Students Claim Econ Department is Too Free Market [!]

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Economics Students Aim to Tear Up Free-Market Syllabus,” reads the headline in The Guardian. Some excerpts:

A growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.

Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs.

Yet no curiosity at all about the Austrian School of economics, many of whose economists did predict the crisis, and who are far more free market than the vast majority of the neoclassicals who teach them.

Joe Earle, a spokesman for the Post-Crash Economics Society and a final-year undergraduate, said academic departments were “ignoring the crisis” and that, by neglecting global developments and critics of the free market such as Keynes and Marx, the study of economics was “in danger of losing its broader relevance”.

So Joe takes for granted that “the free market” caused the crash. I’d be willing to bet that’s by and large what his professors think, too, to one degree or another. So what is supposed to be so bold about this? (My impatience might be excused here, given that I wrote a whole book outlining the government interventions and Federal Reserve policies that brought on the crash. I cover so-called “deregulation” in one section of my 2011 book Rollback.)

Austrian economics is one mouse click away these days. There isn’t much excuse for students who portray themselves as just so darn original and heterodox not even to acknowledge its existence.

A professor sympathetic to the students writes:

It is given such a dominant position in our modules that many students aren’t even aware that there are other distinct theories out there that question the assumptions, methodologies and conclusions of the economics we are taught.

Evidently, they’re completely unaware of the Austrians.

Multiple-choice and maths questions dominate the first two years of economics degrees, which Earle said meant most students stayed away from modules that required reading and essay-writing, such as history of economic thought. “They think they just don’t have the skills required for those sorts of modules and they don’t want to jeopardise their degree,” he said. “As a consequence, economics students never develop the faculties necessary to critically question, evaluate and compare economic theories, and enter the working world with a false belief about what economics is and a knowledge base limited to neoclassical theory.”

No Austrian would disagree with any of this, but still no mention. Orwell’s ghost hovers over the whole thing.

In the decade before the 2008 crash, many economists dismissed warnings that property and stock markets were overvalued. They argued that markets were correctly pricing shares, property and exotic derivatives in line with economic models of behaviour.

What about the economists who said the problem was precisely that “the market” obviously wasn’t doing the pricing, which was being ginned up by government policy, central bank manipulation, etc.? They do not exist.

Here’s a sliver of a picture of the “free market” that exists in the U.S., just on the money side alone:

(1) a coercively imposed monopoly on the production of money;

(2) monopolistic legal tender laws, which artificially privilege the money issued by the government-established central bank;

(3) a central bank with the monopoly power to create legal-tender money out of thin air, a power granted to it by the government, and with a mandate to manipulate the money supply in the purported service of maximizing output and minimizing unemployment and price inflation;

(4) interest rates influenced by a monopoly monetary authority instead of by the free market;

(5) implicit and explicit bailout guarantees for large financial institutions;

(6) artificially low borrowing costs for large institutions, since the public knows these institutions will be bailed out;

(7) artificial protection of the banks, in the form of government deposit insurance and various Federal Reserve mechanisms, thereby keeping afloat a fractional-reserve system that would be radically different under a free market; under the existing system the banks will therefore create more money out of thin air than they otherwise would.

Now that’s just the money side. Forget about government real-estate programs and the whole rotten system of government intervention.

The only alternative these kids — whom, again, we are supposed to consider bold and cheeky — is further government control.

You do not need to fall into this trap. Jeff Herbener and GP Manish will teach you the real stuff.

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