Recent advances and trends

With the internationalisation of British economics came, as elsewhere, the triumph of the objectivist, deductivist mathematic approach to a discipline that increasingly was very far from resembling the human, social and historical ‘moral science’ that had been nascent economics, let alone political economy, as recently as the early twentieth century.

However, the most powerful driver of all was the consequence of British governments requiring that the quality and productivity of research in all disciplines be measured and improved: the Research Assessment Exercises (RAE, now the Research Excellence Framework, REF). Seven of these were conducted between 1986 and 2014, but serious concerns have been raised that the cumulative effects of these audits produced a homogenisation of mainstream economics that all but eliminated heterodox economics and which reinforced the dominance of a small group of universities: the top five in RAE2008 were — in ranked order — LSE, UCL, Warwick, Oxford and Essex. They were all English and Cambridge is noticeable for its absence (Lee et al., 2013, table 2).

In a major sense the internationalisation of English economics has kept English economists to the forefront as producers of economic knowledge.

Looked at from the perspective of RAE2008, the international significance of British economics is then further reinforced. Indeed, when viewed in relation to all subject results in that round of assessment, then economics and econometrics had the highest valuation as measured by the grade point average of publications (Gillies, 2012), which is somewhat ironic since this coincided with the widely discussed failure of economists generally to predict the implosion of the Great Moderation as financial collapse led to the Great Recession beginning in 2007—8, a crisis as yet far from resolved. Concurrently, the Economic and Social Research Council (ESRC) undertook an international benchmarking exercise for economics, broader in remit than the RAE: the report concluded ‘that UK economics research is exceptional by international standards... second only to the United States'; a world leader in micro­econometrics and with ‘significant strength and influence' in labour, public and development economics; and ‘recognise[d] the high quality of applied work in the UK and the huge impact that this has had on policy and practice' (Vickers et al., 2008, ii).

Whilst macroeconomics and PhD training were identified as requiring particular attention, overall the results were presented as highly favourable: good research quality; appropriate returns on investment; good research impact; and a profession with sustainable demographics — moreover one that was internationalising with overseas staff and students a growing proportion.

The ESRC benchmarking exercise was very positive about the ‘healthy relationship between researchers and policymakers' and about broader research impact, especially the direct employ­ment of academic economists in such institutions as the Bank of England and the Treasury (Vickers et al., 2008, 1, 26—7). Additionally, Britain has a very rich set of research institutes and networks, almost all policy-focused and now exploiting the facilities offered by social media, as for example VoxEU, the policy portal established by the Centre for Economic Policy Research. However, viewed in relation to the broader market for economic knowledge, on the supply side now much more populated by those who have a recent, narrowly specialised economics education, there are more disturbing trends.

These became very evident with the Great Recession after 2008, though even before concerns about the disjuncture between economic theory and lived reality were being expressed in many quarters by significant economists (for example, Marglin, 2008). One particular strand of emerging dissent was the campaign for a post-autistic economics. This had originated in France in undergraduate protests in 2000 (Bernstein, 2004), but very much continues today; it has become sufficiently mainstream that at UCL, following a launch at the British Treasury, a nine-country project ‘Rethinking Economics’ is underway in response to ‘Economics students [who] have started to establish new student societies, which focus not on how to get a job in the City, but on the question “How can economics be used to understand the world better and improve it?”’ (Carlin, 2012; Anon, 2013).

Whilst the Great Recession has been a spur to revisit the economics curriculum, the practical effects of reformism are not yet evident. The consequences of an economics profession, academic and non-academic, wedded to a version of neoclassical economics and neo-liberal, low regulation was all too evident in the failure to predict that a combination of permissive macroeconomic policies and financial liberalisation would make certain economies (the US and UK in particular) highly vulnerable to a good, old-fashioned banking crisis. The failure to predict events even attracted the attention of the head of state, with the so-called ‘Queen’s Question’ posed upon a visit to the LSE in November 2008, some seven weeks after the Lehman Brothers’ collapse (Gillies, 2012, 25). Even some four years later, the Governor of the Bank, Mervyn King (b. 1948), the first academic economist to hold the post, was projecting an orthodoxy that the answer to the ‘Queen’s Question’ was ‘extremely simple: no-one believed it could happen’ (King, 2012, 4).

In fact, there were British economists who issued warnings and over a long period. Thus, beginning with the ‘Cassandra of the fens’, Wynne Godley (1926—2010), and his application of the sectoral financial balances approach to macroeconomic (in)stability (Godley, 1999, latterly picked up in Martin Wolf’s (2012) influential Financial Times column), and then extending to City economists, such as Roger Bootle (2004) who warned of a housing bubble, and economic journalists such as Elliott and Atkinson (2007), there were attempts to correct the misidentifi­cation of the 1990s through to middle 2000s as a Great Moderation: not a NICE economy (Non-Inflationary Continually Expansionary) at all but a Great Complacence about the dangers facing contemporary capitalism (Engelen et al., 2011). As it was, and perhaps remains so (Mirowski, 2013), the fate of orthodox economics in Britain vindicates the power of Prasad’s (2006, 105) conclusion that why certain ideas become policy has ‘everything to do with political interest’ rather than economic theory.

The Great Recession illustrates a further aspect of contemporary British economics and the market for economic knowledge: on the demand side, policy-makers needed effective stabilisation policies to avoid the financial crisis and resulting downturn becoming a 1930s Great Depression, but what about the supply side? In fact, the quarterly peak-to-peak GDP loss between 1930.I and 1932.III at 6.9 per cent was slightly smaller than the 7.2 per cent loss between 2008.I and 2009.III, with both sharing the characteristic of being double dip, albeit that the pre-Great Depression GDP level was regained within 16 quarters whereas, with 21 quarters now elapsed (latest estimate is 2013.II), real GDP is still 3.3 per cent below the 2008.I peak (Middleton, 2013, table 8.1 updated by ONS ABMI series). Policy-makers faced a market for economic knowledge in which most academic economists were ignorant of the 1930s, or what they thought they knew about Keynes and policy would not be recognised as real knowledge by economic historians or historians of thought, while non-academic economists were no better equipped and probably worse on average.

Indeed, those working in the commercial world, either as business economists or economic commentators, were operating in the context of a media almost universally propagating a free market message which propounded austerity as the appropriate policy response. In the US, more so than in the UK, though not for want of trying (Crafts and Fearon, 2013), knowledge of the

Great Depression was used effectively to prevent catastrophe, and whilst austerity policies did prevail (more in the UK than US) the Keynesian automatic stabilisers were not, unlike 1930 and 1931, overridden. One leading US economist has gone so far as to say that ‘economic historians have had a good crisis' in that positive lessons were learnt from the 1930s, transmitted to policy makers and then applied with beneficial effects. However, he also notes that ‘The recent crisis... reminds us that the policy response is as much a matter of ideology and politics as it is a matter of economics' (Eichengreen, 2012, 289, 303). In Britain, that was all too evident, with those advocating radical fiscal contraction on the back of the expansionary fiscal contraction hypothesis which lacked empirical foundations. Finally, although the argument is typically oversimplified, there is a strong measure of truth that the Great Depression of the 1930s brought forth Keynesian macroeconomics. The more recent crisis does not appear as yet either to have impacted upon economics nor appear to have dented prevailing neo-liberalism.