Monthly Archives: April 2014

A response to Krugman’s ‘Frustrations of the Heterodox’.

In a recent article in the New York Times, Paul Krugman criticised the heterodox economics movement for going too far. His patronising article is both self-contradictory and self-serving. In his article he repeatedly accepts the need to learn from mistakes and incorporate new ideas into economics while simultaneously attempting to silence those with different ideas. Silencing those who challenge the mainstream has obvious benefits to a man who has made his career out of being a critic embedded within the establishment. I have no doubt that Krugman is sincere in his writings, yet it does not change the fact that much of his prominence arguably comes from being a consistent yet not too radical critic of establishment economics.

By opening the piece with a line like the heterodox need to realize that they have, to an important extent, been working with the wrong story line”, Krugman reveals his intentions. He seeks not to listen or engage, but merely to dismiss out of hand, by patting us on the head and telling us we’ve gotten ourselves muddled. His mocking tone is that of someone who seeks to protect themselves, not to actually debate anything. In fact, it is arguable that in this piece Krugman has misinterpreted some of the facts; more on that later.

Krugman accepts that economists failed to predict the 2008 crisis, while also pointing out that nobody else did either. This is somewhat strange, given that studying the economy is, well, the job of economists. If a security guard doesn’t spot an intruder, they have failed to do their job. Pointing out that several passers by also didn’t spot that intruder doesn’t change that fact; none of those passers by were responsible for identifying and dealing with intruders.

This aside, Krugman argues that the failure to predict the recession is as simple as a failure to properly identify the rise of shadow banking. This seems a little too simple, and misses out many important facts. First of all, when an entire profession completely misses such an important fact, one has to question whether that profession was functioning properly. Even if we accept this explanation, it is still very possible that the uncritical nature of the current state of economics and its failure to adapt to new phenomena are linked.

Krugman also skates over recent developments within heterodox economics – such as the Bank of England’s admission of failure over the role of money. By ignoring the contributions of Steve Keen – as so many within the mainstream have been so keen to do – Krugman distorts the debate to make it seem like there is nothing out there that could aid our understanding that isn’t currently being discussed.

He then goes on to insist that the response to the crisis – austerity – is based on a rejection of textbook macroeconomics. This, of course, depends on the textbook. Many undergraduate economics textbooks are full of material that supports austerity, highlighting the efficiency of markets versus the inefficiency of governments. Can Krugman really not see the connection between a reductionist economics curriculum in which we are taught to accept principles with relatively little questioning and the disastrous application of those principles into public policy?

Furthermore, the culture of avoiding questions of politics and claiming political neutrality must also be linked to austerity. The language that supported austerity policies is tied closely to mainstream macroeconomics. The policy was presented as the only valid option, political and social externalities were ignored and GDP growth was viewed as the only thing worth valuing. If we had an economics that was able to challenge these ideas, to accept that economics has a political aspect and to look beyond GDP growth, then we might not have seen austerity policies brush aside criticism like they did. Many mainstream economists did object to them, this is true, but those economists came from the same culture that prevents economic policies from being criticised on social grounds.

At this point, one possible motivation for writing the article shines through when Krugman says that heterodox economists “want to drive people like me out of the temple, too”. Oh, the horror. Frankly, I don’t particularly want to drive Krugman out. He is clearly a very intelligent person who has a lot to contribute to economics, despite my disagreeing with him on this article. However, I think it is possible that Krugman – who has made a career out of being consistently slightly critical – would see his importance to the discipline of economics decline if we allowed more genuine dissenting voices. No longer would he be the left-most superstar economist, he would have to share that territory with others. Given Krugman’s possible self-interest in the failure of the heterodox movement, it is worth taking his article with a pinch of salt.

Krugman finishes the article by building a rather strange heterodox economist strawperson and knocking it down, before noting that the crisis and the resurgence of high inequality mean that we need to ask questions about how we teach economics. But how are we to ask questions if the people we ask them of are so eager to dismiss concerns out of hand? In the very next breath, Krugman again attacks heterodox economists for having the temerity to question his interpretations of events. This kind of piece serves nobody but Krugman and the mainstream. It gives the illusion of caring about diverse opinions while in practice stifling debate and protecting those who currently rule the temple.



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Manchester United and David Moyes: what went wrong?

The 10-month soap opera has drawn to an undignified end. David Moyes’s short reign at Manchester United is over, and the kings of English football for the last 2 decades look to the future with anticipation. The brand is still strong, the club is still rich and the legions of fans they have amassed the world over will stay, for a while at least. Missing out on Champion’s League football might make it harder to attract the class of players they need to reverse their fortunes, though.

However, with all signs pointing to a large turnover of players for United this summer, a lack of Champion’s League football might be something of a blessing come this time next year. While their rivals are likely to be involved at the sharp end of the Champion’s League, their stars can focus on the league, much as Liverpool have been able to do this year. They face a Chelsea side this weekend who have semi-final ties with Atletico Madrid either side of the weekend’s encounter. While Brendan Rodgers will pick his best team for Liverpool’s biggest challenge between now and the end of the season, José Mourinho faces an unenviable balancing act between domestic and European glory. Still, it is hard to view this season as anything but a failure for the club as a whole. Exactly where the blame for a disappointing season lies is less clear, and depends on a number of factors very few people outside of United really have any idea about. It’s hard to argue that Alex Ferguson left the team in good shape.

This post reviews the United squad, concluding that the defence and midfield are beset with problems. The best-case scenario for the defence is that at least two of Smalling, Jones and Evans make a step up to become world-class centre-halves, but this a long way from certain. In midfield, Januzaj and Mata are the only bright sparks, and Mata has yet to show the form that he did in his first two seasons with Chelsea.  None of this tells us why David Moyes’s year has been quite as painful as it’s turned out to be. There are several possible explanations – the truth is likely to be a combination of all of these.

It is important to note that David Moyes was not the only new face at United this year. In fact, surprisingly for a team that looked in need of an overhaul 10 months ago, there were more off-the-field changes than on-the-field changes. As well as the well-publicised retirement of manager Alex Ferguson, his brother and chief scout Martin Ferguson also retired, along with chief executive David Gill. In short, the three senior personnel responsible for player acquisition all departed at the end of last year. With a squad overhaul imminent, the wisdom of this surely has to questioned. Of course, the Gill and Martin Ferguson decisions are likely related to Alex Ferguson’s decision, but the situation is not the best for success.

A level of continuity would have benefited Moyes. Searching for the right players is not an easy process, especially not when the season is over. Moyes will have been relying on his evaluations of players from when he was at Everton and the evaluations of the United scouts. With all due respect to Everton, it’s unlikely that many players they were interested in turned up on the United radar. Completing a squad overhaul without the guidance of the former chief scout is a challenge that Moyes simply didn’t need. One also has to wonder whether, in the months prior to his retirement, Martin Ferguson will have been focused as single-mindedly on a squad overhaul as someone who knew they would be continuing with the club would do.

Similarly with the chief executive role, new man Ed Woodward has plenty of commercial experience, but not so much on the footballing side. With Moyes presumably spending most of his time frantically searching for the talent to renew his squad, the last thing he needed was any unnecessary complications in transfer negotiations. The bizarre Ander Herrera saga indicates that Woodward might have been less than the reliable presence Moyes needed. Any one of these hurdles might have been insignificant with two experienced hands to help them along, but the combination of all three proved problematic for United.

With some many holes in the squad to fill, United needed to move quickly to identify talent, bring it in at the right price and move on the improving other areas of the squad. Time after time – with Fabregas, Fellaini, Herrera, Baines and others – it was clear that the club were not operating with the fluidity and efficiency that we expect from top sides. Pursuing players who had no intention of joining, failing to take advantage of buyout clauses, non-existent offers and “insulting” offers were just some of the mistakes made by United over the summer; none of these are signs of a club operating competently in the transfer market.

When it comes to coaching, as well, there was a distinct lack of continuity. Gone were many of the experienced hands who had helped Ferguson, such as Mike Phelan and Rene Meulensteen, and in came Moyes’ own men, such as Steve Round and Phil Neville. We don’t know precisely why this happened, whether the likes of Phelan and Meulensteen left of their own volition or were pushed out by Moyes. Of course, Moyes wanted to put his own stamp on the team, but with a 6-year contract, there was more than enough time to do this without sacrificing continuity.

The rhetoric surrounding that contract contrasts, as we can see, with the off-the-pitch reality. While United emphasised the importance of stability, they simultaneously changed many things off the field. Exactly who drove this huge raft of changes should determine where the blame lies. If Moyes insisted on overhauling everything, then he must assume much of the blame. If the changes were beyond his control, then his sacking looks increasingly unfair. If they were beyond his control, we have to ask whether more effort could have been

Even so, Moyes has never seemed like a tactical genius of a football manager. At Everton, he seemed at his finest when forcing square pegs into round holes, improvising without a striker with Cahill playing off Fellaini. His sides never really excelled against the top teams nor played with the style of, say, Brendan Rodgers’ Swansea. Roberto Martinez has taken a very similar group of players and has them playing more attractively, more creatively and more successfully. Everton’s players have spoken about Martinez’s superior tactical ability, which is damning for Moyes.

As the top seven mini table shows, David Moyes’s struggles against top sides have followed him to United. A measly six points and and one win from 12 games against the top seven is far below where United need to be. Most notably, it compares incredibly unfavourably to Roberto Martinez’s record with Everton. These struggles can be interpreted as part of David Moyes’s lack of tactical inventiveness, and a creative deficit within the midfield. While United have the sheer quality to brush past lesser opponents, when faced with players of a higher quality who are tactically more organised, they have little to offer.

All in all, the decision to hire Moyes does not look like a good one. The conditions that Moyes had to work in were certainly not ideal. If those conditions were of his own creation, then he has no-one else to blame. It seems unlikely, however, that Moyes insisted on a complete behind-the-scenes overhaul. It’s likely, however, that other figures at the club are more than happy for the public to blame him rather than take responsibility themselves – Ed Woodward in particular. The reality is that no-one at United comes out of this season with much to celebrate. The higher-ups have looked both incompetent and inconsistent by hiring a tactically limited manager yet not even giving him the tools to succeed. They have preached stability and consistency with the 6-year contract offered to Moyes, yet with all the changes of the field and Moyes’ short reign, they have practised anything but.

Moyes himself has probably ruled himself out of an appointment of a similar calibre in the future, barring a roaring success with a smaller club. It is not the failure to qualify for the Champion’s League that has cost Moyes his job, it is the manner of that failure. Not only are the club a long way removed from the Champion’s League places, but they have never played like a team who are a few signings away from being competitive. Their record against the top sides speaks for itself, and Everton’s fantastic season under Roberto Martinez has done Moyes absolutely no favours at all. Manchester United have officially begun their search for a new manager, though I suspect that began a while ago in reality. The problems at the club go far deeper than who is at the helm though, and whoever the new manager is will need more of a chance to succeed than Moyes has been given.

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Manchester United squad review.

In order to evaluate Moyes’s tenure at United, I have done a short review of the United squad. Credit to Tom Elias for a good discussion.

The goalkeeping position is, thankfully for United, one in which they have relatively little to worry about. David de Gea looks to be improving, particularly in the areas once seen as his weaknesses, and Lindegaard might be a contender for the best back-up goalie in the league. In the defence, the three key stalwarts of the late-Ferguson era defences – Vidic, Evra and Ferdinand – are all beginning to show their age in a big way. Phil Jones, Chris Smalling and Jonny Evans are all progressing well, but as of yet none come close to the commanding centre-halves that Vidic and Ferdinand were in their prime. Rafael looks like a capable right back for the future, though left back is a concern unless Buttner turns out to be a much better player than his 11 league appearances in 2 seasons would indicate.

There are problems in midfield as well. Michael Carrick hasn’t had his best season, though remains an unappreciated player. At 24, the days of expecting Tom Cleverley to suddenly morph into a world-class playmaker are surely over. Fellaini’s signing was a mess of a process, and it’s difficult to work out how Moyes intended to use him. He hasn’t been deployed that regularly for United. At Everton he operated in a hybrid target man/playmaker role. While that worked well at Everton, Fellaini seems to lack the creativity needed to truly excel against top sides. Darren Fletcher has struggled for fitness, and has always been more of a squad player than a dominant first-team presence. In short, United’s centre lacks both a true holding midfielder or a creative presence. Michael Carrick’s ability as a deep-lying playmaker aside, it’s hard to see that any of these players truly belong at United. If Fellaini can rework himself as a holding midfield player, then he might have a future at Old Trafford, but a change is needed.

Moving up the field, the deployment of Shinji Kagawa has been confusing. Both Ferguson and Moyes have regularly played him out wide, causing his former manager Jurgen Klopp to complain wistfully about how his talent is wasted on the flanks and argue that he should be played inside, as a playmaker. The prospects of that happening appear bleak, with the arrival of Juan Mata. If the Spaniard can find the form that lead him to consecutive player of the season titles at Chelsea, then United can breath a sigh of relief. On the wings, Januzaj looks like the real deal, but is too young and too raw to carry the team on his shoulders. Valencia is talented yet one-dimensional, a far cry from the versatile wingers such as Ronaldo, Bale, Robben and Ribery who play out wide for other top European sides. Ashley Young and Nani look roughly the same as they always have: decent squad players and good depth, but little more than that.

Up front, things are much rosier. Rooney and van Persie might be in the final third of their careers, but both still ooze quality. Hernandez is a great back-up, providing a different threat to Rooney or van Persie with his sharp movement and ever-present goal threat. Danny Welbeck continues to be the archetypal manager’s headache: the underscoring striker. Welbeck combines excellent physical attributes with good movement, an impressive work rate, good technique and a baffling lack of goals. He obviously can score goals – sumptuous chipped finishes come to mind – yet does so at a far lower rate than he really should. Deciding Welbeck’s future should he continue his frustrating form will be a tough decision for whoever replaces Moyes.

Ultimately, there are relatively few players who are currently at the level United need them to be. De Gea, Mata, Januzaj, Rooney and van Persie are the only players who other top sides might be seriously interested in. Rafael, Smalling, Jones and Evans are all good squad players who could potentially make a leap up in the next year or so. The likes of Valencia, Carrick, Hernandez and Lindegaard are all good role players who probably have a future at the club should they wish to remain there. Welbeck, Kagawa and Fellaini stand – like the club they play for – at a crossroads. There is obvious talent there, but time is running out for all three to turn that into success at United. The rest of the squad is either too old to form a serious part of United’s future plans or have simply never shown the quality to succeed at the highest level.

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Intellectual Darwinism and the fallacy of the marketplace of ideas

I recently attended panel discussion, organised by the University of Manchester’s Post-Crash Economics Society as a counterweight to the Royal Economic Society’s conference, between Victoria Chick and Diane Coyle on economic pluralism. The Q&A session became somewhat heated after one audience member suggested that the reason modern economics is dominated by one school of thought is that this particular school of thought has beaten out the others. He referred to the numerous paradigm shifts we have seen in economics – from the classics to Keynesianism and from Keynesianism to the monetarists – as evidence that the best theory prevails.

This, however, is a view which neglects the long history of paradigm shifts, both inside and outside economics. Wherever ideas and viewpoints are challenged, those who hold them are often quite naturally defensive. This is normal, and a perfectly human reaction. I am certainly not accusing anyone of wilfully suppressing debate and critical engagement – I think it happens accidentally because we are all, alas, human. However, just because it happens by accident does not mean it is a phenomenon we should close our eyes to.

Throughout the history of the sciences – natural and social – challenging viewpoints have been met with hostility. Within our own discipline, John Atkinson Hobson’s initial theories on underconsumption were to influence the thoughts of John Maynard Keynes over 50 years later in his magnum opus, The General Theory. However, in his own time, Hobson was not so highly regarded. Having found himself unable to counter the arguments of a friend using orthodox theory, he turned away from it, in what was to be a damaging career move. In his own words (cited in Keynes’ The General Theory, 1936: 365-6)

The Physiology of Industry [was] published in 1889.This was the first open step in my heretical career, and I did not realise in the least its momentous consequences. For just at that time I had given up my scholastic post and was opening up a new line of work as a University Extension Lecturer in Economics and Literature. The first shock came in a refusal of the London Extension Board to allow me to offer courses in Political Economy. This was due, I learned, to the intervention of an Economic Professor who had read my book and considered it equivalent in rationality to an attempt to prove the flatness of the earth”

This situation – a promising theory which challenged the deficiencies of the orthodoxy of the time – bears a somewhat worrying resemblance to the present situation, particularly the recent cancellation of Manchester’s Bubbles, Panics and Crashes module. Differing points of view are blocked from academic positions, denied funding and effectively silenced. Of course, those doing the silencing do it in good faith, but that does not change the reality of the situation – dissent is possible, but exceedingly difficult. As a social science, we should be fostering dissent, debate and critical thinking, rather than impeding it. As pointed out in the Association of Heterodox Economists’ response to the last QAA review of the economics curriculum, almost all other social sciences view debate between different and legitimate viewpoints as central to their discipline itself.

If, like many in economics, we prefer to view our discipline as closer to the natural sciences than social sciences, there are still powerful lessons to be learned. Many of the natural sciences have a shameful history of suppressing what would later turn out to be revolutionary ideas. Alfred Wegener’s theories about plate tectonics were met with scathing criticism and hostility during his lifetime. Crick and Watson were instructed to drop their research on DNA, yet continued it on their own time – again, much like the recent Bubbles, Panics and Crashes module.  Even within the “purest” of fields, mathematics, Gauss was unwilling to publish his work on non-Euclidean geometry for fear of ridicule. This fear proved well-founded, as Lobachevsky was, indeed, to face ridicule for daring to publish work on non-Euclidean geometry.

This pattern of hostility to new thought proves that we cannot simply assume that the prevailing ideas of the time are the best. Much like advocates of Social Darwinism, advocates of Intellectual Darwinism fail to comprehend the structural constraints in a system they perceive to be perfectly competitive. The situation is more akin to a sapling trying to grow under a large tree; even if the sapling could potentially grow to be taller than the tree, it will not do so while the larger tree shades it and stunts its growth. It might, perhaps, be suitable to prune back some of the branches of the larger tree in order to see which sapling might grow tallest.

Building on this, it is difficult to see why a talented young economist who could potentially revolutionise the discipline would stay within it. Expensive degrees, vanishingly low wages for PhD tutors and few opportunities to meaningfully challenge the existing paradigm make the life of the next potential Smith, Marx, Keynes or Friedman a somewhat unappealing one, should they choose economic academia. Suffice to say, it is difficult to see why a rational utility-maximising individual would bother with trying the change economics.

Economics needs to change, and it cannot wait until the next great idea in order to do so. Without changing the discipline, we reduce the likelihood of that idea every coming into existence by driving its potential originators out of the discipline. Only by actively fostering debate and critical thinking, and going out of our way to ensure that orthodoxies can be challenged, do we ensure the survival and relevance of economics.

Whether we view economics as closer to a natural or social science, it is clear that we must learn from other disciplines. If it is to be viewed as akin to a social science, we must be mindful of the fact that paradigms in social sciences are allowed to compete and coexist, and that this complex interaction is a key part of the discipline itself. If, on the other hand, it is to be viewed as closer to a natural science, we must be mindful of the long and shameful history of silencing dissent within the natural sciences, and ensure that our paradigms can be effectively challenged.

This post also appears on the Rethinking Economics blog.


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