ATEC 09, QUT July 13, 2009

1. Cicero’s Children: the worth of the history of economic thought and economic history for business students Alex Millmow ATEC 09, QUT July 13, 2009

2. Purpose and scope • ‘What does the GFC tell us about teaching and learning economics?’ • “How does one teach economics at a time like this?’ • Something about bringing back a historical perspective to the teaching of first year economics and economic majors • Timely pursuit with the GFC and the great recession abroad • The return of overt Keynesianism and the discrediting of neo-liberalism

3. A good recession? • Weed out the inefficient and the archaic, reducing debt-fuelled consumption • serve as an educative role…looking forward to Eco 101 • From the boom we never really had 1990-2007 to the boom we’re about to have?? • How will Gen Y cope with the spectre of graduate unemployment-AFR Story • confusing times even for experienced economists about what caused the crisis, what to do about it why we did not see it coming and now explaining why Australia might just have a business recession! • Last year it was all about containing inflation and rising petrol prices, now its coping with the economics of fear, deficit budgets and the fear mongering put out by libertarian think tanks

4. How Going retro clarifies ‘History might not repeat but it does rhyme’ Mark Twain ‘Even the most practical man is usually in the thrall of the ideas of some defunct economist’ Keynes • ‘All Keynesians now’ But some ‘intellectual sclerosis-hardening of the categories’ around • And then, whose Keynes will it be? The expansionist, anti –disinflationist Keynes, the measured market liberal or perhaps bastardised version? • Niall Ferguson of the Ascent of Money’: ‘You’ve got this problem that if no one is taught financial history at any point, they are relying entirely on their own experience...risk models tend to work with just three worth years of data’. • Bernanke ‘s muted conversion to Keynesianism • Alan Greenspan’s epiphany and admission of a ‘flaw in the model ‘ of liberalisation and self regulation. .

5. Will the Mainstream change? • Nope, business as usual!! • Many economists refuse to leave their paradigm • The GFC will be explained on anomalies like a breakdown in the principal-agent relationship, poor financial regulation, govt intervention and over savings caused by China • Mankiw’s leading economic textbook for the 2009 academic year has little changes except for some passages on leveraging and financial intermediation Despite what ‘s in the press and bookshops research by Hodgson (2009 ) shows that the citation of Keynes and Minsky falling over the decades but Roubini, the seer of the GFC, rising. Hodgson concludes economists don’t learn some unlikely support from Posner in his new book the failure of capitalism who sees ‘economists asleep at the wheel’ and too complicit in turning to the Chicago school

6. The contribution of HET to economics education • We can argue that a knowledge of the history of relevant economic theories provide added and useful value to whatever theoretical and empirical studies are being made. American universities offer and teach more HET than we do especially at the high-class liberal arts colleges but the subject is taught in an easy, literal way with the focus on the narrative. • An understanding of the history of economics, even some business thought theory adds to the weight of useful knowledge available • We would return to having business graduates with an ‘all rounder’ ability rather than just pure vocationalism

7. The worth of HET to economics education There are six key contributions HET can make to better economics education and a foundation for both economic research and applied economics and business research

8. The worth of HET to economics education • First, HET is a pathway to understanding economic theory and its application. • Here we use HET as a frame of reference, the historical circumstances in which theories developed showing how they were designed to with a actual problems • Also it shows how economic theory developed and why some theories became dead ends, while other approaches were more successful

9. The worth of HET to economics education • Second, HET as orientation for the development of theory • economists use theories of the past to frame issues of the future • Akerlof (2007) example of using HET to track the development of macroeconomic theory and then to push that theory into a new direction. To know where we have come from, the need for some familiarity of the history of economics is a necessary knowledge base for anyone thinking about theoretical issues

10. The worth of HET to economics education • Third, HET as a conversation with economists of the past • Empty formalism, ahistorical, autistic, tendencies within the eco profession, a tendency to reinvent the wheel with history seen as what happened last week • No point in cutting off the insights of the past • The GFC has brought comparisons with the great depression and brought the works of Keynes (demand failure) Hyman Minsky (asset boom and finance) and Irving Fisher( debt-deflation) into vogue

11. The worth of HET to economics education • Fourth, HET as a storehouse of theoretical approaches and deepening one’s understanding of contemporary theory • The joy of discovering neglected prophets and original thinkers. Take the example of recent best- selling biography of Schumpeter by Thomas McGraw. Using the example of great thinkers in economics to generate student interest. And now the return of Keynes the maestro, the Minsky moment.

12. The worth of HET to economics education • Fifth, HET as a literary approach to economic issues. • Decline in the literary tradition in economics, a loss in the persuasiveness and rhetoric of academic economics due to overmathematisation of the discipline • Where are the academic economists on the news? Can they write or spin a tale? • Marshall’s famous dictum about relegating the mathematical proofs to the appendix • The ability to write well in economics becoming a lost art

13. The worth of HET to economics education • Sixth, HET as a training ground for applied economics • Those with some appreciation of HET are able to access a wider range of perspectives and answers and are better able to think outside the narrow confines of the ruling paradigm • Most American university depts offer a course in HET, Only Half of Australian economic departments do • The proposed University of Ballarat experiment