Please explain and give it a try, any try would be great, please summarise these readings by some points form and if you were to come up with an exam question, what question would you come up? from your understanding its fine, please give a try, thanks a lot!

Neoclassical economics has become an unquestioned belief system and treats those challenging the creed as dangerous Sun 17 Dec 2017 In October 1517, an unknown Augustinian monk by the name of Martin Luther changed the world when he grabbed a hammer and nailed his 95 theses to the door of the Castle Church in Wittenberg. The Reformation started there. The tale of how the 95 theses were posted is almost certainly false. Luther never mentioned the incident and the first account of it didn't surface until after his death. But it makes a better story than Luther writing a letter [which is what probably happened], and that's why the economist Steve Keen, dressed in a monk's habit and wielding a blow up hammer, could be found outside the London School of Economics last week Keen and those supporting him [full disclosure: I was one of them] were making a simple point as he used Blu Tack to stick their 33 theses to one of the world's leading universities: economics needs its own Reformation just as the Catholic church did 500 years ago. Like the medieval church, orthodox economics thinks it has all the answers. Complex mathematics is used to mystify economics, just as congregations in Luther's time were deliberately left in the dark by services conducted in Latin. Neoclassical economics has become an unquestioned belief system and treats anybody who challenges the creed of self-righting markets and rational consumers as dangerous heretics. Keen was one of those heretics. He was one of the economists who knew there was big trouble brewing in the years leading up to the nancial crisis of a decade ago but whose warnings were ignored. The reason Keen was proved right was that he paid no heed to the equilibrium models favoured by mainstream economics. He looked at what was actually happening rather than having a preconceived view of what ought to be happening. Somewhat depressingly, nothing much has happened, even though it was a crisis neoclassical economics said could not happen. There was a brief dalliance with unorthodox remedies when things were really bleak in the winter of 2008-09, but by late 2009 and early 2010, there was a return to business as normal The intellectual monopoly is something of an irony given how central the idea of competition is to orthodox thinking, but it is a sad fact as the preamble to the 33 theses notes "that the neoclassical perspective overwhelmingly dominates teaching, research, advice to policy, and public debate". "Many other perspectives that could provide valuable insights are marginalised and excluded. This is not about one theory being better than another, butthe notion that scientific advance only moves ahead with a debate. Within economics, this debate has died ." That debate needs to be rekindled. A more pluralist approach would take account of the complexity of markets, the constraints imposed by nature and rising inequality. So what needs to be done? Firstly, listen to consumers, because it is pretty obvious that they are unimpressed with what they are getting. The failure of the economics establishment to predict the crisis and its insistence that austerity is the right response to the events of a decade ago has meant the profession has rarely been less trusted. Of course, there were economists who got it right and some of them Paul Krugman, for example wielded real inuence. But it should have come as little surprise that when it came to the Brexit referendum, voters took the warnings from the UK Treasury, the Organisation for Economic Co- operation and Development, the International Monetary Fund and the Bank of England with a very large pinch of salt. After all, not one of these august bodies armed as they were with their general equilibrium models saw the deepest recession since the second world war coming, even when it was already under way. It is welcome news that discontent is bubbling up from below on university campuses. True, the prestigious academic journals remain in the hands of the old order and in economics faculties there is strong resistance to change but increasingly students are showing their frustration at being told to learn and regurgitate economics that is not just narrow and of little relevance, but also plain wrong. Of the 33 theses pinned to the LSE, five involved the teaching of economics, with demands to be taught history and economic thought, and for the monopoly of the status quo to be broken. One of the theses demands that "economics must do more to encourage critical thinking and not simply reward memorisau'on of theories and implementation of models. Students must be encouraged to compare, contrast, and combine theories, and critically apply them to in-depth studies of the real world." The fact that students feel the need to say this is a terrible indictment of the way economics is being taught, and their discontent negates the idea that this is just whingeing from aggrieved Keynesians. Secondly, we should stop treating economics as a science because it is nothing of the sort. A proper science involves testing a hypothesis against the available evidence. If the evidence doesn't support the theory, a physicist or a biologist will discard the theory and try to come up one that does work empirically. Economics doesn't work like that. Theories can be shown to work only by making a series of highly questionable assumptions - such as that humans always behave predictably and rationally. When there is hard evidence that disputes the validity of the theory, there is no question of ditching the theory. Thirdly, economics needs to be prepared to learn from other disciplines because when it does the results are worthwhile. One example is the way in which auto-enrolment has increased pension coverage. If humans were truly economically rational, it would make no difference whether their employers automatically enrolled them into pension schemes: they would decide whether to join schemes on the basis of whether they deemed it worth deferring consumption until they had retired. Yet basic psychology says this is not the way people actually act. They are far less likely to opt out of something than they are to opt into something. Fourthly, economics needs to be demystied. One of the big battles between Catholics and Protestants in mid-16th century England was over whether the bible should be in Latin or English, a recognition that language matters. The easy part of an economic Reformation is to attack the current establishment: the difficult part is to present a compelling story without resorting to jargon. Control of the narrative as George Osborne realised when he criticised Labour for failing to mend the roof while the sun was shining is crucial. At the launch of the 33 theses last week, Victoria Chick, emeritus professor of economics at University College London, put it this way: \"The economics mainstream has the hallmarks of certain religions. They think they have the truth. But read for yourself and think for yourself. Change has occurred before and it can occur again." She's right. It can. Ulbllldl 1511'...\" (:11ch U1 LllC ulbllldl DLlCllLC d l CDPUIIDC LU Ladlly LilllUl. In a recent Guardian column, Elliot reproduced some classic misconceptions about what economists actually do by Various authors / December 20, 2017 It has become routine to assault the "dismal science" with a dismal ignorance of what economics actually involves. Writers, students and even some social scientists from other disciplines who have very little exposure to what economists do are quick to point the finger and declare economics as a veil for vested interest, and dismiss it as a way of thinking that is fossilised in numbers. Sometimes, though, the criticism can even come from within the economics bubble itself. This week, a column by Larry Elliott in the Guardian wrapped up a whole array of these fashionable assaults in a single piece of prose. He wrote: "Neoclassical economics has become an unquestioned belief system and treats anybody who challenges the creed of self-righting markets and rational consumers as dangerous heretics," adding "Complex mathematics is used to mystify economics, just as congregations in Luther's time were deliberately left in the dark by services conducted in Latin." That is simply wrong. Not only that, it is dangerous. Such ill-informed expert bashing is exactly what gives politicians the excuse they need to make policy whilst ignoring evidence. It is also very distant from the empirically based discipline that we see as modern economics. Like most economists, we do not try to forecast the date of the next financial crisis, or any other such event. We are not astrologers, nor priests to the market gods. We analyse data. Gigas and gigas of data on how much people work, which jobs they do, what they buy and what they eat, how they do in school and other aspects of human life. We do so for the UK and many other countries around the worldrich and poor. We analyse this data to understand how people make choices, because that determines how they respond to policies and how they interact. You can ask us about taxes, social mobility, inequality, crime, poverty alleviation, pensions, roads, sanitation, public safety, and, obviously, wine, beer and cider prices. We recognise the important role that government plays in determining well-being and life chances: some of us have spent most of our lives trying to figure out how to design taxes equitably and efciently. We worry about alcohol prices and the impact on public health. We study whether minimum wage oors are set at sensible levels. We work with governments and NGOs in Bangladesh, India, Uganda, Pakistan, Zambia to build evidence on issues as diverse as which poverty alleviation policies actually work, how best to recruit and retain community health nurses in rural areas, and how poor households can be supported in their parenting practices to foster the development of their children early in life. But why do Elliott and many others have such a distorted view of economics? The rst anmer to this question, we think, lies in a misunderstanding of the purpose of mathematical models. Critics complain that economists' models are not realistic and make absurd assumptions. The London Tube map is not realistic and makes absurd assumptions If it did not it would be illegible. And useless. The map is useful precisely because it abstracts from unnecessary details to show you the way. This is what economic models are for, they help us to find our way through complex data in a complex world. When economists write a mathematical model they do so to highlight particular aspects of reality without confusing details. Take the infamous "homo economicus" theory, which says that humans are both selfish and rational. We think that this explains the behaviour of many corporations well. We also think that it does poorly at explaining how we treat our children but it is useful precisely because it serves as a benchmark. Economists spend most of their time studying departures from this benchmarkaltruism towards our children, irrational behaviour when drinking. And not just at the fringes. These are Nobel Prize-winning economists from Richard Thaler to Oliver Hart to Jean Tirole. The other function of maths is that it can be a powerful lie detector. It will not let you get away with lies, or, to be precise it will tell you exactly which assumptions you would need for those lies to be true. It offers a framework that economists can use to empirically test key, first order principles. Absurd assumptions are the canary in the mine. A further misunderstanding is that most economists spend most of their time doing maths. This is just plain wrong. The way economics is done has been transformed in the past 30 years with an empirical revolution, meaning we now use fine-grained data on individuals, households and firms. In a recent survey of published work in top journals, over three quarters of papers analysed data collected either by the researchers themselves or from secondary sources. Economists provide evidence, increasingly using randomised control trials, or big data. Often this leads to theories being supported or knocked down: this is the bread and butter of modern economics, with many more examples being discussed on Twitter with the hashtag #whateconomistsreallydo. Mathematical models account for less than a quarter of economics output. Why they get so much prominence in the layman view remains a mystery. Another misconception is that most economists think that markets are perfect and frictionless. Again, nothing can be further from the truth. While a perfectly competitive market is a useful benchmark, most interesting economics is about the study of market imperfections: real markets are characterised by asymmetric information, frictions, market power: all features that are central to modern theories and that are essential in determining key outcomes. This is the subject matter of the best economists, such as another Nobel laureate Alvin E Roth, who has studied the design of things called "matching mechanisms," relevant from schools to kidney allocations. Then there is the misapprehension that the profession is keen to keep all this hidden from its students. Innovations in the teaching curriculum designed to highlight the empirical nature of the discipline and imperfections of real economies from the beginningsuch as COREare now being widely adopted for teaching undergraduates around the world. Most importantly, and the reason we are writing this, is that all the bashing of economics can change how policy is made. It gives politicians freedom to make policy choices without being accountable to the facts. We are heading away from evidence-based policy and dangerously close to surrender to special interest groups, gut feelings and superstitions. Now, that is something truly scary. Signatories: Orazio Attanasio, UCL Oriana Bandiera, LSE Richard Blundell, IFS and UCL Steve Machin, LSE Rachel Grifth, University of Manchester and IFS Imran Rasul, UCL Tuesday, 9 january 2018 Because the advice of economists is so hopeless, you may say. Well think about the following thought experiment. After the financial crisis. suppose people had done the opposite of what the majority of economists said they should do. We do not need to imagine over Brexit, because most of the 52% who voted for Brexit chose to ignore, or more likely did not hear, the advice of 90+% of economists that Brexit would make them worse off. For those who work that belief was quickly shattered as their real wages fell as a direct result of Brexit. Immediately after the financial crisis interest rates would not have been cut and austerity would have started in 2009, not 2010. Banks would have gone bust because economists said we needed to bail them out. In which case the Great Recession would have become the second Great Depression. Because the majority of economists did not support austerity you would have had continuing cuts in spending during this new depression. So comparing this thought experiment with reality, we can see that economists have prevented a rerun ofthe 1930s depression, and if their majority advice had been taken we would have had a stronger recovery and the UK would not have left the EU. Sounds pretty good to me. But, as I'm sure you are now saying, what ab out the nancial crisis the economists failed to warn of? That was a mistake, but what are the consequences? Do you really think that if most economists had warned about how fragile the sector was anything would have happened? Banks would have continued to lend because they were making money and they had a guaranteed bail out from the state. Their campaign contributions would have weighed far more heavily in politicians' minds than warnings from economists. So yes, not warning about the financial crisis was a mistake, but it would not have changed anything if the mistake had not happened. Economists are often told to stop being naive about politics, but the same needs to be said to their critics. Despite such a strong record in macroeconomics since the crisis, why does economics get so much stick? I think there are three reasons. The first is simple: when the economy goes wrong, economists are easy to blame, particularly because of those forecasts that never predict downturns. In reality virtually no academic macroeconomists are involved in forecasting because they know that kind of unconditional forecasting is a mugs game, and furthermore most economists are not macroeconomists, but for some that kind of detail is irrelevant. [There are also plenty of highly successful pieces of microeconomics, but most critics act as if economics was just macroeconomics.) The second reason is politics Carlyle in 1849 called economics the dismal science because economists did not support his idea of reintroducing slavery. Ever since then economics has annoyed politicians and their supporters of various colours by pointing out the problems with various political programmes or schemes. Politics is also at the heart of the third reason for criticism: politicians and ideologies of the right use the aspects of economics that suits their cause. Want to promote markets? just take the idea from economics that an ideal market is an optimal way of exchanging goods, and ignore all the ways that real markets deviate from this ideal [ways which, incidentally, a great many economists spend a lot of their time studying]. Some heterodox economists of the left, rather than use mainstream economics to point out how the right plays fast and loose with economic ideas, prefer to suggest that mainstream economics is much closer to the right wing caricature than it is in reality. It is why, as Noah Smith observes, so much of this criticism can be found in the pages of the Guardian. This misrepresentation of mainstream economics is either deliberate or reects ignorance. Ignorance about the fact that a lot of economics has become more empirical and therefore more eclectic in its use of theory over the last few decades, perhaps in part because of the inuence of behavioural economics. Ignorance that even in macroeconomics, where ideological inuences can be strong, there is more consensus around New Keynesian economics than some mainstream Keynesian economists imagine. [See my survey with Andre Moreira of post graduate teaching at the top schools here.) Nowadays you will find that in most areas of economics [alas not yet macro so much] there is nothing limiting the analysis to selsh individualistic behaviour. The idea that economics is like a religion is absurd. But sometimes it is hard not to believe that popular criticisms of economics choose to ignore how far economics deviates from the neoliberal characterture. There is no excuse for ignoring that, for example, the best arguments against health care being left to the market can be found in a paper by Nobel prize winning economist Kenneth Arrow written decades ago. As the recent book by Colin Crouch suggests, the best critiques of neoliberalism come from within economics. Another ridiculous charge against economics is that economics has a natural bias against state intervention. Indeed it is possible to argue the opposite. In my own eld it is typical to assume the existence of a benevolent policy maker, who maximises social welfare. It is essentially just a useful analytical device, but you could argue if you wished to that this device biases those that use it to favour state intervention. Judging by recent conversations I have had, many heterodox economists attack the mainstream because it uses the distinction between positive {value free] and normative economics. An example of positive economics would be me saying a temporary cut in government spending when interest rates are stuck at their lower bound reduces output. A normative statement would be that austerity is unfair. Heterodox economists like Sheila Dow seem to suggest that everything is value laden, and the positive{ normative distinction allows economists to avoid being "morally implicated in the advice they give." I think this criticism is either trivial (yes, of course there may be normative reasons for choosing particular research topics) or dangerous. It is dangerous if it suggests that economists should be encouraged to base their analysis on assumptions that reect their values. Economics, even though it is a social science, should conform to the scientific method: it should be as much like a science as medicine. Indeed I think it would greatly improve the public debate if both economists and their critics realised that economics, even though it is a unique and inexact science, is more like medicine than any of the hard sciences. Dow writes \"Getting policy-makers or the general public onside over a particular argument is therefore, critically, a matter of persuasion rather than demonstrable proof [since that proof is impossible)" But surely the best way of trying to persuade a policymaker not to impose austerity is to say that most models, including the consensus theoretical model, and nearly all the evidence suggests austerity will reduce output. In contrast it is far too easy to persuade a politician of things they want to hear. We do not want politicians to pick advice only if it is given by 'one of us' [by those who share theirvalues], or as a result of the rhetorical skills of the academic. The danger in encouraging plurality is that you make it much easier for politicians to select the advice they like, because there is almost certain to be a school of thought that gives the 'right' answers from the politicians point of view. The point is obvious once you make the comparison to medicine. Don't like the idea of vaccination? Pick an expert from the anti-vaccination medical school. The lesson of the last seven years, in the UK in particular, is that we want mainstream economists to have more inuence on politicians and the public, and not to dilute this inuence through a plurality of schools of thought. All this does not mean that economists are beyond criticism. As my last post pointed out, I have fundamental criticisms about current macroeconomic methodology. An important point to note about the microfoundations methodology is that it excludes economists who are not prepared to sign up to what is currently considered [by macroeconomists] acceptable microeconomics, or who do not think microfoundations is where you have to start in doing macro. But this critique has nothing to do with values. The mistake macroeconomics made in the 1980s was not in their desire to look for microfoundations, but in deciding that models that had internally consistent microfoundations were the only admissible models. The big problem with most criticisms of economics you see in the media is not that economics is beyond criticism: as the paragraph above suggests it in many cases should be criticised, and there are plenty more interesting criticisms of economics available. The problem is that these more important criticisms are not those you nd in the pages of the Guardian. The typical criticisms you see in the press are just not very good, and I fear reect either ignorance or ideological antipathy