Aditya Chakrabortty’s one sided Radio 4 polemic on economics

Last night I caught AC’s Radio 4 program on teaching economics after the financial crisis.  It’s a great story, well told.  But, it is just that.  In its totality, 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.  If this were an op-ed in a newspaper, it would be forgivable.  Most people know that when they read comment that they are getting selective advocacy.  But I think a lot of listeners think of Radio 4 as a station they can trust to explain things how they really are.  This program reveals that sometimes the editors slip up.

Here are some examples the one-sidedness that undermines AC’s attempt to portray himself as your friendly, impartial, interlocutor.

1.  The tale of the panics and bubbles course that Manchester University refused to incorporate into their module.  The story told is of a rare piece of enlightened teaching, done voluntarily, leading to the termination of the contract of the dissenting teacher.  I blogged before on what I thought of this course [AC was sent this blog, but either chose not to read it, or ignored it].  From the reading list the students were given, I guessed that the lecturer either knew very little about what was going on in the literature on panics and bubbles, or deliberately set out to give them a haphazard pot-pourri of his favourite tracts.  I won’t claim to be the final arbiter on this [though I do think my views are representative of those working in the intersection between macro and finance].  So presenting only my view, or something like it, would have been just as bad.  But that view did not get heard.  Also, AC plants the inference that the teacher’s contract was terminated solely because of his giving up his own time to offer a dissenting course, and to propose a regular one.  But we don’t get to hear what Manchester University think happened.  Did AC try to speak with them and they declined?

2.  AC caricatures mainstream economics as blindly applying rational choice, pitting a 20 second soundbite from Danny Quah explaining the idea, against a catch-all alternative from Ha-Joon Chang.  The other side of the story about the mainstream is this.  First, there are now hundreds of papers in top journals using what you might call crudely ‘behavioural’ alternatives to rational choices.  Robert Shiller just won the Nobel prize for pointing out the failures of rational choice to explain finance.  Second, most of those I read and know who use rational choice use it in a more nuanced way than you would guess from ACs program. A philosophy I’d characterise like this:  we know people don’t behave literally like this in all its minutiae, but maybe the rational model captures enough of what’s going on to make progress explaining what we see.  Plus, there is the practice of using the contrast of rational choice models with the data to point the way to better models.  [Example:  Shiller again].  Any hint of this in AC’s narrative?  No.

3.  AC, as if to explain what’s wrong with mainstream academic macro, puts the ridiculous question to Steve Keen as to whether Keynes would get published in a top journal now.  This is just such a daft hypothetical.  Things have moved on so much since then.  Who knows what Keynes would write now.  Would you ask whether 75 year old physics papers would get published now?  And:  papers in top journals are literally drenched in Keynes.  It’s probably Keynes’ influence that’s pretty much why the dominant model in central banks has sticky prices, and many have unemployment.  Keynes is everywhere in the modern debate about the power and usefulness of government spending increases in recessions.  [Added 4/12:  AC repeats this silly tactic, asking about Minsky’s chances of getting published.  And a moments’ sensible thought would give the same answer.  PS here’s what I think about Minsky].

4.  In the same breath, Keen states baldly that you can’t publish in top journals if you don’t use the assumption of rational expectations.  False.  I know many dozens of examples.  But here’s Nobel laureate Tom Sargent this time using models with learning, a framework he pioneered.  [That’s funny, two Nobel laureates flouting the AC stereotype of economics.]  If AC had wanted more, he could have googled ‘expectations, learning, business cycles, adaptive’ or something like that.  Perhaps throwing in ‘heuristics, self-confirming’ for good measure.

5.  We’re told that the other thing you can’t write about now in the mainstream is animal spirits.  False.  Try reading Roger Farmer, who climbed to the top of the US university system publishing papers on just that.  Or, try googling ‘animal spirits, business cycles, recession’.

6.  George Soros is quoted telling us that mainstream economics is wrong because it’s based on ‘General equilibrium theory’ which gives you the answer that markets always work perfectly, and their outcomes cannot be improved.  False.  Some such theory does, but there are thousands that don’t.  [eg, any model with sticky prices, or unemployment, or credit frictions, like this one, or……].

7.  Soros again telling us that finance assumes always that risk can be quantified.  False.  Sure, a lot of it does, but, now, there’s lots that explores Knightian uncertainty.  [Oh – is that more Keynes again?  Surely not!]  Try looking at the collected works of Cogley, Sargent, Hansen [Nobel Prize winner again?], who model the effect of agents’ doubt about their models of risk – and the caution that injects into their investment strategies – on asset prices.   Or, google ‘asset prices Knightian uncertainty dividends business cycle’.

8.  Steve Keen is allowed to assert that mainstream macro ignores money, lending and banks.  False.  Take a look at some of the papers on my putative panics and bubbles course.  Or have a read at the mainstream ‘Journal of Money, Credit and Banking‘, or ‘Journal of Monetary Economics‘, or ‘Journal of Banking and Finance‘.  The titles are a bit of a give away.  I’m not sure what Gertler, Rajan, Gale, Brunnermeir, Kiyotaki, Diamond, Keister and others who devoted their lives to modelling banks in macro would make of Steve Keen’s claim or AC’s unsceptical playing of it.  They might say ‘try googling “banks, credit, business cycles, friction, spread” ‘.

9.  Keen makes the subtler accusation – still false! – that where mainstream macro does include money, it’s simply ‘a veil over barter’.  Well, a lot could be described like this. But a lot is not at all like this.  For example the overlapping generations models of money in the Karecken and Wallace volume;  or the ‘new monetarist‘ models of Kiyotaki, Wright, Williamson, Lagos and others.  But even where money is a kind of veil, things are not so silly as Keen makes out.  Those models embody the view that inflation is costly – for which there is some empirical evidence.  They explain the phenomenon at the zero bound that increases in money don’t lead to increase in prices – contrary to the inflation hawks’ worries.  And anyway, not all questions need a model of money to answer them.

10.  AC interviews Andrew Haldane at the Bank of England.  He says ‘it turns out that the model we had was false’.  Which model was that?  I thought all models were false?  And that that was the point of them?  I think Andy is referring to the New Keynesian model of monetary policy and business cycles, varieties of which leave out banking and finance, used across central banks [and still, incidentally, in the banking and finance-less version, at the Bank of England].  But, you know what? I don’t think any of the monetary policymakers I worked for or read believed much of that model.  They worked off hunches, gut instinct, practical experience.  And the judgement that i) finance would not go wrong and ii) monetary policy should and could not try to sort it out if it did.  i) was clearly wrong.  But I think ii) is still a respectable position to take.  So Andy’s quote doesn’t really do justice to what was in the minds of influential people in the profession.

11.  We don’t really get the other side of the story from student’s point of view.  There are interviews with some contrarian Manchester students who are happy with the department.  But what about other universities?  Manchester’s National Student Survey scores plummeted because of the Post-Crash-Economics campaign, but how about talking to the universities that did best?  In fact, Steve Keen’s Kingston Universty aside, try talking to any other university.  Were those students happy because their curriculum was supplying them with lots of heterodox economics?  I don’t think so.  But that is the inference you will draw from AC’s program.

12.  AC voices the complaint that Ha-Joon Chang’s career has suffered solely because of tribal discrimination.  He doesn’t get promoted simply because he fails to publish in top journals, and is not properly compensated for his successful book-writing career.  What about the other side of that story?  Perhaps publishing in peer-reviewed journals does a fair job at quality assuring someone’s grasp of, perseverance and creativity in pushing the frontier?  Perhaps Steve Keen’s assertion that he can’t publish in top journals is not because they are run by religious cabals, but they are all clever and reasonable people?  That the profession has, over a long time, settled on ways of formulating economic ideas and seeing how well they fit the data?  That’s pretty much my view.  I accept that there might be something to the fads and cabals critique on occasion.   But as an explanation for the entire published canon?  Come off it.  Do we get these views in AC’s program?  Nope.  We get Steve Keen’s revelations as unchallenged fact.

The program does have some mainstream voices, so the piece is not 100% propaganda.    Danny Quah is allowed a few seconds on rational choice.  And there is Diane Coyle [not sure what she must have felt about being the token mainstreamer] and Wendy Carlin [who’s excellent new textbook is now out] both making great points.  But they are deliberately drowned out by AC pushing his own distorted story.  The effect conveyed is:  ‘there are one or two who disagree, but, hey, common sense tells you that these students have got it exactly right’.

When I tweeted about this last night, AC’s response was to say ‘merely shouting false…is a better way to draw attention to yourself than actually making an argument’.  This motive-questioning escallation was ironic.  I think you could make a case that AC’s program is  ‘shouting’ to get ‘attention’.  At most turns in the narrative, he fails to maintain journalistic scepticism and balance, and reveals that he didn’t even fancy a quick google, which most of the time would have contradicted things that were put to him.  To speculate about his own motives:  I’d say that a more balanced narrative just wouldn’t be as engaging.  ‘Fair-minded, hard-headed mainstreamers engage in many flowers bloom approach following crisis, having made as good a fist of it as fallible human beings usually do’ [Hold the front page!]


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26 Responses to Aditya Chakrabortty’s one sided Radio 4 polemic on economics

  1. Raoul says:

    “Diane Coyle [not sure what she must have felt about being the token mainstreamer]”

    While I’m sure you can guess:

    “Wendy Carlin, Danny Quah and I seem on the face of it to be the hardline mainstream voices, which is bizarre.” (

  2. Luis Enrique says:

    reading Chakraborty as an economist is a short route to a stomach ulcer. He is so badly informed, he has no interested at all in anything that does not disparage and rubbish economics, no matter how flimsy it is.

    what makes me cross is that the Guardian could hire an economics correspondent what was interested in all that mainstream economics has to offer left wingers. There is a lot, and Guardian readers never read about it.

    Charkraborty has recently been writing about the case of an investment fund that bought a block of flats in the fashionable east end whose tenants have been paying rents far below market rates, and are now going to be turfed out. I’d have liked somebody to have asked him why the investment firm is doing this, and then compare his answer to a rational selfish profit maximizing model.

    incidentally, the papers that Keen gets rejected from mainstream journals include bilge like this:

    • Julian Wells says:

      Luis Enrique is good at abuse, but less so at explaining himself: *why* is Keen’s article “bilge”?

      • Tony Yates says:

        I didn’t know about this Steve Keen claim. Frankly astonishing. And a great shame that he’s actually having quite an impact.

      • Luis Enrique says:

        it’s incredible isn’t it. I remember it being explained in my first intro micro class about how we shall be looking at a model in which we assume producers take no account of their own actions on prices, and their decisions have no effect on decisions of other producers, and this being justified as an extreme case which we might motivate by thinking about, for example, small farmers selling wheat into a very large wheat market, with the lecturer saying don’t worry this is just our first step we shall get onto more realistic market structures next week.

        then this clown comes along, claims that ignoring the impact of own production on market demand is a *mistake* and proceeds to assume that producers take decisions knowing other producers will copy them, and ends up with a solution somewhere in the vicinity of a collusive outcome, where MR>MC and says that’s what profit maximization with non-cooperative atomistic firms looks like! I mean Christ on a bike, at his solution, what happens to the profits of an individual firm if they independently decide to increase own output?

        what proportion of those criticising economics, calling for university courses to be reformed etc. do you think are acolytes of Keen? Evidently none of them have bothered looking into what he actually produces, or if they have are capable of understanding what they read. How are we supposed to have a productive discussion about the current state of economics with interlocutors like these?

  3. Boursin says:

    Oh dear. I thought Akerlof and Shiller, both Nobel laureates, had published an entire book on animal spirits and titled it Animal Spirits. Maybe the Princeton University Press is not mainstream?

  4. B P says:

    “Why should we study models that are 70-100 years old” Diane Coyle, 2014

  5. Cameron McArdle says:

    Lol ‘fair-minded hard-headed mainstreamers’…all students want is a broadening of the economics curriculum to encompass heterodox methodology. ONLY an ideologue can see this as a bad thing. The entrenched dominance of the maximisation framework (plus whatever frictions you want to add, yes yes) isnt due to scientific consensus or progress…if you think it is you are deluded, as simple as that. No one is telling you you can’t continue to do research in your field, all that is asked is that more scope be given in top journals for research using heterodox methods. Also fyi, pretty much any comparisons made between econ and physics are liable to make you look foolish

    • ZC says:

      All students want is a broadening of the biology curriculum to include creationist methodology. ONLY an ideologue can see this as a bad thing.

      • Julian Wells says:

        This is both cheap and ignorant. There are no scientific grounds for creationist ideas (they appeal to an alleged authoritative book, rather than facts and reasoning) and they have no testable content. In contrast a wide range of heterodox schools both offer insights unavailable to the mainstream and make testable predictions.

  6. At some point I’d like to take on Chakrabotty’s work from my perspective, in Politics. I suspect – I’d need to sit down and churn through more of his stuff – that he’s simply parroting what are called “declinist” ideas about recent British history. He seems, from what I have seen, to have imbibed all the features of that school; Britain is sick in a way no other country is, all comparisons must be unfavourable to Britain, the symptoms are uniquely potent in Britain, only radical action (which the author incidentally endorses) can solve this problem, the current elite are incapable of this.

    It’s good to hear from those whose work comes much closer to his in the intellectual genealogy that there are other reservations about some of his perspectives and projects.

  7. Tim Young says:

    As I say here from time to time, I think the problem with academic economics is the use of mathematical models. It is these that drive the use of unrealistic assumptions to get a mathematically tractable model. Economics needs to at least begin, like, say biology or ecology, with observation and explanation of mechanisms, progressing understanding through theories tested by fieldwork and econometrics. Developing and reading academic papers with models expressed in equations is really tedious, and seems to generate, as far as I can tell, little progress in understanding how the economy works both among academics and students. I was a university lecturer in economics for a couple of years (before it became clear that with my approach, my position would probably get worse under the research assessment framework), and I recall teaching a monetary economics tutorial exercise entitled “cash-in-advance in a limited participation model”. Most of the students taking the module could do the exercise correctly, following the lecture example with tweaks, but when asked in the tutorials to explain the meaning of (1) cash-in-advance and (2) limited participation, only one student in each case, of about fifty or so students, ventured to do so.

    • Luis Enrique says:

      “Most of the students taking the module could do the exercise correctly, following the lecture example with tweaks, but when asked in the tutorials to explain the meaning of (1) cash-in-advance and (2) limited participation, only one student in each case, of about fifty or so students, ventured to do so.”

      but that’s the teacher’s responsibility. If you are going to teach these models (which, if you are a mainstream economics lecturer, you are) it is your job to explain what the point of the model is, and ensure students understand the conceptual apparatus brought to bear.

      I have also encountered students who can pass an exam working with a basic DSGE model but cannot answer the most basic questions about what’s going on in these models, but I took this as an indictment of their lecturer (and, I guess, the system which permits the appearance of technical mastery to pass for understanding).

      I am sorry if this sounds like I am accusing you of being a bad teacher and I imagine you were working within constraints you were not in charge of.

      incidentally, I don’t see that much difference between use of maths in biology and economics – example:

      • Tim Young says:

        I wasn’t the lecturer! To be fair, there might have been a “venture” problem too, for which I would have to accept responsibility.

        I doubt that biological academics would require the presentation of something like the Lotka-Volterra model to regard the description of the predator-prey relationship to be “rigorous”, and I dare say that the equations would only be taught to students of a mathematical biology option.

  8. Luis Enrique says:

    glad to hear I was not insulting you.

    yes sorry that Lotka-Volterra thing was rather a throw away. but still I was under impression simplified mathematical models are part of biology too.

    • Tony Yates says:

      Mathematics is ubiquitous in biology. Evolutionary theory [see Martin Nowak’s textbook for undergrads ‘Evolutionary dynamics’, for example]; bio-informatics; statistical paleantology. It’s everywhere. I have biologists in my family and hang out with some, and they are into different maths, but at least as hi-tech in their own ways.

      • Tim Young says:

        I don’t dispute that you CAN do biology with equationed models, Tony, but the point is that you don’t HAVE to do so for a theory to be considered sufficiently rigorous to be published in a prestigious journal. That is why every book you mention has a title that makes its specialisation clear – ie “dynamics”, “informatics” and “statistical”. Compare that with Walsh’s “Monetary Theory and Policy”, which was used as the course book from which the exercise I taught was drawn, and is replete with equations from Chapter 2. In fact, Chapter 2 is an excellent example of what is wrong with academic economics – an edifice of equations built on the sandy foundations of “money in the utility function”. Having joined the BoE with a scientific PhD and being frustrated by such textbooks with promising titles, and even the MSc in economics I eventually did, in my attempts to understand how the economy – and monetary policy in particular – works, I wanted to try to do economics differently as a lecturer, but I could not manage it. My part of the monetary economics course, by the way, included operational issues such as repo and standing facilities and made an end-of-course (December 2005) prediction that central bank policy would lead to a financial crisis, so perhaps there was something in it!

        The practical result of this emphasis on models rather than mechanisms is that, as at the start of the financial crisis, you could get supposedly eminent economists like Krugman apparently believing that the Fed predominantly bought treasury bills when increasing its base money supply, or Buiter apparently believing that if and only if a repo was collateralised with a treasury bond would it be risk free.

  9. Emma Hamilton says:

    How often is the mainstream view/theory put across as unchallenged fact (often not even challenged by the data)? For students, and listeners of Radio 4, it tends to be all they hear.

    When Niall Ferguson is given the Reith lecture spot, is that put across as unchallenged? Etc. It appears to be only right that the opposite position is given some space to be aired. Listeners of Radio 4 are expected to be able to keep an open mind and critique what they are hearing.

    • Tony Yates says:

      Rubbish. ACs program was not prsented as a personal take. And he hasnt even accepted this ex post. As an aside, the ludicrously silly things claimed did not do the anti-msinstream case any favours. They just revealed AC and his interviewees lack of familiarity with the subject.

      • Emma Hamilton says:

        Please excuse me if i’m wrong, but I don’t think mainstream economic theory/analysis on Radio 4 is presented as a personal take. It is presented as explaining ‘things how they really are’. e.g. government spending is like household spending. No challenge is allowed from an alternative paradigm.

      • Tony Yates says:

        Quite wrong. ‘Mediamacro’ as wren lewis calls it bears little relation to mainstream analysis. Likewise Ferguson who is not sn economist anyway and whose views about money and inflation and debt have little connection with modern macro.

  10. Emma Hamilton says:

    But I was just responding to your point, that because something is presented on Radio 4 as ‘the way things are’ (for you AC’s perspective, or for Wren Lewis, MediaMacro), within the same programme, the/an other paradigm should be given a right of reply. I’m attempting to demonstrate that this ‘right of reply’ does not hold for the alternative paradigm, pretty much at all.

    The same is true in the classroom and in high-ranking journals. The alternative paradigm is not given a ‘right of reply’. It’s unusual to hear someone from the mainstream noting how upsetting it is to have their perspective excluded.

  11. pontus says:

    I was approached, not by BBC, but by a colleague herself approach by BBC to participate in the program. At that time, the working title of the program was “University economics: the £9,000 lobotomy”. I suppose the title changed to give an air of unbiasedness, and partly to correct the tasteless analogy to tragic mistakes promoted by psychologists fifty so years ago.

    Given that angle, I, and so did everyone else declined to participate as we knew that we would be edited to look like clowns. Or, if they couldn’t, leave us out due to “time constraints”.

    This is a deeply dishonest piece.

    • Tony Yates says:

      Thanks, Pontus. I think your forecast of the editing was about right, as Danny Quah’s short segment on rational choice did indeed make him look clownish – ie that he believed literally that we all behave like that to the detail in every circumstance.

  12. Noah Smith says:

    Mostly spot-on.

    I’d quibble with #7. The idea of non-quantifiable risk has basically zero presence in finance academia.

    Also for #9, a better counterexample might be OLG models, since money-search models are, to be blunt, a bit daft.

    (I stole the word “daft” from you, btw, it’s a good one.)

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