An intellectual winter

TheJournal.ie reports on a speech given by President Higgins at the University of Chicago this evening.

PRESIDENT MICHAEL D Higgins has told students at the University of Chicago that the teaching of economics is going through “an intellectual winter” because it doesn’t take account of the social impacts of policy.

“The recent economic and financial upheavals have thrown a glaring light on the shortcomings of the intellectual tools provided by mainstream economics and its key assumption regarding the sustainability of self-regulating markets (and, more particularly, of largely unregulated global financial markets),” he told the assembly.

The prepared text for the speech is available on the President’s website.  A recording of the actual delivery and subsequent Q&A session is available here.

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19 thoughts on “An intellectual winter”

  1. Methinks use of the term ‘intellectual’ is somewhat overly generous by The President; the more hard-hitting ‘ideological’ is probably closed to the reality.

    The key problem with the young social science of economics relates not to its generally acknowledged aporias, gaps, misconceptions and variously flawed assumptions – But HOW the output of its simplistic models have been, and continue to be, used by Odious elements of Capital is pursuit of maintaining its own, and not the human lifeworld’s, ends.

  2. bit of an ‘intellectual political winter’ in Eastern Europe also at the mo:

    text from Blind Biddy (on a one-time cell phone from Kharkov)

    ‘Meself and Paddy Zhukov are OK after our ‘observations’ TG. Worth a read … reality between the front lines:

    May 11, 2014 |

    Russia’s celebrations of the 69th anniversary of the defeat of fascism in World War II come just days after Ukrainian neo-fascists enacted an appalling Odessa massacre. For those who know their history, the graphic symbolism speaks for itself.

    And then a geopolitical chess gambit added outright puzzlement to the trademark hypocrisy displayed by the self-proclaimed representatives of “Western civilization”.

    The gambit comes from – who else – Russian President Vladimir Putin, who is now actively mixing chess moves with Sun Tzu’s Art of War and Lao Tzu’s Tao Te Ching . No wonder all those American PR shills, helpless State Department spokespersons and NATOstan generals are clueless. ‘

    http://www.alternet.org/putin-displays-ukraine-chess-mastery?akid=11796.1920389.DmDgJv&rd=1&src=newsletter991495&t=19

  3. Rather than being unaware of the social impact of policy, for example Milton Friedman, the UoC’s most famous economist, couldn’t be reasonably accused of that.

    However, his remedies for a modern world that had rejected classic nineteenth century capitalism and the twentieth century’s failed experiment with communism, were often simplistic.

    Paul Krugman explains here why economic models that seem unrealistic to the layman are used:

    Milton Friedman played three roles in the intellectual life of the twentieth century. There was Friedman the economist’s economist, who wrote technical, more or less apolitical analyses of consumer behavior and inflation. There was Friedman the policy entrepreneur, who spent decades campaigning on behalf of the policy known as monetarism—finally seeing the Federal Reserve and the Bank of England adopt his doctrine at the end of the 1970s, only to abandon it as unworkable a few years later. Finally, there was Friedman the ideologue, the great popularizer of free-market doctrine.

    Did the same man play all these roles? Yes and no. All three roles were informed by Friedman’s faith in the classical verities of free-market economics. Moreover, Friedman’s effectiveness as a popularizer and propagandist rested in part on his well-deserved reputation as a profound economic theorist. But there’s an important difference between the rigor of his work as a professional economist and the looser, sometimes questionable logic of his pronouncements as a public intellectual. […]

    Nobody, not even Nobel-winning economists, really makes decisions that way. But most economists—myself included—nonetheless find Economic Man useful, with the understanding that he’s an idealized representation of what we really think is going on. People do have preferences, even if those preferences can’t really be expressed by a precise utility function; they usually make sensible decisions, even if they don’t literally maximize utility. You might ask, why not represent people the way they really are? The answer is that abstraction, strategic simplification, is the only way we can impose some intellectual order on the complexity of economic life.

    And the assumption of rational behavior has been a particularly fruitful simplification.

    http://www.nybooks.com/articles/archives/2007/feb/15/who-was-milton-friedman/

    Alan Greenspan, who famously admitted in late 2008 that he had discovered a flaw in his guiding model of his world, had given an interesting speech in Kirkcaldy, Scotland, birthplace of Adam Smith, in 2005.

    In the broad sweep of history, it is ideas that matter. Indeed, the world is ruled by little else. As John Maynard Keynes famously observed: “Practical men, who believe themselves to be quite exempt from intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” Emperors and armies come and go; but unless they leave new ideas in their wake, they are of passing historic consequence.

    The short list of intellectuals who have materially advanced the betterment of civilization unquestionably includes Adam Smith. He is a towering contributor to the development of the modern world.

    It strikes me that President Higgins elevates economists to a level of players in the economic cosmos that is not merited.

    What distinguishes the great economists such as Smith, Keynes and Hayek from most other economists is that these men were more than just economists.

    If President Higgins took a wider view than the financial crisis, he may see that recent decades have been marked by impressive improvements in the lot of the common people in many parts of the world.

    What can be observed is that decision making in the long-term usually proceeds by trial and error and sometimes significant change only comes after cataclysmic events.

    Economists are no braver than any other professional group in getting ahead of conventional wisdom.

    Since the crash there has been a babel of economists hurling from the ditch as we say in Ireland, but when calmer times return will we see a great toleration of dissent than there was in 2007?

    Keynes was one of the principal architects of the Bretton Woods’ agreement on the establishment of the IMF and the World Bank before World War II had ended; then in the 1950s, there was a political will to cut tariffs to promote growth in what was then called the ‘free world’ – that ushered in the second coming of globalisation. In the prescient 1919 book ‘The Economic Consequences of the Peace,’ Keynes had described free trade as it existed in June 1914, when a businessman in London could travel the world freely, invest wherever he wanted, and “could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep.” Not only that, Keynes’ Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement.”

    Bitter lessons had been learned from the vengeful peace at Versailles and the Great Depression.

  4. This is the opening paragraph of the 1946 obituary of Keynes in The Economist:

    The sudden death of Lord Keynes on Easter morning has removed a great man. In turn civil servant, pamphleteer, don and college bursar, editor, company chairman, patron of the arts, government spokesman and adviser, member of the Upper House—he touched no career that he did not brilliantly adorn. More than any other man of his time he had the power to arouse informed opinion to the acceptance of novel proposals and if the public mind is better prepared in this country than in many others to face the problems of the period that is now opening, Keynes can claim far more than one man’s share of the credit. The story is told that when he was appointed a director of the Bank of England, he was accused by a friend of turning orthodox in his old age and replied, with his perfect self-assurance, “You are wrong. Orthodoxy has caught up with me.” What would have been conceit in another was the simple truth in his case. He had the gift that comes only to real leaders, of being well ahead of his generation and yet able to pull it along behind him. For this, more than intellect and more than lucidity are needed—though Keynes had both in plenty. He had also the integrity of the philosopher and, when he wished, the fervour of the prophet.

    http://www.economist.com/blogs/freeexchange/2013/11/keynes-from-the-archives

  5. Greetings,

    just a thought, if 40 student organisations from 19 countries, including Brazil, India Russia etc. recognise that curricula in economics preach nothing but outdated and wrong neoclassical theories, and demand change, then this is reason for hope.

    Here:

    http://www.isipe.net/

  6. oh, and btw. before I forget it, perhaps some of the esteemed lecturers here read the open letter in the link above, and perhaps they realise that Ireland is not even listed amongst the 22 countries who joined there already, and perhaps they deem this worthwhile to share with the young souls they were entrusted with, so may be in the future some Irish student organisation, from Trinity, UCD you name it will be listed there as well.

    Thank you

  7. @ MH: “Bitter lessons had been learned from the vengeful peace at Versailles and the Great Depression.”

    Lessons learned? And they would be? Perhaps some lessons were indeed learned. One was that the Rule of Law would restrict Capitalists in their pursuit of economic surpluses. They needed to restrict the restrictions. Took some time, but they succeeded. And look at the outcomes. On second thought, lets just look away. The view is pretty appalling.

    Smith, Keynes and Hayek were great? In their time maybe, and that is surely a debatable matter. But not now: they’re yesterday’s men. Arrow of Time, and all that it implies.

    “If President Higgins took a wider view than the financial crisis, he may see that recent decades have been marked by impressive improvements in the lot of the common people in many parts of the world.”

    I seem to recall that I crossed keyboards with you before on this matter. Lets just agree that these so-called ‘impressive improvements’ came with a fearful external cost to millions of folk. But, Milton (and his ideological sychophants) did not do ‘externalities’ – tad inconvenient that.

    “What can be observed is that decision making in the long-term usually proceeds by trial and error and sometimes significant change only comes after cataclysmic events.”

    Michael, you DO NOT do economic trial-and-error experimentation with the lives and wellbeing of humans. You WILL achieve a cataclysmic outcome. I would have thought that that would be obvious by now. Timujen? Timur? Stalin? Mao? Pol Pot? Friedman? Appears not.

    Which is it? That society is absorbed into, maintained and acquires its characteristics from its particular economic policies and activities? Or society creates and maintains a particular type of a temporal-bound economy, which is but one of the varied and varying sociological and political strands by which that society abides?

    The former is the one that leads to those cataclysmic outcomes. But since it has been such an heroic and successful failure, it abides – so far anyways. Communism was a successful failure also – and look what happened to it!

    Human society will abide, but the Permagrowth economic paradigm will not.

    Cheers, Brian.

  8. @ Brian Woods Snr

    Maybe I should have added trial, error and politics.

    Ronan Lyons’ thread and the utterances of panicing Labour ministers show that they believe people can be bought.

    There is no need to cast a net to fish for tyrants when the naked little emperors are on your own doorstep.

  9. @ MH: Thanks for that. Agreed on the tyrants and emperors. Homebrew is best, 😎

    I read RL’s piece yesterday. Its going to get a skip-load of flak. Brave lad.

    Cheers.

  10. Michael, I typed in a reply. Seems to have ‘vapourized’. Thanks again. Nice point about the tyrants and emperors.

    Cheers

  11. @ David O’Donnell

    You’re correct on Karl Marx.

    I did once try to read Das Kapital.

    He was certainly a profoundly influentail economist.

    I have always thought of him as more a philospher but he was as much an economist or more than Adam Smith given that Marx lived through the Industrial Revolution and was very much influenced by it.

  12. @Michael Hennigan

    Adam Smith thought of himself as primarily a ‘moral philosopher’ – an insight totally lost by many of those who ‘assume themselves’ as following in his footsteps.

    Hayek is a product of the Vienna of the 1930s and heavily influenced by the pogroms in Soviet Union – hence his total [and flawed] rejection of collectivism; yet he conversed with Schutz who coined the collective empirical term LebensVelt )Lifeworld taken much further by continental philosophy – especially Jurgen Habermas, Apel and others who have updated Kant also influenced by Weber. I totally reject Hayek’s flawed Cartesian Individualism which has been debunked by the limits of the philosophy of consciousness and his ideology is thatcher-lovin odious; that said, his work on ‘knowledge in society’ remains relevant. Of course, the Randites on the blog will prob disagree (those that can read, that is!). I don’t rate him as ‘great’ but as one of the dangerous ‘great illusionists’.

    Read Marx’s chapter on Ireland in Capital; brilliant exposition of the value of a pig and an acre of land for the subsistence of the serfs. & where would social democracy, trade unionism, 40 hr week, welfare state, sick pay, and social insurance ect be without his continuing [if mostly silent] influence.

    Smith and Marx are starting points – ideas, contexts, and time continue to develop. Economics ain’t science; ’tis juvenile social science.

  13. from President Michael D. Higgins’ speech [text] in Chicago [love the irony of location & the flawed Chicago Skool of ekonomics]

    ‘Jürgen Habermas candidly expressed the character of our current crisis, and the form of the price being paid:

    “The mass of those who are not among the winners of globalisation now has to pick up the tab for the impacts on the real economy of a predictable dysfunction of the financial system. Unlike the shareholders, they do not pay in money values but in the hard currency of their daily existence.”

    As “predictable” as the dysfunction referred to by Habermas may have been, and although escalating trends in house prices and indebtedness were captured in statistical data, the fact is that most economists failed to predict the collapse.

    Responding to this intellectual failure requires more, I suggest, than an adjustment of the modelling techniques and forecasting tools used by most economists, or a tightening of banking supervision. Such reforms are, of course, necessary and important, but they fall outside the scope of my speech today.

    The Office of the President of Ireland is an independent one, separate from Government under our Constitution, which means that I do not address issues falling within the Government’s remit. However, as Head of State, I am compelled to represent the experience and hardships of the Irish people – all of them, at home and abroad. And as President of a small society which has been affected more than most by the global financial meltdown, I consider it crucial that we collectively reflect on the structural, and indeed philosophical, questions raised by the unfolding crisis

    read on: http://www.president.ie/news/watch-live-address-by-president-in-chicago/

    Neat to see the recipient of the Ulysses Prize from UCD in 2010 get a mention; ‘course most UCD (& oirish) academics have prob never heard of, let alone read, Jurgen!

  14. Breaking Newz on the issue of the day ‘The Price of a Pint of … er … Wat.. er

    Mad Oul Jozie down-the-road has just been rescued by Fire Brigade. She was diggin her own well with a shovel, spade an slean when it fell in an buried her up to the waste; she was in it all night until the postman discovered her this afternoon. She is well – had a toke for her arthur_itis and a cup of tea, and the community have rallied round and will finish the well for her. A tragedy averted; can’t wait to hear what Blind Biddy makes of it all.

  15. Yes – from the volume of comments from economists here – one must agree with The President that it might be a good idea for economists to receive what used to be known as ‘an education’. A regular, somehat challenged, academic here stresses the idea of ‘trained economists’; methinks what is needed are ‘educated economists’.

    Figure it out!

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