1、Cambridge Journal of Economics 2009, 33, 12051221doi:10.1093/cje/bep050Advance Access publication 17 August 2009COMMENTARYThe great crash of 2008 and the reform ofeconomicsGeoffrey M. Hodgson*The 2008 economic crash led to remarkable shifts of opinion among world leaders.Does this crisis create favo
2、urable conditions for the reform and revitalisation ofeconomics itselffrom a subject dominated by mathematical techniques toa discipline more oriented to understanding real-world institutions and actors?And why were warnings of financial collapse not heeded? Recent shortcomings arepartly related to
3、the global triumph of market individualist ideology and partly to theexaggerated roles of modelling and quantification. These failures of economics arepartly peculiar to the discipline and also a result of other wider institutional andcultural forces.Key words: Reform of economics, Substance versus
4、technique, Financial crisis, JohnMaynard Keynes, Hyman Minsky, Free markets, IndividualismJEL classifications: A11, A13, A20, B50, D80, G011. IntroductionThe world financial crash of 2008 signalled the most serious global economic crisis since theGreat Depression of the 1930s. Just as John Maynard K
5、eynes is remembered for his critiqueof the economic theories and policies of his day, critics of mainstream economics may wonderif the latest crisis will help to revive the discipline by exposing the limitations of currenteconomic theory and policy. This article assesses the prospects of such a rene
6、wal. It is arguedthat the possibility of redirecting economics into more constructive and relevant channels isless hopeful than it may appear at first sight, because of major institutional and culturalbarriers to the reform of the profession. Among these are obsolete disciplinary boundaries,deep spe
7、cialisation at the cost of synthetic vision and a cult of metrication and formalisation.While economics as a discipline evolves slowly, the ideological mood has changedrapidly. The financial crisis of 2008 led to remarkable retractions among world leaders ofprevious commitments to lightly-regulated
8、financial markets. The market is no longer seenManuscript received 3 March 2009; final version received 18 June 2009.Address for correspondence: The Business School, University of Hertfordshire, De Havilland Campus,Hatfield, Hertfordshire AL10 9AB, UK; email: g.m.hodgsonherts.ac.uk* University of He
9、rtfordshire, UK. This article uses material from a previous article (Hodgson, 2008B)and historical passages from another (Hodgson, 2004). The author is very grateful to David Blanchflower,Robert Boyer, Alain Caille, Gerry Epstein, Olivier Favereau, Deirdre McCloskey, Richard Nelson, PascalPetit, ano
10、nymous referees and others for helpful comments and discussions.C211 The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society.All rights reserved.as the solution to every problem. Contrary to his Republican pedigree, the then USPresident, George W. B
11、ush, became the exponent of a huge state bale-out of the banks witha massive extension of state ownership within the financial system.Alan Greenspan, former chairman of the US Federal Reserve, belatedly declared that hehad made a mistake in presuming that the self-interest of organizations, specific
12、ally bankswould protect shareholders and equity in the firms. He had discovered a flaw in themodel of liberalisation and self-regulation.1All UK Prime Ministers and Chancellors of the Exchequer since 1979 have promotedmarket liberalisation. As late as 8 November 2005 the then Labour Chancellor, Gord
13、onBrown, spoke to the Confederation of British Industry and explained his policy on financialregulation as not just a light touch but a limited touch.2Yet everything changed with the global financial crisis. Prime Minister Brown adopteda package of measures including partial state ownership of banks
14、. On 19 October 2008 theChancellor of the Exchequer, Alistair Darling, announced massive government borrowing tokick-start the British economy. He said that the Keyness ideas were coming back into vogue.3These changes in ideology among world politicians create a different environment foreconomists.
15、But as yet there are no strong shifts of opinion or practice among academicleaders of our profession. We search in vain for similar conversions or recantations. Thesigns are of business as usual (Cohen, 2009).This essay discusses the relationship between the economics profession and the 2008crash. S
16、ection 2 considers some economists who warned of the crisis. Section 3 comparesthe new affection for Keynes among some politicians and journalists with the declininginterest by economists not only in the economics of Keynes but also in other classiceconomics texts. Sections 4 and 5 consider the prio
17、rity of technique over substance inmodern economics, and whether earlier economic crises provide evidence that this priorityis likely to be reversed. Section 6 considers why warnings of the crisis were ignored. Section7 diagnoses the malady of technique-fixation in economics. Section 8 concludes the
18、 essay.2. Prophets of doomWho were the prophets of the crash of 2008? On 7 September 2006, Nouriel Roubini, aneconomics professor at New York University, told International Monetary Fundeconomists that the USA was facing a collapse in housing prices, sharply decliningconsumer confidence and a recess
19、ion. Homeowners would default on mortgages, themortgage-backed securities market would unravel and the global financial system wouldseize up. These developments could destroy hedge funds, investment banks and othermajor financial institutions. Economist Anirvan Banerji responded that Roubinispredict
20、ions did not make use of mathematical models and dismissed his warnings as thoseof a habitual pessimist.4The British sociologist Laurie Taylor asked listeners of his weekly BBC radio programmeto find an economist who had predicted the 2008 credit crunch. On 15 October 2008 theradio host announced th
21、at the most prescient prophet of the outcome of international1Guardian, 24 October 2008.2See http:/www.cbi.org.uk/ndbs/press.nsf/0363c1f07c6ca12a8025671c00381cc7/ee59d1c32ce4ec12802570c70041152c?OpenDocument (date last accessed 22 January 2009).3This does not imply that government policies strictly
22、follow those of Keynes (Kregel, 2009) or indeedshould do so (Leijonhufvud, 2009).4New York Times, 15 August 2008. In fact, Roubini had performed some modelling using time-series dataon consumer debt and housing prices.1206 G. M. Hodgsonfinancial deregulation since 1980 was the relatively obscure Bri
23、tish financial economistRichard S. Dale. In his book on InternationalBanking Deregulation, Dale (1992) had arguedthat the entry of banks into speculation on securities has precipitated the 1929 crash, andthat growing involvement of banks in securities activities resulting from incrementalderegulatio
24、n since 1980 might precipitate another financial collapse. Dales book receiveda mixed review in the Journal of Finance in 1993 and slipped off the citation rankings.In early 2008, at a time when many leading economists thought that the bank troubles of2007 would not lead to a downturn, Professor Dav
25、id Blanchflower came to the conclusionthat the unfolding credit crisis would tip the British economy into a recession. As late as June2008, Federal Reserve Chairman Ben S. Bernanke was confident that the risk of a USrecession had diminished.1But Blanchflower, as a member of the Bank of EnglandMoneta
26、ry Policy Committee, had been arguing for months that not only was the USAmoving into negative growth but that the same was in prospect for the UK. His view did notprevail on that Committee until September 2008. On what did he base his prognosis?According to Blanchflower (2009) the key evidence of a
27、n impending recession in both theUSA and the UK included declines in soft surveys such as consumer confidence, andpeoples views on the job market. What led him to his view was not a sophisticatedmathematical model but an experienced reading of detailed survey evidence. He remarked:The forecasting mo
28、dels were largely useless . . . forecasters tend to underpredict recessons.Several years after his death in 1996, Hyman Minsky has got some credit. In a series ofpapers, Minsky (1982, 1985, 1992) argued that financial capitalism has an inherenttendency to instability and crisis, due to speculation u
29、pon growing debt. He gave a numberof warnings about the severe consequences of global financial deregulation after 1980. Hisideas were never popular with the mainstream. Yet as early as 4 February 2008 the NewYorker noted that references to his financial-instability hypothesis have become common-pla
30、ce on financial websites and in the reports of Wall Street analysts. Minskys hypothesis iswell worth revisiting.There are other claimants to the title of Prophet of the Crash. Many post-Keynesiansand others have warned since the 1980s of the dangers of expanding derivatives markets,financial deregul
31、ation and excessive debt. But we must be wary of extending the list anylonger, at least until the criteria involved are clarified. After all, Marxists have beenpredicting the collapse of capitalism since 1848. Those that habitually predict doom arebound to be right one day. But that does not mean th
32、at their wisdom is superior.The outstanding prophets in this context are those that have added to our understandingof the institutional mechanisms by which massively expanding debt was financed, and whoacknowledged its powerful upward trajectory as well as its hidden and growing risk.Essentially, th
33、is is not a matter of predicting the timing of a crash, but improving ourunderstanding of the covert structures and forces that pushed the economy over a cliff. Itmeans an appreciation of how the debt-boom unleashed by liberalised financial marketscreated the preconditions for the collapse.3. But do
34、es anyone read Keynes?Let us now turn to economics as practised in universities. Politicians, bloggers, newspapersand magazines may have noticed the relevance of such economists as Keynes and Minsky1http:/ (date last accessed 23 April2009).The great crash of 2008 and the reform of economics 1207for
35、today, but have they been cherished or rediscovered in departments of economics in themost prestigious universities?I tried without success to find the work of Keynes or Minsky on any reading list availableon the web of any macroeconomics or compulsory economic theory course in any of thetop univers
36、ities in the world. Instead, there is ample evidence of student proficiencyrequirements in mathematics.By searching post-1950 leading journals, we can ascertain how many times theaforementioned authors were cited in each decade. Figure 1 shows the results. Keynesremains the most highly cited of the
37、four authors, but his visibility in leading journals hasdeclined dramatically. Other authors who warned of the dangers of financial deregulationreceive a low level of citations. Notably, while much of Roubinis work is discursive, themajority of his articles in top journals of economics contain model
38、s.Data for 2008 and 2009 were not available and have to be extrapolated from earlier yearsin the same decade. Of course when this data becomes available, these two years may showa revival of citations to Keynes and others, but so far there is no sign of this. And a return to1950s levels would be rem
39、arkable.Are academic economists simply citing the wrong people? Such a perception wouldbe mistaken. By citation measures, Keyness classic antagonists do little better. TakeMilton Friedman: from 1950 he was cited by an average of only 344 articles or re-views per decade, in the same list of journals.
40、 Friedrich Hayek was cited by only 139items per decade. Gerard Debreu, a mathematical economist and pioneer of generalequilibrium theory, was cited by only 24 items per decade. Mainstream economistsseem to have stopped citing anyone, except the most recent pioneers of mathematicaltechnique.The negle
41、ct of the classic texts is dramatically illustrated by the fate of Keynes own ideas.Keyness wisdom was quickly bowdlerised and forced into a formal model (Robinson,1965; Leijonhufvud, 1968; Davidson, 1972; Rotheim, 1998). Even when Keynes work isacknowledged, it is often in second-hand and suspect t
42、erms.Fig. 1. Number of articles or reviews citing Keynes, Minsky, Roubini and Dale in leading journals ofeconomics and finance.Source: JSTOR. 20089 figures are extrapolated from 20007 results. Journals used: AmericanEconomic Review, Econometrica, Economic Journal, Economica, Journal of Finance, Jour
43、nal ofPolitical Economy, Quarterly Journal of Economics, Review of Economic Studies, Review ofEconomics and Statistics.1208 G. M. HodgsonRemarkably, the habit of ignoring past great economists is defended by a professor at theUniversity of Cambridge, in the homeland of Keynes. Partha Dasgupta (2002,
44、 p. 61) writes:You can emerge from your graduate studies in economics without having read any of the classics,or indeed, without having anything other than a vague notion of what the great thinkers of thepast had written. The modern economist doesnt even try to legitimize her inquiry by linking it t
45、oquestions addressed in the canon; she typically begins her article by referring to something in theliterature a few months old.Dasgupta argues that on reflection it is not clear that this is an altogether bad state ofaffairs. For him, ignoring the past has important positive compensations:In order
46、to do creative work, there is a further advantage in not being knowledgeable about theintellectual concerns and struggles of bygone eras; there would be a lower risk that the past wassetting the presents research agenda.But our research agenda is always set by the past, even if it may address the fu
47、ture. Ourconcepts and theories come from the past. It can be no other way. Whether we should beknowledgeable about the intellectual concerns and struggles of bygone erasdepends largelyon whether these issues are of contemporary relevance or not. Sadly, because we are facingan economic crisis on the
48、scale of the Great Depression, we must learn from that distantexperience, as we must learn from other recessions caused by bank failures and from theanalyses and policies of dead economists. Yet Dasgupta wishes the past away. Great wisdomis given a short consume-by date, and valuable knowledge is ne
49、glected.Despite this, as Mark Blaug (1991, p. x) points out, few inventors of new ideas ineconomics can resist the temptation to nominate one or two precursors. Yet, as detailedknowledge of the history of economics becomes an unfashionable rarity, the nomination ofprecursors becomes a shallow ritual. The deeper neglect of past texts undermines habits ofcareful scrutiny for theoretical precursors, of detailed interrogation of the subtle changes inthe meanings of words, of concern for elegant
