approach of neoclassical economics – equilibria derived from optimisation problems couched in ever-more complicated mathematical settings – is highly restrictive, ideologically loaded, and universally imposed on undergraduates. The result of the complete elimination of any other approach from the curriculum is that students spend all their time learning how to manipulate abstract mathematical models which appear to hold little relevance for the real-world problems they are interested in addressing – as is made clear from the interviews conducted by Chakrabortty.”

    Third, a major point of Tony’s criticism was that that the programme on Radio 4 was unbalanced. Rob and Jo’s response to this is essentially to claim victim status. The argument is: oh well it might have been unbalanced but that’s OK because we, the poor downtrodden, have had our voices drowned by the industrial roar of the mainstream machine for far too long. The main problem with this line of argument is that it tries to invoke sympathy for the (allegedly) oppressed rather than addressing any genuine accusations of bias. But let’s take a look at it on its own merits. It is suggested that listeners to Chakrabortty’s show would be used to hearing the mainstream side of the story and would find a dissenting view different and refreshing. However as Rob and Jo point out the programme was about the teaching of economics. It is interesting to speculate about the nature of the debate about the economics curriculum or its teaching that the average Radio 4 listener (an intelligent non-economist let’s say) is familiar with. I would guess that, for non-economists listening to that programme, this was the first time that they had ever heard any discussion whatsoever about the nature of undergraduate economics education. There was therefore a duty on the part of the programme makers to fairly set out the territory within which that debate was taking place rather than simply providing a platform for the polemical views of some disgruntled students. As such, Tony’s criticisms of bias seem fair.

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  3. Thanks for the comments.

    Alex: I don’t regard the INET Core curriculum project as going nearly far enough in addressing the issues raised by the students. To give one example: we have highlighted the lack of economic history and history of economic thought in undergraduate programmes. The Core curriculum is no improvement in this respect. A previous INET committee, headed by Skidelsky in the UK and Mehrling in the US produced an initial set of proposals which were much more in line with the demands of the student groups.* Unfortunately, this project appears to have been superseded by the much less ambitious Core project.

    I agree with the point on ontology and epistemology. We were using ‘methodology’ in the broader sense: choice of theoretical approach informed by ontological and epistemological considerations – rather than the narrow sense of making marginal adjustments to marginalist models (I would regard the latter as changes in method rather than methodology).

    On Ken Clark’s points:

    We used ‘cancelled’ as short-hand to describe the sequence of events that led to the course not being offered to students and to the lecturer leaving Manchester. We do not know the full details of these events so we cannot comment further.

    Clark accuses us of misrepresenting the content of economics degree courses. He provides a list of topics which he claims are currently taught on undergraduate degrees. He even goes so far as to acknowledge that ‘[advocating] a different balance between mainstream theory […] and other types of theory’ is a reasonable position. The list of topics he provides looks much like the wish-lists circulated by the student-led curriculum groups. This begs the question – if all this stuff is already being taught, why are students complaining that it isn’t? In short, we stick by our assertion that the great majority of undergraduate degree programmes are dominated by formal modelling of the type we describe. Further, our piece was written as a reply to Tony Yates who appears to support the study of ‘exotic non-linear differential equations’ to the point of excluding of almost all other material.

    The final point made by Clark is the most misleading. Our defence of Chakrabortty’s programme is in no way intended to invoke sympathy and ‘victim status’. We simply highlight that the points raised by the student groups – 65 groups from 30 countries at the time of writing – had not yet been heard anywhere on mainstream media. The intelligent non-economist Radio 4 listener is likely to have understood that the programme was about a particular pressure group. They would further understand that the established status quo against which the protests are directed — academic economists in this case — are likely to disagree with the protestors and to have intelligent representatives who are able and willing put their side of the argument. It is now up to those who disagree with the student groups to come forward and engage in the debate. As we note in our piece, the criticisms of the economics taught to undergraduates have, for a long time, been met with silence and it is only because of the determination of the student movement that academics are now – reluctantly it seems – being pushed to defend economics curricula. PCES note in their response** to Yates that Coyle was the only representative Manchester put forward – and that other Manchester academics were approached directly but declined the opportunity to appear in the programme.



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