Real world economists and the economics curriculum

Keynes’ attempt to re-shape the world order in the 1940s highlighted the need of an international currency system that might only work by means of a “wide measure of agreement”, that is, by means of the creation of a new international convention. In Keynes’ time, this convention would rely on multiple needs: an international currency, a stable exchange rate system, redistribution of international reserves, stabilizing mechanisms, sources of liquidity, besides a central institution to aid and support other international institutions related to the planning and regulation of the world economic life. In our times, new convention-conducing institutions could foster financial regulation.

As global finance has subordinated the outcomes of social reproduction, the main question is, as Hyman Minsky warned, Who will benefit? The recent global crisis has indicated that the structure and dynamics of current global finance, as a historical set of institutions, products, procedures, behaviors and policies have potentially materialized the risk of collapse of the financial system with deep negative consequences for the real economy and society. In order to support sustainable development, it’s time to stimulate students to rethink global finance, as well as its policy agenda about global and corporate governance, prudential regulation and supervision of systemic risk.

Considering the current global scenario, we need real world economists to re-conceptualize financial problems. The understanding of these financial challenges requires new perspectives regarding knowledge, abilities and attitudes in order to rethink alternatives. As the organization of economic and social institutions helps to define policy goals and outcomes, students should reflect on how to promote a new relationship between the financial and industrial spheres, which is required to promote growth and income distribution. Here, the economic agenda involves aggregate demand (fiscal and monetary) and income policies besides the articulation of financial flows in both credit and capital markets. Under this perspective, the role of monetary policy could be highlighted through the participation of central banks in redirecting flows of credit. It is necessary to articulate the flows of credit within the framework of industrial and labor policies that would search for alternatives to the market power of global corporations. It is also time to think about capital controls that might reduce the effects of sharp reversal short-term capital flows.

In fact, any transformation in economic curriculum needs to look forward to search for more coherence in the approach to the relationship between finance and sustainable development both in micro and macro courses. This approach must emphasize a historic understanding of business dynamics, since economic decisions are based on conventions that in turn are based on trust. Indeed, trust is a conventional concept related to the level of confidence built in a society around the legal, regulatory, political  and economic setting. In other words, trust has a social and historical nature. It’s time for explicitly introducing this discussion in the economics curriculum.

2 thoughts on “Real world economists and the economics curriculum

  1. Mady: I am in fully in agreement that this topic needs INTENSE study. Current financial system is DISASTROUSLY bad. To fix it will require HARD WORK in generating consensus — which will first have to break through a huge FOG of obfuscations which confuse people about the nature of money and finance. Many of these extremely bad theories are being taught as gospel truth in leading universities. The central myth about money is the Quantity Theory which suggests the money is veil, which we have to look through to get to the real economy. The strange thing is the Keynes clearly states that money is of importance in both short and long run, contrary to QTM. In fact the QTM itself is a veil — it hides the real nature and function of money and banks, which is essential to allow this highly unjust system to continue. This is just deals with the domestic creation of money — the international finance adds a substantial additional level of complexity. Again, current system is highly inequitable and provides huge powers to the big players — the top 85 people who own more than half the wealth of the entire planet.

  2. This is insightful thinking. In fact it is the beginning of economic Wisdom. If genuine Wisdom is the most relevant integration of truths, workabilities and applicbilities that also excels ethically for all parties and the system as well….how can it not be the framework and impetus for a new and alyernative theory?

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