Post-Crash Economics and the Covid Emergency in the Global Economy: Interdisciplinary Issues in Teaching and Research 3031316045, 9783031316043

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Post-Crash Economics and the Covid Emergency in the Global Economy Interdisciplinary Issues in Teaching and Research Edited by Abdullah Yusuf · Carlo J. Morelli · Omar Feraboli

Post-Crash Economics and the Covid Emergency in the Global Economy “Covid-19’s deep impacts on society are only beginning to unfold and be examined. This important book explores as it also exemplifies those impacts on economic education. Especially valuable are the book’s inclusion of heterodox economic theories, how mainstream curricula marginalize them, and the social costs and missed policy opportunities because of that marginalization. A kind of wake-up call to the economics profession.” —Richard D. Wolff, Professor of Economics Emeritus, University of Massachusetts, Amherst www.democracyatwork.info

Abdullah Yusuf · Carlo J. Morelli · Omar Feraboli Editors

Post-Crash Economics and the Covid Emergency in the Global Economy Interdisciplinary Issues in Teaching and Research

Editors Abdullah Yusuf International Relations University of Dundee Dundee, UK

Carlo J. Morelli Economic Studies University of Dundee Dundee, UK

Omar Feraboli Economic Studies University of Dundee Dundee, UK

ISBN 978-3-031-31604-3 ISBN 978-3-031-31605-0 (eBook) https://doi.org/10.1007/978-3-031-31605-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: © Alex Linch shutterstock.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

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Introduction: The Financial Crisis, the Covid-19 Pandemic and the Future of Economics Abdullah Yusuf, Carlo J. Morelli, and Omar Feraboli

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COVID-19 and the Future of Higher Education Abdullah Yusuf, Mehdi Chowdhury, and Ian Roache

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Assessing the Education Needs of the Rohingya Refugees and the Impact of COVID-19 Roberta Dumitriu

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COVID-19 in an African Context: What the Pandemic Has Taught Us About the Development Economics Curriculum and the Need for Reform Kevin Deane, Julia Chukwuma, and Lorena Lombardozzi The Effects of Covid-19 Stringency Measures: From Increased Educational Inequality to Poverty Trap, with a Particular Focus on European Countries Daniela Tavasci and Luigi Ventimiglia In the Beginning……: An Analysis of the Starting Topics in Introductory Economics Textbooks Martin K. Jones

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CONTENTS

Labour Rights, Full Employment, Mental Model Choice and a Dynamic Market Economy Morris Altman

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Reflections and Experiences of an Economics Degree: A Plea for Pluralism Louis Bryson, Emma Madill, and Stoyanka Stoimenova

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An Analysis on the State of Economics Education in Scottish Universities Louis Bryson

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Post-crash Economics: What Are the Implications of the 2007 Crisis for the Teaching of Economics? Omar Feraboli

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Index

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List of Contributors

Morris Altman School of Business, University of Dundee, Dundee, Scotland, UK Louis Bryson University of Dundee, Dundee, Scotland, UK Mehdi Chowdhury Bournemouth University, Poole, UK Julia Chukwuma Economics Discipline, Open University, Milton Keynes, UK Kevin Deane Economics Discipline, Open University, Milton Keynes, UK Roberta Dumitriu University of Dundee, Dundee, Scotland, UK Omar Feraboli University of Dundee, Dundee, Scotland, UK Martin K. Jones Economics and International Business, School of Business, University of Dundee, Dundee, Scotland Lorena Lombardozzi Economics Discipline, Open University, Milton Keynes, UK Emma Madill University of Dundee, Dundee, Scotland, UK Carlo J. Morelli University of Dundee, Dundee, Scotland, UK Ian Roache University of Dundee, Dundee, Scotland, UK

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LIST OF CONTRIBUTORS

Stoyanka Stoimenova University of Dundee, Dundee, Scotland, UK Daniela Tavasci Queen Mary University of London, London, UK Luigi Ventimiglia Queen Mary University of London, London, UK Abdullah Yusuf University of Dundee, Dundee, Scotland, UK

List of Figures

Fig. 7.1 Fig. 7.2 Fig. 7.3

Neoclassical and efficiency wage labour market Real wages, X efficiency, technical change and average cost X efficiency & the distribution of income

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List of Tables

Table 5.1 Table 5.2 Table 5.3

Total length of school closure across a selection of countries from February 2020 until April 2022 Broadband internet access by household income in the EU, 2020 ICT availability for the students to use at school (average)

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CHAPTER 1

Introduction: The Financial Crisis, the Covid-19 Pandemic and the Future of Economics Abdullah Yusuf, Carlo J. Morelli, and Omar Feraboli

This volume analyses and examines challenges and problems that economics is facing as an academic discipline and it focusses particularly on the repercussions brought about by the 2007–2008 Great Financial Crisis and by the economic emergency caused by the Covid-19 crisis. It is a development of the book “Post-Crash Economics. Plurality and Heterodox Ideas in Teaching and Research” (Feraboli & Morelli, 2018), and it is the outcome of the Post-Crash Economics in a Post-COVID

A. Yusuf (B) · C. J. Morelli · O. Feraboli University of Dundee, Dundee, Scotland, UK e-mail: [email protected] C. J. Morelli e-mail: [email protected] O. Feraboli e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_1

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World Interdisciplinary Conference held online in 2020. In recent years, mainstream economics has been subject to widespread criticism due to its inability not only to predict but also to explain and to cope with the 2007–2008 financial crisis. Prior to the crisis, eminent orthodox economists such as Olivier Blanchard (2008) and Robert Lucas (2003) claimed that the world economy was stable and in good state, and that macroeconomic theory succeeded in solving the crucial economic problem of depression prevention. In the aftermath of the financial crisis, the neoliberal orthodoxy resulted in the implementation of economic policies which have further exacerbated the negative effects of the crisis by imposing austerity measures accomplished under IMF supervision. The 2007–2008 financial crash has given rise over the past decade to extensive criticisms from economists and from students. This has generated a debate within the academic community about the necessity to depart from the neoclassical ideology, encapsulated in the so-called Washington Consensus, and which has led to over-simplified, one-size-fits-all approach to the teaching of economics and inadequate policy packages driven by unrealistic assumptions on the perfect functioning of markets. The recent Covid-19 pandemic has further aggravated social and economic disparities and hence it has exacerbated the existing social and political discontent. National governments’ simplistic, inappropriate, and inconsistent responses to the Covid-19 pandemic of 2020 also highlight the divergence of economic policy-making across the globe. The marked gradient in infection rates and mortality rates of Covid-19 links closely to the extent of economic liberalism embedded within different states indicates that a singular homogenous understanding of “economics” is no longer hegemonic (Lloyd & Dixon, 2021). If the Covid-19 pandemic demonstrated anything, it was the continuing importance of institutions, primarily government, for the very existence of markets.

Pluralism in Economics Criticisms of mainstream economics advocate and promote heterodox and alternative economic approaches, which propose to move away from the simple and naive assumptions underpinning most of mainstream economic models and from the laissez-faire economic ideology. The need to redefine economics has been highlighted by several authors. Among them Paul Krugman (2009), who argues that economists have an idealised and romanticised vision of the economy, and that mainstream economics

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neglects the imperfections of markets (especially financial markets) which cause sudden and unpredictable crashes, and the dangers created when regulators do not believe in regulation. Even the IMF concede that some aspects of the neoliberal agenda have not delivered as expected (Ostry et al., 2016). They claim that, even if growth is the main objective of the neoliberal agenda, advocates of that agenda should pay attention to distributional effects, and they recognise that austerity policies affect demand adversely and hence have a negative impact on employment. Several networks of academics and students have been established to challenge the mainstream approach in economic teaching and research, to provide alternative and pluralistic views, and to promote dramatic changes in economics curricula. In particular, the Post-Crash Economic Society of the University of Manchester was founded in 2012 by economics students and believe there should be a serious rethinking of economics courses contents to include alternative views and interdisciplinary elements in the curricula. Heterodox and alternative ideas have the foundations in the work by authors, such as Karl Marx, Joseph Schumpeter, and Piero Sraffa, who have been marginalised by mainstream economics and are ignored in most of curricula. These authors should be rediscovered as they provide viewpoints which are able to address economic phenomena more realistically. The sense of frustration and dissatisfaction among economics students and lecturers in the UK has become quite evident in recent years. In 2012 economics undergraduate students at the University of Manchester established the Post-Crash Economics Society and criticise academic departments for ignoring to explain why mainstream economics failed to warn and to cope with the 2007–2008 financial crisis, and for neglecting critics of the free market such as Keynes and Marx. According to students, university courses focus only on orthodox free market teaching and marginalise alternative approaches. As a consequence, the study of economics is “in danger of losing its broader relevance”. Joe Earle, a spokesman for the Society, argues that students in British universities are taught neoclassical economics “as if it was the only theory”, and that neoclassical economics has such a dominant position that many students do not even know there are different alternative theories which challenge and questions the assumptions and the methodologies uses in economics (Inman, 2013a). As a result, economics students are not able to develop the abilities which are necessary to critically think, assess, examine, and compare different economic theories. Instead, they leave

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university with the confidence that economics is limited only to neoclassical theory (Inman, 2013a). The students’ protests received support from a group of academic economists who urge to reform economics courses which are dominated by free market theories (Inman, 2013b). These academics extended these criticisms to agencies providing teaching and research grants, as they institutionalised an “intellectual monoculture” which is further reinforced by a system of state funding based on journal rankings that are in turn extremely biased towards orthodox economic theory and against intellectual diversity” (The Guardian, 2013). The academics argued that teaching of economics is based on a purely dogmatic approach which is in stark contrast with the openness of teaching in other social sciences, which is instead characterised by consistently presenting competing paradigms. They also said that students can graduate in economics without studying fundamental theories of Keynes, Marx, or Minsky, and without learning about the 1929 Great Depression. Economics students internationally also called for a reform of economics teaching, and, under the initiative of the International Student Initiative for Pluralist Economics (ISIPE), argue that the dogmatic approach based on and dominated by free market theories produces huge negative effects on societies, as it harms the ability and the competence to face challenges, such as financial instability, food security, and climate change (Inman, 2014). In their “International student call for pluralism in economics” (2014), they point out that the lack of intellectual diversity within economics teaching not only has negative impacts on education but also research. It also sharply reduces the capability to confront multidimensional and complex problems that humanity faces in the twenty-first century. They also argue “the real world should be brought back into the classroom”, together with a debate based on pluralism of theories, approaches, and methodologies, which is dramatically needed to revive economics as a discipline. Along with the Post-Crash Economics Society of the University of Manchester, several other organisations of economics students and academics have been established to promote pluralism in both teaching and research. The Institute for New Economic Thinking, based in New York, has been created by a group of economists who challenge conventional wisdom and advance ideas to better serve society, by providing an alternative to free market fundamentalism, fiscal austerity, financialisation, and corporate influence in politics. Some of the key principles guiding the approach to economics research should be the independence of economists from powerful interests, addressing issues

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such as inequality and distribution which are as important as productivity and growth, questioning theories based on unrealistic assumptions like rational behaviour of agents, developing heterodox theories which are alternative to the neoclassical orthodoxy in order to create an intellectually vibrant and pluralistic academic environment, and cooperating with scholars from other social sciences, humanities, and natural sciences in order to better the real world. The International Student Initiative for Pluralist Economics is a large network of 82 associations of economics students from 31 countries around the world; their members believe it is time to re-examine, re-evaluate and rethink the way economics is taught, and stand for a more open, diverse and pluralist economics. Pluralism should play an essential and crucial role in economics teaching and research to enrich and to renovate the discipline, and it is also fundamental to bring economics back to the service of society. Rethinking Economics is an international network of students and academics which promotes pluralism in economic approaches and aims to construct a better economics for curricula and courses. Their members promote an education approach in which economics is not focussed on a specific set of theories, methods, or thoughts, but instead centred on the subject of study, the economy. Based on this approach, the principles driving the disciplines should be pluralism, real world, and values. The Londonbased CORE Econ provides free online textbooks and resources for an innovative and pluralistic method of teaching and learning economics in order to change economics education to a focus on the most important contemporary problems in our societies. Students who attended the Scottish Economics Conference 2020 at the University of Dundee suggest that the next generation of economists have “responsibility” to question Adam Smith, have a duty to make the global economy and global trade more ethical, and should challenge current economic ideology. Kay (2009) critic of mainstream economic theory argues that the failure of assumptions which are at the core of orthodox economics generates profit opportunities and determines instability in the global economy. In his seminal book “How Economics Forgot History: The Problem of Historical Specificity in Social Science” (2001), Hodgson argues that economists use the same theoretical approach to explain all economic facts and phenomena. In his opinion, different theories are necessary to assess, analyse and study different economic events, and the historical context must be taken into account. Instead, mainstream economics completely neglects the historical dimension and economic theories assume universal

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and eternal doctrines. Hodgson argues that, as a result, economics is characterised by historical amnesia and eclipse of reality, which create a false perception of intellectual security and result in a failure to comprehend and explain the real world. Hence, claims of universal and eternal truths are generally false. Ozanne (2016) examines the challenges to mainstream economics and focusses particularly on the University of Manchester Post-Crash Economics Society. The Post-Crash Economics Society began with a petition and the creation of an informal economics course at the University of Manchester which analysed economic crises from the Great Depression to the 2007–2008 financial crisis from a heterodox perspective. The course became very popular and the initial criticism from the Post-Crash Economics Society became broader and deeper, and resulted in a more general critical review of economics education in the UK. Ozanne points out the fundamental role played by the Post-Crash Society as catalyst in spreading strong criticism against mainstream economics to the rest of the UK universities and internationally. Ozanne also notices that the Post-Crash Economics Society does not request universities to stop teaching neoclassical economics, but rather it demands diversity and pluralism in the curricula. The Post-Crash Economics Society students proposed alternative and innovative approaches to be included in the economics curricula; one of the approaches students asked for was a class-based (or bargaining power) model of income distribution, which is closely related to the analysis developed by Piketty’s “Capital in the 21st Century”. Piketty (2014) provides a strong criticism of neoclassical economics and focusses on the main contradiction of capitalism, which is in his opinion the return to capital exceeding economic growth rate, which in turn creates huge wealth inequality. Piketty’s analysis maintains that unequal distribution of resources generates bargaining power inequality, which in turn triggers wealth inequality. Piketty argues also that wealth inequality is an intrinsic feature of capitalism, and that extreme inequality foments discontent and threatens democracy. In Piketty’s view, only state intervention can revert the tendency towards greater inequality. Hence, without a reform of capitalism, democratic values will be endangered and jeopardised. According to Piketty (2020), the only answer to tackle increasing inequality is socialism. He calls for “true social ownership of capital” in order to attain fair wages and an equal distribution of economic power. Varoufakis (2016) follows the argument proposed by Piketty and claims that the real power is in the hands of those who control the economy, and that giant multinational corporations and the

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super-rich “cannibalise” the political domain; as a consequence, capitalism will eat democracy. Varoufakis (2011) uses the metaphor of the minotaur to explain the US-based capitalism which results into a hegemony over government choices about economic policy.

Covid-19 Pandemic The Covid-19 emergency has posed immense economic challenges to and has created huge negative impacts on the world economy. The Covid19 pandemic has also shown the flaws and the inability of the current neoliberal model to address the problems generated by the pandemic, but it is also showing the ethical inadequacy of policymakers’ responses. Many authors argue that adequate policy interventions are necessary to prevent a recession. Fornaro and Wolf (2020) point out that monetary policy cannot do much with the interest rates constrained by a zero lower boundary; they emphasise that implementation of aggressive fiscal policy is likely to be effective in mitigating the slowdown caused by the pandemic by supporting investment and this can in turn sustain economic growth and employment. Portes (2020) argues that governments should do whatever it takes—and whatever it costs—in the interests of people’s health, and that we should not believe the myth that there is a trade-off between sacrificing lives and saving the economy. Deutsche Welle columnist Martin Gak (2020) notices that some political leaders suggest that the economy should not be allowed to go into a recession or a slowdown if that meant sacrificing lives. He points out that a moral dilemma is a situation in which an individual faces two mutually exclusive choices and urgent reasons to choose each of them; in the case of Covid-19 medical personnel often face the moral dilemma of deciding which person lives and which person dies. However, Gak argues that choosing between the economy and human life is not a moral dilemma, and that suggesting that human lives and money can be equated is moral bankruptcy. Gak correctly concludes that the arguments behind the equation between human lives and money are the assumption that part of humanity— the elderly and those who are economically unfit and unproductive—is superfluous and disposable. This inhumane and brutal perspective can be summarised by The Telegraph editor Jeremy Warner (2020): “From an entirely disinterested economic perspective, the Covid-19 might even prove mildly beneficial in the long term by disproportionately culling

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elderly dependents”. As a result, policy responses based on recommendations provided by the neoclassical approach have shown the stark global inequalities in access to vaccines and treatments. Many academic journals addressed several issues related to the Covid-19 pandemic which began in December 2019, and many authors have assessed the impact of Covid19 on economic variables. The significance of the Covid-19 pandemic has been highlighted by Jimenez-Gomez and Abellán Perpiñán (2021), who assert that the Covid-19 crisis is characterising the first years of the current decade. Even though it is a recent and ongoing event, a great number of academic papers have been devoted to analysing and assessing the impacts of the Covid-19 pandemic, and the effects of the measures taken by government to fight the spread of the virus. The authors also advise and endorse the inclusion of behavioural economics into epidemiological models, as this would allow to endogenise human behaviour and to assess how the pandemic is affected by individual behaviour. Alves and Kvangraven (2020) argue that the inadequate and inappropriate responses to the Covid-19 pandemic have exposed the intrinsic and fundamental weaknesses in the predominant economic paradigm, which is based on considering the market economies as separated from the rest of societies, and on using quantitative models established on rigid and unrealistic assumptions. This methodology resulted into the development of economic principles which are abstracted from the rest of society and are seen as ahistorical and apolitical. The authors claim that heterodox economics can help understand and explain the flaws of current economic paradigm. In the introduction of a special journal issue about Covid-19, Graz et al. (2021) emphasise that the dramatic shocks brought about by the pandemic and the answers to it concluding that the impacts on societies and economies will result in deep structural effects. Graz et al. argue that the crisis caused by the pandemic has highlighted all limitations and weaknesses of the paradigms which are currently prevailing in social and economic sciences, and they call for a debate about the interpretations of the several features of the Covid-19 crisis linked to the political tensions produced by capitalism. They finally urge for a critical assessment of the Covid-19 crisis based on a diversity of approaches, particularly among heterodox and pluralistic academics in economics and the social sciences. Cotton et al. (2021) analysed the effects of Covid-19 on consumption and inequality on a week-by-week basis throughout the Covid-19 pandemic. Using US consumption data they find that demographic, economic, and Covid-19 factors are all playing a crucial role

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in explaining spending differences across household groups. Morikawa (2021) analyses the impact of Covid-19 on firms’ uncertainty in Japan using an original survey and government data. The paper finds that firms’ uncertainty increased considerably during the Covid-19 pandemic, and that the increase in uncertainty has been much larger compared with the 2007–2008 financial crisis. Rufrancos et al. (2021) investigate the effect of university re-openings in Scotland in Autumn 2020 on Covid-19 transmission in neighbourhoods close to student residences. The authors estimate the increase in Covid-19 daily cases in zone close to student halls, and also the potential transmission from halls into neighbouring areas. They find a considerable and persistent increase in cases in areas containing halls and significant evidence of transmissions to wider areas which are contiguous to student residences. These results clearly suggest re-openings of student halls posed a serious risk for areas hosting halls. Borino et al. (2021) focus on the impact of Covid-19 on strategies of international firms and use a firm-level dataset including more than 4,400 firms in 133 countries. Whereas international companies are more likely to be affected than domestic firms due to higher exposure to domestic and foreign lockdowns, they are characterised by higher resilience deriving from their connectivity and productivity. The outcome highlights the significance of global interconnectedness and international trade in facilitating resilience to foreign shocks. Charles et al. (2021) point out that the Covid-19 pandemic has triggered an unprecedented economic crisis and that its economic and social repercussions have been catastrophic. They argue that the pandemic crisis is entangled with the environmental crisis, and this should force economists to reconsider and re-examine macroeconomic policy-making. They oppose the neoclassical consensus and advocate fiscal policy as main instrument for macroeconomic policies. They think that monetary policy should be implemented as a support for fiscal policy, and they propose further policy measures, such as reductions in working hours. They maintain that these approaches to macroeconomic policy are necessary to mitigate the negative economic effects brought about by the Covid-19 pandemic, to bring about full employment, and to properly address environmental issues. Padhan and Prabheesh (2021) assess the literature on the economics of Covid-19. They conclude that monetary, macroprudential, and fiscal policies can separately help alleviate the negative effects of the Covid-19 crisis. However, coordination among these three tools could be more effective. The implications for economic policy are that orthodox macroeconomic policies should be adjusted to

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include complementary social policies. Müller (2021) argues that the policy responses to the Covid-19 pandemic demonstrated that economies, societies, and political systems are not three separate entities, he stresses the importance of inclusive growth in order to produce effective policy participation for all, and urges for the need to keep ethical values above individual objectives. Vaughan reports that according to a British Parliament report, the UK government’s response to the Covid-19 pandemic was inadequate as the government waited too long to impose a lockdown in England at the beginning of the pandemic, it adopted a strategy of “herd behaviour”, and it did not do enough to slow the spread of the virus by following a “fatalistic approach”. The report also highlights that the government ignored the recommendation provided by Scientific Advisory Group for Emergencies (SAGE) to enforce a circuit breaker lockdown in September 2020.

Economic Theory and Policy The inadequacy of national governments and supranational institutions to address properly and to answer economic, social, ethical, and environmental issues has caused widespread responses from society, which have generated rebellion, demonstrations, protest movements, and new political parties. Some of them are purely demagogic, but many others— such as the movements Occupy Wall Street and Extinction Rebellion, and the political party Podemos—put forward logical and rational arguments which are based on scientific theories and empirical evidence. The public debate has triggered discussions among academics. Capitalism as an economic system supported by neoclassical economics has been profoundly criticised because of its intrinsic outcome resulting in inequality and exploitation. As capitalism has failed to satisfy people’s expectations, many intellectuals look for an alternative model which could produce a better and more just society. As a result, in recent years, even many “mainstream” economists have started to challenge the dominant neoclassical ideology which have permeated and monopolised research, policy, and teaching in economics since the 1980s. Mariana Mazzucato in her book “The Entrepreneurial State: Debunking Public vs. Private Sector Myths” (2013) demystifies the myths that the state is an impediment for economic growth, that the private sector is the only force driving economic progress, and that economics failed to recognise the role of the government in driving innovation. The Rimini Centre for Economic

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Analysis based in Rimini (Italy) initiated in 2021 a series of webinar called “Rethinking Capitalism”. The organisers argue that the current economic system is in a human, political, social, and environmental crisis. The Rethinking Capitalism Webinar Series is, therefore, an opportunity to reflect on the deficiencies and the failures of capitalism, and its objective is to provide the ground for academic and policymakers to foster awareness and cooperation, and to propose corrective policies aimed to move the world economy on a sustainable path. Rodrik et al. (2019) reckon that income and wealth inequality are solvable problems, but in order to address them there is a need for a broad debate aiming to develop a new set of policies. They are also very critical towards the ideas in economic policy which have dominated the discussion in the past few decades, and they argue that those ideas are not supported by sound economic theories and empirical evidence. They conclude that neoliberalism—which they define as market fundamentalism and market fetishism—is only a primitive and simplistic corruption of economics. Rodrik (2017) in his paper “Rescuing Economics from Neoliberalism” points out that the critical weakness of neoliberalism is that it does not even get the economics right, and that it must be rejected simply because it is bad economics. Davis (2006) suggests that the dominant neoclassical economics might be replaced by a new pluralism, proposes a pluralistic approach in research which combines game theory, experiment, and behavioural assumptions, and concludes that ideas and theories which currently belong to heterodox economics will be used by the mainstream. Brancaccio and Califano (2019) in their textbook “Anti-Blanchard Macroeconomics” examine and criticise the orthodox economic theory and policy which prevail in most curricula, and they provide a set of alternative approaches. Economists can and should learn from other disciplines. Apicella and Silk (2019) point out the importance of cooperative behaviour in human evolution and claim that rules derived from culture and society can affect and determine human behaviour, provide a mechanism for variety, and preserve human cooperation. Mattei (2022) analyses the history of fiscal austerity and argues that governments facing financial issues have used austerity economic policies, such as reduction in public spending, cuts to benefits and to wages, to tackle fiscal solvency problems. Mattei’s analysis is of fundamental importance in the current political debate as she points out that fiscal austerity policies, albeit successful in addressing government budget problems, they result in hugely adverse effects on welfare, and, as a consequence, they trigger social unrest and pave the way to fascism, as

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the recent case of Italy has shown. Many economists who challenge the neoclassical ideology, like Mazzucato and Rodrik, are still using the same old paradigm, which is based on the orthodox view of the superiority of market above any other form of organising the economy. However, other authors depart entirely from the market-oriented orthodox assumptions and propose radically different frameworks. Resnick and Wolff (2006), who are among the most eminent critics of capitalism and the most wellknown proponents of socialism as economic system, assess the validity of Marxist theory in the current economic debate, reformulate Marxism as non-determinist theory, and redevelop the Marxian class analysis to construct a modern comprehension and realisation of the inconsistencies generated by capitalism. Wolff (2012) analyses the 1929 Great Depression, the 2007–2008 financial crisis, and other crises which have hit capitalism in history, maintains that over the past decades neoclassical economics and capitalism have prevented any critique within the orthodox academic debate, and looks for possible alternatives to capitalism. Franklin D. Roosevelt implemented the New Deal in the 1930s and saved capitalism by rebuilding the US democracy with the introduction of political reforms such as social security system, state pensions, and unemployment insurance. The neoliberal agenda was restored with Milton Friedman’s laissez-faire approach, it has dominated the debate in economics since early 1970s and has led to implementation of de-regulation policies— particularly in the USA and in Britain—based on supply-side economics, trickle-down economics, and anti-union laws. The 2007–2008 financial crisis is the obvious outcome of such policies. However, recent political movements, such as Occupy Wall Street, have highlighted the problems which are intrinsic to capitalism, and reopened again the controversy in order to produce an alternative. Resnick and Wolff (2006) and Wolff (2012) argue that one of the fundamental features—namely the organisation of production based on class structure—should be replaced. Hence, Wolff (2012) urges a transition from the current capitalistic organisation based on exploitation towards a new way of organising production grounded on collectivism and democracy, and proposes Workers’ SelfDirected Enterprises as a democratic alternative to organise the economy, in which workers are responsible of firms’ decision-making, contrarily to the current capitalistic organisation of production, in which directors and managers do not work in production units, but decide about production. Workers’ Self-Directed Enterprises would be an efficient way to decide,

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plan and organise industrial production, as within the Workers’ SelfDirected Enterprises all agents taking part in the production processes belong to the same class. More importantly, this would eliminate the exploitative features of capitalism. Wolff (2019) provides a fundamental guide to Marxism and points out that Marx’s analysis is extremely relevant in the contemporary debate about capitalism, since it explains and highlights the importance of class struggle as main conflict within capitalism. Younge (2019) investigates and discusses how US voters feel about socialism. He cited several surveys and showed that according to a 2019 Gallup poll 43% of Americans think that some form of socialism would be beneficial for the country—compared to 25% in 1942—and that today Americans tend to relate socialism with “equality” more than with “government ownership or control”, as they did in the 1940s. A 2019 Harris poll found that only 24% of respondents would vote for a socialist; however, according to other polls, 50% of those who are under 40 prefer to live in a socialist country, and 75% of Democrats think that moving towards a more socialist economy would make the country better off. Younge argues that, due to real wage stagnation combined with higher prices of health insurance and education over the past 40 years, to some extent the opinions of Americans on socialism reflect and reveal their views on capitalism. G. Cohen (2009) defines socialism as humanity’s attempt to “overcome and advance beyond the predatory phase of human development”. Einstein (1949) criticises what he calls “the economic anarchy of capitalist society” which is, in his opinion, the source of the evil, and he concludes that the result of capitalism is an oligarchic elite who has an immense and excessive power which cannot be restrained and scrutinised even by democratic societies. According to Einstein capitalists control, directly or indirectly, the main sources of information, included education. The outcome is, therefore, that individual citizens are not able to make use of their political rights. M. Cohen (2018) strongly criticises economic teaching, which is, in her opinion, stuck in the past. She argues that in order to build a better society, undergraduate education should be pluralist and critical; she points out that students should learn mainstream economics, but also other schools of economic thought, such as feminist economics (based on gender relations), ecological economics (which assumes that the economy is part of the environment) and post-Keynesian economics (focussing on demand rather than supply). A rediscovery in an interest in Marxism and post-Marxism is one of the defining features of the rise of heterodox approaches. Callinicos et al.

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(eds., 2022) provide one summary of these ideas and forcefully draw the connection between theory with practice in assessing the relevance of political economy and economic ideas.

Conclusions This book takes a holistic and pluralistic approach to economics, it incorporates interdisciplinary elements in economics teaching and research, and it reflects the objectives of the 2020 Online Interdisciplinary Conference Post-Crash Economics in a Post-COVID World, organised by Abdullah Yusuf, Carlo J. Morelli, and Omar Feraboli. Therefore, it continues the ongoing debate about the need for alternative, interdisciplinary and heterodox approaches to teaching economics at university, deals with challenges currently faced by economists, pursues an interdisciplinary approach to enhance collaboration with academics from disciplines other than economics, and analyses several questions and issues related to the 2007–2008 financial crisis and the current Covid-19 emergency. The volume engages also with an academic audience interested in incorporating a wider range of economic approaches in their research and teaching, and with undergraduate and postgraduate economics students who are trying to understand the limitations of their current economics syllabi. The novelty of the book is the active involvement of undergraduate and postgraduate students, who played a significant role in the project, presented their own research at the abovementioned conference, and contributed to this volume with two chapters. The book includes contributions from students who presented their works at the 2020 Online Interdisciplinary Conference Post-Crash Economics in a PostCOVID World. One of these chapters is based on students’ reflections and experience of being taught economics at the university, and it is the result of the debate among students about the criticism to mainstream economic theory and the need for alternative and pluralistic approaches to economics teaching. In the remaining chapters, students analyse and examine issues of economic theory and policy. This volume focusses also on the Covid-19 pandemic as a paradigm-shifting incidence in society, it analyses the impact of pandemic on health, inequality, education, and it assesses the policy measures undertaken by some European governments. It addresses issues of educational inequality and suggests there is a need to engage in a discussion about education as a global public good. The book also deals with pedagogical issues and concentrates particularly on

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the development of heterodox, innovative, pluralist, and interdisciplinary approaches to economics. Kuhn (1962) claims that science does not evolve gradually towards truth, but instead it has a paradigm which is widely accepted as “orthodox” until a paradigm shift takes place and results in an updated theory which is able to explain phenomena that the previous paradigm could not explain. The neoclassical paradigm in economics has been rejected by the events and the phenomena occurred over the past decades and has been severely challenged by several academics and by many institutions, which suggest that a paradigm shift in economic theory is necessary to cope with reality, and if not now, when?

References Alves, C., & Harvold Kvangraven, I. (2020, January–June). Changing the narrative: Economics after Covid-19. Review of Agrarian Studies, 10(1). Apicella, C. L., & Silk, J. B. (2019, June 3). The evolution of human cooperation. Current Biology, 29, R425–R473. Blanchard, O. (2008, August). The state of macro (NBER Working Paper No. 14259). Borino, F., Carlson, E., Rollo, V., & Solleder, O. (2021, April 7). International firms and Covid-19: Evidence from a global survey (Covid Economics, Issue 75). Brancaccio, E., & Califano, A. (2019). Anti-Blanchard macroeconomics. Edward Elgar. Callinicos, A., Kouvelakis, S., & Pradella, L. (Eds.). (2022). Routledge handbook of marxism and post-marxism. Routledge. Charles, S., Dallery, T., & Marie, J. (2021). Covid-19 et imbrication des crises: réhabiliter le keynésianisme pour refonder la politique macroéconomique. Revue de la regulation, 29. Cohen, G. A. (2009). Why not socialism? Princeton University Press. Cohen, M. (2018). Post-crash economics: Have we learnt nothing? Nature, 561. Cotton, C. D., Garga, V., & Rohan, J. (2021, July 2). Consumption spending and inequality during the Covid-19 pandemic (Covid Economics, Issue 83). Davis, J. B. (2006). The turn in economics: Neoclassical dominance to mainstream pluralism? Journal of Institutional Economics, 2(1), 1–20. Einstein, A. (1949). Why socialism? Monthly Review, 1(1), 9. Feraboli, O., & Morelli, C. (Eds.). (2018). Post-crash economics. Plurality and heterodox ideas in teaching and research. Palgrave Macmillan.

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Fornaro, L., & Wolf, M. (2020). Covid-19 coronavirus and macroeconomic policy (Economics Working Papers 1713). Department of Economics and Business, Universitat Pompeu Fabra. Gak, M. (2020). Deutsche Welle. Opinion: Economy vs. human life is not a moral dilemma. Retrieved August 20, 2022 from https://mikescrafton.com/2020/ 03/29/martin-gak-economy-v-human-life-is-not-a-moral-dilemma/ Graz, J., Alary, P., Labrousse, A., Lamarche, T., & Vercueil, J. (2021). What does the Covid-19 crisis reveal about economics and the economy? Revue de la régulation, 29. Hodgson, G. M. (2001). How economics forgot history the problem of historical specificity in social science. Routledge. Inman, P. (2013a). Economics students aim to tear up free-market syllabus. Retrieved May 10, 2022 from https://www.theguardian.com/business/ 2013/oct/24/students-post-crash-economics Inman, P. (2013b). Academics back students in protests against economics teaching. Retrieved May 8, 2022 from https://www.theguardian.com/edu cation/2013/nov/18/academics-back-student-protests-neoclassical-econom ics-teaching Inman, P. (2014). Economics students call for shakeup of the way their subject is taught. Retrieved May 3, 2022 from https://www.theguardian.com/educat ion/2014/may/04/economics-students-overhaul-subject-teaching International Student Initiative for Pluralism in Economics. (2014). An international student call for pluralism in economics. Retrieved October 5, 2022 from http://www.isipe.net/open-letter Jimenez-Gomez, D., & Abellán Perpiñán, J. M. (2021). Behavioral economics of the Covid-19 pandemic. Ekonomiaz, N.º 100, 2º semester. Kay, J. (2009). How economics lost sight of real world. FT. Retrieved May 14, 2022 from https://www.ft.com/content/35301d06-2eaa-11de-b7d300144feabdc0 Krugman, P. (2009). How did economists get it so wrong? NY Times Magazine. Kuhn, T. S. (1962). The structure of scientific revolutions. University of Chicago Press. Lloyd, P., & Dixon, R. (2021, March). Modelling the spread of the coronavirus: A view from economics. Australian Economic Review, 54(1), 36–56. Lucas, R. E. (2003). Macroeconomic priorities. American Economic Review, 93(1), 1–14. Mattei, C. E. (2022). The capital order. How economists invented austerity and paved the way to fascism. The University of Chicago Press. Mazzucato, M. (2013). The entrepreneurial state: Debunking public vs. private sector myths. Anthem Press. Morikawa, M. (2021, June 16). Uncertainty of firms’ economic outlook during the COVID-19 crisis (Covid Economics, Issue 81).

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Müller, M. H.-P. (2021). Ethics and morals in an economy—COVID-19 and learning from the past. Retrieved October 11, 2022 from https://www.glo balpolicyjournal.com/blog/13/04/2021/ethics-and-morals-economy-covid19-and-learning-past Ostry, J. D., Loungani, P., & Furceri, D. (2016). Neoliberalism: Oversold? IMF Finance & Development, 53(2). Ozanne, A. (2016). Power and neoclassical economics: A return to political economy in the teaching of economics. Palgrave Pivot. Padhan, R., & Prabheesh, K. P. (2021). The economics of COVID-19 pandemic: A survey. Economic Analysis and Policy, 70, 220–237. Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press. Piketty, T. (2020). Capital and ideology. Harvard University Press. Portes, J. (2020). Don’t believe the myth that we must sacrifice lives to save the economy. The Guardian. Retrieved May 12, 2022 from https://www.the guardian.com/commentisfree/2020/mar/25/there-is-no-trade-off-betweenthe-economy-and-health Resnick, S. A., & Wolff, R. D. (2006). New departures in Marxian theory. Routledge. Rimini Centre for Economic Analysis. Retrieved October 12, 2022 from https:/ /www.rcea.world/events/past-events/2022-rcea-webinar-series Rodrik, D. (2017, November 6). Rescuing economics from neoliberalism. Boston Review. Rodrik, D., Naidu, S., & Zucman, G. (2019, February 27). Economics after neoliberalism. Boston Review. Rufrancos, H., Moro, M., & Moore, E. (2021, June 9). The impact of University reopenings on COVID-19 cases in Scotland (Covid Economics, Issue 80). The Guardian. (2013). Post-Keynesians are staging a comeback. Retrieved May 25, 2022 from https://www.theguardian.com/education/2013/nov/ 18/post-keynesians-comeback Varoufakis, Y. (2011). The global minotaur. Zed Books. Varoufakis, Y. (2016). Capitalism will eat democracy—Unless we speak up. Retrieved April 22, 2022 from https://www.ted.com/talks/yanis_varoufakis_ capitalism_will_eat_democracy_unless_we_speak_up?language=en Vaughan, A. (2021). UK’s slow response to covid-19 was a ‘serious’ error, say MPs. Retrieved May 13, 2022 from https://www.newscientist.com/article/ 2293227-uks-slow-response-to-covid-19-was-a-serious-error-say-mps/ Wolff, R. D. (2012). Democracy at work: A cure for capitalism. Haymarket Books. Wolff, R. D. (2019). Understanding Marxism. Democracy at Work. Younge, G. (2019). Socialism used to be a dirty word. Is America now ready to embrace it? The Guardian. Retrieved October 19, 2022 from https://www.theguardian.com/us-news/2019/sep/06/socialism-usedto-be-a-dirty-word-is-america-now-ready-to-embrace-the-ideology

CHAPTER 2

COVID-19 and the Future of Higher Education Abdullah Yusuf, Mehdi Chowdhury, and Ian Roache

Introduction The COVID-19 pandemic impacted the world in numerous ways. In many cases, the world economy observed a complete shutdown of activities such as restaurant services, international flights and tourism. Many activities suffered heavily due to the lockdown imposed by countries all over the world. In the face of all adversaries, one activity that managed to continue more or less as before is the delivery of Higher Education.

A. Yusuf (B) · I. Roache University of Dundee, Dundee, Scotland, UK e-mail: [email protected] I. Roache e-mail: [email protected] M. Chowdhury Bournemouth University, Poole, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_2

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The reason for the quick change of the mode of education from faceto-face to online was the utilisation of various online platforms. It needs to be noted here that online platforms for education have been available for a while, however, never before has Higher Education embraced them in this manner seen in the last years. Those who are involved with universities and colleges all over the world unanimously agree with this. The paper aims to evaluate how the adoption of online learning technologies during this will impact Higher Education post-COVID-19. The paper analyses the impact, from the end user’s perspective, in this case employers, and argues that the changing demand for Higher Education from employers will significantly impact the type of education demanded by students and consequently students’ choice of the mode of delivery. We argue that the traditional mode of delivery using state-of-the-art physical infrastructure with high tuition fees will face strong competition from low-cost online institutions. The institutions, which will continue with high investment in physical infrastructure, will suffer as the student intake will not be able to cover those costs. Our recommendation will be to increase the focus of Higher Education to the development of human capital and virtual infrastructure and to operate using a hybrid model combining face-to-face and online delivery.

Covid-19 and Higher Education The COVID-19 crisis presented an existential threat to the UK Higher Education sector. The market experiment imposed on universities—in England since 1998 that subsequently accelerated after 2009—when universities were able to charge tuition fees of up to £9,000 per year effective from 2012–2013 (Murphy et al., 2017) has engendered marketfocused Higher Education systems, particularly in the UK, United States and Australia. One of the key components of Higher Education in these countries has been face-to-face teaching, led by research-informed academics. Additionally, these universities also pride themselves on their state-of-the-art resources and libraries to enhance student experiences. And it is the marketisation—and pursuit—of these student experiences that have become a hallmark of Higher Education. COVID-19 forced the universities to rethink their Higher Education policy. In the new economic environment post-pandemic, the nature of Higher Education is bound to change. This resulted in many universities

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subsequently investing heavily in developing online platforms and necessary IT equipment. This, however, is going to continue in the coming future.

Transformation of Education Delivery Longitudinally Is Likely If Online Learning Becomes the Norm The Coronavirus pandemic has paved the way for remote teaching and online learning. There are many indicators that the crisis will bring longterm transformation to many aspects of life. In many respects it already has. Education will be one such aspect should remote teaching become normalised. History shows that tectonic, permanent shifts in society can occur quickly when unexpected events force us to change our beliefs and practices. For example, during the Second World War, with mainly men away to serve in the military, women proved that they could work in almost any capacity to meet those economic demands of the war effort. Indeed, that war changed many countries and societies for women, and despite employment equality still being a work in progress they never looked back after that (PBS, 2017). Major online retailers that are part of the critical infrastructure for distributing household essentials, healthcare items and foodstuffs, are the winners during this pandemic. While consumer spending at highstreet shops dropped steeply due to lockdowns, internet-based businesses have benefitted, resulting in an increase in the wealth of the world’s most affluent (Ponciano, 2020). Even the retail businesses that are not internet-based also changed themselves to accommodate the changing environments (BBC, 2022). The COVID-19 crisis may well permanently change our world and our global outlook—especially in the Higher Education sector, where online learning is becoming increasingly common. This pandemic might just be the catalyst that necessitates a rethink about how these institutions educate and train their students. That is the direction of travel. Another consideration is: Will employers value these students who have been, or will be, educated via virtual platforms? Students themselves have questioned the value of such methods of education delivery in relation to the tuition costs attached to them (Anderson, 2020).

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The expectation of change in education can be mirrored in the world of work. A report by McKinsey and Company, cited by the World Economic Forum, highlighted how workers now expect more from their jobs post-pandemic. It concluded that: “…many (workplaces) are planning a hybrid virtual model that combines remote work with time in the office. This sensible decision follows solid productivity increases during the pandemic” (Alexander et al., 2021).

Online Learning Necessitates a Change in the Way We Value Degrees There has been increasing discussion that students may have decided to take a gap year starting from September 2020 (Clagett, 2020). This has been backed up by research. A study of 1,500 students at Arizona State University found that 13% of students delayed graduation as a direct consequence of the pandemic (Aucejo et al., 2020). However, such action does not reduce the total number of potential students, as those who plan to not enrol in the coming year will likely enrol the next. A low intake in, for example, September 2020 may only have had short-term consequences on enrolment statistics, though will have been devastating for some universities. To understand how university education will be impacted in the long term, we rather need to see it from the perspective of employers which—until now—is surprisingly overlooked. The advent of COVID-19 indicates that online teaching is likely to be a staple ingredient of Higher Education delivery. This has been reflected in the blended learning approach that some universities had utilised even pre-pandemic (Razavi, 2020) and by others that have confirmed they intend to utilise it post-pandemic. And there are forecasts that outline how it is the big tech companies who are preparing to collaborate with academic institutions to deliver online learning (Walsh, 2020). In reality, online education is already here and has been for about a decade, commonly known as Massive Online Open Courses or MOOCs. Universities—worldwide—also proved that online degrees are possible by moving to exclusively online methods of teaching in a very short time period. What the pandemic did was accelerate the upskilling of teaching staff who, having been familiar with aspects of online learning pre-COVID19, suddenly had to immerse themselves in it. This proved that the technology is there and that universities are capable of delivering virtual degrees.

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MOOCs already have acceptance in the workplace for topping up pre-existing skills (Banks & Meinert, 2016); however, they were not accepted as replacements for university-accredited degrees (Hamori, 2018). Increased exposure of employers to the online education system due to the pandemic may pave the way for acceptance of online courses vis-à-vis the traditional degree certificate. That many workplaces used inhouse online courses, including MOOCs, as a significant part of their staff training provision before the pandemic ensured that e-learning was familiar territory for them when the lockdowns arrived (Hamori, 2021). The question of employers’ acceptance and embrace of the changing nature of education has already been raised in relation to the school sector. With pupils unable to sit in exam halls to take tests during the pandemic, it has fallen to teachers to determine grades by means of coursework and assessments (BBC, 2022). The impact of the pandemic disruption on the employment opportunities of those impacted by the absence of exams may only be properly assessed over the long term. Nevertheless, as MOOCs/online degrees are possible to be delivered at a fraction of the cost of the traditional degree, it is likely that there will be a shift in demand towards online degrees. This is particularly true as employers will no longer distinguish between traditional and online higher degrees, and as the financial bite affected by the pandemic leaves its mark on the sector.

Lessons from an Economic Analysis A simple microeconomic analysis can be useful in evaluating the consequences of COVID-19 on Higher Education and helps us to forward observations. These observations are forwarded using a simple microeconomic analysis that is taught during the first year of an undergraduate degree. Students of microeconomics often struggle to identify the usefulness of abstract economic concepts in the real world. This matter has been specifically raised by students during an online conference by the Economics students of the University of Dundee (2020). The analysis thus is also providing an example of the applicability of economics to analyse real-world problems. The universities, though, are regarded as not profit-making institutions, operated within the usual cost-benefit analysis. (Any microeconomics text would cover the analysis of profit maximisation by firms. See, for example, Parkin, 2019.) Hence, the aim of the universities is also to

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generate the usual surplus by extending the difference between the cost and revenue. The surplus generated is then reinvested or used for other purposes. The cost structure of the universities has been impacted by COVID19 through a number of channels. One of it is the overhead expenditure of the already developed infrastructures. These infrastructures will remain underutilised but will require necessary maintenance. The universities that borrowed money for the development of buildings and infrastructures will also have to repay the debt (Economist, 2018). On the other hand, the investment to maintain and improve the online presence must continue. Similarly, the underutilised infrastructures of the university will not generate targeted revenues, implying a substantial investment rendered unproductive. In addition, universities are likely to experience a drop in student intake due to competition from other online platforms. There can be some fluctuation in the student number of traditional universities in the near future, however a drop in number eventually is likely to take place. Combining the impacts on the cost and revenues of the universities, it is likely that some universities will find it difficult to continue to operate (Research Professional, 2023). Unless substantial changes take place in the Higher Education sector, we will see a drop in traditional universities followed by an increase in non-traditional modes of delivering Higher Education. It must be also noted that most Western universities are also highly dependent on the fees paid by foreign students. The universities have recently observed an increase in the foreign student number which may have resulted due to changes in visa regulations and the availability of post-study work, and in general the increase of vacancies in the labour market following great resignation (ICEF LBS, 2022; Monitor, 2023). This influx may provide temporary respite to the universities, however, if the flow is not continued, the universities will not be able to sustain the revenues.

Opportunities and Threats Nevertheless, it will not be all doom and gloom for universities. They will continue to adapt to new opportunities emerging (Siminski & Temnyalov, 2020), and it is certain that the sector will persist in the post-COVID-19 landscape. The critical ingredient of this adaptation will be the human

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capital contents of the Higher Education sector which will be desperately needed to perform and innovate. The virtual infrastructure will become more important than the physical infrastructure. Consequently, the equipment and support available for online learning will assume new importance. Online lecture content requires preparation and innovation, hence investment in human capital and technological capacities will be crucial for the sector and its future (Morris, 2020). One interesting and perhaps unexpected aspect of learning online has been the access to webinars and conferences that, pre-pandemic, would have been restricted by geography and beyond the reach of most students. Virtual gateways have opened up via Zoom, Microsoft Teams, etc., that allow researchers to “attend” an event, for example, taking place in Washington, DC. while sitting at home in London, Edinburgh or Sydney. Register, note the time difference and log in, and you become part of the learning experience and discussion, while not actually in the room (RuizBarrera et al., 2021). This broadening of the audience on a global scale is likely to be permanent and must be viewed as a positive development, particularly for PhD researchers. There is also an opportunity for teaching to include online elements during face-to-face classes. A study conducted in Romania in 2022 found that students liked using electronic educational resources, such as Moodle, in the “physical” classroom (Stoian et al., 2022). This can enhance innovation and increase involvement in class activities. However, as a business model, our view is that it will be harmful to mimic MOOCs or become online only. Universities will perhaps benefit from a hybrid model, where both face-to-face and online interactions are available. Networking and face-to-face interaction—particularly for the more practically structured courses—are essential. Students still benefit from a one-to-one discussion with tutors, especially when it comes to pastoral care and identifying mental health concerns (Spears & Green, 2022). Mental health is deserving of the greater focus placed on it by wider society, not just education. It must be a key consideration when policy decisions regarding teaching provisions are made by universities (ONS, 2022). Potential isolation of individuals must be avoided. Face-toscreen is no substitute for eye-to-eye and the reassurance that can bring to an anxious student. Demand for face-to-face teaching will remain, however, this demand may dwindle, in the short-term at least. Instead of commuting or paying for accommodation, some students may prefer

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exclusively online delivery (Razavi, 2020). Only a hybrid model will be able to reconcile these conflicting needs. The reduction of overhead expenditures will be important. Universities are currently generating revenues through renting out premises for accommodation and other activities (JLL UK, 2019) Many of them will become redundant or will be underutilised. In the immediate future, it seems to be impossible to salvage the cost already incurred for developing those physical infrastructures (White, 2019). This should not stop investment in human capital and virtual infrastructures, which will be of high importance going forward. The pandemic has also placed individual student finances under pressure. A study by the London-based Sutton Trust raised concerns over students who tended to work in the most vulnerable employment sectors, such as hospitality or retail, losing income during the crisis, while noting that university hardship funds were not always able to meet students’ needs (Montacute, 2020). However, the post-pandemic world has also observed great resignation, implying, on the one hand, the availability of jobs but, on the other hand, the lack of additional money for meeting the demand for university-level education.

A Personal View: Ian Roache, PhD Candidate and Tutor “I clearly recall the very first time coronavirus became ‘real’ for me. It was early 2020 and I had just read the story of Dr Li Wenliang, the Wuhan doctor who had been censored by the Chinese authorities for raising concerns about a dangerous, new virus making people ill in his city (Xiao et al., 2022). The name of the pandemic had yet to be announced – that was still a month or so away. Dr Li was to die at the age of just 34, a hero to many people inside China and around the world. Memories are also fresh of a lecturer of mine predicting that, because of what was about to unfold, the world would never be the same again. It seemed rather, uncharacteristically, melodramatic at the time but how right they were”. “My PhD journey had yet to start but I was already working for the University of Dundee on a tutor’s contract teaching an International Relations module. As China’s crisis quickly became a global emergency, the UK’s Prime Minister Boris Johnson officially announced the start of

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the first lockdown on Wednesday, March 23, 2020. Higher Education provision would never quite be the same again”. “Universities, including my own, had to stop, take stock and then come up with a survival strategy. Innovative ways had to be found of negotiating lockdown. Instead of thinking Teams were groups of people who played football or rugby matches, we all had to navigate around this new and challenging mode of digital communication. Instead of Zoom being something had to do up a flight of stairs when late for a meeting, that word became the meeting itself, zoomed in via a computer screen. As spring turned into the summer of 2020, plans were completed and put in place, and the dramatic upskilling of staff began in earnest. It was a steep learning curve for me, despite having also worked from home as a journalist throughout the lockdown. My university teaching was to be online via the Blackboard e-learning resource. The first class duly arrived and with it came the usual opening-day nerves and anxiety – and that was just the tutor! Your priority became, not the subject content (in my case International Relations theory) but mastering the technology from your living room. Students appeared to be forgiving of any keyboard misstep of mine, although they may have secretly been giggling from behind the safety of their screens at home, with mics definitely on mute. Slowly but surely, week by week, my confidence – boosted by the support of other staff – grew and seminars became more ‘normal’”. “One concern of mine, though, was that it was difficult to get some students to put themselves forward to talk on-screen, with some preferring the anonymity provided by sound and vision being switched off. In the ‘actual’ classroom, tutors should strive to involve all students in any discussion and debate but that was more challenging online. Another concern was that you never actually met your students. Academic relationships between tutors and students, as well as lecturers and students, are invaluable but those were adversely impacted by the pandemic. Despite those difficulties, the delivery of the module was achieved, with all credit to, of course, the efforts and ability of the students. As a tutor, though, you yearned for the day when you were back standing in front of those faces, chatting and discussing in person. Online teaching did the job required, as education faced an existential threat, but could never be, in my view, a permanent replacement for face-to-face tutoring”. “Wearing my other Higher Education hat, as a student embarking on a PhD course in Middle East politics, the pandemic posed a substantial threat to the success of my endeavour. As my research area centred on

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the war in Yemen and the Houthis’ rise to power, I was already facing up to not being able to do any on-the-ground fieldwork due to that state being a conflict zone. COVID-19 exacerbated the already precarious situation in Yemen and increased the suffering of the people. Nevertheless, all was not negative. Access to supervisors remained good, and I began to feel more of a part of university life as things began to open up, meeting fellow researchers and staff members in person for advice, guidance and camaraderie. Also, what I began to discover over time was that conferences and events that I would not have been able to attend in person suddenly became open-access online in the face of lockdowns. Through my membership of various bodies and organisations related to my research topic, I was able to ‘attend’ webinars and talks covering the Middle East in general and Yemen in particular. This is a policy that has been continued as restrictions have eased, albeit some events are now hybrid, with an audience in the room accompanied by others scattered across the globe. It is a welcome development for researchers, especially for those of us who had been facing field-work challenges even pre-pandemic. The world has welcomed us in digitally and we are, hopefully, here to stay”.

Post-Script Universities have returned to face-to-face teaching and, in some cases, students have been welcomed back to campus in even greater numbers than before COVID-19. Higher Education has been changed forever and the hybrid method of learning is permanent. What is required of universities now is to retain and invest in human capital, in addition to virtual infrastructure. As evinced by the personal view provided by the student/ tutor, the digital classroom has never quite matched the actual classroom. The importance of human capital and virtual infrastructures cannot be understated moving forward. Those universities that do not invest will struggle to remain in operation; mimicking those high-street giants that suffered with the advent of online shopping. There will be some demand for physical infrastructures, however, by reducing investment in that area, significant cost-saving is possible (Jack, 2020). The demand for Higher Education will persist, however, universities will need to compete with low-cost online alternatives which will increasingly gain wider acceptance, crucially from employers now used to e-learning. Innovation will be key.

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References Alexander, A., De Smet, A., Langstaff, M., & Ravid, D. (2021). What employees are saying about the future of remote work. https://mck.co/3Dd1G1E. Accessed 12 May 2022. Anderson, G. (2020). Feeling shortchanged. https://www.insidehighered. com/news/2020/04/13/students-say-online-classes-arent-what-they-paid. Accessed 12 October 2021. Aucejo, E., French, J., Araya, M., & Zafar, B. (2020). The impact of COVID-19 on student experiences and expectations: Evidence from a survey. Journal of Public Economics, 191, 104271. https://www.sciencedirect.com/science/art icle/pii/S0047272720301353. Accessed 1 May 2021. Banks, C., & Meinert, E. (2016). The acceptability of MOOC certificates in the workplace. https://core.ac.uk/download/pdf/77020593.pdf. Accessed 1 May 2021. BBC. (2022). Primark finally goes online in new click-and-collect trial. BBC. https://www.bbc.co.uk/news/business-61863413. Accessed 20 December 2022. Clagett, R. (2020, May). https://theconversation.com/5-reasons-students-sho uld-consider-taking-a-gap-year-now-138712. Accessed 1 May 2021. Economist (2018). Britain may soon have a bankrupt university. The Economist. https://www.economist.com/britain/2018/11/08/britain-maysoon-have-a-bankrupt-university. Accessed 6 May 2023. Hamori, M. (2018). Can MOOCs solve your training problem? https://hbr.org/ 2018/01/can-moocs-solve-your-training-problem. Accessed 21 December 2022. Hamori, M. (2021). MOOCs at work: What induces employer support for them? https://doi.org/10.1080/09585192.2019.1616593. Accessed 10 December 2022. ICEF Monitor. (2023). Latest UK visa numbers indicate continuing strong growth in international HE enrolments this year. ICEF Monitor. https:/ /monitor.icef.com/2023/03/latest-uk-visa-numbers-indicate-continuingstrong-growth-in-international-he-enrolments-this-year/#:~:text=Here% 20are%20the%20highlights%3A,2022%20were%20for%20higher%20education. Accessed 6 May 2023. Jack, A. (2020). Live Q&A: What is the future for universities? https:// www.ft.com/content/3f23acbf-3934-40f6-a2f1-530726093d27. Accessed 6 December 2021. JLL UK. (2019). How universities are maximising revenue from real estate. https://www.jll.co.uk/en/trends-and-insights/cities/how-universitiesare-maximising-revenue-from-real-estate. Accessed 3 September 2020. Can be accessed via this archive page: https://tinyurl.com/2xup46rb. Accessed 3 April 2023.

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LBS. (2022). What’s driving the great resignation? London Business School. https://www.london.edu/think/whats-driving-the-great-resignation. Accessed 21 December 2022. Montacute, R. (2020). Social mobility and Covid-19: Implications of the COVID-19 crisis for educational inequality. https://dera.ioe.ac.uk/35323/ 2/COVID-19-and-Social-Mobility-1.pdf. Accessed 20 December 2021. Morris, N. (2020). Scaling up online education? More haste less speed. https:// www.hepi.ac.uk/2020/04/29/scaling-up-online-education-more-haste-lessspeed/. Accessed 10 November 2022. Murphy, R., Scott-Clayton, J., & Gillian Wyness, G. (2017). Lessons from the end of free college in England. https://www.brookings.edu/research/lessonsfrom-the-end-of-free-college-in-england/. Accessed 21 October 2020. Office for National Statistics (ONS). (2022, October 24–November 7). ONS website, statistical bulletin, Cost of living and higher education students, England. https://www.ons.gov.uk/peoplepopulationandcommunity/educat ionandchildcare/bulletins/costoflivingandhighereducationstudentsengland/ 24octoberto7november2022. Accessed 20 December 2022. Parkin, M. (2019). Microeconomics (13th Edition) (Global Ed.). Pearson Education. PBS. (2017). Women and work after world war II . https://www.pbs.org/wgbh/ americanexperience/features/tupperware-work/. Accessed 11 September 2021. Ponciano, J. (2020). The world’s 25 richest billionaires have gained nearly $255 billion in just two months. https://www.forbes.com/sites/jonathanponciano/ 2020/05/22/billionaires-zuckerberg-bezos/?sh=2fa1345a7ed6. Accessed 18 Ocotber 2021. Razavi, L. (2020). https://www.theguardian.com/education/2020/may/27/ students-like-the-flexibility-why-online-universities-are-here-to-stay. Accessed 6 December 2021. Research Professional. (2023). Universities in ‘perilous’ financial situation. Research Professional News. https://www.researchprofessionalnews.com/ rr-news-uk-universities-2023-3-universities-in-perilous-financial-situation/. Accessed 6 May 2023. Ruiz-Barrera, M. A., Agudelo-Arrieta, M., Aponte-Caballero, R., GutierrezGomez, S., Ruiz-Cardozo, M. A., Madrinan-Navia, H., Vergara-Garcia, D., Riveros-Castillo, W. M., & Saavedra, J. M. (2021). Developing a webbased congress: The 2020 international web-based neurosurgery congress method. World Neurosurgery, 148, e415–e424. https://doi.org/10.1016/j. wneu.2020.12.174. Accessed 1 October 2022. Siminski, P., & Temnyalov, E. (2020). 200 billion hours to spend: The Covid19 opportunity to upskill. https://wol.iza.org/opinions/200-billion-hours-tospend-the-covid-19-opportunity-to-upskill. Accessed 10 November 2022.

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Spears, B., & Green, D. (2022). The challenges facing pastoral care in schools and universities due to the COVID-19 pandemic. Pastoral Care in Education, 40(3), 287–296. https://doi.org/10.1080/02643944.2022.2093961. Accessed 20 December 2022. Stoian, C. E., F˘arcas, iu, M. A., Dragomir, G. -M., & Gherhes, , V. (2022). Transition from online to face-to-face education after COVID-19: The Benefits of online education from students’ perspective. Sustainability, 14(19), 12812. https://doi.org/10.3390/su141912812. Accessed 10 November 2022. University of Dundee. (2020, October 1–2). Online interdisciplinary conference: Post-crash economics in a Post-covid world, organised by the University of Dundee. Walsh, J. (2020). The coming disruption. https://nymag.com/intelligencer/ 2020/05/scott-galloway-future-of-college.html. Accessed 3 May 2021. White, J. (2019). The report is in. https://www.campusestate.co.uk/index.php/ editorial/aude-spotlight/the-report-is-in. Accessed 6 December 2020. Xiao, M., Qian, I., Wen Liu, T. and Buckley, C. (2022). How a Chinese doctor who warned of COVID-19 spent his final days. https://www.nytimes.com/ 2022/10/06/world/asia/covid-china-doctor-li-wenliang.html. Accessed 17 December 2022.

CHAPTER 3

Assessing the Education Needs of the Rohingya Refugees and the Impact of COVID-19 Roberta Dumitriu

Introduction “The most persecuted minority in the world”, the Rohingya having found refuge in Cox’s Bazar are now facing new disruptions caused by the global COVID-19 pandemic and its repercussions (Human Rights Council, 2017). Since the beginning of the COVID-19 pandemic, experts have warned that the living conditions in the Rohingya refugee camps create the ideal environment for an outbreak with catastrophic mortality (Truelove et al., 2020). The current homes of the Rohingya living in Cox’s Bazar primarily consist of hand-built, makeshift tarpaulin, and bamboo shelters with floors consisting of paper and plastic, with many of the most recent Rohingya refugees who fled Myanmar in 2017 still living in the initial emergency shelters (Ahmed et al., 2021). In terms

R. Dumitriu (B) University of Dundee, Dundee, Scotland, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_3

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of sanitation facilities, communal toilets as well as bathing facilities are utilised by on average 250 people per day, with people often having to wait in queues to access these services (Oxfam International, 2020). With approximately half of Rohingya refugees under the age of 18, disruptions, produced by the pandemic in terms of access to education facilities, are likely to generate a myriad of consequences both in the short- and long-term (UNICEF, 2021). The Bangladeshi authorities alongside its humanitarian partners were forced to adopt drastic measures in the attempt to control the spread of the virus within the refugee camps and although the measures adopted fulfilled their scope, the consequences of these measures need to be acknowledged. With a specialised lockdown set in place since March 2020, the results of the Joint Multi-Sector Needs Assessment held in July–August 2020 reinforced that food security, health, education, and child protection are amongst the top priorities of the Rohingya people (ISCG, 2020a). This chapter explores the education needs of the Rohingya in order to identify the direct and indirect effects of the pandemic on the education sector in the refugee camps in Cox’s Bazar, by relying on empirical literature originating from secondary sources.

Who Are the Rohingya? To understand the plight of the Rohingya, it is paramount to explore how they came to be dubbed as “the most persecuted ethnic minority” in the world (Human Rights Council, 2017). The Rohingya people have had a long history in Myanmar, however their country now refuses to acknowledge this history, their people as a minority and any such incumbent rights, instead branding them as “Bengalis” or “illegal immigrants” (Ibrahim, 2018, pp. 3, 10). Although Myanmar currently recognises a total of 135 minority groups, it ceased to acknowledge the Muslim Rohingya ethnic minority, stripping them of their citizenship, despite historical evidence of their existence in the Rakhine State of Myanmar (Lee, 2021). This distinction has led the Rohingya to be targeted by the Myanmar Government and vilified in Myanmar’s media and society, often progressing to violent interactions with the country’s military (the Tatmadaw) (Kipgen, 2019). This anti-Rohingya violence is not new, with waves of displacement occurring sporadically in the last 50 years and major exoduses of Rohingya being recorded in 1978, 1991–1992, and 2017 (UNOCHA, 2019). The third and most recent of these major

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refugee waves came to be known as the Rohingya Crisis which started in August 2017 when, following the launch of brutal military operations targeting civilians, approximately 900,000 Rohingya fled Myanmar to Bangladesh, in what later was labelled as “a textbook example of ethnic cleansing” (Al Hussein, 2017). Currently, the vast majority of Rohingya reside in Bangladeshi refugee camps within the Cox’s Bazar District. The population density in these camps averages at 40,000 people per square kilometre, with areas where the density exceeds 70,000 (Sharma, 2021). This population density is 40 times higher than that of Bangladesh, which is considered one of the most densely-populated countries in the world, with its approximately 1200 people per square kilometre (O’Neill, 2021). According to the United Nations Office for the Coordination of Humanitarian Affairs, UNOCHA (2019) “over 909,000 stateless Rohingya refugees reside in Ukhiya and Teknaf Upazilas” with approximately half of the Rohingya refugee population, being under the age of 18 (UNICEF, 2021). The high number of children which arrived in Cox’s Bazar from the last wave of displacement often lack access to basic human needs including food, safe drinking water, medicine, and sanitation items, facing limited access to psychological and mental health services to support them in dealing with the traumatic experiences, and memories which led them to their current predicament (Prodip, 2017).

Why Is Access to “Education in Emergencies” Important? Education is important for children and young people, irrespective of their geographical location, personal experiences, or backgrounds. Education is considered one of the fundamental human rights under international law recognised by numerous international treaties and conventions including “The Universal Declaration of Human Rights” [Article 26] (UNGA, 1948), “The Convention relating to the Status of Refugees” (UNGA, 1951), and “The Convention of the Rights of the Child” [Articles 28, 29 and 32] (UNGA, 1989). Education can be especially lifechanging for socially, economically, or culturally marginalised individuals as it equips them with the skills and knowledge to overcome the obstacles arising from their less privileged environments (Talbot, 2013). “Emergency situations” that jeopardise the access to education are defined as situations “in which man-made or natural disasters destroy,

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within a short period of time, the usual conditions of life, care and education facilities for children and therefore disrupt, deny, hinder progress or delay the realisation of the right to education” (Committee on the Rights of the Child, 2008, p.1). Although the benefits of education are not contested, often it is one of the first services that is halted in emergency situations (UNICEF, 2019). “Education in emergencies” refers to “quality, inclusive learning opportunities for all ages in situations of crisis, including early childhood development, primary, secondary, non-formal, technical, vocational, higher and adult education” (INEE, 2018, p. 4). Education in emergencies is essential during conflicts, forced displacement, disasters, and public health emergencies, with clear benefits both short and long-term (Talbot, 2013). Short-term education can equip individuals with the skills and knowledge to react during an emergency whilst providing “a channel for conveying health and survival messages” (UNHCR, 2004, p. 2). Longterm, through (uninterrupted) education, children and young people develop a sense of routine and stability, essential in their development and recovery from traumas, facilitating a return to a sense of “normality” (Talbot, 2013, p. 5). Often education in emergencies commences with establishing childfriendly spaces which monitor the physiological needs of children and young people, providing a safe environment for the process of learning (Save the Children, 2008). Education in emergencies is vital due to the fact that it provides “physical, psychosocial and cognitive protection”, assistance in learning basic literacy, numeracy, and life skills in health, safety, and security to individuals who have experienced traumas, equipping them with knowledge and mental resources that strengthen their resilience (INEE, 2018, p. 4). Although beneficial for young refugees, education in emergencies “receives on average less than 3% of humanitarian aid” which hinders the development of protective learning environments as well as access to education in those in emergencies (UNICEF, 2019). A high percentage of the Rohingya refugees are under the age of 18, dealing with the psychological and emotional fallout of their often-violent displacement, which makes the structured and safe environment of education imperative in allowing these young people to develop self-reflection and agency, enabling them to unlock their potential, progress through life and overcome past experiences (Shohel, 2020). Often health crises combined with educational disruptions can have “compounding negative impacts on adolescents and their life-course trajectories” reinforcing that education

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can play a pivotal role in providing the mechanisms to overcome traumas and understand the gravity of an imminent crisis, allowing individuals to regain a sense of ownership over their prospects (Guglielmi et al., 2020a, p. 7).

Rohingya Education Pre-COVID-19 In pre-COVID-19 Cox’s Bazar, education was delivered through Temporary Learning Centres, Child and Adolescent-Friendly Spaces administered by Non-Governmental Organisations (NGOs) which provided basic education to children and young people. This fulfilled only part of the scope for education in emergencies as no or only limited provision was made for vocational, higher, and adult education (Guglielmi et al., 2020a). Prior to the 2017 influx of Rohingya refugees, the temporary learning centres taught an amalgamation of Bangladeshi and Myanmar curricula, however, this amalgamated curriculum was not recognised by either Bangladesh or Myanmar. Further, Bangladeshi authorities have banned the use of the Bangla language as a medium of instruction permitting only English, Burmese, or the Rohingya language, known as Arakani (Shohel, 2020). Following the high influx of refugees in 2017, the United Nations International Children’s Emergency Fund (UNICEF) and partners launched an initiative, “the Learning Competency Framework and Approach”, which addressed the restrictions against using Myanmar or Bangladeshi curricula by creating an informal syllabus (Tancred, 2019). Since its inception, the Learning Competency Framework and Approach has been rolled out progressively, encapsulating elements of both the Myanmar and the Bangladeshi curricula and containing structured teaching and learning materials for primarily young Rohingya refugees with ages ranging 4–14 years old in English and Burmese, covering various subjects from Level 1 to Level 4 (Tancred, 2019). Without the subsequent levels, the informal education programme offered through this framework often raised concerns and frustration as “the learning centre would not provide the opportunity to enrol in secondary education or university” affecting youth prospects for the future (Human Rights Watch, 2019). The education sector also faced significant challenges in terms of infrastructure and resources. Although since the Rohingya exodus in 2017,

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3000 learning centres have been built, each of these can only accommodate 40 children at a time, insufficient given the number of children and young people in the refugee camps (Human Rights Watch, 2019). These facilities also suffered from understaffing. The Humanitarian Response Plan in 2018 identified that in order to teach a section of 37,000 Rohingya children aged 4–18, 6000 teachers were needed, however, four months following the appeal, only 385 teachers were recruited and trained. This deficit may in part be due to the restricted usage of the Bangla language as a medium of instruction, which resulted in increased difficulty in both accessing learning materials and given that extremely few Bangladeshi and Rohingya teachers have Burmese language competency, in recruiting instructors (Shohel, 2020). This policy appears to be based on the grounds that making long-term education and Bangla fluency widespread amongst the Rohingya, may weaken the negotiation position of the Government of Bangladesh in future talks regarding their repatriation as they may be seen as prepared to be integrated into Bangladeshi society (Ullah, 2020). Education in the refugee camps has always been a matter of concern. In 2019, “an alarming 83% of the [Rohingya] adolescents and youth aged 15–24 years old” were unable to access educational facilities to develop their skills (ISCG, 2020b, p. 70). Instructors teaching in learning centres highlighted that often caregivers withdraw children from their classes, which may be due in part to concerns regarding food security as school feeding programmes were not implemented across all the educational facilities and represent an enrolment criterion for caregivers, with children likely to be enrolled in moktabs (religious schools) because “they provide free food and sometimes clothing” (Human Rights Watch, 2019). These intrinsic obstructions and their associated impacts on Rohingya education were further compounded by both the pandemic itself as well as the strategies enacted to contain and stave off its influence.

The Impact of COVID-19 on the Rohingya Refugees At the outset of the pandemic experts including Truelove et al. (2020) and Kamal et al. (2020), carried out modelling scenarios to identify possible impacts of COVID-19 in Rohingya refugee camps which generated concerning results. For instance, Kamal et al. (2020, p. 2) with a sample of the 23 camps, estimated “over 1,500 daily deaths in a

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low transmission setting, and over 2,000 deaths in a high transmission setting”. However, from the beginning of the pandemic in March 2020 until 23 May 2021, 42,483 COVID-19 tests were carried out in the Rohingya refugee camps discovering only 1,013 positive cases, which resulted in 16 deaths (WHO Bangladesh, 2020, p. 3). The figures presented regarding the number of positive cases may, however, be inaccurate since testing capacities in the refugee camps are scarce and often refugees refrained from testing even when possessing symptoms due to numerous fears, widespread misinformation and distrust of Bangladeshi authorities (Banik et al., 2020; Barua & Karia, 2020; Homaira et al., 2020). The low number of positive cases and, therefore, deaths associated with COVID-19 is often labelled as “extraordinary” given the unhygienic and overcrowded living conditions in the camps (Kotowski, 2021). Whilst the trajectory of the virus remains unpredictable, it can be argued that the strategies adopted by the Bangladeshi authorities and humanitarian organisations minimised the spread of the virus in the camps. Whilst recorded fatalities were low, the human cost of the pandemic due to the numerous disruptions caused by the containment policies is more difficult to gauge. Due to the alarming data and modelled scenarios reflecting the transmissibility of COVID-19, the World Health Organisation in collaboration with the Government of Bangladesh created a model strategy “Infection Prevention and Control”, applied at a district level, as a strong response to the unprecedented biological threat (WHO, 2021). The overall strategy outlined by the Government of Bangladesh and its humanitarian partners focused on minimising the exposure of the refugees to the virus, through imposing movement restrictions, designing containment policies, raising awareness, and promoting deterring mechanisms, whilst striving to improve the health and sanitation facilities available to refugees. The spatial restraints of the refugee camps, combined with living conditions dependent on shared facilities, necessitated a specialised lockdown. The specialised lockdown restricted access into and movement from districts, except for emergency food and medical supplies, limiting the relief operations and humanitarian footprint in camps by 80%, with aid workers, volunteers, and teachers unable to continue their work (Kotowski, 2021). This combined with the closure of nonessential facilities, such as Temporary Learning Centres or Safe Spaces, left approximately 456,410 Rohingya refugee children and young people with extremely limited, if any access to educational facilities (UNICEF, 2021).

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Beyond the closure of educational facilities, the pandemic response also impacted the ongoing efforts towards improving the education sector. Following calls for the Government of Bangladesh to expand the access to education of the Rohingya, a new pilot project, “The Myanmar Curriculum Pilot”, was granted approval in January 2020, aiming to transition away from the Learning Competency Framework and Approach to address the long-term needs of the Rohingya preparing for future repatriation, by focusing solely on the Myanmar curriculum in their educational training (UNICEF, 2021). This pilot project targeted 10,000 Rohingya students from Levels 6 to 9 and aimed to tackle the shortages arising from an informal curriculum which lacked any documentation of learning, as was provided under the Learning Competency Framework and Approach (Shohel, 2020). However, all education initiatives were halted due to the nationwide lockdown announced in March 2020 (Guglielmi et al., 2020b). Further to the direct impacts of the pandemic, its worldwide spread created further implications for the Rohingya, one such implication is represented by the lack of financial assistance and humanitarian aid now offered to Bangladesh. The 2021 Joint Response Plan for Rohingya Humanitarian Crisis (JRP) provided a comprehensive roadmap which addressed the needs and gaps experienced by the people living in Cox’s Bazar, based on the report issued under the Joint Multi-Sector Needs Assessment (J-MSNA) in 2020 (J-MSNA) (ISCG, 2021). The 2021 JRP budgeted 943 million US Dollars (USD) to fund the 134 partners, to provide services for the approximately 1.4 million people living in Cox’s Bazar (ISCG, 2021). Compared to the 2020 JRP which budgeted for over 1 billion USD and achieved 59.4% of its funding target, by May 2021, only 33.2% (340 million USD) of the 2021 JRP funding target was raised. The efforts of the Government of Bangladesh alongside humanitarian partners were jeopardised by the reduced funding received for this year, with main donors having scaled back their contributions. For example, the UK donated 165 million USD in 2019, then 65 million USD in 2020 and is expected to drop to 39 million USD in 2021 (AsiaNews, 2021). Securing significantly less funding in 2021 than the previous year, during even more challenging circumstances due to the COVID-19 pandemic, has placed additional hardship on the Government of Bangladesh and the humanitarian community (UNHCR, 2021).

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With only approximately 3% on average of received aid being spent on education, this shortfall will likely cause further strain on an already stretched service, inhibiting any ability to recover as lockdown measures ease (UNICEF, 2019).

The Fallout of Numerous Emergencies on the Rohingya Based on the J-MSNA (2020) The subsistence of refugees has always been impacted by scarcity and permanent reliance on humanitarian aid (Bhatia et al., 2018). The pandemic exacerbated the pre-existing deficiencies experienced by the Rohingya refugees with structural factors that “continue to challenge the response, including a lack of formal education in camps, insufficient health, water, sanitation and hygiene (WASH) provisions, and weak shelter infrastructure” (ISCG, 2020a, p. 3). The J-MSNA (2020) provided an analytical evaluation of the needs of the Rohingya people based on previous Joint Multi-Sector Needs Assessments, in particular the J-MSNA held in 2019 to help identify the priority needs for the 2021 JRP (ISCG, 2021). The J-MSNA (2020) report, carried out by the Inter-Sector Coordination Group (ISCG) (2020a), was based on extensive qualitative and quantitative research, undertaken in July–August 2020, having carried out 836 household interviews and 40 key informant interviews remotely, targeting all Rohingya refugee households residing in the 34 camps in Ukhiya and Teknaf Upazilas. The sectors covered by J-MSNA (2020) included “Food Security, WASH, Shelter and Non-food items, Site Management and Site Development, Protection, including the Child Protection and Gender-Based Violence Sub-Sectors, Health, Education, Nutrition, and Communication with Communities” (ISCG, 2020a, p. 4). Main findings suggested that the pandemic and its associated containment policies increased needs towards “food security, health-seeking behaviour, education and (child) protection” (ISCG, 2020a, p. 4). The loss of access to education services as a result of the COVID19 outbreak constituted a major concern to respondents partaking in the J-MSNA (2020) surveys, with 62% reporting the limited success of remote study (ISCG, 2020a) due to a multitude of obstacles originating with an internet blockade enacted in 2019 (UNOCHA, 2020) and the ongoing lack of support, both in materials, guidance, and lack of electricity and devices (ISCG, 2020a, p. 6). The ISCG (2020a, p. 6)

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also reported that the closure of education facilities is likely to increase the gap between genders regarding education enrolment, claiming that “the longer children, especially girls are out of school, the less likely they are to return”. Additionally, the disrupted daily routines and access to Temporary Learning Centres led to an increase in child protection issues, resulting in a 16% increase in child labour and missing children (ISCG, 2020a, p. 35). To counteract the effects of closing education facilities, UNICEF Bangladesh distributed learning resources to caregivers, to benefit children and young people however, due to low literacy levels, the parents and caregivers could not engage with the learning materials (Reidy, 2021). The effects of halting education combined with the uncertainties created by the global pandemic have led to rising levels of insecurity and psychological trauma. Rohingya refugees highlighted the limited control they have over their lives and prospects for the future (Human Rights Watch, 2019).

Conclusion The closure of education facilities has had numerous negative effects on Rohingya children and young people. The effects of halting education due to the COVID-19 pandemic are likely to offset any progress made since 2017, losing the momentum achieved by the changes within the education sector through the adoption of the Learning Competency Framework and Approach and later through the Myanmar Curriculum Pilot. With additional financial hardship, due to limited funds as indicated by the 2021 JRP in relation to previous years, the focus of the Government of Bangladesh and the humanitarian partners serving the Rohingya are likely to be redirected towards more pressing matters faced by the refugees, although restoring the access to education of the Rohingya children and young people should remain a priority for stakeholders and policymakers. Although the most commonly reported impact of COVID-19 on a global scale revolves around infection and mortality rates, currently low within the Rohingya population, the ancillary effects of the pandemic on the Rohingya, already an unprecedentedly persecuted and vulnerable people, are likely to be long-reaching and disproportionate. Only through uninterrupted education will the Rohingya people have the chance to overcome their traumatic experiences, escape their current conditions and strive for a brighter future for themselves and generations to come.

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Human Rights Council [HRC]. (2017). OHCHR | Human Rights Council opens special session on the situation of human rights of the Rohingya and other minorities in Rakhine State in Myanmar. https://www.ohchr.org/en/ press-releases/2017/12/human-rights-council-opens-special-session-situat ion-human-rights-rohingya?LangID=E&NewsID=22491. Accessed 5 October 2021. Human Rights Watch. (2019). Are we not human? Human Rights Watch. https://www.hrw.org/report/2019/12/03/are-we-not-human/den ial-education-rohingya-refugee-children-bangladesh. Accessed 17 July 2021. Ibrahim, A. (2018). The Rohingyas: Inside Myanmar’s genocide (Rev. and updated ed.). Hurst & Company. Inter-Agency Network for Education in Emergencies [INEE]. (2018). INEE Strategic Framework 2018–2023. [online] New York. https://inee.org/ system/files/resources/INEE_Strategic_Framework_2018-2023_ENG.pdf. Accessed 8 October 2021. https://inee.org/resources/inee-strategic-framew ork-2018-2023. Accessed 5 May 2023. Inter-Sector Coordination Group [ISCG]. (2020a). Joint multi-sector needs assessment. [online] Cox’s Bazar, Bangladesh. https://www.humanitarian response.info/sites/www.humanitarianresponse.info/files/documents/files/ 2021_05_iscg_2020_msna_report_refugee_english.pdf. Accessed 8 September 2021. Inter-Sector Coordination Group [ISCG]. (2020b, January–December). Joint response plan Rohingya humanitarian crisis. [online] https://reliefweb.int/ sites/reliefweb.int/files/resources/jrp_2020_final_in-design_280220.2mb_0. pdf. Accessed 8 September 2021. Inter-Sector Coordination Group [ISCG]. (2021, January–December). Joint response plan Rohingya humanitarian crisis. [online] https://reporting.unhcr. org/sites/default/files/2021%20JRP.pdf. Accessed 7 June 2021. https://rel iefweb.int/report/bangladesh/2021-joint-response-plan-rohingya-humanitar ian-crisis-january-december-2021. Accessed 4 May 2023. Kamal, A., Huda, D., Dell, D., Hossain, D., & Ahmed, S. (2020). Translational strategies to control and prevent spread of COVID-19 in the Rohiynga refugee camps in Bangladesh. Global Biosecurity, 1(4). Kipgen, N. (2019). The Rohingya crisis: The centrality of identity and citizenship. Journal of Muslim Minority Affairs, 39(1), 61–74. https://doi.org/10. 1080/13602004.2019.1575019 Kotowski, A. (2021). Four things to know about Covid in the world’s largest refugee camp. Oxfam International. https://www.oxfam.org/en/blogs/ four-things-know-about-covid-worlds-largest-refugee-camp. Accessed 16 July 2021. Lee, R. (2021). Myanmar’s Rohingya genocide: Identity, history and hate speech. I.B. Tauris.

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O’Neill, A. (2021). Topic: Bangladesh. [online] Statista. https://www.statista. com/topics/2507/bangladesh/. Accessed 24 August 2021. Oxfam International. (2020). Up to 250 people per single water tap in refugee camps braced for arrival of coronavirus. Oxfam International. https://www. oxfam.org/en/press-releases/250-people-single-water-tap-refugee-camps-bra ced-arrival-coronavirus. Accessed 15 July 2021. Prodip, M. A. (2017). Health and educational status of Rohingya refugee children in Bangladesh. Journal of Population and Social Studies [JPSS], 25(2), 135–146. https://so03.tci-thaijo.org/index.php/jpss/article/view/102280. Accessed 25 September 2021. Reidy, K. (2021). In search for education for Rohingya children. [online] https://www.unicef.org/bangladesh/en/stories/search-educat UNICEF. ion-rohingya-children. Accessed 15 August 2021. Save the Children. (2008). Child friendly spaces in emergencies: A handbook for save the children staff . https://www.savethechildren.org/content/dam/glo bal/reports/education-and-child-protection/cfs-handbook-08.pdf. Accessed 5 October 2021. Sharma, I. (2021). Indefinite hosting of Rohingya refugees a growing concern for Bangladesh. [online] Thediplomat.com. https://thediplomat.com/2021/ 07/indefinite-hosting-of-rohingya-refugees-a-growing-concern-for-bangla desh/. Accessed 11 August 2021. Shohel, C. (2020). Education in emergencies: Challenges of providing education for Rohingya children living in refugee camps in Bangladesh. Education Inquiry, 1–23. https://doi.org/10.1080/20004508.2020.1823121 Talbot, C. (2013). Education in conflict emergencies in light of the post-2015 MDGs and EFA agendas. Network For International Policies and Cooperation in Education And Training. [online] NORRAG. https://www.norrag. org/fileadmin/Working_Papers/Education_in_conflict_emergencies_Talbot. pdf. Accessed 7 September 2021. https://www.edu-links.org/sites/default/ files/media/file/Education_in_conflict_emergencies_Talbot.pdf. Accessed 3 May 2023. Tancred. L. A. (2019). UNICEF Substantial progress in providing education to hundreds of thousands of Rohingya refugees. https://www.unicef.org/rosa/sto ries/unicef-substantial-progress-providing-education-hundreds-thousands-roh ingya-refugees. Accessed 7 October 2021. Truelove, S., Abrahim, O., Altare, C., Azman, A., & Spiegel, P. (2020). COVID19: Projecting the impact in Rohingya refugee camps and beyond. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3561565 Ullah, A. (2020). Rohingya refugees children and their rights to education. [online] The Rohingya Post. https://www.rohingyapost.com/roh ingya-refugees-children-and-their-rights-to-education/. Accessed 24 August

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2021. https://www.rohingyapost.com/rohingya-refugees-children-and-theirrights-to-education/. Accessed 3 May 2023. United Nations General Assembly [UNGA]. (1948). Universal Declaration of Human Rights, 217 A (III). https://www.refworld.org/docid/3ae6b3712c. html. Accessed 8 October 2021. United Nations General Assembly [UNGA]. (1951). Convention relating to the status of refugees. United Nations, Treaty Series, 189, 137. https://www.ref world.org/docid/3be01b964.html. Accessed 8 October 2021. United Nations General Assembly [UNGA]. (1989). Convention on the rights of the child. United Nations, Treaty Series, 1577 , 3. https://www.refworld. org/docid/3ae6b38f0.html. Accessed 8 October 2021. United Nations High Commissioner for Refugees [UNHCR]. (2004). Innovative strategic partnership in refugee education. Education Forum Initiative. [online] Education Unit UNHCR Geneva. https://www.unhcr.org/protect/ PROTECTION/408e06224.pdf. Accessed 8 October 2021. https://www. unhcr.org/libraries/pdf.js/web/viewer.html?file=%3A%2F%2Fwww.unhcr. org%2Fsites%2Fdefault%2Ffiles%2Flegacy-pdf%2F408e06224.pdf. Accessed 3 May 2023. United Nations High Commissioner for Refugees [UNHCR]. (2021). UNHCR, aid partners call for renewed and strong support for the Rohingya refugees. UNHCR. https://www.unhcr.org/news/briefing/2021/5/609 e24f34/unhcr-aid-partners-call-renewed-strong-support-rohingya-refugees. html. Accessed 17 July 2021. https://wam.ae/en/details/1395302934732. Accessed 3 May 2023. United Nations International Children’s Emergency Fund [UNICEF]. (2019). UNICEF Education in emergencies (2019). https://www.unicef.org/educat ion/emergencies. Accessed 8 October 2021. United Nations International Children’s Emergency Fund [UNICEF]. (2021). UNICEF Education—Education case study. [online] https://www.unicef. org/media/102011/file/Bangladesh%20case%20study%20-%20refugee%20e ducation.pdf. Accessed 7 October 2021. United Nations Office for the Coordination of Humanitarian Affairs [UNOCHA]. (2019). OCHA Rohingya refugee crisis. OCHA. https://www. unocha.org/rohingya-refugee-crisis. Accessed 6 August 2021. United Nations Office for the Coordination of Humanitarian Affairs [UNOCHA]. (2020). COVID-19: Access to full mobile data and telecommunications in Myanmar and Bangladesh is essential to save lives, say 26 major aid groups—Bangladesh. ReliefWeb. https://reliefweb.int/report/ban gladesh/covid-19-access-full-mobile-data-and-telecommunications-myanmarand-bangladesh. Accessed 16 July 2021.

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World Health Organisation [WHO]. (2021). Building Bangladesh capacity on infection prevention and control. https://www.who.int/bangladesh/news/ detail/23-03-2021-building-bangladesh-capacity-on-infection-preventionand-control. Accessed 8 September 2021. World Health Organisation Bangladesh [WHO Bangladesh]. (2020). WHO Bangladesh: Coronavirus Disease 2019 (COVID-19) Update (17–23 May 2021). [online] Bangladesh. https://reliefweb.int/report/bangladesh/whobangladesh-coronavirus-disease-2019-covid-19-update-17-23-may-2021. Accessed 8 October 2021.

CHAPTER 4

COVID-19 in an African Context: What the Pandemic Has Taught Us About the Development Economics Curriculum and the Need for Reform Kevin Deane, Julia Chukwuma, and Lorena Lombardozzi

Introduction Crises often create a space for a critical reflection on mainstream economic theory and the discussion of alternative schools of thought. Following several decades of neoclassical dominance, the recent financial crisis of 2007/08 illustrated the need to look beyond the narrow confines of

K. Deane (B) · J. Chukwuma · L. Lombardozzi Economics Discipline, Open University, Milton Keynes, UK e-mail: [email protected] J. Chukwuma e-mail: [email protected] L. Lombardozzi e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_4

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neoclassical economics, given that neoclassical economists had little to say about the causes of the crisis (and indeed had been blamed for the crisis in some quarters [Skidelsky, 2010]) or what to do about it. Instead, the work of Keynes and Marx was revisited for alternative analyses and policy prescriptions, giving much needed exposure to economic perspectives that had become marginalised in the discipline. The COVID-19 pandemic also presents such an opportunity, given that public health responses implemented across the globe have been intimately intertwined with economic considerations with respect to the impact of lockdowns and other control measures that hinder economic activity, and the implications that domestic policies have had for the global economy. This is especially the case in the African context, with concerns raised about the economic impact of COVID-19 control measures and the potential impact of the general global economic slowdown on African economies. The economics of the response to this public health crisis (though there is a strong argument that COVID-19 is not an external shock but an inevitable and predicted outcome of expanded and increasingly intensive economic activity [Caminade et al., 2019]), therefore, enables some critical reflections on mainstream development economics curricula. In particular, the response highlights the importance of the reintroduction of a number of currently unfashionable topics and perspectives that have been displaced by the neoliberal turn in development economics that has seen this previously rich sub-discipline of economics reduced to the application of standard neoclassical theory and methods to development issues (Herrera, 2006), and more recently the behavioural turn promoted by the World Bank and exemplified by the work of Banerjee and Duflo (Banerjee & Duflo, 2011). Further, a recent report by the World Bank that compared the developments economic curricula in top US academic institutions with academic institutions in the Global South attempted to further embed these approaches and to redefine the scope and contemporary terrain of development economics (McKenzie & Paffhausen, 2015). While behavioural science and behavioural economics have played a role in the design of some aspects of the public health response, there are limits to what these perspectives can contribute with respect to the economic challenges that many countries in the Global South have faced. This chapter, then, discusses how lessons from the pandemic can inform the reform and renewal of development economics teaching. We cover six main economic topics; the role of the state, industrial policy, dependency, development financing, social policy and social care. These are addressed in turn across the chapter before some concluding remarks.

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The Role of the State One key theme highlighted by the COVID-19 pandemic was the central role of the state both in terms of managing the public health response and mitigating the inevitable, predictable and unintended economic consequences of lockdowns and other related control measures. While there was no uniform response to COVID-19, the control measures implemented by states across the sub-Saharan context included home confinement for specific periods, curfews, bans on outside gatherings, various restrictions on international and internal mobility, border closures, school closures, closures of bars and restaurants and non-essential shops and restrictions on the use of public transport (Haider et al., 2020). Given initial uncertainty surrounding COVID-19 as well as underfunded public healthcare systems, limited ICU capacity and access to oxygen, these measures were seen as an important initial response to COVID19. However, the potential economic implications of these measures are self-evident, and so they were accompanied by economic interventions that ranged from targeted relief programmes for poorer households, food distribution, provision of free electricity and water to increases in social protection programmes (Haider et al., 2020). The state was also tasked with navigating an increasingly challenging domestic and global economic context including the economic slowdown in the Global North and China, utilising approaches that included tax relief, stimulus packages to support employment and/or increased government spending and central bank interventions to support local commercial banks (Haider et al., 2020; Khambule, 2021). The state, therefore, was required to make complex public health decisions that involve the consideration of both economic consequences of lockdown as well as the transmission dynamics in their context, and the provision of economic programmes and policies that seek to mitigate the impact of measures taken to manage the pandemic and address the impact of the broader economic environment. This expanded and interventionist role for the state in the pandemic is at odds with the way that the state has been theorised in mainstream development economics. Since the neoliberal ‘rebirth’ of development economics in the 1980s (Herrera, 2006), the state is now primarily tasked with providing the conditions for markets to function efficiently or to correct a set of narrowly defined market failures through a limited range of policy instruments that are grounded in market mechanisms. Further, the more recent behavioural turn in development economics has

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emphasised a move away from engaging with structural aspects of the economy to a limited focus on ‘small’ problems and little to no discussion about what the state can (or should) do. While behavioural science has undoubtedly provided important insights into the design and implementation of public health measures, mainstream theoretical perspectives that either focus on the promotion of markets or the behavioural aspects of economic life are poorly placed to provide theoretical insights to inform State responses or to explain what the state has actually done in practice. Indeed, alternative perspectives provide a more convincing guide for state action in the context of a global pandemic. Writing about the Great Depression in the 1930s, Keynes argued for state intervention, including expanded government spending to prop up aggregate demand and to maintain confidence within the economy as key to the recovery from the economic crisis. Market forces alone would not be able to ‘correct’ for economic shocks, with the economy trapped in a downward spiral as weakened business confidence, employment losses and the resulting reduction of aggregate demand (further undermining business confidence) reinforce each other. The expanded role for the state in times of crisis raises questions about the extent to which the state should intervene more frequently in the economy to address specific social issues. With further global public health crises predicted, slow and stagnating progress in relation to poverty reduction, increasing wealth and income inequality and an environmental crisis that is disproportionately affecting people in countries of the Global South, renewed debates about the relative roles of the market and the state are necessary. However, while there is a rich existing literature from which to draw, ranging from the ‘old’ development economics that engaged with questions of structural transformation, to the literature on the developmental state that emphasised the central role for the state in ‘governing the market’ (Mkandawire, 2001; Wade, 2018), these discussions have been largely purged from development economics. The economic aspects of the COVID-19 pandemic and state responses have highlighted that these debates need to be (re)incorporated into the development economics curriculum.

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Industrial Policy One core task for a more interventionist developmental state is the formulation of industrial policy; an issues that has proven contentious and subject to great debate (Lin & Chang, 2009). The importance of revisiting this debate around industrial policy was also highlighted by the pandemic. Countries with limited industrial capacity were not able to organise the provision of necessary products locally and had to rely on international markets which were unable to cope with the shock and the emergency demand created by COVID-19. One key example was the issue of vaccine distribution. Oversupply in the Global North, with states of the Global North placing multiple orders with different vaccine suppliers, and undersupply in the Global South due to asymmetric decision-making power in the distribution mechanisms caused problematic delays in the immunisation campaigns in most African countries and other parts of the Global South (Hassan et al., 2021). In the early stages of the pandemic, a limited supply of vaccines was provided through the COVAX facility, though this was dependent on the availability of excess vaccines. The lack of industrial/manufacturing capacity greatly hindered the response to COVID-19, not only in terms of vaccine supply but also the provision of other necessary medical technology and supplies such as oxygen and expanded ICU capacity. In addition to this, states in Europe and other countries in the Global North intervened through the provision of large subsidies for some vaccine developers and the implementation of import-substitution and tariffs to support the local production of scarce goods such as sanitary equipment. This highlights that among other things; the pandemic has been a crisis of production and distribution. Industrial policy aims at improving the growth strategy of a country via enhanced productivity and employment. However, over the past decades, industrial policy has been understood by mainstream economic theories as a marginal function of the state. In particular, the mainstream perspective saw the operation of the state in the system of production as a set of distortions. Instead, mainstream economists recommended that under the logic of free market mechanisms, comparative advantage would pave the way for development. As long as prices are right, markets will create the incentive for producers’ supply and consumers’ demand to clear the disequilibrium of the market. Indeed, ‘neoclassical economics free trade would produce a tendency towards factor-price equalization; the prices of labor and capital

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would tend to equalise across the planet. This became the noble lie of neoclassical economics and neoliberalism and appeared to make industrial policy superfluous’ (Reinert, 2020). This understanding holds two other theoretical implications particularly relevant for the way industrial policy has been researched and taught: first, that the context specificity of the country, namely its resources, employment needs, infrastructure deficit and colonial history were largely ignored. Methodologically, as Perry in a Development Economics blog noted, the neoclassical approach gave space to prioritise ‘econometric-centred reasoning that seeks to find cross-country regularities’ (Perry, 2020). The second implication is that free trade has shaped the conditions of production, and hence, development outcomes of many countries. For example, countries which were abundant in natural resources, land and rural labour, instead of protecting infant industries with targeted protections and investment in manufacturing, have tended to specialise in cash-crops and other commodities export based on extractive modes of production with little added value and causing environmental damage. At the micro-level, neoclassical theory has also struggled to appreciate the capacity of the state as a collective institution with complex and long-term interests for potential sustainable and inclusive growth. Instead, the individual agencies involved, preferences and utility of rational individuals have gained predominant importance. In other words, the state is seen as a sum of the individuals and not recognised as a collective institution with its own public mandate linked to social and economic goals. However, the role of the state is crucial to enhance production capacity through industrial policies to address objectives linked to public health, employment and social policy. In order to do that, a wide organisation and long-term planning of the national industrial complex is necessary in contrast to the short-term logic of profit-led growth. Indeed, the pandemic has made clear the unequal distributional effects of output exchanged in the market which is nevertheless necessary for the reproduction needs of all, especially the most vulnerable. In order to move away from underdeveloped industrial capacity and climb the ladder of technological innovation, the role of the state is fundamental. One action is through Research and Development (R&D). Financing research and higher education institutions would create the condition for local industries to benefit from local know-how and technology and avoid relying on the international market to acquire resources, therefore limiting the risk of international debt. At the same time, the hegemony of neoclassical

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economics in many universities across the world makes it hard for progressive ideas on industrial and trade policy to come through. A second intervention would be to subsidise the local production of strategic sectors of the economy. That, as stated above, would depend on the context specificity of the countries such as resources, geography and population. In parallel, protecting those sectors from international competition through direct and indirect trade barriers has proven successful to sustain infant industries in the Global North over the centuries, and it cannot be denied now to developing countries to overcome years of economic colonialism and dependency. These policy recommendations are based on principles put forward by the classical and structural theories of development, which treat sectors as not-homogenous, technological innovation and class relations as endogenous to the growth process. The Prebisch-Singer hypothesis, for example, by conceptualising the deterioration of the terms-of-trade for primary products relative to manufactured goods is proven to be still relevant to untangle the development challenges of many low- and middle-income countries today. In conclusion, industrial policy should challenge given comparative advantage and understand economic outcomes as social processes linked to race, history and class. Focussing again on the organisation of production and the role of demand will unveil the structural causes of uneven development and inequality both locally and globally.

Dependency A third and related theme brought into focus by the COVID-19 pandemic that is rarely covered in standard development economics courses relates to the consequences of global economic inequalities and dependency that have been introduced above. One key aspect of this was illustrated through the example of inequalities in access to/distribution of vaccines and initial dependence on donations through the COVAX scheme. As has been noted, this cannot simply be explained by utilitarian models of demand and supply and maximisation, given that these inequalities in vaccine coverage provided fertile ground for the emergence of new variants that could potentially be less susceptible to the vaccines. This was, as is now known, precisely what happened, highlighting how a collective interest in equitable global vaccine access was undermined by narrow (and short-sighted) state and corporate interests. While standard models of international trade and economic integration emphasise

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the mutual benefits of doing so, the reality is that in times of crises these benefits are soon forgotten, leaving countries of the Global South dependent on donation schemes for initial vaccine access. This dependency was compounded by the refusal of the Global North to respond to requests to waive intellectual property rights over the vaccines to enable them to be produced in countries such as India and South Africa which had the capacity to produce and distribute vaccines and potentially ease global supply problems in their regions. Additionally, many African economies required external budget support for economic and social support programmes that were implemented to address the consequences of lockdown and other control measures, and more generalised economic challenges associated with the global economic context. Further, as with the global financial crisis of 2007/08, global integration has left many sectors dependent on continued demand from economies of the Global North, often with trading relationships shaped along colonial lines, leaving economies susceptible to economic shocks and slowdowns in the Global North. For example, the global tourism sector came to a virtual standstill during the pandemic, with tourist arrivals to developing economies reduced by between 60%-80% in 2020 alone (UNCTAD, 2021). This sector is vital for many developing economies, often contributing upwards of 30% of exports of goods and services (UNWTO, 2020) and is thus a key source of foreign earnings, local direct and indirect employment, as well as an increasingly important sector in terms of overall contribution to GDP and economic growth. However, in many settings, this sector is entirely dependent on foreign visitors. In their absence, local consumers were unwilling to take up the slack in a sector from which they had traditionally been barred. The result was that activity in this sector collapsed with significant economic implications. Although the pandemic has shed lights on these multiple forms of dependency, this topic is missing from the mainstream development economics curricula. The recent World Bank report discussed above notes that ‘Comparing developing country to top-20 undergraduate courses, we see developing country courses are significantly less likely to cover institutions, human capital, credit markets, land markets, risk and insurance, impact evaluation, and data analysis; and significantly more likely to cover models of economic growth, dependency theory, the role of the state, the environment, and macroeconomic management’ (McKenzie & Paffhausen, 2015). Dependency theory, then, as a theory

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which engages with global power relations and exploitation is rather ironically not taught in the top institutions of the country that wields the most global economic power and instead is regarded as a relic of economics departments that have the ‘wrong’ focus. However, theories of dependency (there is not one unified dependency theory, see [Chilcote, 1974] for a review) enable the interrogation of how unequal power relationships between and also within countries influence processes of development and change and outcomes related to these processes. These power relationships have a history and reflect the development of capitalist relations as they have spread across the globe. While a full review of dependency theory is beyond scope here, it remains an important lens through which to understand the global economic system and different ways in which developing countries could respond, such as expanding their own industrial capacity (as noted above), reducing reliance on aid and Foreign Direct Investment (FDI), more focus on self-sufficiency, increased mutually beneficial trade between developing economies and engaging with the global market on their own terms. These suggestions, of course, are not in line with mainstream economic theory but may offer a more viable alternative to the current mode of integration.

Development Finance Another contentious subject, which was brought to the fore by the COVID-19 pandemic, is the issue of development finance, with emerging and developing countries faced with a financing gap of an estimated US$ 2.5 trillion as a result of the pandemic (Stubbs et al., 2021). In direct response to the crisis, Development Finance Institutions (DFI) pledged to support countries of the Global South in their efforts to fill the gap. Notably, the International Finance Cooperation (IFC), the world’s largest multilateral DFI announced as early as March 2020 to financially support private companies and financial institutions in developing countries with a pay-out of US$ 8 billion (IFC, 2020). These extraordinary additional financial needs of countries in the Global South as a consequence of the economic and social crises prompted by the pandemic and the immediate response to it distinctly highlight the on-going shift towards mobilising development finance in order to promote private over public interests. Under the banner of ‘building back better’, focus was put on supporting the private sector and to improve the business environment at the expense

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of channelling resources towards public systems (Van de Poel, 2020; Dimakou et al., 2021). The trend towards private finance for development is firmly anchored in the 2015 United Nations Addis Ababa Agenda for Action (AAAA), which explicitly promotes the use of scarce public resources and official development assistance to de-risk and leverage private finance for investments in infrastructure projects and social sectors (Bayliss et al., 2021). The role of the World Bank Group, in particular, in endorsing more private sector involvement and in encouraging a limited role for the state, downgraded to a regulatory body and financier of last resort, is substantial and at the heart of their ‘Maximizing Finance for Development’ agenda.1 Most prominently, public–private-partnerships (PPPs) are nowadays upheld as the way-forward to mobilise development finance, despite limited evidence of their advantageousness (Romero, 2015). As highlighted by Bayliss and Van Waeyenberge (2018), the contemporary push for PPPs is less concerned with alleged efficiency gains through privatisation (as was the case during earlier waves of privatisation), but more concerned with creating investment opportunities for global financial investors. What is more, in many of the countries of the Global South, the extent of external and domestic borrowing as a means to complement domestic public finance raised via tax systems is significant. While domestic public resources remain an important source of development finance, the levels of public revenues mobilised are often not high enough for reasons including international tax competition, multinational tax evasion, difficulty to tax the informal sector, illicit financial flows and a limited scope for countries of the Global South to raise trade taxes due to adverse terms-of-trade (Griffiths, 2018). As a consequence, many countries in the Global South already faced unsustainable debt burdens prior to the on-set of the COVID-19 pandemic, largely attributable to them having been pressured to integrate into under-regulated international financial markets, which exposed them to the volatility of private capital flows and financial speculation (UNCTAD, 2020). Resultingly, debt servicing represents a major share in many Global South countries’ public budgets, constituting, oftentimes, a multiple of public resources available for, 1 See here: https://documents1.worldbank.org/curated/en/168331522826993264/ pdf/124888-REVISED-BRI-PUBLIC-Maximizing-Finance.pdf [Accessed: 31 January 2022].

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e.g., health, including during the COVID-19 pandemic (Jubilee Debt Campaign, 2020, Oxfam et al., 2020). While some concessions were made in light of the pandemic (such as the G20’s Debt Service Suspension Initiative), notably the international financial institutions (IFIs) advocate for fiscal consolidation and the adoption of austerity measures as the ‘best answer’ to high debt levels and economic crises in countries of the Global South. Mirroring the policies that they had promoted throughout the ‘decade of austerity’, which followed the 2008 Global Financial Crisis and disproportionally affected vulnerable households, the IFIs, also now, are urging governments to adopt excessive public budget cuts until at least 2025 (Ortiz & Cummins, 2021). In the 2010s, austerity policies were promoted on basis of economic theory, suggesting that high levels of debt stifle economic growth (Reinhart & Rogoff, 2010). And, while the results of Carmen Reinhart (now Chief Economist at the World Bank) and Kenneth Rogoff have been found to be erroneous (Herndon et al., 2014), development economics teaching continues to spotlight New Consensus Macroeconomics, which accords more importance to monetary over fiscal policy (Fine & Dimakou, 2016). It heavily draws on key ideas of New Classical macroeconomic theory, which propagates that public spending (which may require governments to run budget deficits in times of crisis) is inherently inflationary and, thus, not recommended (Harvey, 2007). It is within this context that the development finance discourse has shifted towards the idea of ‘financing more projects with less public money’ (Romero, 2016, p. 59). It is, therefore, elementary that today’s development economics teaching attentively scrutinises economic ideas promoting financial liberalisation in the name of growth, used to justify the private turn in development finance. Development economics curricula need to integrate alternative perspectives, which diligently reflect on the impact of austerity measures, financialisation and private development finance on people living in countries of the Global South, who are yet to see their developmental needs met.

Social Policy Another realm of development economics emblematic of the dominance of neoclassical economic theory and its attachment to microeconomic foundations is social policy. The COVID-19 pandemic has made apparent the dominance of a narrow understanding of social policy, which

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takes responsibility away from the state to publicly provide a range of social services, pushing responsibility onto the individual to make ‘wise’ consumption choices (and, oftentimes, to pay from them privately at point of use). With the on-set of the pandemic, many governments expanded or introduced social policy initiatives in order to mitigate the social and economic repercussions of measures put into place to contain the spread of the virus. Many of these were reflective of the conceptualisation of social policy as a residual safety net with most measures having concentrated on boosting households’ disposable income. In the UK, for example, housing benefits and universal credit rates were increased and programmes such as the Self-employment Income Support Scheme and the Job Retention Scheme were introduced to provide financial support to employees no longer able to work because of the pandemic (Hick & Murphy, 2021). Similarly, in the United States, the Federal administration sent checks—so-called economic impact payments—to all American adults on an annual income of less than US$ 75,000.2 And, in Spain, the government started channelling monthly cash transfers to the country’s poorest 850,000 households (Arnold, 2020). Although dubbed a Universal Basic Income (UBI) scheme (Ingreso Minimo Vital ), the scheme, in reality, is a means-tested programme targeted at poor and vulnerable households.3 Similarly, in countries and regions on other continents, cash transfers to households and individuals were increased and/or introduced amidst the COVID-19 pandemic. Many African governments opted to support their poorest and most vulnerable citizens with cash transfers to compensate them for the loss of income incurred due to movement restrictions (Devereux, 2021). In the same vein, governments in Latin America, Asia and the Middle East introduced or expanded existing programmes providing cash assistance to their citizens (Blofield et al., 2021, Gentilini et al., 2020). While ‘more money’ may look like a good policy on first sight, the reignited global attention on UBI as a result of the COVID19 pandemic as well as the scaling-up of cash transfer schemes in the Global South need to be treated with caution. Today, the take seems 2 See: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-fam ilies-and-workers/economic-impact-payments [Accessed: 13 January 2022]. 3 See: https://www.seg-social.es/wps/portal/wss/internet/Trabajadores/Prestaciones PensionesTrabajadores/65850d68-8d06-4645-bde7-05374ee42ac7 [Accessed: 13 January 2022].

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to be that social policy should be primarily concerned with alleviating income poverty through the provision of extra cash to consumers, who will then satisfy their needs via the private market. At the same time, though, collective provisioning systems receive limited public funding and support, resulting in an intensification of inequalities in access and the side-lining other dimensions of social well-being (Coote, 2021; Ghosh, 2011). The disproportionate attention given to cash transfers as preferred social policy instrument in countries of the Global South predates the COVID-19 pandemic. Since the early 2000s, social protection (rather than social policy) has featured as ‘buzzword’ in the international development discourse and has actively been promoted as the way-forward to tackle poverty (Hickey & Seekings, 2017). Income-targeted assistance programmes have been at the heart of social protection, often having been handled as ‘the primary – and sometimes the only – social protection instrument addressing poverty and vulnerability’ (Barrientos, 2011, p. 243). What is more, frequently, eligibility for a regular cash transfer is tied to the fulfilment of specified conditionalities with the aim of increasing recipients’ so-called human capital—their skills, knowledge and ability to be productive (Schultz, 1961). Such a view that economic growth and development is a gradual and continuous process, ‘only’ requiring individuals to pay more attention to improving their skills and ability to be productive, is rooted in neoclassical growth theory, habitually a centre piece of mainstream development economics curricula (see, e.g., Mankiw et al., 1992). This theory, however, ignores legacies of decades of enslavement and colonialism as well as contemporary global power relations and dependencies that continue to determine development trajectories of countries and regions in the Global South. At the same time, the notion that a cash transfer should be tied to specified conditions in order to nudge people into behaving ‘the right way’ is yet another demonstration of the ‘behavioural turn’ in development economics as described earlier. While behavioural economists discredit the assumption of the forever-rational consumer, they, too, ignore systemic power structures impacting peoples’ agency to enact their choices. Despite such major shortcomings, there is, oftentimes, an omission to put a more critical engagement with such economic viewpoints at the forefront of teaching development economics. Instead, focus is put on conveying ideas of welfare economics, which relies on the premise that individuals seek to maximise their utility through their consumption

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choices, suggesting that the competitive market, allegedly distributing goods and services to those individuals who value them the most, rather than the state, is best placed to assure the most efficient outcome (Pigou, 1951). Prominently, however, while an outcome may appear to be paretooptimal in an efficiency sense, such an outcome may be unfair and inequitable (Hill & Myatt, 2010, p. 13). In view of this, there is dire need for development economics teaching to reflect theories and conceptualisations of social policy, paying attention to its multiple tasks ranging from protecting members of society from hardship to promoting the transformation of societies into a more equitable direction (Adésínà, 2009). The pandemic could serve as an important opportunity for us to assure that a reconceptualisation of the role and functions of social policy, instrumental in generating welfare and equity within the planet’s ecological boundaries, finds its way into development economics curricula.

Care A final key issue highlighted by the pandemic is the importance of the role of care and unpaid work in contemporary capitalism. The COVID19 pandemic has exposed the fragility of the capitalist market system through the loss of paid jobs and massive reduction in global output. In 2022, the UN has estimated that over 200 million are unemployed.4 In this gloomy context, women have been affected to a greater extent than men. Women have not only been more likely to lose their job, but they have also been essential in life-making activities, namely the provision of care within the household and in the community (Ferguson et al., 2021). Lockdowns have exacerbated the double-burden of women who had to juggle between conflated paid work and unpaid reproductive work. The pandemic has been even harder for those working in essential services, affected by the long hours away from home, unsafe working conditions and poor wages (Mezzadri, 2020). Before discussing the reason why, it is important to understand the theoretical premises under which such dimensions have been completely neglected or widely misrepresented in development economics theories and policy-making. Neoclassical economics uses its core principles and assumptions to address gender inequality at both micro and macro level.

4 https://news.un.org/en/story/2021/06/1093182.

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At the micro level, Becker’s New Household Economic (NHE), first in 1965 with A Theory of the Allocation of Time, and then in 1981 with A Treatise on the Family, has been a paradigmatic step in mainstream gender economics (Becker, 1965, 1981). Becker treats the household as an economic unit of both production and consumption holding the assumptions of equal power in the decision-making of the resource allocation, utility maximisation, rational choice and common preferences that will converge to reach the optimal social outcome. The collective household interest is therefore the result of a conflict-free relations between the household members and violence, women’s interest and context and time specificity are largely neglected. Furthermore, regarding the issue of work, Becker’s theory on the division of labour served perfectly well the domination of patriarchal norms. In this perspective, given the different market position of men and women, men have a comparative advantage to work outside the house for a wage while women work within the domestic sphere to reach an efficient welfare maximisation. However, if we challenge this theory with feminist Marxists thoughts on paid and unpaid work, it is easy to note that wage work gives to men undiscussed material, political and cultural privilege and undermines domestic reproductive work such as cooking, cleaning, care, which are essential tasks to guarantee social reproduction of society. The macro policy implications of these theories are that the market is the only channel through which to address any forms of gender inequality and discrimination: from the gender wage gap to women empowerment. The case for gender equality is justified by an efficiency argument where women participation is not perceived as a right to be defended per se, but because instrumental to economic growth. In practice, the World Bank mission of Smart Economics underlines the link between the economy and gender inequality. Such agenda is inserted in the framework of Women in Development also started in the early 1970s and then further pushed through the MDG3, in which gender equality in terms of women’s integration in the labour market, or as owner of assets or entitled to credit is explicitly coupled to investment and growth. Yet, the structural causes of gender inequality relate on how production is organised and classified, which are not included as a variable of those theories or policy solutions. Furthermore, again this desirable objective of women inclusivity tends to rely on methodological individualism in which the women’s position is analysed in a vacuum and not in relation to men,

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patriarchy, racism and other forms of institutionalised social discrimination. On the contrary, if we analyse gender relations from a perspective that acknowledge the importance of reproductive work to sustain and maintain the economy, it is easy to note how inequality comes to play. The COVID-19 pandemic, being among other things a crisis of care, has made even more visible the necessity to redefine the taxonomy of work, essential work and essential labour and how those are redistributed in society and retributed in economic and social values (Stevano et al., 2021). In this crisis, it has is also been made clear that the marketisation of care services and healthcare system has made social reproduction unaffordable for the poor. In the absence of free and universal public services and a properly funded welfare system, the burden of these activities is likely to fall on women to compensate for the lack of childcare, elderly care, etc. These concrete social services, if funded by the state, would not only reduce gender inequality in the formal sector but would have a progressive mission. Public and affordable care services would also directly benefit the poorest strata of society the most. Another implications are that this would create environmentally friendly and socially necessary jobs (De Henau & Himmelweit, 2021). That is why a holistic economics curriculum would focus on entangling the social and political meaning of work, in all its multidimensionality. At the same time, it would emphasise the limits of the commodification of basic services and analyse alternative solutions to guarantee a social contract based on economic justice in both high- and low- income countries.

Conclusion This chapter has discussed a range of economic issues that have come to the fore during the COVID-19 pandemic. While these are of course not the only issues highlighted by the pandemic, they emphasise issues that have long been subject to theorising and debate within the broader field of development economics prior to the neoliberal turn and the narrowing of the scope of development economics. To some extent, then, this chapter can be read as a call for the re-integration of these alternative perspectives into the development economics curriculum—it is not always necessary to reinvent the wheel, and there is a rich existing literature for lecturers and students of development economics to draw from. This can also help ensure that past errors are not replicated, and foregrounds, as

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a point of difference from mainstream approaches, the importance of the role of history However, the development economic curriculum continues to be dominated by work originating from the Global North (with some exceptions), and this also applies to many of the alternative perspectives and analyses presented above. Future work on the development economics curriculum also needs to move beyond the standard alternative cannon of work and promote theoretical perspectives and insights from authors from the Global South that will shed a different light on the roots of these economic problems and ways forward. Acknowledgements An early version of some of the ideas in this chapter was presented at the Online Interdisciplinary Conference; Post-Crash Economics in a Post-COVID-19 World organised by the University of Dundee. Elements of the chapter were also presented in a piece for the Mint Magazine titled ‘Colonial Economies’, available at https://www.themintmagazine.com/colonial-eco nomics.

References Adésínà, J. O. (2009). Social policy in sub-Saharan Africa: A glance in the rearview mirror. International Journal of Social Welfare, 18, S37–S51. Arnold, C. (2020). Pandemic speeds largest test yet of universal basic income. Nature, 583(7817), 502–504. Banerjee, A. V., & Duflo, E. (2011). Poor economics. Penguin. Barrientos, A. (2011). Social protection and poverty. International Journal of Social Welfare, 20(3), 240–249. Bayliss, K., Romero, M. J., & Waeyenberge, E. V. (2021). Uneven outcomes from private infrastructure finance: Evidence from two case studies. Development in Practice, 31(7), 934–945. Bayliss, K., & Van Waeyenberge, E. (2018). Unpacking the public private partnership revival. The Journal of Development Studies, 54(4), 577–593. Becker, G. S. (1965). A theory of the allocation of time. The Economic Journal, 75(299), 493–517. Becker, G. S. (1981). A treatise on the family. Harvard University Press. Blofield, M., Giambruno, C., & Pribble, J. (2021). Breadth and sufficiency of cash transfer responses in ten Latin American countries during the first 12 months of the COVID-19 pandemic. Tulane University, Department of Economics. Caminade, C., McIntyre, K. M., & Jones, A. E. (2019). Impact of recent and future climate change on vector-borne diseases. Annals of the New York Academy of Sciences, 1436(1), 157–173.

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Hickey, S., & Seekings, J. (2017). The global politics of social protection (WIDER Working Paper [9292563394]). Hill, R., & Myatt, T. (2010). The economics anti-textbook: A critical thinker’s guide to microeconomics. Zed Books Ltd. IFC. (2020). IFC Increases COVID-19 Support to $8 Billion to Sustain Private Sector Companies and Livelihoods in Developing Countries. World Bank Group. Jubilee Debt Campaign. (2020). Sixty-four countries spend more on debt payments than health. https://jubileedebt.org.uk/press-release/sixty-four-cou ntries-spend-more-on-debt-payments-than-health. Accessed 27 January 2022. Khambule, I. (2021). COVID-19 and the counter-cyclical role of the state in South Africa. Progress in Development Studies, 21(4), 380–396. Lin, J., & Chang, H.-J. (2009). Should industrial policy in developing countries conform to comparative advantage or defy it? A debate between Justin Lin and Ha-Joon Chang. Development Policy Review, 27 (5), 483–502. Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107 (2), 407–437. McKenzie, D., & Paffhausen, A. L. (2015). Development economics as taught in developing countries (World Bank Policy Research Working Paper 7521). Mezzadri, A. (2020). A crisis like no other: social reproduction and the regeneration of capitalist life during the COVID-19 pandemic. Developingeconomics.org. https://developingeconomics.org/2020/04/20/a-crisis-like-noother-social-reproduction-and-the-regeneration-of-capitalist-life-during-thecovid-19-pandemic/2022. Mkandawire, T. (2001). Thinking about developmental states in Africa. Cambridge Journal of Economics, 25(3), 289–314. Ortiz, I., & Cummins, M. (2021). Global austerity alert: Looming budget cuts in 2021–25 and alternative pathways. https://d3n8a8pro7vhmx.cloudfront. net/eurodad/pages/2239/attachments/original/1618845096/Global-Aus terity-Alert-Ortiz-Cummins-2021-final.pdf?1618845096 Oxfam, Christian Aid, Global Justice Now and Jubilee Debt Campaign. (2020). Passing the buck on debt relief . https://www.oxfam.org/en/research/passingbuck-debt-relief Perry, K. (2020). COVID-19: How to transform the industrial policy toolkit in developing nations on development economics. Developingeconomics.org. https://developingeconomics.org/2020/05/04/covid-19-howto-transform-industrial-policy-toolkit-in-developing-nations/2022. Pigou, A. C. (1951). Some aspects of welfare economics. The American Economic Review, 41(3), 287–302. Reinert, E. S. 2020. Industrial policy: A long-term perspective and overview of theoretical arguments. UCL Institute for Innovation and Public Purpose, Working Paper Series.

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CHAPTER 5

The Effects of Covid-19 Stringency Measures: From Increased Educational Inequality to Poverty Trap, with a Particular Focus on European Countries Daniela Tavasci and Luigi Ventimiglia

Introduction The effects of the restrictive measures implemented in the attempt to contain the spread of Covid-19 were of an unprecedented magnitude on schools and universities, with inevitable disruptive implications for education. This calls for a new reflection on the nature of education as a fundamental right (for a full discussion about the evolution of this debate, see McCowan, 2013). The length of school closure was significantly different across various countries, and so were the measures adopted

D. Tavasci (B) · L. Ventimiglia Queen Mary University of London, London, UK e-mail: [email protected] L. Ventimiglia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_5

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to deliver teaching online while schools and universities were closed. Furthermore, online delivery was not always guaranteed across the world and not consistently effective, depending on the digital divide, which, in turn, depends on various factors. This diversity prompted a specific development of the analysis which concentrated on the exacerbation of the educational inequality across and within countries during the two years of the pandemic. This chapter introduces the different lengths of schools’ and universities’ closures across various countries and the implications of the mitigating measures that required the transfer of delivery online in the next section. It then shows the channels through which schools’ and universities’ closures have affected educational inequality in section three. The chapter then moves to a critique of the current conversation’s approach around the increased educational inequality brought about by the extraordinary measures adopted by governments to contain the spread of Covid-19. In section four, we argue that there has been an excessive focus on the digital divide, the issues related to technology and the unequal access to it, at the expense of a deeper debate on the nature of education (and perhaps schooling) as a public good. Also, the emphasis on inequality has diverted the focus away from pre-existing vulnerabilities and poverty. The chapter concludes with a reflection on the need to continue to engage in a debate about education as a global public good. In fact, while conversations and analyses around technology are welcome, technology in itself might just replicate divides and structures that might entrench individuals, households and communities in disadvantaged conditions.

The Magnitude of Schools’ and Universities’ Closures Across the World The unequal effects of Covid-19, especially mass schools’ closures, on the education systems on the most vulnerable learners cannot be overestimated. School closure affected and continues to affect learners across the world two years after the start of the pandemic and the first school closures. According to UNICEF (2021), in their call for attention to the need for governments to prioritise the reopening of schools, more than 168 million children globally had their schools completely closed for almost a full year.

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Table 5.1 Total length of school closure across a selection of countries from February 2020 until April 2022

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Schools closure United Kingdom Spain France Germany Italy

27 15 12 38 32

weeks weeks weeks weeks weeks

Source UNESCO Global Education Coalition data (2022)

Table 5.1 shows the total weeks of schools’ closure for a selection of European countries as reported by UNESCO Global Education Coalition (2022), which has produced a timed interactive map to monitor schools’ closures globally. The diverse length of schools’ closures across various countries does represent an inequality factor in the matter of increased educational inequality as an effect of the measures implemented to contain the spread of Covid-19: besides the experience of a handful of European countries (including Poland, Bulgaria, Serbia) who kept school closed for slightly more than 40 weeks in total, the majority of European countries, including the ones we are looking at more closely, kept their schools closed for less than 40 weeks with Spain and France keeping schools closed “only” for 15 and 12 weeks, respectively. However, to fully appreciate this picture, it is necessary to zoom out and concentrate on other continents as well. For example, North and South America kept schools closed for more than 70 weeks, Canada “only” for 51 weeks, and India closed schools for more than 80 weeks (UNESCO Global Education Coalition, 2022). Schools’ closures do not represent the entire picture of the increased educational inequality during the pandemic. When schools and universities were open, they implemented health and safety protocols that required the isolation of classes and/or individuals. An essential consideration in assessing the international variation of schools’ and universities’ closures is whether alternative (e.g. remote) teaching was provided or not. There were variations in the participation of students in schooling and the modes, media and teaching methods used during the first two years of the Covid-19 pandemic. Accordingly, in many African countries such as Burkina Faso and Rwanda, for example, respectively, 92% and 70% and so Kenya (47%), Ethiopia (44%) of school

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leaders surveyed reported a complete lack of teaching and learning provisions during the closure period, the figure is lower but still significant for India (28%) (Meinck et al., 2022). The length of schools’ closures affected countries which exhibit both high and low Human Development Index (HDI). However, we have a different picture if we consider the combination of both the different duration of schools’ closures and the number of schools unable to offer remote teaching. This combination discloses a considerable inequality between the measures implemented to contain the spread of Covid-19 that involved teaching and learning opportunities in lower HDI measures countries vis-à-vis those counties with higher HDI measures. As a result, the complete deprivation of learning opportunities due to both measures, schools’ closures and lack of online alternatives over long periods will result in a significant achievement gap between peers across various countries. Data about universities’ closures are more difficult to gather because of the autonomous status of these institutions. In some European countries, universities were closed as part of the closure of all public venues. However, especially during the first year, while classrooms remained closed and teaching moved online, campuses did not close, and certain services remained in place: for example, housing provided by universities remained open while access to accommodation was restricted to residents only. More problematic and subject to the general uncertainty of the second year of the pandemic, many universities eventually decided to implement a mixed-mode of teaching delivery with some activities, including teaching, provided both in the presence and remotely. The rationale for this choice was to allow international students to access resources even if they were from countries where restrictive measures would be in place: In the USA, Chinese students are 33.7% of the foreign student population, and Indian students are 18.4%. Approximately, 144,000 Chinese students come to study in the UK higher education every year, and last year, 53,000 students came from India, representing about 19% of the non-EU student population (HESA, 2022). For universities, domestic and international mobility restrictions had a severe impact on staff. Moreover, universities faced significant uncertainty in planning the mode of operation and choosing between face-to-face and/or remote teaching and learning (or a combination of the two) at the beginning

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of the academic year 2021/22. Nevertheless, universities had accumulated experience and knowledge in terms of best practices for a diversity of modes of delivery and overall operations different from the traditional face-to-face mode with a considerable initial investment in terms of skill acquisitions, choice of appropriate software and platforms to support remote delivery and had had the time to experiment and share best practices and improvements. There are still concerns related to exchanges of both staff and students and international mobility globally (Sabzalieva et al., 2022). More recently, a widely discussed topic within higher education is related to how some of the changes implemented in 2020 as emergency measures could be considered beneficial beyond the end of the current pandemic. The crisis forced the sector to transform its operation mode rapidly and then adapt and improve. The sector accumulated a great experience during the emergency in the first months of the pandemic. In the following months, universities reflected further on how to accelerate changes that had been previously considered and planned for the future, including the idea of offering a mixed-mode of delivery, both remote and face-to-face and, with it, the broader implications of this choice concerning inclusiveness and student wellbeing (EUA, 2021; Gaebel & Stoeber, 2022). This section sketched out the general picture of the unprecedented magnitude of European schools’ and universities’ closures and internationally contextualised their lengths. The following section will focus on how the literature has addressed the main channels through which school closures have affected educational inequality and will likely continue to affect it.

How the Effects of Covid-19 on Equity in Education Have Been Analysed The impact of Covid-19 on educational inequality has been far larger than the geographical one alone: the previous section showed the very different lengths of schools’ closures across various countries. There is consensus across the literature that the pandemic has increased educational inequalities, exacerbated pre-existing crises and revealed vulnerabilities that might have been not obvious to the public (Meinck et al., 2022).

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Given the expected long-term effects of this disruption, it is essential to highlight that the stream of studies focussing on the exacerbated educational inequality during and after the pandemic is in its infancy. Still, this literature has revealed several mechanisms that include risks for students’ health and wellbeing, learning losses and upended educational trajectories, with likely consequences for the future of an entire generation, which calls for the need to continue to investigate its impact in the longer run. Studies carried out so far have concentrated on theoretical and pedagogical aspects of periods of school closures such as summer vacations. Empirical studies have relied on pre-existing datasets such as the results of the OECD’s Programme for International Student Assessment’s (PISA) periodic testing programme on student performance, national and European statistics, for example, for child poverty figures, issues related to digital access (EUROSTAT and ONS) and on ad-hoc surveys. More recently, UNESCO Institute for Statistical data has a global monitoring of school closures caused by Covid-19.1 The availability of such a wealth of data might encourage further studies into this area. However, many other efforts exist to collect and provide similar information: they are mostly derived from non-representative rapid surveys from schools: while these efforts contributed to the broader debate, they lack internationally comparable information since they were not collected in a systematic and scientific manner. The Responses to Educational Disruption Survey (REDS) of UNESCO, presents unique data, collected from countries, schools, teachers and students for the first time. The most relevant issue related to educational inequality is the accessibility to and broad effectiveness of online and blended forms of learning. The terminology is not always used consistently across international studies: digital learning refers to the inclusion of digital technology in any form, online courses or using digital tools in class. It expands learning opportunities but requires teachers’ training. E-learning, instead, complements classroom learning: an example is the use of Virtual Learning Environment (VLE). Distance learning is often confused with E-learning. It is a way of completing a course by attending through the internet. It is traditionally used in higher education, and it is widely accessible and convenient. Finally, blended refers to a combination of online and face-toface learning. E-learning, distance learning and blended learning have had

1 https://en.unesco.org/covid19/educationresponse.

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implications for educational inequality because of the lack of technology and broadband services that could be not consistently and reliably available. Younger students have increasingly relied on parents for assistance (Stafford Digital Marketing Institute, 2018; Global, 2020). Several studies focus (Van der Graaf et al., 2021, for a review) on the number of channels through which school closures have exacerbated educational inequality. The starting point to evaluate the effects of school and university closures is pre-existing literature investigating educational inequality and schooling (e.g. Entwisle et al., 2001; Di Pietro et al., 2020). Accordingly, while benefits from schooling are similar across different household income groups (Downey et al., 2018), school’s closures, during summer breaks, for example, exacerbate educational inequality (Ready, 2010). Educational inequality also accumulates with the increased number of school years: Alexander et al. (2007) argue that summer closure during primary school contributes to the differences in high school performance. Other studies (Borman & D’Agostino, 1996, for a review) have shown the educational inequality implications of summer closures. Because in European countries remote learning was used as a mitigating strategy to cope with school closures, the actual channels through which closures increased educational inequality have been looked at with this copying strategy in mind. First, there is an entire set of topics related to remote learning that often involves learning from home: the kind of environment experienced by the learner is pivotal in this process and crucially depends on material and non-material factors. For example, higher economic background is likely to be associated with higher family cognitive skills, which is correlated with an individual’s higher cognitive skills (Heineck & Silke, 2010). Parental cognitive skills influence efficiency in assisting with homework including more time spent with children (Holmund et al., 2008), and digital skills but also the different quality of parental involvement (Khalil et al., 2020). This brings to the issue of instruction time which is only one part of a larger picture: the economic burden faced by parents—both in terms of job loss and falls in income—will also affect the nation’s children and will do so in an unequal manner. Ruiz-Valenzuela (2015) and Rege et al. (2007) documented the negative impact of job loss on attainment. Dahl and Lochner (2012) look at parental income changes and test scores: the total impact is likely to open up an even greater divide between those attending outstanding

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schools, and who have access to parental resources and those who are not so lucky. During schools’ closures, this picture was made even more complicated for younger children by the need to have parental digital skills to access and participate in education. For older children, their socio-economic background also affects their suitability for online learning. From various surveys carried out across many countries, learners experienced difficulties finding a suitable place at home for taking online classes. In addition, support or lack thereof at home might involve emotional support and time spent at home, which might not be possible. Parental non-cognitive skills caused widening disparity in socio-emotional skills among British children of different socio-economic status. Inequality increased especially for boys at the bottom of the distribution because of their material conditions (Attanasio et al., 2020): according to Gould and Shierholz (2020), in the US 61.5% of workers in the highest wage quartile can work remotely, whereas the corresponding figure for those in the lowest wage quartile is less than 10%. However, the quality of remote learning also depends on both school resources and network infrastructures. Eurostat data show that access to broadband internet connection varies significantly by household income across all European countries. Wealthier households are consistently more likely to have a broadband internet connection than poorer households. Within Europe, 74% of households in the lowest income quartile have a broadband internet connection, and the corresponding figure for households in the highest income quartile is about 97%. However, Table 5.2 shows a considerable variation between the broadband internet access of the lowest income quartiles across various countries, with Italy and the UK at the bottom (Table 5.3). One particular factor to consider is that the figure above does not account for the variability, just for the average. However, schools located in difficult areas, perhaps rural or disadvantaged areas, are more likely to lack access to the appropriate infrastructure. Furthermore, significant differences have also been detected in the provision of remote teaching and learning resources between private and public schools. In the UK, a survey by Teacher Tapp found that 66% of private schools vs. 52% of public primary schools were ready to deliver remote teaching already on Monday after the first week of school closures (School Weeks reporter, 2000). This difference might be explained by the physical access to devices and the internet for students in terms of both, material access

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Table 5.2 Broadband internet access by household income in the EU, 2020 France Spain Germany Italy UK

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1st lowest income quartile

Average income

3rd lowest income quartile

71 77 84 68 57

78 90 95 79 93

86 97 98 87 98

Source Eurostat data (2021) and ONS (2022)

Table 5.3 ICT availability for the students to use at school (average)

Italy

5.6

Spain France Germany

6.3 6.1 6.6

Source PISA (2018)

to a specific type of device type and internet speed, conditional access to shared devices and even attitude towards using technology (Coleman, 2021). Accordingly, one of UNESCO’s recommendations to ensure learning remained uninterrupted during the pandemic related to the digital divide and its implications during schools’ and universities’ closures (UNESCO Global Education Coalition, 2022). This, however, brings us to the other one, which is the emotional wellbeing and stress: UNESCO recommends solutions to address psycho-social challenges posed by the pandemic as a priority over teaching, “ensure regular human interactions, enable socialcaring measures, and address possible psycho-social challenges that students may face when they are isolated” (p. 1). The UK seems to have particularly deep problems in this dimension (Monbiot, 2022). Many of the studies on the effects of Covid-19, however, analyse also the effects of school closure that was not directly related to education: they focus, in particular, on school-based health provision, food, protection and safeguarding and, for university campuses, even housing. Schools and universities work as a health, including mental health, providers through a number of services organised institutionally differently across countries. For example, during the pandemic, a campaign was launched

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to prevent children in England from going hungry since, once schools closed, they no longer had access to the daily school lunches provided (Di Pietro et al., 2020). Similarly, even though teaching migrated online, university campuses did not close because they provided a home for students estranged from their families or simply had no other place to go. The suspension of these services should not be underestimated, for it is often overlooked in studies about the effects of Covid-19 measures on education. The developmental implications for some of these services are associated with specific vulnerabilities that might have long-term and irremediable effects. For example, referrals for learning difficulties evaluations, typically activated by primary and secondary schools, were no longer provided. When schools eventually reopened, the backlog was huge, and the resumption of the assistance proved to be particularly difficult (Verdese, 2020; Wilson, 2020). This session has summarised the main implications of schools’ closures for educational inequality.

How We Look at Educational Inequality and the Need for a Re-focus The partial (although in its infancy, the literature about this topic is sizeable and growing) summary of the main topics related to educational inequality sketched out in the previous summary highlights several issues with the way we look at this topic broadly. First, as the Covid-19 emergency forced schools and universities to take teaching online, the issue of its immediate effects coincided with the issue related to the digital divide. However, there is nothing inherently transformative about technology. Instead, algorithms, for example, have been shown to reproduce structures of racism precisely by repeating learned patterns of behaviour (Lindblad et al., 2021). Second, the experience during the Covid-19 schools’ and universities’ closures makes a case for schooling, both in itself and because of the additional services it provides, as a public good (Sen, 1999) in contrast to more utilitarian and economic approaches (Locatelli, 2018) even more vital. In the countries, we have observed, the lack of adequate recovery strategies to mitigate the impact of school closures and tackle learning losses and all the services associated with schooling, particularly

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for disadvantaged individuals, led to missed opportunities and developmental steps. Some (Wulff, 2021) have gone a step forward and called for a global governance intervention to protect education as a global public good. Third, there the emphasis on diversity might be misleading. Depending on the circumstance, a more useful concept might be the one of vulnerability: vulnerability is a multidimensional concept that is difficult to capture. Alwang et al. (2001) concentrate on income as the only dimension to define vulnerability. This definition is only apparently narrow: in fact, it opens the door to a wealth of implications. The link between low household income with several factors, including housing stress, overcrowding, poor mental and physical health, community safety, higher crime convictions, joblessness, as well as low levels of cohesion, trust and resources, has long been established (Griggs et al., 2008; Larsen, 2013; Pinoncely, 2016). These individual and family factors expose some groups to higher levels of risk; in other words, the vulnerability of specific groups was pre-existing and has just been more blatantly exposed by the Covid-19 crisis. Fourth, and as a consequence of the previous point, the problem is not so much educational inequality. The problem is one of poverty. The individual and family risk factors then entrench entire communities in social disadvantage. This inevitably recalls the development economics literature on poverty trap (Matsuyama, 2018, for a review). Various factors support this vision, including the idea that due to interruptions in education during the pandemic, vulnerable students with limited access to education would experience long-lasting learning loss (Carvalho & Hares, 2020). Their financially disadvantaged background is considered to impact young people in terms of a range of social, emotional and behavioural problems (Edwards & Baxter, 2013), including being developmentally vulnerable when commencing school compared to their peers. But the idea of trap is also linked to the intergenerational character of differentiated learning opportunities mediated through unequal access to the academic curriculum, learning resources and experiences and quality pedagogy. It is often intergenerational as demonstrated in the PISA survey (Schleicher, 2019). In summary, the Covid-19 crisis has revealed pre-existing vulnerabilities and affected more disadvantaged individuals, household and communities, making them poorer: because of the missed opportunities and long-term developmental implications linked to education and

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with all the services that are provided within the schooling systems, the crisis has pushed them in a condition where mobility became even more complicated. None of the countries under consideration have invested in an effective recovery strategy. Nor global governance has been able to defend and reinforce education as a public good.

Conclusions This chapter has discussed the educational inequality caused by the measures adopted to contain the spread of Covid-19, especially schools’ and universities’ closures. These have also delayed several crucial services for vulnerable individuals and communities. Examples range from schools’ free meals, the suspensions of which increased hunger in the UK, and delays in referring students for diagnosis of learning difficulties. The chapter also discusses that a significant number of studies concentrated on the digital divide and on technology as one of the main culprits for the increased educational inequality. While this aspect should not be underestimated, especially in prolonged situations of schools’ and universities’ closures, it is also fundamental to realise that this crisis has revealed pre-existing vulnerabilities: the right analytical category to use would be the one of poverty rather than inequality. Moreover, once one accounts for the intergenerational character of the vulnerability (the influence of parental skills and their material and non-material factors), then an even more appropriate analytical category is the poverty trap. From a policy prescription viewpoint, the emphasis should be on the idea that education is a public good and that there is global governance that should protect it and encourage governments to take the necessary steps to protect it.

References Alexander, K. L., Entwisle, D. R. & Olson, L. S. (2007). Lasting consequences of the summer learning gap. American Sociological Review, 72. Alwang, J., Siegal, P. B., & Jorgensen, S. L. (2001), Vulnerability: A view from different disciplines. Social Protection. World Bank. Attanasio, O., Blundell, R. Conti G., & Mason, G. (2020). Inequality in socioemotional skills: A cross-cohort comparison. Journal of Public Economics, 191.

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Borman, G. D. & D’Agostino, J. V. (1996). Title I and student achievement: A meta-analysis of federal evaluation results. Educational Evaluation and Policy Analysis, 18(4). Carvalho, S., & Hares, S. (2020). Six ways COVID-19 will shape the future of education. https://www.cgdev.org/blog/six-ways-covid-19-will-shape-fut ure-education Coleman, V. (2021). Digital divide in UK education during COVID19 pandemic: Literature review. Cambridge Assessment Research Report. Cambridge Assessment. Dahl, G., & Lochner, L. (2012). The impact of family income on child achievement: Evidence from the earned income tax credit. American Economic Review, 102(5). Di Pietro, G., Biagi, F., Dinis Mota Da Costa, P., Karpinski, Z., & Mazza, J. (2020). The likely impact of COVID-19 on education: Reflections based on the existing literature and recent international datasets, EUR 30275 EN, Publications Office of the European Union, Luxembourg, 2020, ISBN 978-92-76-19937-3 (online), https://doi.org/10.2760/126686 (online), JRC121071. Digital Marketing Institute. (2018). What are the Benefits of Blended Learning? May 17. https://digitalmarketinginstitute.com/blog/what-are-the-benefitsof-blended-learning Downey D. B., Yoon, A., & Martin, E. (2018). Schools and inequality: Implications from seasonal comparison research. In B. Schneider (Ed.), Handbook of the sociology of education in the 21st century. Handbooks of sociology and social research. Springer. Edwards, B., & Baxter, J. (2013). The tyrannies of distance and disadvantage: Factors related to children’s development in regional and disadvantaged areas of Australia (Research Report No.25). Australian Institute of Family Studies. Entwisle, D. R., Alexander, K. L., & Olson, L. S. (2001). Keep the faucet flowing: Summer learning and home environment. American Educator, 25(3). EUA European University Association. (2021). https://eua.eu/resources/pub lications/957:universities-without-walls-%E2%80%93-eua%E2%80%99s-visionfor-europe%E2%80%99s-universities-in-2030.html Eurostat. (2021). Households—Level of internet access. Gaebel, M., & Stoeber, H. (2022) One year of Covid-19: The impact on European higher education. European University Association. https://eua.eu/dow nloads/publications/one%20year%20of%20covid19%20the%20impact%20on% 20european%20higher%20education_final.pdf Griggs, J., Whitworth, A., Walker, R., McLennan, D., & Noble, M. (2008). Person or place-based policies to tackle disadvantage? Joseph Rowntree Foundation.

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Gould, E., & Shierholz, H. (2020). Not everybody can work from home Black and Hispanic workers are much less likely to be able to telework. Working Economics Blog. Economic Policy Institute. Heineck, G., & Silke, A. (2010). The returns to cognitive abilities and personality traits in Germany, EconStor Open Access Articles and Book Chapters, issue, pp. 535–546, https://EconPapers.repec.org/RePEc:zbw:espost:68593 HESA Higher Education Students Statistics. (2022). https://www.hesa.ac.uk/ data-and-analysis/students/where-from Holmlund, H., Lindahl, M., & Plug, E. (2008) The causal effect of parent’s schooling on children’s schooling: a comparison of estimation methods (IZA Discussion Paper 3630). Bonn. Khalil, R., Mansour, A. E., Fadda, W. A., Almisnid, K., Aldamegh, M., AlNafeesah, A., Alkhalifah, A., & Al-Wutayd, O. (2020). The sudden transition to synchronized online learning during the COVID-19 pandemic in Saudi Arabia: A qualitative study exploring medical students’ perspectives. BMC Medical Education, 20 (285). https://doi.org/10.1186/s12909-020-022 08-z Larsen, C. A. (2013). The rise and fall of social cohesion: The construction and de-construction of social trust in the US, UK, Sweden and Denmark. Oxford University Press. ISBN 978- 0199681846 Lindblad, S., Warvik, G., Berndtsson, I., Jodal, E., Lindqvist, A., Messina Dahlberg, G., Papadopoulos, D., Runesdotter, C., Samuelsson, K., Udd, J., & Johansson, W. (2021). School lockdown? Comparative analyses of responses to the COVID-19 pandemic in European countries. European Educational Research Journal, 20(5). https://doi.org/10.1177/14749041211041237 Matsuyama, K. (2018). Poverty Traps. The new Palgrave dictionary of economics. Palgrave Macmillan. https://doi.org/10.1057/978-1-349-95189-5_2700 McCowan, T. (2013). Education as a human right: Principles for a universal entitlement to learning. Bloomsbury Academic. Meinck, S., Fraillon, J., & Strietholt,R. (2022). The impact of the COVID-19 pandemic on education: International evidence from the Responses to Educational Disruption Survey (REDS). https://unesdoc.unesco.org/ark:/48223/ pf0000380398 Monbiot, G. (2022). England’s punitive exam system is only good at one thing: Preserving privilege, The Guardian, 27th April. https://www.theguardian. com/commentisfree/2022/apr/27/england-exam-system-children-mentalhealth ONS Office of National Statistics. (2022). Internet access—Households and individuals , Great Britain. Pinoncely, V. (2016). Poverty, place and inequality: Why place-based approaches are key to tackling poverty and inequality. Royal Town Planning Institute.

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PISA Programme for International Student Assessment. (2018). Results (Volume II). Where All Students Can Succeed. https://doi.org/10.1787/19963777. OECDPublishing,Paris Ready, D. D. (2010). Socioeconomic disadvantage, school attendance, and early cognitive development: The differential effects of school exposure. Sociology of Education, 83(4), 271–286. Rege, M., Telle, K., & Votruba, M. (2007). Parental job loss and children’s school performance (Discussion Papers, No. 517). Statistics Norway, Research Department, Oslo. Ruiz-Valenzuela, J. (2015). Job loss at home: Children’s school performance during the great recession in Spain. CEP Discussion Paper No 1364. Sabzalieva E., Takudzwa, M., & Yeroviet C. (2022). Moving minds: Opportunities and challenges for virtual student mobility in a post-pandemic world. Unesco. https://www.iesalc.unesco.org/wp-content/uploads/2022/03/IES ALC_220315_RE_VSM_EN.pdf Schleicher, A. (2019). PISA 2018 Insight and interpretations. OECD. https:/ /www.oecd.org/pisa/PISA%202018%20Insights%20and%20Interpretations% 20FINAL%20PDF.pdf School Weeks reporter. (2000). Coronavirus: Fears lockdown will lead to a widening inequality gap, 27th March. https://schoolsweek.co.uk/corona virus-fears-lockdown-will-lead-to-a-widening-inequality-gap/ Sen, A. (1999). Development as freedom. Anchor Books. Stafford Global. (2020). What’s the difference between Online Learning and Distance Learning? , January 22. https://www.staffordglobal.org/articlesand-blogs/whats-the-difference-between-online-and-distance-learning/ UNESCO Global Education Coalition. (2022). https://en.unesco.org/cov id19/educationresponse#schoolclosures Van der Graaf, L., Dunajeva, J., Siarova, H., & Bankauskaite, R. (2021). Research for CULT committee, education and youth in post-COVID-19 Europe—Crisis effects and policy recommendations, European Parliament, Policy Department for Structural and Cohesion Policies, Brussels. Verdese, M. (2020). Covid-19, lockdown e le conseguenze dell’interruzione della terapia neuro psicomotoria nei pazienti con disgrafia. ANUPI TNPEE. https://www.anupitnpee.it/rivista-digitale/articoli-sulla-professione-deltnpee/1390-covid-19-lockdown-e-le-conseguenze-dell-interruzione-della-ter apia-neuro-psicomotoria-nei-pazienti-con-disgrafia-dott-ssa-tnpee-martina-ver dese.html. Wilson, M. (2020). The coronavirus will widen the education gap in the UK. Aljazeera Media Network, 12th April. https://www.aljazeera.com/opinions/ 2020/4/12/the-coronavirus-will-widen-the-education-gap-in-the-uk Wulff, A. (2021). Global education governance in the context of COVID-19: Tensions and threats to education as a public good, Development, 64.

CHAPTER 6

In the Beginning……: An Analysis of the Starting Topics in Introductory Economics Textbooks Martin K. Jones

Since the financial crisis of 2007–2012, economics, as a discipline, has been going through a period of introspection both in terms of teaching and research. While, in the UK, numbers of students applying to do economics degrees at university have been modestly increasing (Economics Network, 2016), it is also apparent that not all of them are happy with the curriculum on offer (Observer newspaper, 2014). This paper will examine the traditional first year economics curriculum that is put forward in economics textbooks and is taught in university economics curricula all over the world. This curriculum has not changed in some of its essentials for decades, and it may be asked whether now is the time

M. K. Jones (B) Economics and International Business, School of Business, University of Dundee, Dundee, Scotland e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_6

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to re-examine some of the basic assumptions of introductory economics teaching. In particular, we will look at the starting topics in introductory economics courses. These starting topics have also often been in place for decades but the justification for doing these topics has not been examined for a long time. It should be emphasised that this is crucial from a student-centred point of view: the starting topics set the tone for the rest of the course. If these topics are seen to be dull, irrelevant or disconnected to the rest of the course then this will reflect poorly on those who are teaching the course and on the discipline. Many, if not most, students who study any economics at all will probably do economics as an option, usually for one year, and their impression of the subject will be shaped by the introductory module. In order to analyse the starting topics, we will look to the first chapters of major current economics textbooks as sources. The textbooks we will use are Mankiw and Taylor (2017), Lipsey and Chrystal (2015), Begg et al. (2014), Sloman et al. (2018), Parkin (2016) and the CORE (2016) textbook. The CORE textbook is a new, high profile and opensource textbook that has been created in response to criticism of economics textbooks after the 2007 financial crisis and has been adopted by several economics departments. The choice of these textbooks is, inevitably, arbitrary because of the lack of information on sales and popularity as assigned textbooks. However, all demonstrate longevity, having gone through multiple editions, with all of them being in double figures. Mankiw is a version of the American textbook (Mankiw, 2019) which is the bestselling textbook in the US. Sloman et al. (2018), Begg et al. (2014) and Parkin (2016) all score highly on the OpenSyllabus (2021) count1 of most popular assigned textbooks in the UK, with Sloman coming top. All of these are well-established and widely used in the UK and are commonly used across the world. Insofar as textbooks are used to inform the contents of modules, the contents of these textbooks will also give us a clue as to the content of the courses. Looking at the first chapters of these textbooks there is high diversity of content but also quite a bit of common ground. Three topics in particular are covered in the first four of the textbooks: Opportunity Cost, Scarcity and Command vs Market Economies. Parkin (2016) includes the first two but not the last one, while the CORE project has none of them in any depth. Other topics include Comparative Advantage and the Invisible Hand. This paper will focus mainly on the three most common topics and

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will briefly discuss the others at the end. This is justified by the commonality of these three topics: if they are so popular then we should be able to find good reasons for including them at the start of the course. Throughout this paper, we will judge these introductory topics by a variety of criteria. Primarily, these will be teaching criteria rather than investigations into their truth. We will judge them in terms of their ease of teaching, the usefulness of these topics within economics, their links with subsequent topics and whether they are liable to cause students confusion either within the introductory course or later on. In particular, we will use Biggs and Tang’s (Biggs & Tang, 2011) criterion of constructive alignment to judge whether these topics are worthwhile including. Constructive alignment is the idea that a student’s learning activities should be aligned with the intended learning outcome of a module or programme of study. This enables students to engage in deep as opposed to shallow learning, whereby the students actively understand the topics being taught to them as opposed to learning by rote or having a surface understanding. In this paper, we will be concerned with overall programmes of study or courses and the intended learning outcomes associated with these programmes. In general, intended learning outcomes for programmes do not specify, in detail, what should be studied at each level or module but what should be learnt by the end of the degree programme. It follows that, if we want students to undertake learning activities that result in them satisfying these learning outcomes, we need content that is consistent with them. This means that any topics that are not relevant to these learning outcomes or confuse in some way the achievement of them are automatically suspect. We will also, as a side issue, judge the topics in terms of their perceived attractiveness to students and relevance to real-life economies. There is no attempt to judge these topics in terms of their truth or of their logical consistency. It is assumed that they are true and logically consistent, at least in some contexts. However, this alone should not be a passport to the parts of economics teaching that, for many people will be their only exposure in their entire life. We are asking whether these topics are important enough, and whether their teaching is worth our while, for such a crucial spot in the curriculum.

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Opportunity Cost On the surface, opportunity cost may seem like an obvious inclusion at the start of an introductory module. It is almost always taught in economics courses and appears in most introductory textbooks. Many topics in economics, it seems, cannot be taught without reference to opportunity cost. However, on reflection, the inclusion of opportunity cost is strange. It is stated in Sloman et al. (2018) that opportunity cost is at the centre of economics thinking about choice. However, taken literally, this simply isn’t true. None of consumer choice, decision theory nor game theory explicitly use opportunity cost in any meaningful sense. Where opportunity cost is used in introductory economics textbooks, it seems to operate as a “gloss” on the main part of the text rather than as a central explanatory component. An example of this can be seen in Mankiw and Taylor (2017, p. 46) when discussing prices as signals. They state: Rising prices act as a signal that more will have to be given up in order to acquire the good and they will have to decide whether the value of the benefits they will gain from acquiring the good is worth the extra price they have to pay and the sacrifice of the value of the benefits of the next best alternative.” (my italics)

The part in italics is an obvious reference to opportunity cost. However, much of the sentence (and the rest of the explanation on the page) is concerned with the comparison between the marginal benefits and marginal costs of acquiring the good. The opportunity cost explanation doesn’t add anything to this and is effectively redundant. One could eliminate the part in italics and one would still have a reasonable explanation for price signalling. It should also be noted that opportunity cost seems to fit rather uneasily with subsequent analyses of economic choice. For a start, as a “cost”, opportunity cost is treated differently from all other types of cost. When one is constructing a total cost function (and then marginal and average cost), these costs include the labour costs and capital costs but never the opportunity cost. It is always seen as a comparative measure, where the benefits of one’s current choice are compared with the benefits of the next best alternative, where the latter is interpreted as the opportunity cost of the current choice. Given this cost dichotomy, there are

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attempts to “normalise” the position of opportunity cost by claiming that there are two types of cost namely “Accounting costs” and “Economic Costs”, of which the latter include opportunity costs. However, at the end of the day, it is the “accounting costs” which enter into total cost functions in economics and not the “economic costs”. To explain this, it will be useful to see why opportunity cost vanishes in more advanced textbooks when referring to the very subjects in which it is supposed to be so useful. Opportunity cost operates by an individual selecting the option that has the lowest opportunity cost compared to other options. This can be seen by the reference to the benefits of the next best alternative as the measure of opportunity cost. This suggests an iterative process whereby the “next best” is established in terms of opportunity cost with the second-next-best. Hence, the “best” alternative is the one that minimises opportunity cost. However, this simply the same as saying that one maximises utility (or profit). This means that once indifference curves, isoquants, isocost lines and constrained optimisation are introduced, opportunity cost effectively becomes redundant since all utility/profit maximisation is accounted for by the framework. This can further be seen in consumer theory, where the difference between one bundle of goods and another is judged by the constrained utilities of the two bundles. That which has the highest utility is then chosen, while the one with the next highest utility is not chosen. Opportunity costs, therefore, reflect the utilities of the two highest utility goods bundles in the feasible set and offer a justification for choosing the highest. Since this is done over a far broader range of bundles of goods and far more effectively by indifference curve analysis, the use of opportunity costs becomes redundant. It must be said that there are topics for which opportunity cost does seem to be helpful. Two examples are in labour supply and the demand for money. In labour supply analysis, labour is seen to be disliked, not in itself, but as leisure foregone, with the wage rate as compensation for undertaking the work. Leisure, therefore, is analysed as the opportunity cost of work. In the demand for money, money is not seen as being desired for itself but in its role as a risk-free alternative to government bonds, where the price of bonds (or inversely, the interest rate) is the opportunity cost of holding money. Tobin’s portfolio balance approach to money demand (Tobin, 1956) is partly motivated by this idea. However, it is also worth pointing out that, once the comparison between the two types of goods has been established, labour and leisure

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on one hand and money and bonds on the other, the analysis usually takes place in the context of a multi- argument utility function. There, the trade-off between the various different combinations of either labour and leisure or money and bonds is assumed to be part of the preferences between the pairs. These preferences are not usually specified in terms of opportunity costs. Opportunity cost, therefore, seems to have a heuristic role in economics rather than a serious analytical role. It must also be said that, once we have established that opportunity cost can be subsumed into a utility or profit function, some of the uses to which opportunity cost is put to in the textbooks are actively misleading. We will take two examples, one from Mankiw and Taylor (2017, p. 82) and the other from Sloman et al. (2018, p. 16).1 In the first example, the authors describe the budget constraint as a preliminary to introducing indifference curves and the consumer choice explanation of demand curves. In doing so, they equate the slope of the budget line with the opportunity cost of the goods. In the second example, the authors are looking at the production possibility frontier and equate the slope of the frontier with the opportunity cost of one good in terms of another. However, taken literally, neither of these make any sense. There is no optimal choice on either the budget constraint or the production possibility frontier unless one picks an optimal point on each curve. This can only be done when one has a tangential indifference curve or social welfare curve to decide which is the “best” outcome in each case. It is only then that one can decide which is the second-best and so what is the opportunity cost. In both cases, the authors are implicitly assuming optimisation and that the individual or economy is in equilibrium but have not mentioned it. It may be asked how opportunity cost came to have such a large role in introductory economics if it is increasingly ignored in later versions of economics taught to students. The concept of opportunity cost has an odd intellectual history since it was not originally part of the Jevons/ Marshall marginalist revolution in economics (Jevons, 1905; Marshall, 1895). Opportunity cost appears first in Green (1894) as an explicit part of Austrian economics and did not form part of the analysis in Alfred Marshall’s textbook (Marshall, 1895) in any of its editions. This represents the split in the early marginalist schools between the “proto-

1 Begg et al. (2014) makes both of these errors.

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neoclassicals” such as Jevons, Marshall and their followers and the “protoAustrians” such as Menger (2007), Bohm-Bawerk (1890) and others. The split within the marginalists was partially caused by the unwillingness of the Austrians to countenance labour as having any value in itself (Spencer, 2004). This was the result of the opposition of the Austrians to the Classical idea of the labour theory of value. By contrast, the neoclassicals believed that labour could have a value in terms of its marginal disutility. The Austrians put forward the idea that the real foundation of value was simply in final consumption—any other values in the economy were simply derivative from this. It followed that leisure and consumption were the only things that could have value, so work had to be valued as an alternative to leisure that allowed for other types of final consumption via wages. Indeed, the concept of opportunity cost was put to far greater use by the Austrians in that it was used to describe all productions costs. A “cost”, from the Austrian point of view, is simply the value of products produced by alternative uses for the current allocation of factors of production. This means that all costs are, essentially, opportunity costs, including the factor costs. Pushed to its extremes, production would become costless if there are no alternative uses for factor inputs within the productions process or if one had infinite resources (Spencer, 2004). However, this view of costs is largely rejected by the neoclassical school, that currently dominates economic thinking, and factor costs tend to be seen as objective and separate from opportunity costs. Indeed, the split between “accountancy” and “economic” costs in textbooks is predicated on this idea with accountancy costs comprising all factor costs, while the economics costs include opportunity costs as well. It is noticeable that this distinction does not travel through into advanced microeconomics textbooks. It follows that the notion of opportunity cost is an awkward “conceptual fossil” spliced on to neoclassical thinking. Why it is retained within the textbooks is unclear: I would suggest that it originated as a form of “appeasement” to Austrians and an attempt to tie the two traditions together without seriously taking on board the Austrian arguments. It is certainly true that some neoclassical economists may still think in terms of opportunity cost, but it is questionable as to whether we should continue to include it in our introductions to economics. It is time that we applied our teaching tests to the idea of opportunity cost. First of all, opportunity cost is difficult to teach for various

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reasons. It requires a notion of cost that is different from those which are commonly used in ordinary life, which tend to be the same as “accounting cost”. Second, it employs a complex counterfactual relationship between the chosen bundle of goods and the alternative. It has been shown that these types of comparisons use up far more working memory than other types of conditional reasoning (Byrne, 1997). Finally, the precise relationship between opportunity cost and other costs is vague. The textbooks do not go down the full Austrian route of equating them and so the consistency in the derivations of all costs via opportunity cost is lost. As a result, the student is faced with two conflicting definitions of cost, which is highly confusing. In practice, as the programmes proceed, the influence of opportunity cost diminishes as more and more alternative tools of choice are introduced. Eventually, opportunity costs are largely ignored and “ordinary” costs reign supreme. However, confusingly, the two definitions are never reconciled. This leads into the question of how well opportunity cost links up to the rest of economics. In a sense, it can be said to link up to all choice situations and the more one chooses an Austrian interpretation, the more relevant it is. However, it is probably true that the emphasis placed on it in introductory textbooks is undeserved. There are very few linkages to the theory of the firm or to consumer theory actually presented in textbooks. Almost all economic theory, in fact, uses multi- argument utility and production functions rather than using opportunity cost. While there is a connection, it is not made obvious to the student and is not sustained throughout the programme of study. It follows that, in terms of constructive alignment, we are on very shaky ground with opportunity cost. Modern neoclassical economics does not use opportunity cost in anything more than a heuristic manner,2 and it is certainly not a core part of what one learns in the degree. There are no explicit links made with other tools of choice and, if anything, it acts to confuse students as to what is and isn’t important in choice theory. Opportunity cost, therefore, is not likely to be aligned with the learning outcomes of modern economics programmes.

2 The UK Quality Assurance Agency Benchmark statement for Economics (2015) does actually give opportunity cost and scarcity as “transferrable skills”. This is indubitably correct—both, used correctly, have excellent heuristic value. However, this does not make their use as teaching tools any better.

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Scarcity Scarcity may also, at first blush, seem to be immune from any criticism as a part of introductory economics. Many economists may still use Lionel Robbins’ definition of economics as “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” (Robbins, 1932). This definition places scarcity at the heart of economics and indeed defines the whole subject in its terms. Again, all the textbooks we have mentioned (apart from CORE) have scarcity as one of the introductory topics and it is taken as a matter of course that it is a core part of economics. This chapter will not argue that scarcity is unnecessary in economics nor that it is a useless tool in understanding the economy. However, as it stands, the emphasis placed on scarcity, as on opportunity cost, seems to be overdone, although for different reasons. In particular, it ignores the fact that, in some situations, the economic problem is not one of scarcity but of some other issue. An obvious example of this can be seen within macroeconomics. In macroeconomics, one of the central problems is that of the unemployment of factors of production, in particular of labour. In such a situation, there is obviously a problem not of scarcity but of abundance. There are simply too many factors of production available for the quantity of goods demanded. This would place the economy within the production possibility frontier rather than on the frontier, as would be the case if there was scarcity. In fact, one crucial aspect of scarcity is that it supposes that Pareto Optimality holds in the economy. This means that people will generally trade on the production possibility frontier so that there is no way in which one person or firm can gain something unless someone else loses something else. This allows for substitution to occur between factors of production and also between goods. However, in modern economics, there are a variety of situations where two agents can both be better off if they make different decisions from their “equilibrium” actions. This situation happens within game theory where some game solutions can be Pareto suboptimal. The classic example of this is the Prisoner’s Dilemma where individuals both follow their own self-interest and must end up at a Pareto suboptimal equilibrium. Even in a game, such as the stag-hunt game, where a Pareto-optimal equilibrium exists (known as the payoff dominant equilibrium), there are often reasons to choose

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the Pareto-suboptimal equilibrium (known as the risk dominant equilibrium). This suggests that the constraint on achieving greater returns is not scarcity but strategic interaction between agents. The area where scarcity is important in economics is in applications of cooperative game theory. Cooperative game theory differs from noncooperative game theory in that any outcome, given the payoffs of the game, can be reached because agreements are assumed to be binding. This means that, for example, in the Prisoner’s Dilemma, cooperation can be achieved because an agreement to cooperate can be enforced. It follows that, rationally, the suboptimal outcomes will be ignored and all possible solutions will be negotiated among Pareto-optimal outcomes. This means that scarcity becomes important as, in the game, all possible solutions (apart from the reserve solution if agreement is not reached) return the best possible outcomes and making one person better off will make another worse off. The classic example of such a cooperative game is the trading game first put forward by Edgeworth (1881—known as the “Edgeworth box”). The trading game is an example of a free market where individuals are freely trading with each other. This shows that the emphasis on scarcity makes most sense in an environment, such as a cooperative game, where all the goods in society are divided up among competing people and there are none left over at the end. This is obviously an important area of economics, but it is not the only area and others, involving other structures, may be important. Maybe what is important historically is that scarcity, originally, was the most important concept in economics. Adam Smith, in trying to explain value and the water/diamond paradox, used scarcity to explain the difference in value. Both the classical and neoclassical economists used scarcity to explain the existence of value in the economy and economies operating under conditions of scarcity were the central part of economic analysis until the Second World War. After the Second World War, however, the development of Keynesian macroeconomics and game theory posed an increasing number of theoretical situations where either individuals or countries would not be faced with situations of scarcity. Instead, the theories suggested situations where everyone could improve their situations by making different choices but these choices were prevented by strategic or coordination problems. Also, with the growth of information economics and ideas of asymmetric information, there was created another set of theoretical situations where

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scarcity was not the most important constraint. For example, in asymmetric information, it was shown that, with adverse selection, one could end up with a situation where there was a supply of used cars that people wanted to sell but, because of limited information about the quality of the car, few or no people wanted to buy them. The excess supply shows a situation where scarcity does not hold but asymmetric information acts as the constraint on making a Pareto-improving choice (Akerlof, 1970). It follows that the importance of scarcity in economics is exaggerated in introductory courses compared to when it is applied to theoretical ideas beyond the introductory stage. Indeed, in Sloman et al. (2018), the authors contradict themselves within the first chapter by, first of all, explaining the universal applicability of scarcity and then, later on, when looking at macroeconomics, explaining that unemployment occurs when labour is not scarce! It follows that the links of scarcity with the rest of economics are not as secure as might be thought and scarcity gives a misleading guide to the discipline in its modern form. On the remaining teaching criterion, ease of teaching, scarcity scores well. Scarcity is a concept that easily transfers across from ordinary discourse, and it can be taught in a way that is fairly straightforward. Some difficulty may be experienced in teaching concepts attached to scarcity such as Pareto Optimality and the production possibility frontier but they are also generally fairly intuitive and straightforward subjects. However, while useful, one might wonder if introducing scarcity right at the start properly aligns the content of the introductory course with the learning outcomes of the programme. If there are large areas of economics where scarcity is not an issue then why pretend that it is?

Command vs Market Economies The third of the three most common topics used as introductory material in textbooks and courses is that of command versus market economies. This is obviously deemed important by at least four of the textbook writers and, quite often, takes up a lot of space in the textbooks. The discussion of planned economies varies in length but the same basic ideas are presented: the split into market, command and mixed economies, the characteristics of the command economy, the problems caused by the command economy, characteristics and problems of the mixed economy and then the claim that most economies are mixed economies.

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In all cases, while the command economy is given a reasonable description, its flaws are seen as fatal and the market economy is seen as superior in most areas, apart from the provision of some socially desirable goods and macroeconomic stability. The mixed economy compromise is usually of the form where the free market is allowed to reign, but the government intervenes to correct its excesses. This contrast between free markets and command economies has an old history in economics textbooks and dates back to Samuelson’s, 1948 textbook (Samuelson, 1948) where this contrast is discussed in great detail. The eventual conclusion—that a basically capitalist economy with government intervention is the solution adopted by most Western countries is the same that is made today except that it is said to be adopted by “most countries” with “Western” missed out. Indeed, Sloman et al., (2018, p. 19), when classifying economic systems, show that there has been a marked move towards more free market systems compared with the 1980s. Only a few outliers, such as Cuba and North Korea, have anything approaching traditional command economies. However, this change poses the big question of relevance. Given that there are so few command economies in the world, and no important ones, why should the contrast between free and command economies be given such prominence? Why have it as an introductory topic to the study of economics? The contrast made sense when Samuelson was writing in 1948 and Communism was dominant in major countries such as Russia and China. However, now neither of these countries is really command economies in the sense outlined in textbooks. Why should students be interested in economic systems that are only exemplified by small outliers in the world economic system? Even worse, this discussion doesn’t really seem to go anywhere in the form that it is presented in the first chapters. It is very rare that one can find programmes in economics that study the contrasts between the two systems beyond this initial coverage. In fact, it can be safely said that the concepts and tools underlying the command economies are systematically ignored in most economics programmes. Perhaps more interestingly, the arguments used to argue against command economies often allude to the impossibility of acquiring enough information to follow through on the plan. This is an Austrian argument put forward by Hayek (1935) in the so-called Socialist Calculation debate. However, there is

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no discussion of informational problems of this type in most neoclassicalbased economics teaching and the idea (which is highly interesting) is subsequently ignored. It follows that the discussion of command versus free market economies is a strange one to have in a modern textbook. It doesn’t link up with other areas of economics programmes and it includes elements that are never discussed again. The only ideas that are followed up are those that are used in the discussion of the free market and mixed economy. While the contrast between command and free markets may be comparatively easy to teach, it may be that students would find it difficult to understand why they are being taught these ideas. It also causes problems with the notion of alignment. If the study of command economies is no longer part of the main curriculum then why briefly introduce it in first year?

Others There are various other topics mentioned in the four textbooks, although none in so great detail as the three above. The most common other one is comparative advantage: the idea that, when trading, countries should specialise in those goods for which they have a comparative advantage and that this results in both sides in the trading relationship gaining since they can both operate outside their production possibility frontiers. Comparative advantage is mentioned briefly in three of the textbooks (plus CORE) but is only discussed in any depth in Begg et al.’s book where it forms a follow-on to their discussion of scarcity and opportunity cost and CORE, where it follows on from a discussion of division of labour and specialisation. In the other two textbooks, an in-depth discussion is deliberately postponed until a specialist chapter on international trade. Examining Begg et al.’s exposition, it seems that the inclusion of comparative advantage in the introductory chapter is difficult to justify from a teaching point of view. To start with, it involves a concatenation of things that need to be understood, in conjunction, for comparative advantage to be understood as a whole. First of all, opportunity cost needs to be understood. Then opportunity cost needs to be related to efficiency and the production possibility frontier.3 Then one needs the 3 As we saw earlier, this link between the PPF and opportunity cost is highly problematic in itself.

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understanding that specialisation is an efficient way of producing goods and finally that specialisation leads to increased trade and availability of bundles of goods outside the production possibility frontier. These are highly complex topics and it would be hard for a student to tie all of these different things together. There are similar issues with the CORE exposition. Second, comparative advantage is hard to justify as an introductory topic. It is highly specialised in that it is concerned with international trade. It is also a topic in general equilibrium rather than the partial equilibrium models mostly used in introductory courses. It could be argued that it provides a justification for trade between individuals, but this link is never made in the textbooks, probably because of its general equilibrium foundations. Furthermore, this general equilibrium requirement is never made clear. It follows that, while comparative advantage is an important part of international trade, its role as an introductory topic is dubious. It is too specialised and complex for what is supposed to be a general introduction to economics. Another topic that sometimes crops up is the division of labour, which is mentioned briefly in Lipsey and Chrystal and also the CORE project. The rarity of its mention may seem to be surprising given its historic resonance going back to Adam Smith (1776). Indeed, the division of labour is mentioned extensively both in Marshall’s (1895) and Samuelson’s (1948) textbooks where they form part of a discussion of the advance of technology, much of which is missing from modern economics textbooks (although CORE does go into it in more detail). This is surprising, given the continuing relevance of much of the material (Marshall, for example, has an interesting discussion of industrial clusters). It is also true that the division of labour is not pursued in mainstream textbooks after the introductory chapters. So, while it is an interesting and vital topic, it is given short shrift and is not linked up to other areas. Other topics tend to be fairly innocuous. One such example that pops up in all five textbooks (but not CORE) is that of Adam Smith’s notion of the invisible hand. Unlike his discussion of the division of labour, this seems to have been retained in modern textbooks as an explanation of the self-organising ability of the market. Quite often it is used as an “aside” to the discussion about the virtues of the market economy compared to the command economy. While this is interesting, the textbooks rarely go into the topic of self-organisation in any detail.

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Conclusions This chapter has discussed the introductory topics of six prominent economics textbooks. Since these textbooks, or others like them, are widely used in economics courses across the world, then it is reasonable to ask why they are being used to introduce economics and how effective they are in introducing economics. The question of “why” seems to be linked up with the history of economic thought. Many of the topics introduced in the opening chapters have a long history in economics, such as scarcity, the invisible hand, the division of labour and comparative advantage. Others, such as opportunity cost, are the remnants of a long forgotten academic debate, which has been superseded by modern economic techniques. The focus on command versus market economies seems to be a hangover from the Cold War clash between capitalism and communism, while also reflecting previous academic debates on socialist calculation. It also seems that the introductory topics are linked up with the publishing history of textbooks themselves. There seems to be a deep conservatism about what should be included in textbooks, so that old debates between command and market economies, for example, are replicated from one edition to another. Even the division of labour has managed to survive jumping from one textbook to another in attenuated form. There seems to be an exaggerated respect for the past so that, any topics that cannot be incorporated directly within the marginalist system that dominates the remaining chapters of introductory textbooks, are often mentioned in the first few chapters. As a result, the topics brought up have a rather scattergun effect. While there are attempts to unify these topics together under one heading, the story that is told rarely carries on into the rest of the book. The topics in the introductory chapters, therefore, look like isolates with few links to the rest of economics. In addition, as we have seen, these topics are often misleading as to the content of economics—decision theory in economics rarely explicitly uses opportunity cost and scarcity is not as crucial to modern economic analysis as is claimed. Furthermore, some of the topics, such as comparative advantage and opportunity cost, are actually quite difficult to teach- an important factor when we are trying to attract students to study economics. It seems that it has been a long time since anyone has thought seriously about how microeconomics should be introduced in the five “traditional”

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textbooks. The current set of topics are a mixed bag and it might be asked just how relevant a student may find a discussion of command economies, division of labour or of comparative advantage, particularly since she may never come across them again. Furthermore, the lack of alignment between the introductory topics and the rest of the course is a serious issue. How can we encourage deep learning among our students if we introduce topics only to dispose of them immediately afterwards? How can we encourage people to understand topics in modern economic theory if they still have the baggage of old ideas being fed to them in first year? One exception to these textbooks is the CORE project, which was deliberately set up as a counterpoint to the others. As such, it has broken away from the classic introductory model put forward in this chapter. It is noticeable that the first topics introduced in CORE are GDP, growth, technological progress, etc., all of which are focussed around an economic history-based narrative. As such, the CORE project avoids the issues that plague the other textbooks, at least at the start. However, some topics do re-emerge, without much change, in Chapter 3, especially scarcity and opportunity cost. In both cases, the problems outlined in this paper reoccur. In conclusion, the CORE project is an enormous improvement on the other five textbooks when it comes to introductory chapters, even though when it does handle topics such as scarcity and opportunity cost, it tends to stick to the same format as the others. Nevertheless, there is plenty of scope for new ways of introducing economics to students and it is incumbent on textbook writers to make it interesting, topical and relevant as well as linking into later economic analysis. The fact that five out of the six textbooks surveyed in this chapter fail to do this, at least to some extent, is a possible explanation for student dissatisfaction with the discipline.

Bibliography Akerlof, G. A. (1970). The market for ‘Lemons’: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500. Begg, D., Vernasca, G., Fischer, S., & Dornbusch R. (2014). Economics. McGraw- Hill Education. Bohm-Bawerk, E. (1890). Capital and interest. Macmillan and Co. Ltd.

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Biggs, J., & Tang, C. (2011). Teaching for quality learning at university. Society for Research into Higher Education and Open University Press McGraw Hill Maidenhead England Byrne, R. M. J. (1997). Cognitive processes in counterfactual thinking about what might have been. Psychology of Learning and Motivation, 37 , 105–154. COREECON. (2016). http://www.core-econ.org/ebook/, Core Project, Economics Department, University College. The Economics Network. (2016). Research: Trends in UK economics education (updated 2016). https://www.economicsnetwork.ac.uk/research/ trends. Accessed 31 May 2019. Edgeworth F. Y. (1881). Mathematical psychics: An essay on the application of mathematics to the moral sciences. Kegan Paul. Green, D. I. (1894). Pain-cost and opportunity-cost. The Quarterly Journal of Economics, 8(2), 218–229. Hayek, F. A. (1935). “The nature and history of the problem” and “the present state of the debate.” In F. A. Hayek (Ed.). Collectivist economic planning (pp. 1–40, 201–43). George Routledge and Sons. Jevons, W. S. (1905). The principles of economics. Macmillan and Co Ltd. Lipsey, R., & Chrystal, A. (2015). Economics. Oxford University Press. Mankiw, N., & Taylor, M. (2017). Economics (4th edn). Cengage Learning. Marshall, A. (1895). Principles of economics 1 (3rd ed.). Macmillan. Menger C. (2007). Principles of economics. Ludwig von Mises Institute. Observer. (2014, May 4). Newspaper Sunday. https://www.theguardian.com/ education/2014/may/04/economics-students-overhaul-subject-teaching OpenSyllabus. (2021, 12th July). website. https://opensyllabus.org/result/cou ntry-field?id_country=GB&id_field=Economics Parkin M. (2016). Economics (12th edn). Pearson Harlow. Quality Assurance Agency for Higher Education. (2015). Economics benchmark. Robbins, L. (1932). Essay on the nature and significance of economic science. Macmillan & co Ltd. Samuelson, P. A. (1948). “Economics”, an Introductory Analysis. McGraw-Hill. Sloman, J., Garrat, D., & Guest, J. (2018). Economics (10th edn). Pearson Education. Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations 1 (1st edn). W. Strahan. Spencer, D. (2004). From pain cost to opportunity cost: The eclipse of the quality of work as a factor in economic theory. History of Political Economy, 36, 387–400. Tobin, J. (1956). The interest elasticity of the transactions demand for cash. Review of Economics and Statistics, 38, 241–247.

CHAPTER 7

Labour Rights, Full Employment, Mental Model Choice and a Dynamic Market Economy Morris Altman

Introduction I model how labour rights, providing workers with effective voice, and providing all levels of management with effective voice, combined with full employment contributes a dynamic, more productive and efficient market economy. This argument, however, stands in stark contrast to the assumption, very much embedded in the conventional wisdom that an empowered labour force negatively impacts the economy from the supply side. An empowered labour force yields higher labour costs, which yields higher unit production costs, which makes firms less competitive, thereby less economically sustainable. This line of argument is also well embedded in Marx’s Das Kapital and Marxian critiques of capitalism—that higher real wages are not sustainable in capitalist economies. This argument

M. Altman (B) School of Business, University of Dundee, Dundee, Scotland, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_7

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is even embedded in Keynes’ General Theory as well as in Keynesian short run modelling wherein lowering real wages (coinciding with sufficient increases in aggregate demand) is a necessary condition to pull an economy out of a recession or depression (see Altman, 2006a, 2006b, 2009). Michal Kalecki (1943), a leading Marxian economist, in his “Political Aspects of Full Employment,” was one of the first to argue that increasing wages is not an obstacle to increasing employment and thereby increasing an economy’s total output or Gross Domestic Product. His argument is strongly embedded on his modelling of the demand side of the economy, assuming a closed economy and persistent excess capacity in this economy. Increasing wages are covered by the increasing output generated by the increased-wage induced aggregate demand and also by the ability of firms to increase (mark-up) prices in a closed relatively uncompetitive environment. Therefore, there is no good rational reason for capitalists to oppose increasing wages out of fear or concern over the increasing power of labour. In this chapter, I draw upon Kalecki’s (1943, 1971) insights on the political economy of full employment—that there can be opposition to full employment for ideological and personal as opposed to solid economic reasons. But I argue that there are rational reasons for capitalists to be concerned full employment even within the parameters of Kalecki’s model, especially if one recognizes that there are different groups of capitalists in his three-sector model, who are differentially affected by wage increases—there are losers and winners amongst the ‘capitalist class’ in Kalecki’s narrative. Moreover, one also has recognize the implications of the supply side of the market (theory of the firm—going beyond Kalecki’s mark-up narrative) and capitalists’ understanding (which need not be accurate) of the implications of wage increases on the unit costs and profits. Kalecki assumes that all capitalists are aware of, understand and subscribe to his model and that they don’t mind that there are winners and losers amongst them and that they are also not at all concerned by Kalecki’s assumed inflationary eventuality generated by full employment. I, therefore, argue that of critical importance to a better understanding of many capitalists (and politicians) opposition to wage rises, are the mental models that drive decision-making (Altman, 2014; Denzau & North, 1994). If one believes that tight labour markets, by driving labour costs upward, will result in less competitive firms, lower profits and less competitive economies one would expect significant opposition to

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full employment by rational capitalists and politicians. This is in addition to the other possible factors that have been identified that might drive capitalist opposition to full employment. Capitalists do not have to have an irrational fear of enhanced labour power (Kalecki’s argument) to be concerned about increased labour power that stems from full employment. A critical contribution of this chapter is to demonstrate the importance of mental models for capitalist and government decision-makers with regard to opposing or supporting full employment policy. I argue that a false mental model typically dominates the decision-making process. The focus of this chapter is also on the supply side. In contrast to the conventional economic wisdom’s or mental model’s assumption that improved labour benefits such as increasing real wages will have negative effects on the economy, I argue (and model) that this need not be the case in a dynamic capitalist economy (working through real or historical time). This would be the case even when the economy is operating at full capacity in a highly competitive environment. This true mental model could shift the policy perspectives of capitalists and policy-makers who have a concern for the viability and sustainability of the market economy whilst also having pro-social preferences. Kalecki’s demand side argument, to the extent that it reflects the reality of capitalist economy, reinforces the supply side argument presented in this chapter as to the viability of a ‘high wage’ economy. Hence, a key point of this chapter is presenting an alternative supply side model of the firm when facing increasing real wages. Another key point is appreciating and identifying the importance of shifting the mental models of decision-makers and their capacity to understand any such models presented to them (model literacy). But another point make in this chapter is the importance of the decision-makers’ preferences. And, these preferences need not be homogeneous across decision-makers. When the utility or wellbeing decisionmakers are enhanced by keeping wages low, even though it is known that higher wages need not harm the competitive position of the firm, then such decision-makers, when in power, will resist the realization and institutionalization of a full employment economy (which is Kalecki’s point). On the one hand, there are capitalists whose utility and wellbeing are enhanced by realizing policy which improves the wellbeing of workers, if this does not undermine the economic sustainability of firms. This underlies the importance of the development of true mental models (the

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viability of high wage regimes, for example), their exposure to decisionmakers as well as to the voting public (in democratic societies), and of power as key determinants of both micro and macroeconomic policy such as whether or not full employment policy is pursued and facilitated. This chapter, therefore, models the sustainability of a full employment—high wage or higher wage economy, from both the supply and demand side; the importance of the mental models adopted by decisionmakers; the significance of false mental models in inducing rational decision-makers into making decisions they would not have made otherwise (such as opposing persistent full employment); and the importance of particular preferences in driving decisions that precludes full employment even though full employment is consistent with a robust competitive economy.

Kalecki on Full Employment Kalecki focuses on the importance of demand side policies-making it possible for full employment to be achieved. Ceteris Paribus, Kalecki (1943, 1971) argues, increased aggregate demand, facilitated by increasing wages results in more employment and even more profits. Therefore, in his model, increasing real wages need not result in lower profits. But it can result in higher prices as firms use a mark-up formula over costs, inclusive of wages to determine their prices (see Asimakopulos, 1978, on mark-up theory; see also Dunlop, 1938; Tarshis, 1939). But given the assumption of monopolistic competition and a closed economy, this should not threaten the competitiveness of the firm. Hence, ‘capitalist’ opposition to full employment (where it exists) is largely of a political nature—it has little to do with objective economic conditions. Some critical points made by Kalecki (1971, p. 8): The redistribution of income from profits to wages as described in the last two sections is feasible only if excess capacity exists [author’s emphasis]. Otherwise, it is impossible to increase wages in relation to the prices of wage goods because prices are determined by demand, and the functions f become defunct.

Fundamental to Kalecki’s narrative is the permanent existence of excess capacity even in the face of full employment. Increasing wages are in some sense covered by the increasing output generated by the demand

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created through increasing wages. Profits are also protected by the ability to increase prices as wages increase. However, profits might fall in certain sectors of the economy, compensated by an increase in another or other sectors. Hence, aggregate profits do not fall. Also, critical to this narrative is that real wages are not necessarily increasing since firms increase their prices in Kalecki’s closed monopolistic economy. In this case, capitalists have nothing to fear from a full employment economy from a purely economic perspective. However, Kalecki (1943, p. 326) argues that with full employment: …the ‘sack’ would cease to play its role as a ‘disciplinary’ measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system. [my emphasis]

Kalecki is assuming that employers believe that full employment will have no impact on their capacity to compete on the market. But is this actually the mental model that ‘capitalists’ adhere to? Even in Kalecki’s theoretical narrative, not all capitalists in all sectors benefit for increasing wages. Moreover, critical to sustained profitability is the ability of firms to continuously increase prices as nominal wages rise in the domain of full employment. And this assumes an unrealistic scenario of a closed economy and perpetual excess capacity. Therefore, rational capitalists might fear full employment as a threat to profitability once full employment is realized and economies are at least somewhat competitive. From a theoretical perspective, Kalecki does not refute the conventional neoclassical wisdom that higher wages might very well reduce profits and make firms less competitive under reasonable competitive assumptions. Also, mark-uprelated inflation is assumed not to be perceived as threat to any members of the ‘capitalist class’.

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One gap in Kalecki’s theoretical narrative is that it does not model the determinants of real wages (the labour market) and how real wages impacts on average costs and profit. And, he does not articulate how higher nominal wages causing higher prices impacts on real wages and how this fits into the microeconomic determinants of employment levels and full employment per se. This is something that Keynes at least attempts to do in his The General Theory (1936; see also Keynes, 1939). And this is also core to behavioural macroeconomics, pioneered by Akerlof and Shiller (2009; see also Akerlof, 2002). A core contribution of this chapter is to address gaps in Kalecki’s theoretical narrative about the sustainability of full employment in capitalist economies, with my focus being largely on the microeconomic dimension. This should also help to better understand why rational capitalists, even those sympathetic to the wellbeing of workers, might be resistant to a full employment economy, if under the influence of ‘false’ or misleading mental models of the economy.

Core Arguments on the Significance of Low Real Wages For most economists, full employment, invariably causes wages to increase, average costs to rise, and profits to fall, generating a crisis in capitalism, a ‘reality’ well known to capitalists. Hence, full employment is a challenge to economically sustainable capitalism. Also, across a range of economic schools of thought or methdologies increasing employment increase requires a drop in real wages. This latter point is adhered to by classical and Keynesian economists, with some exceptions (Altman, 2006a, 2006b). The debate is on how to achieve lower real wages to increase employment and if this is even a possibility, especially if one assumes rational or reasonably smart individuals (workers in particular). Indeed, for classical and new classical economists, rational workers would be unwilling to accept lower real wages, and this yields higher ‘equilibrium’ unemployment rates. Efforts to reduce real wages by increasing prices will generate inflation as opposed to lower real wages and lower unemployment rates. There is no causal trade-off between inflation and unemployment—more inflation yields less unemployment. Related to this, increasing aggregate demand only has the effect of increasing prices unless workers accept lower real wages as a group (see Friedman [1968] for the classic contemporary rendition of this perspective). Kalecki

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assumes that increasing demand will increase employment because he implicitly assumes that increasing nominal wages should not impact on profits since capitalists, according to Kalecki, have the capacity to increase prices at will, given monopolistic product markets. Kalecki also assumes that capitalists should not and are not concerned about inflation as one closes in on full employment. Amongst some non-mainstream economists, unemployment is regarded as an important disciplinary device to force workers to work harder; otherwise, effort per unit of labour input diminishes and average cost increases. This generates higher unemployment rates (Shapiro & Stiglitz, 1984). Full employment, by increasing the bargaining power of labour, allows workers to work less hard (which is assumed to be their preference), reducing effort inputs, thereby, increasing average cost. Profits would also be reduced. Because effort is a discretionary variable in the Shapiro and Stiglitz narrative, higher rates of unemployment are required, than would be otherwise, to force effort levels upwards.1 In this case, one has a mental model wherein capitalists should fear full employment since full employment is predicted to make firms less productive and less competitive. This argument can be illustrated in Eq. 7.1 (based on Altman, 1998, 2005, 2006a, 2006b), assuming a simply one input economy, where AC is average cost, W is the wage rate and Q/L is output per unit of labour input. Reducing effort input reduces Q/L or labour productivity which, in turn, increases average cost, ceteris paribus. In the Shapiro and Stiglitz type model, full or fuller employment yields higher average costs. The same argument holds true for a multi-factor input model. W AC =   Q L

(7.1)

The above scenario is very much part and parcel of the efficiency wage narrative, first articulated by Leibenstein (1958) and then extended to the macroeconomic domain by Akerlof and Yellen (1988, 1990; see also Yellen, 1984). In efficiency wage theory, there is a positive relationship between real wage rates and effort inputs. Unlike in the conventional 1 Given that effort is a discretionary variable, profits can only be maximized if effort inputs are increased using a relatively higher unemployment rate as a disciplinary device. A concave production function is assumed.

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modelling effort is realistically assumed to be a variable input into the process of production and, therefore, in the production function. In the Akerlof and Yellen narrative, rational capitalists will not reduce real wages during a recession or depression to facilitate an increase in employment even given a sufficient level of aggregate demand required to increase employment. In his narrative, capitalists know that rational workers will retaliate to wage cuts by reducing effort inputs. The most productive workers will also seek employment elsewhere as they will reduce their trust with current employers. Basically, workers want to be treated fairly. And, introducing fairness into one’s modelling narrative or mental model results in higher ‘equilibrium’ unemployment rates than would exist if effort inputs are fixed and fairness has no impact on labour productivity. To the extent that full employment enhances the bargaining power of labour, this can result in a higher ‘equilibrium’ efficiency wage and, thereby, in a higher ‘equilibrium’ unemployment rate.2 In efficiency wage narrative, there is an equilibrium efficiency wage that minimizes average cost or maximizes profits. This uniqueness is a function of the assumption of a concave production function with a unique maximum—this particular production function is assumed. It is not reality based. From this perspective, higher wages above the equilibrium efficiency wage, that’s a product of lower rates of unemployment, poses the greatest threat to employment. But it would also threaten profits, given demand, when the higher wage rates rise above the equilibrium efficiency wage. In this efficiency wage narrative, the key to lowering the rate of unemployment is to lower real wage rates through inflationary policy (Akerlof’s, 2002; see also, Akerlof et al., 2000). When inflation is low, rational workers would not find it worth whilst (in terms of transaction costs) to pay attention to the resulting cut in their real wages. Capitalists would find this acceptable because the lower rate of unemployment is profitable given the cut in real wages. Also, in this scenario the efficiency wage does not change since the workers are not paying any attention to the reduction in their real wage rate. If they did, inflationary policy would have no effect on the unemployment rate. It is important to appreciate the theoretical framework or mental model that informs important cohorts of economics expertise and that would raise rational concerns amongst capitalists about high or higher 2 The role of full employment in affecting the equilibrium efficiency wage is an extension of the Akerlof (2002) narrative which I can’t detail in this chapter.

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real wages. This assumes that capitalists accept the basic premises of the conventional model, even at an intuitive level. Critical to the conventional model is the assumption of a marginal product of labour function that is subject to diminishing returns. In Fig. 7.1, along the marginal product of labour curve MP0, when aggregate demand drops, employment diminishes from Lo to L1 which, in turn, results in the real wage rate increasing from W0 to W1. For Keynes, reducing real wages is required to restore employment to L0 though increasing aggregate demand. Increasing aggregate demand without reducing real wages appropriately (to W0) will not result in restoring employment to its pre-fall in aggregate demand level (L0). But Keynes argued that the most practical way of reducing real wages, which would be consistent with the preferences of most workers and unions, is through inflationary policy measures facilitated by increasing aggregate demand. This would be acceptable to workers since there would be no change in their relative positioning in terms of real wage rates. And, they would know that this cut in real wages, which all workers must endure, is a product of the government increasing employment by increasing aggregate demand. Keynes does not envision any capitalist opposition to this type of government policy since it is consistent with their maximization of profits. However, workers would oppose individual firms’ efforts to independently reduce wages, since there is no guarantee that employment will be increased or that their employment will be more secure. There is also no expectation that other firms will do the same, hence workers in one firm might very well experience a diminution in their relative position respect to their wage rates relative to workers in other firms.

Fig. 7.1 Neoclassical and efficiency wage labour market

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In the efficiency wage model discussed above, efforts to reduce real wages, results in workers reducing their effort inputs. The consequence of this is illustrated by a shift in the marginal product of labour curve from WP0 to WPEF as real wages are reduced from W1 to W0. As a result, employment will not increase. In this sense, full employment is not possible for rational efficiency wage consideration. This is a more theoretically sophisticated version of Keynes’ argument that workers will resist employers’ efforts to cut real wages. As mentioned above, in Akerlof’s (2002; see also, Akerlof et al., 2000) narrative employment increases if real wages are reduced through inflationary means. This argument is also, ultimately, similar to Keynes’, as discussed above. In Akerlof’s narrative, as in Keynes’ there is no discussion of capitalist resistance to full employment, where the latter is important to Kalecki. For Akerlof and Keynes, there is no rational reason for capitalists to oppose full employment as individuals or as a group when this entails falling real wages. But these narratives do not articulate what might transpire when increasing aggregate demand results in increasing real wages and the mental model that capitalists employ to understand the implications of this for their profits and the competitiveness of their firms.

An Alternative Model I apply an extended version of x-efficiency theory (developed elsewhere over the past 3 decades (for example, Altman, 1998, 2006b), where effort is a discretionary variable. X-efficiency theory was first developed by Leibenstein (1966) to help explain why firms with similar traditional factor inputs are characterized by large differences in productivity. Extending this benchmark model, I construct a reasonable scenario whereby higher wages incentivizes firm members to work more efficiently and to engage in higher levels of technological change (induced technical change) (on such technical change see Altman, 2009). This posits an alternative to the conventional economics mental model that can inform capitalists and public policy decision-makers when considering the implications of full employment and could inform any rational opposition to full employment. Of course, in the conventional model, full employmentinduced higher real wage rates will increase prices and/or reduce profits making firms less competitive. In the alternative model, tight labour markets, which yield higher real wages, are consistent with competitive market economies, especially if firms are supported in their efforts to

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increase labour productivity, by government, in response to the initial challenge of higher real wages. To the extent that the alternative mental model is a more accurate representation of what can occur inside of the firm, and this is believed to be the true mental model, this can generate practices and policies that would not be advanced had the alternative mental model not been available and understood. This alternative model provides a micro-foundation for understanding the impact of higher real wages on the level of equilibrium employment from the supply side. Unlike assumptions embedded in conventional and non-conventional approaches to the labour market, discussed above, this behaviouralist and institutionalist modelling assumes that effort input is affected by the work and competitive environment, as is the extent of technological change.3 Tight labour markets are what empowers workers, driving up their real wages (and related benefits) which, in turn, can incentivize increasing effort inputs (which incorporates working smarter and harder), thereby increasing productivity. This same type of tight labour market environment also incentivizes management to work harder and smarter. This theoretical narrative is consistent with the efficiency wage narrative developed by Leibenstein (1958), and then elaborated upon by Akerlof and Yellen (1988, 1990). I argue this is the more accurate theoretical narrative (compared to the conventional one) and if adopted by decision-makers, both inside and outside of the firm, would facilitate their acceptance of full employment policy as being consistent with being competitive and with low levels of inflation, where inflation tends to be assumed to be a function of efforts to keep the level of unemployment at relatively low levels. The Basics of the Alternative Model Labour productivity is a function of the conventional variables, such as capital (K) and land (L), plus effort input (e). It is also a function of technical change (T) which can be induced by tight labour market related conditions. Unlike in the conventional models, effort is not fixed and technical change is not necessarily exogenous. Rather, effort is a variable input and technical change can be endogenous. Also, unlike in the original x-efficiency model, where managerial effort preferences drive labour

3 This narrative has its roots in Adam Smith’s, The Wealth of Nations.

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productivity, in the alternative extended x-efficiency model (Eq. 7.2), real wages (and overall working conditions), managerial preferences (M), effort input (e), technical change (T) and labour (Q/L) productivity are interactive variables (Altman, 1998, 2006a, 2006b, 2009). Q = f (K, N, M, e, T) L

(7.2)

To the extent that changes in effort input and, therefore, in productivity, changes sufficiently to offset changes in real wages (labour costs overall), changes in real wages would be consistent with a constant average cost. This point is illustrated in Eq. 7.3, where AC is average cost, w is the wage rate, Q is output and L is labour input. For example, a 10% increase in w need not increase average cost if this results in a 10% increase in productivity (Q/L). And, a 10% decrease in wages will not reduce average cost if this results in a 10% decrease in productivity. In this sense, a weak labour market will not or, at least, need not result in firms becoming more competitive. This argument would more easily obtain when there are more variables in the production function. More realistically, if labour represents only 50% of total costs, a 10% increase in wages requires a 50% of the 10% increase in wages or a 5% increase in productivity for average cost not to increase. And if labour comprises only 20% of total cost, a 10% increase in wages requires only a 2% increase in productivity (20% times 10%) for average cost not to increase. W AC =   Q L

(7.3)

If there is a range of wage rates wherein average cost is constant as wage rates change due compensating changes in labour productivity related to induced changes in the quality and quantity of effort inputs one would have a type of multi-equilibrium across a range of wage rates. If one allows for induced technical change this makes possible even further increases in real wages to be consistent with a constant average cost as induced technical change, induced by tighter labour markets, generates productivity increases sufficient to neutralize increases in real wages. Unlike in the conventional economics models, technical change can be driven or incentivized by cost factors such as increasing wage rates. Therefore, technical change becomes endogenized as opposed to being exogenously determined (Altman, 2009). This alternative modelling of

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Fig. 7.2 Real wages, X efficiency, technical change and average cost

the impact of changes in real wage rates on average cost is not what currently informs decision-making. This alternative model is illustrated in Fig. 7.2. Note, in the standard efficiency wage model there is a unique equilibrium given by some unique efficiency wage. And this unique equilibrium generates a higher rate of unemployment then would arise if effort inputs are fixed at some maximum. This is in contrast to my alternative model where there is a multiple equilibrium allowing for a range of real wage rates which compatible with a unique average cost. In Fig. 7.2, the conventional model’s prediction is given by line segment A-Conventional. In this scenario, improvements in real wages increase average cost, damaging the firm’s competitiveness. And, these increased wages can be the expected outcome of tight labour markets that are a consequence of full employment. In the alternative model, increasing real wage rates have no effect on average cost, given by 0c or Ad and average cost curve BE (behavioural economics). In this case, one has the above-mentioned multiple equilibrium, wherein effort variability allows for productivity changes to offset any increase in costs related to increases in real wages. Eventually, one would expect diminishing returns to set in and average cost to increase as wage rates rise. But this need not take place with induced technological change, yielding a shift in the average cost curve from BE to BETC. Over real historical time, both increasing levels of x-efficiency and induced technical change can allow firms to remain competitive in the face of full employment-induced increases in real wage rates. In this modelling scenario, higher real wages, need not be an obstacle, on the supply side, to increasing employment. And, ‘full’ employment and, therefore, full capacity production, by facilitating increasing real wages, would not undermine the sustainability of the firm.

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Rather, full employment and tighter labour markets generate a more dynamic capitalism, which is consistent with the worldview of Adam Smith, where workers benefit from the market economy and the world of work. Moreover, increasing real wages to workers need not come at the expense of income to capitalists. There is no zero-sum game here. This point is illustrated in Fig. 7.3. In this Edgeworth Box diagram, in the static conventional model, increasing real wages and the real income to employees or workers comes at the expense of income to capitalists, in this one sector model, as one moves from La to Lb. In the alternative model, this should not be the case, since increasing real wages is accompanied by increasing productivity as both the level of x-efficiency and the extent of induced technical change increase. This is illustrated by an expansion of the Edgeworth Box diagram to the right from K to K’. In this scenario, workers benefits’ are not at the expense of capitalists’ material benefits. From this diagrammatic perspective, it is also clear that society is better off in the high wage regime. But it is also useful to appreciate that capitalists, as a group, might be in the same material situation, in terms of aggregate real income, in both the low and high wage regimes. But is also possible that both ‘classes’ can share in the riches of this dynamic growth process when productivity growth exceeds wage growth. It is also important to note here that a firm can remain competitive in either a high or low wage regime. If capitalists or certain capitalists accepted this alternative mental model as the most accurate representation

Fig. 7.3 X efficiency & the distribution of income

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of reality, they could be indifferent between the low and high wage regime all other things remaining the same. Both wage regimes are no different in terms of average cost even at full capacity production where real wage pressures can be relatively high. The rate of profit across all wage regimes can also be the same given the assumptions being made.

Why Rational Capitalists Might Resist or Embrace Full Employment Policies If capitalists accept the conventional microeconomic foundational mental model that higher real wage will increase average cost and invariably lower profits, they would be expected to oppose policy that increases real wage rates, such as full employment policy. This would be the case even for capitalists who sympathize with the conditions of workers in general. Even such sympathetic capitalists are unlikely to support policy that they believe will damage the economic sustainability of their firms. Even in Kalecki’s model not all capitalists benefit from higher levels of employment. Moreover, in Kalecki’s model capitalists are protected from higher real wages if they have sufficient monopolistic power to adequately mark-up prices. But in this scenario, real wages are not necessarily increasing. Rather, nominal wages are increasing along with prices, with causality running from wage rises to inflation, which might be of concern to some capitalists given its price effect on inputs. Therefore, even if capitalists accepted Kalecki’s modelling scenario, a multitude of rational capitalists might very well oppose full employment and, relatedly, full capacity output policy. The alternative model presented above provides a micro-foundation for understanding how and why full employment policy need not cause firms economic harm and capitalists a loss of income. If this mental model was accepted by capitalists as a more accurate presentation of reality, then, on the surface, there would be no good rational economic reason for capitalists to oppose full employment policy. This should be especially the case for those who are sympathetic with the wellbeing of employees. However, the ability of firms to respond to real wage rate increases by sufficiently increasing productivity is a dynamic process and requires an investment in continuous productivity improvement. This also incorporates the need for corporate leaders to invest more time and effort to sustain this productivity enhancing process. We are making the reasonable assumption that these costs would be recovered through the increased productivity of firms. Also, the high wage path generates more employee

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loyalty, which is associated with lower costs to the firms and higher quality effort inputs from employees. Capitalists who are indifferent to the wellbeing of their employees might rationally choose the relatively low real wage regime since it involves less short-term investment in their firm(s). And these capitalists would be ‘maximizing’ their utility or wellbeing in the low wage regime. However, one would expect that rational capitalists who are sympathetic to the wellbeing of their employees will choose the higher real wage regime given that it should not negatively impact on the economic sustainability of their firms. This raises the important point that one should not assume that all capitalists are alike in terms of their preferences. Kalecki models, perhaps in the Marxist tradition, capitalists as identical economic agents with identical preferences, all aligned for reasons of power and preferences against high wage regimes. This is a very simplistic assumption that does not reflect the reality that capitalists can be divided on this front, and be supportive of different types of capitalisms, not only lower wage regimes. Following from this, a key point I would make is that understanding the alternative mental model or models can shift the preferences of sympathetic capitalists towards supporting high wage regimes. If such capitalists are not versed in alternative mental models and make their decisions based on the conventional ones, then they will oppose policy that will encourage increasing real wages. From this perspective, mental model availability, being aware of and understanding creditable alternatives to the conventional mental models becomes a critical determinant of the support that full employment policy will have amongst what, might very well be, an important class of capitalist. Support for full employment policy amongst such sympathetic capitalists would increase if government policy and support are oriented towards facilitating the transition from a low to high wage regime. Such policy reduces the short-term cost of introducing a higher wage regime. This directly speaks to the mental model that government and its supporting bureaucracy adhere to in formulating policy. Hence, providing a plausible alternative mental model to government and officials can shift government policy towards supporting a transition to a higher wage economy. Mental models can, therefore, shift the demand for different types of wage regimes. The alternative model presented above can shift the demand or support for full employment-higher wage regimes. But there can be capitalists who will resist full employment policy that will facilitate increasing real wages even if they believe that this will have

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no negative effect on average cost or profit. In Kalecki’s narrative, this type of capitalist is the typical or representative capitalist, which need not at all be the case. I would argue that there is a cohort of capitalists who oppose a high wage economy because this diminishes their power in the economy and their relative positioning with regard to income since a higher wage regime can reduce the income gap between capitalist and workers or employees. This would serve to reduce the utility or wellbeing of this type of capitalist. A powerful force in facilitating increasing support amongst capitalists for a full employment economy is providing a plausible alternative to the conventional model. I believe that the alternative model articulated in chapter is a step in the right direction. But this model must be available, known and understood to influence the decisions made by capitalists and by policy-makers. Even if the effect of such model availability initially only shifts the preferences of sympathetic capitalists this can have a positive impact on capitalists with other preferences through peer effects and the preference for some for social stability, which can very well be part of the preference function of even the more narrowly self-interested capitalists. This being said, a powerful force incentivizing a higher wage regime and in incentivizing exposure to and a better understanding of alternative models of the economy is economic policy that works towards maintaining tight labour markets and supports capitalists in their journey of developing economically sustainable higher wage firms. Related to this is policy that further empowers workers, providing them with more effective voice. This enhances their bargaining power, further incentivizing relatively high wage regimes. Even capitalists who do not favour higher wage regimes, despite understanding that these will cause them no economic harm, are forced to adjust their practical firm objectives and management regimes to remain competitive and to increase their income by increasing productivity. This is as opposed to keeping real wages rates at relative low levels and at a relative low rate of growth. Ultimately, for high wage economies to be most sustainable and competitive, workers and capitalists as well as government must co-operate in the journey of increasing firm productivity.

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Conclusion High real wages generated by full capacity full employment are consistent with and contribute to a dynamic market economy. It is also consistent with a market economy that is fairer and more equitable. Full employment need not generate an economic crisis in capitalism. This follows from a behavioural microeconomic foundational model articulated in this chapter. It adds further substance to macroeconomic arguments for a profitable capitalism modelled by Kalecki. But Kalecki’s model requires less than full capacity production and the ability of firms to mark-up prices as nominal wages increase when full employment macroeconomic policies are employed. His model also predicts that there will be sectors of economy where capitalist profits will necessarily deteriorate. Therefore, rational capitalists, I argue, have an economic reason to be concerned about the repercussions of full employment even if they accept Kalecki’s mental model of the economy. This would be the case even though his perspective is much more optimistic with regard to the impact of full employment on profits than the conventional economics mental model. The alternative mental model presented in this chapter suggests that under reasonable assumptions; full employment-full capacity production should not increase average cost nor reduce profits. Full employmentinduced increased real wage rates should be consistent with no increase in average cost and no reduction in profits. Moreover, in the alternative model, less than full employment rates of unemployment are not required to discipline labour into being more productive and to keep real wage rates relatively low. Rather, it is higher real wage rates that incentivize all members of the firm, across the board, into being more productive. Rational capitalists should not be wary of full employment capitalism if they understand that full employment is not a threat to the competitiveness and profitability of their firms. However, as Kalecki surmises, this need not suffice to garner the support of capitalists across all sectors of the economy. This would be particularly the case, I argue, for those capitalists who are not sympathetic with the wellbeing their employees. A fundamental determinant of employment policy, I argue, is the mental model or theoretical frame employed by decision-makers. Belief in the conventional mental model and even in the Kalecki an alternative would help explain why rational capitalists, even those sympathetic to the wellbeing of their employees, would resist full employment policy and

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any other policy that would facilitate increasing real wage rates. An understanding of the alternative mental model or theoretical frame presented in this chapter should encourage capitalists, public policy experts, and government representative sympathetic to the wellbeing of workers, to support full employment policy. False or misleading mental models have had the opposite effect with deleterious effects on economies, worldwide. Changing mental models is, therefore, critically important to developing a fairer and more vibrant market economy. For other capitalists, even if higher real wages are now understood not to pose an economic threat, they might impose an existential threat. If such capitalists dominate the decision-making process, policy that promotes the realization of higher wage regimes will falter even when these regimes are known not to pose an economic threat and will most likely incentive a more dynamic, vibrant and competitive market economy. Hence, the importance of more accurate, empirically grounded, theory to inform decision-makers and the general public. Only a coalition of sympathetic capitalists and policy-makers informed by evidence-based mental models can impose, through the democratic process, policies that will generate full employment and, relatedly, higher wage regimes. But this will not take place as long as conventional economic models dominate, wherein higher real wage rates represent an economic threat to a viable and sustainable market economy.

References Akerlof, G. A. (2002). Behavioral macroeconomics and macroeconomic behavior. American Economic Review, 92, 411–433. Akerlof, G. A., & Shiller, R. J. (2009). Animal spirits: How human psychology drives the economy, and why it matters for global capitalism. Princeton University Press. Akerlof, G. A., Dickens, W., & Perry, G. (2000). Near-rational wage and price setting and the long-run Phillips curve. Brookings Papers on Economic Activity, 1, 1–60. Akerlof, G. A., & Yellen, J. L. (1988). Fairness and unemployment. American Economic Review, Papers and Proceedings, 78, 44–49. Akerlof, G. A., & Yellen, J. L. (1990). The fair wage hypothesis and unemployment. Quarterly Journal of Economics, 105, 255–283. Altman, M. (1998). A high wage path to economic growth and development. Challenge: The Magazine of Economic Affairs, 41, 91–104.

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Altman, M. (2005). Behavioral economics, power, rational inefficiencies, fuzzy sets, and public policy. Journal of Economic Issues, 39, 683–706. Altman, M. (2006a). What a difference an assumption makes: Effort discretion, economic theory, and public policy. In M. Altman (Ed.), Handbook of contemporary behavioral economics: Foundations and developments (pp. 125–164). M.E. Sharpe. Altman, M. (2006b). Involuntary unemployment, macroeconomic policy, and a behavioral model of the firm: Why high real wages need not cause high unemployment. Research in Economics, 60, 97–111. Altman, M. (2009). A behavioral-institutional model of endogenous growth and induced technical change. Journal of Economic Issues, 63, 685–713. Altman, M. (2014, September 11–14). Mental models, bargaining power, and institutional change. World interdisciplinary network for institutional research, Old Royal Naval College, Greenwich, London, UK. Asimakopulos, A. (1978). An introduction to economic theory: Microeconomics. Oxford University Press. Denzau, A., & North, D. C. (1994). Shared mental models: Ideologies and institutions. Kyklos Fasc, 47 (1), 3–31. Dunlop, J. T. (1938). The movement of real and money wage rates. Economic Journal, 48, 413–434. Friedman, M. (1968). The role of monetary policy. American Economic Review, 58, 1–17. Kalecki, M. (1943). Political aspects of full employment. Political Quarterly, 14, 322–330. Kalecki, M. (1971). Class struggle and the distribution of national income. Kyklos, 24, 1–9. Keynes, J. M. (1936). The general theory of employment, interest, and money. Harcourt. Keynes, J. M. (1939). Relative movements of real wages and output. Economic Journal, 49, 34–51. Leibenstein, H. (1958). The theory of underemployment in backward economies. Journal of Political Economy, 65, 91–103. Leibenstein, H. (1966). Allocative efficiency vs. ‘X-efficiency’. American Economic Review, 56, 392–415. Shapiro, C., & Stiglitz, J. E. (1984). Equilibrium unemployment as a worker discipline device. American Economic Review, 74, 433–444. Tarshis, L. (1939). Changes in real and money wages. Economic Journal, 49, 150–154. Yellen, J. L. (1984). Efficiency wage models of unemployment. American Economic Review, Papers and Proceedings, 74, 200–205.

CHAPTER 8

Reflections and Experiences of an Economics Degree: A Plea for Pluralism Louis Bryson, Emma Madill, and Stoyanka Stoimenova

Introduction The world has been, and always will be, in a constant state of change (Alexander et al., 2004). It can be seen amongst all living things, and the products of those things, that if something were not to adapt to new situations, it would cease to be useful and would become resigned to history. How has it come to pass, then, that an academic discipline so vital to the functioning of society—such as economics—has found itself distanced from reality in its teaching and refuses to adapt to a more complex world?

L. Bryson (B) · E. Madill · S. Stoimenova University of Dundee, Dundee, Scotland, UK e-mail: [email protected] E. Madill e-mail: [email protected] S. Stoimenova e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_8

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This chapter uses the experiences of three recent economics graduates to help answer this question. Drawing on our experiences as a base for analysis, this chapter aims to discuss the problems with the teaching of math, theory and models in economics, before relaying this to our primary motivation for writing this chapter—to add our voices to the vast numbers calling for pluralism (Screpanti & Salanti, 1997).

Our Expectations The tranquil setting for our economics education was a far cry from the contextual reality that most young people worldwide are faced with: a world ablaze. Skyrocketing global inequality, persistent and worldwide extreme poverty, international conflicts causing humanitarian disaster, an ongoing climate catastrophe and the fallout of the biggest economic crash in recent times (Food and Agricultural Organisation of the UN, 2019). Before coming to university, none of the three of us had any formal economics education. We were all keen readers of economic material, however, with experience reading about economic policy and watching economics programmes online, as well as related political and philosophical material. It was this prior knowledge that directed us to the field of economics in the first place, and our ideas on what an economics degree entailed would thus impact our experience of it. We expected the theoretical side to our degrees to be focussed around trying to encourage debate on how to solve the aforementioned problems. How can inequality and poverty be eliminated or reduced? What are the potential economic incentives that encourage conflict? What is the economic result of war and can economic means be utilised to help encourage peace? Is there structural and economic causes behind the climate disaster, and if so, what can we do? Our overwhelming expectation coming into first year was that an economics degree should be a forum of free thought for students to explore different economic systems from all over the world and from different times in recent history. Different schools of economic thought, not only limited to the more mainstream market principles, should be explored by students when looking at these problems, developing amongst students the critical thinking skills to allow them to arrive at their own opinions and solutions. Economic theory, then, should almost always be tied to wider societal problems and phenomena. We expected to learn a lot at university, including a lot of theory, but we did not expect economic theory to be taken as given,

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with discussion on the suitability of the theories left outside the relevant curriculum of core modules. This point will be further expended upon in the ‘teaching theory’ subsection. Our expectations of more practical economic modules were that theories and models would be put to use to describe case studies of both successful and unsuccessful economic events. Since Stoyanka and Emma studied Economics alongside international business, they hoped to gain the vital background and context for theories in international business. The way they expected to gain this perspective was to explore different theories and models to describe a specific case study, to give them a knowledge of practical application of economics they could take further into their education. A key aspect of this was demonstrated through the use of the CORE textbook which primarily used cross-discipline tactics, such as conceptualisation and the application of economic notation in real life examples to fully understand theory’s outcomes and limitations (Team CORE, 2017). Initially in our degrees, our image of practical economics was partly satisfied with the module exploring the financial crash of 2007 (Cline, 2014). However, the rest of our degrees strayed further from the case study focussed type of module, which will be explored further under the ‘teaching models’ section.

The Teaching of Maths Although it may not seem directly linked to the crux of this chapter—a call for increased pluralism—it is important to first discuss our experiences of the teaching of maths in economics, including the effects this had on our perception of certain theories and models. In a more specific sense, we found that math classes at level one and two were boring, too basic, and seemingly abstract (to the student) from the rest of economics. At first, this may seem like a non-issue—we are sure many students in other fields wouldn’t mind having an easier start to an otherwise challenging module. However, these easier maths classes were usually offered instead of regular class for the first few weeks, meaning students who already had the required level of maths missed out on valuable time in an already time restricted degree. It is important, however, that all students are proficient in enough maths to do analysis tasks. Our suggestion would be to make the more basic classes available to students alongside normal classes for the first weeks, and then move on

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as a whole class to more relevant and challenging analysis in the middle of the module. In a more general sense, maths in economics should always be immediately tied to theoretical or analytical questions, or even case studies, otherwise it is difficult for students to maintain interest. For example, in finance or microeconomics modules students could study the accounts and options available for companies that have gone through difficulty, such as Debenhams (Eley, 2020), and calculate options available for them. An example for macroeconomics could be in second year, after applying theory in practical settings such as the ‘econland’ programme, relevant mathematical analysis could be brought in alongside the practical work (Harvard Business Publishing, 2018). This would help highlight the intricate overlapping variables, which would not be apparent when studying either mathematics or theory alone. At this stage, our recommendations for the teaching of maths start to overlap with many pluralist teachings. Sound mathematical work alongside economic theory is in no way acceptable ‘proof’ of the correct theory—unlike it would be in a pure science subject—and it should never be treated as such. If the conclusions of mathematical analysis on a microor macro-level are that the studied actor was doomed, this should open wider discussion more broadly on the suitability of the economic structures these actors existed within, introducing less mainstream theories into discussion. In addition to this, there are cases where mathematical work alongside theory may not be particularly useful, for example, if the theory makes sense without mathematics and does not necessarily need it for analysis. On a similar note, students should not necessarily waste time learning mathematical analysis for models that have less than concrete theoretical foundations. In such cases, it is more useful for the student to instead explore heterodox alternatives.

The Teaching of Theory A quick look at the prospectus page of almost any economics degree will show you the skills an economics degree claims to give you: data analysis; a knowledge of current events; problem solving; and critical thinking skills. However, an economics student can only truly develop critical thinking skills if they are able analyse a situation from the perspective of a wide knowledge of economic theories. For example, a student well versed in monetarism can only use monetarism to analyse a problem

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and may sometimes land upon a relatively agreeable solution—the phrase ‘a broken watch is still correct twice a day’ comes to mind. However, if an effective and moral solution cannot be found in monetarism, as an economics student, they need to be able to use different theories to think about the situation. It should also be noted here, that for the purpose of this example, teaching Keynesianism as the alternative to monetarism also isn’t sufficient on its own, because it still leaves students with a fairly narrow scope of analysis, and thus more heterodox approaches should also be given consideration (Corporate Finance Institute, 2021). Our overwhelming experience learning theory is that heterodox theories must be taught earlier than the end of third year/start of fourth year. Although we consider ourselves lucky to have learnt about any heterodox theories at all, a late introduction of these does not give the student enough time to become as analytically versed as they are in more mainstream theories. In addition to this, a late entry of heterodox theories indirectly condemns students to not having the critical and analytical abilities to properly explore these theories (Salemi, 2005). For example, in a fourth-year module we were asked to critically evaluate different theories on the concept of competition, which many students initially had a difficult time grasping because they had been stuck learning mainstream perspectives for so long they simply didn’t have the prior knowledge or the relevant critical ability. There were also problems with the more mainstream theories we were taught. Much of the first two years is spent learning foundational market concepts such as marginal utility and equilibrium, which, by the end of second year and third year, the student finds out are not particularly useful and are flawed and outdated (Goolsbee, 2013). Another example of this is the concept of diminishing marginal utility, which we were given the example of number of beers consumed on a night out. Supposedly, participants in the stated preference survey were shown to display less satisfaction with each additional unit of alcohol they consumed. However, the conclusion that such a relationship is universal is clearly false. To some students, it is the accumulation of pints making them inebriated that gives them positive utility from drinking. One ‘pint’ may have zero or even negative total utility to them. The intention seems to have been to cast diminishing utility as an iron law of human nature, which is not the case (Cost, 2019). Despite the apparent weaknesses in mainstream theories, in many modules the weaknesses of said theories are only discussed superficially or in passing, without much thought on the real-world effects that

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the continued propagation of these schools of thought has. In addition, when the weaknesses were discusses, they were often discussed from the point of changes you could make to the theories, or similar theories that could be used. Discussion on alternative theories was often not part of the recognised curriculum, with solutions based around the potentially inherent failings of market economies almost non-existent in most core modules. In general, economics as an academic discipline lacks historical context and was also lacking in our experiences as economics students. In many core modules, mainstream economics theories are presented to students the same way that these theories present themselves to the wider populace: as human nature based, rationally derived and generally well working. However, this view does not portray the reality—the current mainstream theories are simply the current winners of centuries long struggles of different ideas, philosophies and classes (Schöller & GrohSamberg, 2006). In particular, the economic history of the last one hundred years is vital context to modern economics and can’t be deprioritised. Capitalism’s victory over socialism in the twentieth century has resulted in a self-congratulatory attitude within the current economic mainstream, resulting in the two-dimensional teaching of economics we see today, and the mass societal and environmental problems that the current order brings (Sachs, 1999). Further exasperating the problem is that in contemporary discourse political terms such as democratic and authoritarian are often convoluted with economic terms such as capitalist and socialist, an unnecessary and often untrue narrative that economics students should ideally be equipped to deal with and ascertain more concrete facts (Sachs, 1999). An economic/political history module would help do away with the ideological supremacy of mainstream economics in university, allow students the background needed to create informed opinions on the future directions for economics, as well as having the additional benefit of helping put modern theories such as feminism, ecology and post-colonialism into their historical context.

The Teaching of Models The process of teaching outdated and flawed theory in core economics modules extends to the teaching of models, many of which have questionable assumptions and leave students in doubt on their actual purpose.

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A primary difficulty we faced in understanding the purpose of model teaching more generally was what any specific model was able to achieve in the real world. For example, the Mundell-Fleming model was somewhat useful in explaining certain macro-relationships and helped students understand the interactions between goods and money markets. However, it was not made entirely clear that in modern economics this is effectively the practical extent of this model (Wang, 2005). Few, if any, use this model for predictions or forecasting. Thus, beyond passing an exam and having an understanding of the goods-money market, the amount of time spent on this model seems disproportionate to its actual usefulness. There was also only limited discussion in core modules of the usefulness of models more generally. Economists such as Krugman and Stiglitz debate the usefulness of models extensively, and it is a relevant debate in contemporary economics, but if mentioned it was only done so as a passing footnote, rather than a key component of model teaching. In addition, as was the same with the teaching of theory, model teaching only interacted with the criticism of models in a superficial way, neglecting the real-world effects of the continued propagation of potentially flawed schools of thought, and stifling any debate on the suitability of mainstream economic structures. It left us with the impression that many core modules that focussed on models existed to give legitimacy to mainstream theories (Borg, 2010). It would be much better to give students the critical thinking skills they should be entitled to as economics graduates. There were also some specific, and surprisingly well-documented flaws, with the models we were taught in university. Most undergraduate taught models take equilibrium as a natural given, forcing students to focus on trying to find stable steady states. This is a fairly outdated assumption to make, with the teaching of models more focussed on an unstable and moving equilibrium point both more realistic, as well as a potential explanation for the boom-bust cycle that market economies have as inherent feature (Boland, 2017). The assumptions of perfect rationality and information of actors are also a relic from a romanticised era, which should not be entertained beyond a surface or historical level in modern economics teaching. It should also be made clear to students that the use and selection of assumptions themselves is a theoretical, and hence ideological decision. The very creation of models is not exempt from the ideological presupposition of those that champion it. Thus, the use of models is not, and cannot, be a purely scientific act—and students should be wary

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of the supposed sensibility of certain models in the legitimising act of mainstream economics. These points lead to a similar conclusion to the previous section— that students are not encouraged to engage with theories or models on a critical level. Problems with models are only examined superficially, and very limited discussion is hence brought forth on the suitability of models more generally, or of the economic systems these models claim to represent. Furthermore, it should be thoroughly emphasised to students the power economic ideas and models have on political decision making. For those not entirely versed in the intricacies of economics, i.e., politicians and some civil servants, models are an easier way to come to grips with economic situations, and therefore, inform important policy. If, as economics graduates, we enter the world of work and only have knowledge of outdated or flawed models, we will see a long-term reduction in the quality of economic decision-making, as well as a reduction on critical discussion on what structure economies should take.

What Is an Economics Degree? In light of the reflections on our experiences of economics at university, and before we evaluate and pose implications, it is important to first establish what we believe an economics degree should be. Our time at university did not leave any clear impression of any sort of consensus within economic academia on what economics really is. Is the job of an economics degree to teach students about the world of economics in its current state in depth, and therefore, be able to find more stable and practical employment? Or, is an economics degree supposed to discuss what the world could or should look like, and what alternatives, if at all desirable to the student, could be? Furthermore, upon graduation, is an economics graduate an efficient administrator and problem solver suited for financial institutions and industry? Or, are they guides of public policy and academic thought, both suited for public institutions, governing bodies, and academia? We feel that these are two distinctly different types of degrees, and perhaps both degree pathways should be offered though clearly labelled modules within an undergraduate degree, allowing the students to decide what they want of their degree. It must also be said that no matter the track taken, it is our strong opinion that the degree must be pluralist in nature, otherwise defeating the point of economics as a social science degree.

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Discussion and Implications Our experiences learning maths, as discussed in the ‘teaching of maths’ section, leads us to the following. First: it is important that all economics graduates have a solid level of mathematical foundation to be able to undertake analysis and do regressions. However, the beginner classes must be offered out—with the regular curriculum, until the entire student body is ready to take on more relevant challenges together. Second: there are many theories that do not need mathematical ‘proof’ to be relevant in an undergraduate degree. Educators must be careful to only include mathematical work if it is relevant and necessary, otherwise students will lose interest. Third: teaching maths in economics is most effective for students when done in direct lieu with a case study. Fourth: seemingly coherent mathematics is not ‘proof’ that a certain theory is correct. The assumptions and political biases behind the creation of theories makes economics a social science unable to be ‘proven correct’ like the more natural sciences of physics and chemistry. Finally: if there is no mathematical solution for the problems of an actor in a case study, this does not mean the actor is mathematically destined to fail. Such scenarios must always open dialogue on the economic and political structures said actor exists within that they are unable to be helped by mainstream theories. A key tenet of an undergraduate economics degree is the students being able to develop their critical thinking skills. However, as discussed in ‘teaching theory’, students by definition are unable to critically think on a situation if they don’t have knowledge on a wide array of theories. Heterodox economic theories must be introduced early in the curriculum, and given as much time as more mainstream theories, to allow economics graduates the ability to solve future problems with a wide repertoire of ideas. Economics teaching must also ditch outdated ideas such as diminishing marginal utility and static equilibrium. We also emphasise the possible real-world effects of the continued propagation of these flawed theories, such as the human cost of repeated recessions, and encourage the teaching of alternative theories that explain the relationship between mainstream economics and the politics of recessions. Furthermore, a history of political and economic thought module would provide vital context for the theories learnt, help dispel historical myths of certain economic systems and help students understand contemporary theories such as post-colonialism and ecology.

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There are also some key implications when it comes to the teaching of models. Firstly, it must be made clear when being taught a model what the intended purposes, as well as the realistic scope for the use of the model, should be. In a related point, discussion on the usefulness and feasibility of models more generally would be welcome. Secondly, as with the teaching of theory, the problems of models taught in core classes are usually only engaged with superficially. More in depth analysis of the often large flaws in taught models should be explored, with a discussion on alternatives to that model to follow. Thirdly, outdated models and assumptions, such as assumptions of static equilibrium and perfect rationality should be relegated to introductory classes, or classes on economic history, and such models should not be taught to students as viable tools of analysis. Students should also be taught that all economics assumptions are inherently ideological in their selection, and therefore, not immune to bias. It can be seen throughout this chapter that, bar more specific implications based on certain theories or assumptions taught, most of the solutions revolve around one theme: an increase in pluralism in the teaching of economics. Our concluding remarks are as follows: Economics is a social science. Despite attempts in recent times, particularly since the end of the cold war, to paint economics as a burgeoning pure science based on purely rational assumptions and mathematics, economics is and always must be a social science. The claimed origins of market economics in ‘human nature’ are not based on tangible fact and are in themselves ideological, and claims by pro market economists that economics has transcended ideology to be a real science are in themselves the highest form of ideology. Economics graduates should not be willing servants of any one dominant economic system, but people of great critical ability—in both the practical and academic sense. This can only be achieved by a completely pluralist rework of the economics educative system, and our hope is that this chapter will highlight some student experiences that portray the need for a more pluralist education.

References Alexander, J. C., Eyerman, R., Giesen, B., Smelser, N. J., & Sztompka, P. (2004). Cultural trauma and collective identity. University of California Press.

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Boland, L. (2017). Equilibrium models in economics. Oxford University Press. https://books.google.co.uk/books?hl=en&lr=&id=FdOPDgAAQBAJ&oi= fnd&pg=PP1&dq=limitations%2Bof%2Bequilibrium%2Beconomics&ots=sx-_ 1q1_kl&sig=q-V8u7-ZjYlCEE-t--9NbVAhyz0#v=onepage&q=limitations% 20of%20equilibrium%20economics&f=false. Accessed November 29, 2022. Borg, M. (2010). Teaching critical thinking in interdisciplinary economics courses. College Teaching, 49(1), 20–25. https://doi.org/10.1080/875675 50109595841 Cline, W. R. (2014). Financial globalization, economic growth, and the crisis of 2007–09. Peterson Institute for International Economics. Corporate Finance Institute. (2021). Heterodox economics’. https://corporate financeinstitute.com/resources/economics/heterodox-economics/. Accessed November 28, 2022. Cost, B. (2019). The diminishing marginal utility of draft beer, beyond cost plus. https://www.beyondcostplus.com/blog/diminishing-marginal-uti lity-draft-beer. Accessed November 28, 2022. Eley, J. (2020). Debenhams liquidation compounds crisis in UK High Street. Financial Times. https://www.ft.com/content/54740cc0-20c8-49eb-b20150fe4cade93d. Accessed November 28, 2022. Food and Agriculture Organisation of the UN. (2019) The state of food security and nutrition in the world: Safeguarding against economic slowdowns and downturns. https://books.google.co.uk/books?hl=en&lr=&id=0lWkDwAAQ BAJ&oi=fnd&pg=PR1&dq=Skyrocketing%2Bglobal%2Binequality%2C%2Bp ersistent%2Band%2Bworldwide%2Bextreme%2Bpoverty%2C%2Binternational% 2Bconflicts%2Bcausing%2Bhumanitarian%2Bdisaster&ots=0qunlJMqLg&sig= FACch2UZywpx1pbO3CHnO3i8zWE&redir_esc=y#v=onepage&q&f=false. Accessed December 1, 2022. Goolsbee, A. (2013) Microeconomics. Worth Publishing. Harvard Business Publishing. (2018). Macroeconomics simulation: Econland. https://hbsp.harvard.edu/product/8725-HTM-ENG. Accessed November 28, 2022. Sachs, J. D. (1999). Twentieth-Century political economy: A brief history of global capitalism. Oxford Review of Economic Policy, 15(4), 90–101. JSTOR. https://www.jstor.org/stable/23607036. Accessed November 29, 2022. Salemi, M. (2005). Teaching economic literacy: Why, what and how—(IREE). Economicsnetwork.ac.uk. https://www.economicsnetwork.ac.uk/iree/v4n2/ salemi.htm. Accessed April 22, 2021. Schölloer, O., & Groh-Samberg, O. (2006). The education of neoliberalism. In D. Plehwe, B. Walpen, & G. Neunhöffer (Eds.), Neoliberal hegemony: A global critique (pp. 171–187). Routledge. Screpanti, E., & Salanti, A. (1997). Pluralism in economics: New perspectives in history and methodology. Elgar.

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Team CORE. (2017). The economy: Economics for a changing world. CORE Project. Wang, P. (2005). The Economics of Foreign Exchange and global finance. Springer.

CHAPTER 9

An Analysis on the State of Economics Education in Scottish Universities Louis Bryson

Introduction In a previous chapter of this book, a panel of students, including myself, offered reflections on our experience of learning economics in a Scottish University. This chapter aims to broaden this discussion beyond anecdotal accounts and offer analysis and discussion on the state of economics teaching in Scottish universities in general, before looking at the potential implications of this on political, economic and social society as a whole. Firstly, by comparing curriculum across all universities in Scotland offering undergraduate degrees in economics, this chapter will conclude that on the whole, economics degrees in Scotland have a substantial neoliberal and free market bias in their curriculums. This phenomenon is, unfortunately, not a new occurrence, neither is it a surprising one. The now infamous quote by Prime Minister Winston Churchill, ‘History is

L. Bryson (B) University of Dundee, Dundee, Scotland, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_9

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Written by the Victors’, is also applicable to economics (Alves & Kvangraven, 2021), and viewed in this context, we should not be surprised that since the end of the cold war, students have received a fairly narrow economics education. In fact, prominent works such as ‘The Education of Neoliberalism’ by Schölloer and Groh-Samberg (2006) promote the idea that education is a primary dissipator of neoliberal ideology. Therefore, secondly, this paper will use concepts such as ‘Cultural Hegemony’ to facilitate discussion on the roots of neoliberal dominance within higher education institutions, as well as utilise concepts such as the ‘deification of the Market’, first postulated by theologian Harvey Cox, and Mark Fisher’s ‘Capitalist Realism’ to discuss the implications of this on the economics discipline, and society as a whole. This essay will also use these three ideas to finally discuss the role that economics education itself plays in the reproduction of the conditions resulting in the neoliberal dominance of the field, before offering recommendations based on the findings— primarily that there needs to be a rethink of the curriculums offered to students studying economics, as well as a concerted effort by both students and academics to examine the origins of ‘common sense’ and ‘naturalised’ knowledge.

The Teaching of Economics in Scottish Universities Mainstream neoliberal economics has dominated economic thought and policy throughout the world since the end of the cold war. Mainstream economics refers to neoliberal ideas of low government intervention, free markets and privatisation bringing growth. This trend is reflected, and is perhaps reproduced, by the economics curriculums of universities offering undergraduate economics degrees in Scotland. This section of the chapter will take a look at the curriculums, showing that universities in Scotland at worst completely ignore alternative economic systems to the free market and at best only offer a single module or a sprinkling of alternative teachings throughout an otherwise neoliberal degree. There is, however, one exception to these results, offering a more pluralistic curriculum, but weighed against the rest of Scottish higher education institutions, it becomes nothing more than so—an exception. For this analysis, we will only take into account universities that have the option to study a purely economics undergraduate degree, ignoring courses such as finance or business management. This is because the

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nature of finance or business degrees gears students towards working in the financial and business worlds after graduation, and are thus more vocational and focused on analysing the world as present. Economics degrees are, however, a social science, in which there should be space to discuss competing ideas and theories, and are therefore a good subject of our analysis. In the case of Glasgow Caledonian University, there was no purely economics undergraduate course, but the undergraduate in economic policy had a range of modules, both theoretical and practical, which will be used as a suitably similar substitute for this analysis. The pages used for the collection of information for each university will be available in appendices. Economics degrees in Scotland fall into three main categories when it comes to pluralism and economic alternatives in their curriculum. The first category is those that focus heavily on free market economics, stating on their online course information sites that the aim of the degree is to help students understand the world around them, rather than help shape or change it. The University of Strathclyde, the University of Edinburgh, Heriot-Watt University, the University of St. Andrews and the University of Aberdeen all fall into this category. The first two years of study across these universities contains fairly similar modules with similar aims. All these universities first introduce students to broad economics concepts and introductory microeconomic and macroeconomics modules, as well as statistical and econometrics modules to build up the quantitative skills needed in the later years of the degree. These universities all offer a wide range of optional modules during the first two years, encompassing subjects such as finance, accounting and international business. The third and fourth year in these universities tends to branch out further, while still staying in the framework of market economics. More advanced microeconomic and macroeconomic modules are offered by all these universities, covering the roles of institutions and different analytical models, as well as modules encompassing wider themes, for example, modules like development, behavioural and institutional economics offered by the University of Edinburgh and Heriot-Watt University. There is not, however, any significant mention of alternative economic systems to the free market in any of these modules, and thus the scope of pluralism in these universities is internalised within discussions of the role of The Market. Interestingly, it can be seen online for each university in this group what they prioritise, when both producing graduates and recruiting

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new students, by looking at the career opportunities advertised as likely outcomes for studying at their university. All of these universities advertise careers in finance banking, management roles, business and accounting consultancy firms, as well as potential roles in policymaking. The University of St Andrews doesn’t even mention working for the civil service, governance or policy-making sectors in the career section of the economics degree page. This further illustrates, along with the available modules, that these universities are treating undergraduate economic degrees as a more vocational course, aiming to get their graduates employed by the big institutions and corporations that dominate the modern economy, rather than treating economics as the social science that it should be. The second category of universities in Scotland that offer undergraduate degrees in economics is those that focus mainly on free market economics, stating on online course information sites that the aim of the degree is to help students understand the world around them, but also offer perhaps a single module, or a scattering of discussion across modules, on alternative economic theories. The focus of the degree remains, however, on understanding the workings of the current free market economy. The University of Glasgow, the University of Stirling and the University of Dundee make up this group. In these three universities, first and second year has similar content to those in the first group of universities. It starts with modules introducing students to the macroeconomic and microeconomic concepts that help them decipher modern economic systems and to help understand the free market, as well as statistical and econometrics modules to build up the quantitative skills needed for later modules. Second year is a more intermediate take on similar core concepts, with optional modules available in both years across subjects like finance, accounting, international business and especially in the case of the University of Stirling, behavioural and environmental economics. This is when you do begin to see a difference with the first group of universities, because in first and second year at the University of Dundee, non-mainstream ideas are touched upon in the module ‘Global Economics Perspectives’. Third and fourth year in this group of universities builds on the foundations of first and second year, with even more advanced microeconomic and macroeconomic modules available, as well as optional modules available in marketing, behavioural economics and business analytics. Most of these modules cover a variety of topics, but not many of which stray from varying points of view

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within market economics. Differing from the first group, however, the university of Glasgow has a third/fourth year module called ‘Alternative Perspectives on Topics in Economics’, as well as the University of Stirling having a module called ‘Growth, Inequality and Economic Instability’, both of which offer some alternative perspectives to problems caused by or unsolved by free market economics. The University of Dundee has a module titled ‘Economics of an unequal world’ which does cover some alternative topics that stray from the usual curriculum, as well as these topics being discussed in the modules ‘Macroeconomic Analysis’ and ‘Business Strategy’. It should be noted, however, that despite having a module or parts of modules that touch on alternative economic modes of thought, the courses of these universities are still primarily filled with modules teaching solely about free markets, finance markets or the microeconomics underpinning the free market, and as such are still courses mainly focused free market economics. Similarly, to the first group of universities, if one looks at the potential careers section of economics degrees advertised online by the universities of Glasgow, Stirling and Dundee, you can see the type of graduate aimed to be produced, and the type of student these universities try to attract. These three universities advertise careers in management roles, banking, business and accounting consultancy firms, as well as potential roles in policy-making and public life. This again illustrates that despite the occasional module, these universities are committed to producing graduates to work within the boundaries of the already established economy, and that they still view economics as mainly vocational and fail to fully treat it like the social science it is. The third category of universities, or rather just university, is Glasgow Caledonian University (GCU), which offers an undergraduate degree in economic policy. Their degree, however, takes a much more pluralistic viewpoint than the other two groups. On the course description, it states that after the 2008 crash and the global pandemic, mainstream economics hasn’t suitably answered questions about the rising of global inequality and the reasons behind economic crashes, and therefore, “a more pluralist and progressive way to look at the economy is embedded within this degree and equips students with a better understanding of the nature of how the economy is managed, going beyond the traditional limitations of mainstream economic teaching” (Glasgow Caledonian University, 2021). The course at GCU offers a variety of modules such as: Economics of Regulation of Business; Health care and law ethics; Poverty inequality

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and policy; Environmental Economics; Women work and Income; and Advanced human rights law—thus proving their claim of championing a more pluralistic approach to economics teaching. The career opportunities advertised by GCU also have a different emphasis than the previous two groups, in that “the degree is designed to ensure that on completion, students are provided with the tools and skills required to engage with and improve society” (Glasgow Caledonian University, 2021), and are therefore best suited in roles in regulatory bodies or governance. The emphasis of this degree on creating people that will better society, rather than producing graduates that can work for large private sector firms, shows what an economics degree could be. A pluralistic education allows students to decide for themselves the economic systems they believe in. The curriculum at GCU is, unfortunately, an exception to the trend that universities in Scotland on the whole prioritise the understanding of current free market economic systems, rather than the pluralistic education that the social science of economics should be. This is shown by the fact that all but one of the university curriculums studied prioritised free market economics, aiming to prepare graduates for what they see as the ‘real’ world, mirroring the domination of free market economics and philosophies around the world since the end of the cold war. Is it fair to treat economics as an exact science, where undergrads get taught one system of production? Or would this simply lead to neoliberal models being dressed up in language that suggests neutrality and objectivity, which according to Alves and Kvangraven (2021) “conceals power imbalances and structural inequalities in knowledge production itself”?

The Dominance of Free Market Economics How did the curriculums in Scottish universities become so dominated by free market economics? To answer this question, one must look at the development of the field of mainstream economics, how it became defined and shaped so, and why. In the 1970s, English translations of the Italian philosopher Antonio Gramsci’s work on ‘cultural hegemony’ became widely available and popular. The concept of hegemony became vital to cultural analysis and social critique (Artz & Murphy, 2000), particularly when faced with a section of society in which one group or ideology portrays dominance. As such, the concept of hegemony is perfect for the analysis on the causes and

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reasons behind the dominance of free market economics in the teaching of the subject in Scottish Universities. The concept of Cultural Hegemony has no single or precise definition in any of Gramsci’s works. However, what he describes is as follows. Since the beginning of complex societies and civilisations, there has been dominant classes of people, and a dominant structure of society derived from the dominant class of the time. Examples of this include the ancient world, in which slavery was the main mode of production, or in the feudal period, dominated by feudal landlords with the land worked by peasants. The dominant class of any time period would always aim to maintain their dominance, with either outright force or the consent of other classes. Force, however, is expensive and difficult to maintain, so many dominant classes in history instead tried to build consent for the ruling order (Gramsci, 1971). Lears (1985) therefore defines hegemony as: the ‘spontaneous’ consent given by the great masses of the population to the general direction imposed on social life by the dominant fundamental group. (Lears, 1985, p. 568)

with Artz and Murphy (2000) defining it as: the process of moral, philosophical, and political leadership that a social group attains only with the active consent of other important social groups. (Artz & Murphy, 2000, p. 1)

Throughout history, force and consent have always coexisted, although one usually dominates the other. For example, Lears (1985) argues that Tsarist Russia relied on domination and monopolising the instruments of state control, whereas early modern parliamentary regimes rule through hegemony, where the ruling groups seek to win consent of subordinate groups to the existing social order, although the threat of officially sanctioned force remains (Lears, 1985). This goes some way to explain the French Revolution, which could be described as dominated by the merchant and industrial class as the new order, but with the consent of workers, farmers and service people, because the social and cultural vision promised freedom, opportunity and security (Artz & Murphy, 2000). The current neoliberal order is no different from this historical trend (Harvey, 2005).

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Perhaps the most important aspect of hegemony in relation to our analysis is how hegemonic consent is maintained over time. In becoming the political, cultural and philosophical leaders of a society, the ideology of the ruling class begins to alter the conditions of society in the minds of those that inhabit it—be that the values, norms, beliefs, perceptions and prejudices, as well as the conditions that support and normalise the continuing of the social order as the most ‘common sense’ option— and even the permissible range in which disagreement can occur within the social order (Artz & Murphy, 2000; Harvey, 2005; Lears, 1985). And thus, when quoting Raymond Williams, Apple (2018) states, “hegemony acts to ‘saturate’ our very consciousness, so that the educational, economic, and social world that we see and interact with, and the common sense interpretations we put on it, becomes the world ‘tout court’, the only world” (Apple, 2018, p. 14). When discussing the process of education itself, Gramsci maintained it was important to remember that the traditional intelligentsia, as a distinct group of people independent of class or class relations, is simply false. As members of society, intellectuals cannot be independent to the social relations that define the current order, and the research and education they provide is thus influenced by past and present class and social relations (Gramsci, 1971). What he means by this is that any process of education—be it through family, the workplace or at higher education levels—is inherently involved in constantly making and reproducing the effective dominant culture, as well as being itself subject to that culture (Apple, 2018). An economist through any time period in history cannot, therefore, offer any objective teachings, as all possible information to him has come through the lens of the ‘common sense’ of the dominant culture and economic order of the time. Capitalism has dominated the Western world since the eighteenth century, with it having complete worldwide hegemony for the last thirty years. Western educators, as with everyone else in Western society, are experiencing reality through the ideology, education and common sense created and legitimised by the cultural hegemony of the dominant class. Economics professors teach their students what they believe to be the most common sense and rational explanations to describe the world around them (Thompson, 1997), but the notion of common sense in itself derives from the subconscious ideology of the ruling class imbedded in all members of society. In addition, Thompson (1997) makes the

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important note that the crowding of the curriculum of advanced mainstream theories left little room for reflection and theoretic awareness, a more passive symptom of this hegemony (Thompson, 1997). Looking at cultural hegemony in this way, we can see that it need not be a deliberate decision of most of the universities in Scotland to have a heavy focus on free market economics, because educational institutions are a part of a society and are thus subject to its norms. Individual educators are also subject to hegemony, and what they see as the common sense of free market economies (Thompson, 1997) derives from the hegemony—that has lasted for hundreds of years in Scotland—of the capitalist class. This is not to say that educators cannot have individual thought, but that by claiming that they are only teaching the economic systems that make sense to them, or will be the most useful to students, they are negating the way that these economic systems became dominant, as well as the concept of common sense in itself, and the grasp on the collective subconscious these systems have. Thus, it can be seen that the concept of Cultural Hegemony is applicable, useful and shines light on the dominance of free market economics in Scottish Universities.

Implications on Education and Wider Society Cultural hegemony may be a useful tool to analyse the state of economics teaching in Scottish universities, but it is by no means the only useful theory. More modern writings such as ‘The Market as God’ by Harvey Cox and ‘Capitalist Realism’ by Mark Fisher offer a valuable insight into the effects that the hegemony of the free market could have upon a society, as well as the political and economic discourse that takes place within it.

The Market as God In 2016, the renowned Harvard theologian Harvey Cox released the now infamous book ‘The Market as God’. Inspired by addresses by Pope Francis highlighting the failure of the current economics system to deal with climate change and famine, as well as language critiquing capitalism as more of a religion and of The Market being deified, Cox decided to use his background in theology to analyse current discourse around market economies within the field of economics (Cox, 2016). Cox concluded that The Market was best understood as a religion, and “the fact that

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acolytes of the market faith do not formally acknowledge it as a religion does not change this reality” (Cox, 2016, p. 6), as well as that “the way the world economy operates today is not simply ‘natural’ or ‘just the way things work’, but is shaped by a powerful and global system of values and symbols that can best be understood as an ersatz religion” (Cox, 2016, p. 7). However, it is useful to delve into Cox’s analysis of the structure and emergence of The Market religion to draw links between his analysis, that of cultural hegemony, and the state of economics teaching in Scottish universities. According to Cox, The Market religion has many similarities in structure to more traditional monotheist religions. At the top of these religious structures is, of course, God, the position of which is now held by The Market (Cox, 2016). It is also significant to note that Cox capitalises ‘The Market’ to emphasise the reverence it inspires in its followers. Like God, we are assured The Market possesses the attributes of omniscience, omnipresence and omnipotence, even if these traits are hidden to us mere mortals by the transcendent nature of the divine itself (Cox, 2016). In economics classes, we are taught that The Market is able to determine what human needs are, the price of precious metals, what capital costs, how much hairdressers and CEOs should be paid, how much shoes and sound systems should sell for, etc. (Cox, 2016). This is because in a free market system all these transactions take place within The Market, and therefore, The Market already has all the information needed to perform these functions innately. And thus, we are taught of the omniscience of The Market. Cox also mentions the more recent phenomenon in the field of economics of taking economic theory and market calculations and applying this to areas that would have once seemed unrelated, such as dating and family life, marital relations and childbearing (Cox, 2016). The basis of these theories is that the forces of The Market are in some way both inherent to and reproductive of ‘human nature’, so that everything in human life can be described using the mechanics of The Market. When using a biblical example, Cox aptly states that: “Saint Paul reminded the Athenians that their own poets sang of a god ‘in whom we live and move and have our being’” (Cox, 2016, p. 18). This analogy implies that The Market is likewise not only around us but inside us, informing our thoughts and our feelings. Thus, we are told that The Market is omnipresent.

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On the attribute of omnipotence, Cox refers to some of the dialectics of Calvinists and Thomists to describe the power of The Market. The example given is that of ‘process theory’, or the idea that God may not be all powerful yet and is simply moving towards this ability, which explains why some bad things may still happen or things may seem out of God’s reach (Cox, 2016). In relation to The Market, this could explain why some things are slightly out of reach, with the example given by Cox of the purchase of the remains of Saint Thomas à Becket being blocked by government (Cox, 2016). It is clear to most people, however, that The Market is most certainly heading towards omnipotence, with the achievement of this seeming almost an inevitability, and thus any short-fallings or failings should not make one question “the ultimate benevolence of the Market God” (Cox, 2016, p. 9). Like many religions, The Market has many different sects and denominations who often disagree with one another, such as classical, neoclassical, Keynesian and neo-Keynesian. An example of this in modern Christianity would be disagreements between Thomists, Lutherans, Calvinists or Barthians (Cox, 2016). However, like in the different Christian denominations, the sects of The Market never delve away from the ultimate benevolence and the base doctrines of The Market God itself. There are many parallels to be drawn in the way Cox describes The Market God to have emerged, as well as the workings of this religion, to the way academics of cultural hegemony describe the dominance of an ideology over a population. Cox argues that throughout time, markets have often been a part of human history, for example trading between tribes, or the markets set up outside churches or holy sites to sell food and religious iconography (Cox, 2016). However, the forces of these markets had always played second fiddle to those of the prevailing social orders, be that of religion or that of the local lords or kings. It wasn’t until the rise of the renaissance and the enlightenment that The Market began to take over as the dominant social force, replacing and absorbing the religions and ruling orders of old (Cox, 2016). It is easy to see the parallels here with the analysis of cultural hegemony that with the dominance of the industrial and merchant classes over the old order of landed aristocrats and kings, they brought with them their own ideologies, those of The Market. Cox also argues that it is important to The Market God that its origins are never doubted as anything else other than completely identical to that of human nature. The myth of the ‘Cro-Magon man’ trading his spearhead for some meat is argued by proponents of The Market

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as the founding truth that humans are inclined to trade and partake in market activities, thus giving The Market its legitimacy (Cox, 2016). However, this is, according to Cox (2016), a myth—as most anthropological evidence suggests that early humans took part in gift culture and sharing within communities. In cultural hegemonic writings, it is similarly noted that a dominant class must make their ideology the ‘natural’ and ‘common sense’ option, to legitimise their rule and stabilise it over longer periods of time (Artz & Murphy, 2000; Lears, 1985). Cox also stated that The Market shared similarities to many modern religions, including Christianity, in that there are many denominations of faith, but none of which stray from the base doctrines of The Market. This portrays extremely similar sentiments to cultural hegemony, in which it is pre-decided by the ruling ideology what the permissible range in which disagreement can occur within the social order is (Lears, 1985). There are many denominations of The Market in which discussion can occur, but none must question or stray away from market economics. It can therefore be seen that the writings of Cox share a multitude of similarities and overlaps with scholars of cultural hegemony, and thus the deification of The Market would be a good tool to help analyse the state of the teaching of economics. Debate could still be had whether the deification of The Market is a result of cultural hegemony, or developed alongside it, but the results remain the same. The dominance of The Market over societies worldwide through cultural hegemony and the ersatz Market Religion prevents free markets being held accountable with suitable evidence to support the continuation of these systems. Additionally, the dominance of The Market in culture, politics, academics and the subconscious prevents meaningful debate within all stratus of society that would postulate ideas of a different type of economy. It can therefore be argued that the dominance of free market economics in Scottish universities is also a symptom, as well as a preacher, of The Market religion and the cultural hegemony surrounding it.

Capitalist Realism Philosopher Mark Fishers’ 2009 book ‘Capitalist Realism’ deals with a worrying premise: that since the end of the cold war, it has become increasingly difficult for the majority of people to imagine another coherent economic system apart from capitalism, to the extent that for

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most it is easier to imagine the end of the world than the end of capitalism. In the book, Fisher deals with wide-ranging ideas such as the role of ‘big government’ blaming in late capitalism, the post-Fordist mode of production, the effect of capitalism on mental health and the proliferation of bureaucratic anti-production. This analysis will talk on passages relating to the way capitalism has dealt with the post-cold war world, capitalist ideology and anti-capitalism, and the differences between ‘the real’ and ‘reality’, before imposing these ideas on the already discussed theories of cultural hegemony and The Market as God, as well as the analysis of economics education in Scottish universities. Throughout most of its history, capitalism has had the problem of how to deal with and absorb energies and ideologies from outside its sphere. In the post-cold war period, however, the problem is reversed. How can capitalism survive without an outside to absorb and expand into? Drawing on sentiments influenced by Alain Badiou, Fisher argues that capitalism has had to claim that it has delivered us from the abstractions of a barbarous past of dangerous ideologies, in itself acting as the shield that protects us from the perils posed by historic beliefs themselves (Fisher, 2009). To defend this position, the actors of the current order cannot claim that capitalism is perfect or even ideal, as for the majority of people, it is not. Instead, it has presented everything else as terrible, with sentiments such as: our democracy isn’t perfect, but it is better than the dictatorships; capitalism can sometimes be unjust, but it is better than Stalinism; we let millions worldwide die of hunger and AIDs, but at least we don’t make racist and nationalist speeches like Milosevic (Fisher, 2009, p. 5). In presenting itself as the only realistic option, capitalism successfully surpassed the ideologies of the past, as well as past forms of capitalism, to become the new reality. According to Fisher, modern capitalist ideology does not function on making the case for something new like propaganda does, but by discrediting other systems, as well as concealing the fact that capitalism does not depend on subjectively held belief at all (Fisher, 2009). When paraphrasing Žižek, he more precisely argues that the capitalist ideology overvalues internal attitudes and beliefs at the expense of beliefs we exhibit in our behaviour. Many people do think capitalism is good, but for those that don’t, so long as we believe (in our inner subconscious) that capitalism is bad, we are able to continue to participate in capitalist consumption (Fisher, 2009; Žižek, 1989). This phenomenon explains

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why some movies and media are allowed to have specifically anti-capitalist messages, such as the film Wall-E. This type of movie has the effect of doing our anti-capitalism for us, because in our hearts we know capitalism is bad, but allows us to continue to consume with impunity, and therefore strengthens capitalist realism (Fisher, 2009). It also explains why certain genres of music with a rebellious and anti-establishment rhetoric, such as grunge or hip hop, did not bring around wide action against capitalism, as it served the purpose of doing the public’s anti-capitalism for them, with the added bonus of these genres of music eventually being integrated into the mainstream of capitalist exchange (Fisher, 2009). Capitalist realism has also absorbed the anti-capitalist protest that does still happen. The lack of reality for alternative economic systems has resulted in purely moral critiques of capitalism—protesting against poverty, famine, war, etc. However, these things are presented under the current ideology as an inevitable part of reality, and since there is a lack of political organisation in the opposition, and a concurrent lack of viable alternatives to capitalism posited, most of these protests end up aiming to mitigate capitalism’s worst excesses (Fisher, 2009). These demands could then therefore be met, in part, while maintaining the current mode of production or dismissed as utopian idealism. The difference between real and reality is an important aspect of Fishers’ writings on capitalist realism, specifically ‘the reality principle’ (Fisher, 2009, p. 17). It is argued that what we experience as social, political and economic reality (see also Thompson, 1997; Smithson, 1989) is itself ideologically motivated, and one could claim that it even constitutes the highest form of ideology, the one that presents itself as empirical—or economic or biological—fact (Fisher, 2009, p. 17). The real is, therefore, what any ideology seeks to repress, and reality is then presented through this repression. Thus, capitalist realism can only be challenged by unveiling the real(s) underneath it. Fisher argues that environmental catastrophe and the growing mental health pandemic are such reals, as although capitalism may try and absorb them, it simply cannot—both because they are side effects of capitalism itself and will ultimately bring about its destruction (Fisher, 2009). There are multiple instances where capitalist realism overlaps with cultural hegemony and the deification of The Market. The first of this is when in capitalist realism, by ironising practices of the past, presents itself as the only rational, and indeed desirable, outcome. Parallels can be drawn here to cultural hegemony, in which when a dominant class

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becomes the political, social and economic leaders of a society, their ideology begins to manifest itself in that of its subject, thus becoming the common sense and rational option. Secondly, capitalist realism then goes beyond being the most common sense option, and by removing actually existing alternatives to capitalism, and presenting its ideology as based on empirical and natural fact, it becomes the new reality. This reality, based of human nature and empirical evidence, gives capitalism an inescapable aura of legitimacy, permeating the subconscious of those who live under it. Fisher even writes that capitalist realism “is more like a persuasive atmosphere, conditioning not only the production of culture but also the regulation of work and education, and acting as a kind of invisible barrier constraining thought and action” (Fisher, 2009, p. 16). In ‘The Market as God’, Cox similarity writes that the myth of the cromagon man trading his spearhead is used as the founding justification to legitimise The Market, presenting it as derived from human nature itself. In relation to the permeation of the subconscious from the perspective of cultural hegemony, Apple (2018) quotes Raymond Williams stating that “hegemony acts to ‘saturate’ our very consciousness, so that the educational, economic, and social world that we see and interact with, and the common sense interpretations we put on it, becomes the world ‘tout court’, the only world” (Apple, 2018, p. 14). Finally, capitalist realism allows for differences in opinion on some specific aspects of capitalism. For example, after the crash of 2008, it was seen as unthinkable to let the banks crash, and what followed was a massive assertion that there was no alternative to capitalism (Fisher, 2009). However, after the bailouts, neoliberalism became more unpopular. In order to save itself, capitalism was able to revert to social democracy, or authoritarianism, or any type of capitalism it needs (Fisher, 2009). This echoes sentiments made by scholars of cultural hegemony that the dominant culture will also seek to set boundaries for the permissible range of disagreement, as well as echoing the workings of The Market God in having certain permissible sects and denominations of the religion. It is thus evident that there lies much agreement between capitalist realism and ‘The Market as God’, and it could also be said that capitalist realism is in many ways a modern continuation of the sentiments and arguments expressed by scholars of cultural hegemony. Capitalist realism could then, therefore, be an explanation for the dominance of free market economics in Scottish universities. The complete dominance of capitalism has resulted in capitalist ideology assuming the place of reality

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in the minds of all those who live under it. From this perspective, it is not surprising that the economics of capitalism should dominate educational institutions. The institutions, and the academics that make them up, are subject to a society shaped by the unconscious ideologies of a dominant system, meaning what they teach is inherently tied up in these naturalised theories. Teaching what is common sense and logic, or indeed just explaining the ‘reality’, may seem like the best way to teach students, but either accidentally or otherwise helps feed the centre-less entity of capitalist realism.

The Role of Education for the Future So far, the analysis in this chapter has mainly focused on the effects concepts such as cultural hegemony, the deification of The Market and capitalist realism could have on the teaching of economics, explaining the dominance of free market economics observed in Scottish universities. Before discussing the role of economics education in the future, however, we must first discuss the role education currently plays in the contribution and the recreation of the cultural dominance of capitalist economics in society. Papers such as Apple (1978) (republished 2018), Harvey (2005), Thompson (1997), and Schölloer and Groh-Samberg (2006) deal with these concepts. Apple (2018) argues that all aspects of society are subject to the cultural hegemony of a prevailing order. So, the ways institutions, people, modes of production, distribution and consumption are organised and controlled all reflect this hegemony. This therefore includes the day-today practices of schools and universities, and the teaching and curriculum they distribute (Thompson, 1997). Since the purpose of educational institutions is to spread knowledge, but the institutions are subjects of the hegemony of a dominant culture, the institutions thus become one of the primary facilitators of the recreation of this hegemony. Apple notes that educational institutions “create and recreate forms of consciousness that enable social controls to be maintained without the necessity of dominant groups having to resort to other mechanisms of domination” (Apple, 2018, p. 12). Apple argues that there are three main aspects of education that need to be understood in this analysis: the school as an institution; the knowledge forms; and the educator themselves, which Apple states must be reconsidered within the larger ‘nexus of relations’ of which they

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are a constitutive part, to properly understand the role education has in reproducing hegemony (Apple, 2018). Firstly, it is important to note that educational institutions cannot be neutral enterprises. In fact, it is impossible for anything to be considered truly neutral under a dominant culture, because of the effect it has on the subconscious. Therefore, Apple argues that as subject to a dominant culture, educational institutions become one of the main agencies for distributing said culture, and has the effect of creating people who struggle to imagine and other serious possibilities to the economic and cultural reality they experience (Apple, 2018). Secondly, the knowledge presented in education is already a choice from a much larger universe of possible social knowledge and principles (Samuels, 1996), and the choice of what to teach is often a reflection of the perspectives and beliefs of the dominant segments of our society, either deliberately or as the common sense option dictated by the dominant ideology (Harvey, 2005). Thirdly, our fixation on the individual in modern times is but an abstraction, as it does not situate the life on an individual (for example, an educator) as an economic and social being, built into the societal and structural relations that dictate the reality that said individual experiences (Apple, 2018). Thus, educators, as beings subject to societal relations dictated by a dominant ideology, often subconsciously create a generation of students with no other knowledge apart from that of the dominant culture, who then themselves become further agents and reproducers of this hegemony. The question should therefore be asked: what should be done about this? Currently, economics is being treated as an exact science, rather than the inherently political social science with a vast history of multiplicity that it is (Samuels, 1996). The discussion in previous sections, as well as a plethora of related and interdisciplinary work, such as Berger and Luckmann’s (1967) influential ‘The Social Construct of Reality’ and Žižek’s ‘The Sublime Object of Ideology’ (1989), illustrate the social and ideological basis of ‘reality’. Thus, there is no such thing as an economic reality removed from ideological and political forces. The start of a pushback against the hegemony of free market economics would have to start with a more pluralistic curriculum and outlook of the teaching of economics, with as much focus on heterodox (alternative) economic theories as on mainstream economics. If students were taught schools across many viewpoints of economics, such as Schumpterian, Marxist, Austrian and Behaviouralist, as well as being taught that all possible structures of economics are as possible as each other—with mainstream economics

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presenting itself as natural defaults only because it won a political battle over ideas—we would have a generation of thinkers equipped with the tools to potentially challenge the current dominant order. This, however, cannot be the end of the discussion. To paraphrase Michael Apple, if what we learned were merely an imposed ideology, with the ideas of the ruling class taught to us merely occupying the top of our minds, it would be a much easier thing to change (Apple, 2018, p. 16). To impact meaningful change, we must make discussions on the role of educational institutions in replicating a social order more commonplace, as well as encouraging reflection within students and academics into what constitutes common sense, and what political and economic forces make up the reality we experience. Only by taking away this guise, and invoking the ‘real’ that the current order represses—mainly that all forms of knowledge are ideologically derived—can economics become the social science it is meant to be. Finally, it must become the goal of educators across all sectors to seek the maximisation of social, educational and economic equality, rather than pander to the accumulation of goods and profit motives of the current order.

Concluding Remarks The following conclusions can therefore be arrived upon. Firstly, there is a clear dominance of free market economics throughout universities in Scotland, with even those offering some teachings on alternative systems being outweighed by other modules supporting the free market. Secondly, through readings of scholars of cultural hegemony it was concluded that cultural hegemony is a useful tool to describe the process of the dominance of the free market in Scottish universities. Thirdly, more modern theories such as ‘The Market as God’ and ‘Capitalist Realism’ were analysed, with both having profound passages directly relating to our analysis of cultural hegemony, as well to each other, and were further tools that could be used to explain the state of economics in Scottish universities. Finally, we looked at the role education plays in furthering cultural hegemony, and concluded that if economics education was to become the social science it should be, we should move towards a more pluralist curriculum, as well as encourage discourse on the origins of ‘common sense’ and the doctrines that dictate the current economic reality.

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References Alves, C., & Kvangraven, I. H. (2021, January 20). \#economicsfest: Does economics need to be decolonised? Economics Observatory. https://www.eco nomicsobservatory.com/economicsfest-does-economics-need-to-be-decolo nised?fbclid=IwAR07o8VWgJqFf8naAekNVY7YXpzBGPQKhP5FHdOcvPs USOHp8q4pm7ZasxU. Accessed 13 July 2021. Apple, M. W. (2018). On analysing hegemony. Journal of Curriculum Theorising, 1(1), 10–25. Artz, L., & Murphy, B. O. (2000). Cultural hegemony in the United States (pp. 1, 22). Sage Publications Ltd. Berger, P., & Luckmann, T. (1967). The social construct of reality (pp. 11–31). Doubleday. Cox, H. (2016). The market as god (pp. 4, 5, 6, 8, 9, 15, 18, 21, 25, 34). Harvard University Press. Fisher, M. (2009). Capitalist realism (pp. 5, 8, 13, 15, 16, 17, 78). Zero Books. Glasgow Caledonian University. (2021). BA (Hons) Economic Policy. https:/ /www.gcu.ac.uk/study/courses/details/index.php/P03346/Economic_Pol icy/. Accessed 14 July 2021. Gramsci, A. (1971). Selections from the prison notebooks (Q. Hoare & G. N. Smith, Eds., pp. 3–5). International Publishers. Harvey, D. (2005). A brief history of neoliberalism (pp. 39–63). Oxford University Press. Lears, T. J. J. (1985). The concept of cultural hegemony: Problems and possibilities. The American Historical Review, 90(3), 567–593. Samuels, W. (1996). On the structure if the archaeology of economic thought in the eighteenth century. The Journal of Interdisciplinary Economics, 7 (4), 291–313. https://doi.org/10.1177/02601079X9600700404 Schölloer, O., & Groh-Samberg, O. (2006). The education of neoliberalism. In D. Plehwe, B. Walpen, & G. Neunhöffer (Eds.), Neoliberal hegemony: A global critique (pp. 171–187). Routledge. Smithson, M. (1989). Ignorance and uncertainty: Emerging paradigms (pp. 216– 226). Springer-Verlag. Thompson, K. (1997). Ignorance and ideological hegemony: A critique of neoclassical economics. Journal of Interdisciplinary Economics, 8(4), 291–305. Žižek, S. (1989). The sublime object of ideology (Chapters 5, 6). Verso.

Economics Programmes Glasgow Caledonian University. (2021). BA (Hons) Economic Policy. https:/ /www.gcu.ac.uk/study/courses/details/index.php/P03346/Economic_Pol icy/. Accessed 14 July 2021.

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Heriot Watt University. (2021). MA (Hons) Economics. https://www.hw.ac.uk/ uk/study/undergraduate/economics.htm. Accessed 29 September 2021. The University of Edinburgh. (2021). MA Economics. https://www.ed.ac.uk/stu dying/undergraduate/degrees/index.php?action=view&code=L100. Accessed 19 September 2021. University of Aberdeen. (2021). Economics—Undergraduate study areas. https:/ /www.abdn.ac.uk/study/undergraduate/subject-areas/356/economics/. Accessed 29 September 2021. University of Dundee. (2021). Economics BSc (Hons). https://www.dundee.ac. uk/undergraduate/economics-bsc. Accessed 29 September 2021. University of Glasgow. (2021). Undergraduate study—2022 Degree Programmes https://www.gla.ac.uk/undergraduate/degrees/econom A-Z—Economics. ics/. Accessed 29 September 2021. University of St Andrews. (2021). Economics BSc (Honours). https://www.standrews.ac.uk/subjects/economics/economics-bsc/. Accessed 29 September 2021. University of Stirling. (2021). BA (Hons) Economics. https://www.stir.ac.uk/ courses/ug/economics/. Accessed 29 September 2021. University of Strathclyde. (2021). BA Economics Degree. https://www.strath.ac. uk/courses/undergraduate/economics/. Accessed 29 September 2021.

CHAPTER 10

Post-crash Economics: What Are the Implications of the 2007 Crisis for the Teaching of Economics? Omar Feraboli

Introduction The 2007 financial crisis has highlighted the inability of mainstream economic theory to explain the real world, it has given rise to extensive criticisms of orthodox economics, and it has generated demand for alternative economic approaches both in research and teaching. This chapter focusses on the implications of the crisis for the teaching of economics at university. It analyses the work done by students and academic societies— such as the University of Manchester Post-Crash Economics Society—in emphasising the inadequacies of the discipline to address contemporary needs of economics students, and hence in calling for the need to change significantly teaching methods and contents of syllabus. Mainstream or

O. Feraboli (B) University of Dundee, Dundee, Scotland, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0_10

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“orthodox” economic theories are based on neoclassical economic theories, they have unrealistic assumptions such as perfect competition, full information and homogeneity within production factors. These theories are central to policy failures, nevertheless they continue to be taught largely without criticism in most universities across the world. The 2007 financial crisis exposed the weaknesses intrinsic to mainstream economic theory. When visiting the London School of Economics in 2008 on the turmoil in international markets, Queen Elizabeth II asked why nobody saw the crash coming. Nobody saw the crisis approaching because market stability is considered by most of the orthodox economic theories a dogma, and as such it does not require empirical evidence. Prior to the crisis eminent economists repeatedly stressed the common belief that freemarket mechanisms are efficient in preventing recession and instability. Lucas (2003) in his Presidential address to the American Economic Association in 2003 stated that the “central problem of depression-prevention has been solved”. Blanchard (2008) pointed out that after the explosion of macroeconomics in the 1970s, the debate looked like a battlefield in which researchers followed different approaches, moved in different directions, and often involving in acronymous disputes, but over time “because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged”; he argued that not everything is fine, but concluded that “the state of macro is good”. Lucas (2007) explained that he was sceptical that the subprime mortgage problem would affect the whole mortgage market, that housing construction would stop, and that the economy would move into a recession, and asserted that “if we have learned anything from the past 20 years it is that there is a lot of stability built into the real economy”. He concluded with the Milton Friedman’s quotation that “inflation is always and everywhere a monetary phenomenon”, which implies that monetary policy should focus only on controlling the inflation rate. Then Fed chair Bernanke (2007a) in a conference speech on 17 May 2007 addressed economic, social and policy issues caused by the rise in subprime mortgage loan defaults occurred in early 2007. When analysing and discussing the subprime mortgage market, he argues that, as the problem emerged and evolved, the Fed observed “some signs of self-correction in the market”, and that there were no significant spill-over effects from the subprime market to the rest of the economy. Bernanke noted that markets were adjusting to the subprime market troubles, but regulatory actions might be necessary. He also believed that the broader housing market would be very slightly

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affected by the subprime market problems, and he expected no spill-over effects in the future. He maintained that markets can sometimes overshoot, but eventually market forces manage to prevent excesses. Bernanke concludes that “for some, the self-correcting pullback may seem too late and too severe. But I believe that, in the long run, markets are better than regulators at allocating credit”. In a subsequent speech before the Congress on 28 March 2007, Bernanke (2007b) reported about the state of US economy, asserted that growth had slowed down to about 2% per annum in the second half of 2006, and expected the economy to grow at a similar pace in 2007. He stated that the main cause for the slowdown was the weakening of demand in the housing market, and that “the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained”. Bernanke expected expansion in production and sales, which should bring about a moderate increase in business investment in 2007, claimed that the slowdown in the housing market and in some manufacturing sectors should not result in negative spill-over effects to other sectors of the US economy, and that economic growth, supported by increase in consumer spending, should continue to be positive. Bernanke concluded that the slowdown in housing should diminish and finally come to an end, that private consumption is expected to be stable and that investment was likely to produce positive returns. Alan Greenspan (Board of Governors of the Federal Reserve System, 1990), then Fed Governor, during a Meeting of the Federal Open Market Committee on 21 August 1990, stated: “I think there are several things we can stipulate with some degree of certainty: namely, that those who argue that we are already in a recession I think are reasonably certain to be wrong in the sense that we do have weekly data that suggest, as others have mentioned, that up until perhaps a week or so ago there was no evidence of deterioration in what was a very sluggish pattern”. In reality, in July 1990 the US economy had already entered a recession which ultimately lasted through March 1991, with GDP falling by about 1.5%, unemployment reaching its highest level at 6.8%, and nearly 1.5 million jobs lost. In the US Congress Committee on Oversight and Government Reform in October 2008 Representative Waxman, chairman of the Committee, reminded Greenspan that he was the most influential voice for deregulation, quoted the Greenspan’s statement “There’s nothing involved in Federal regulation which makes it superior to market regulation”, and asked him if he

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was wrong. Greenspan admitted he was “partially wrong” in his permissive approach towards the banking sector, and that he was in a “state of shocked disbelief”. Greenspan also acknowledged that he made a mistake in assuming that self-interests of banks were effective in protecting their own shareholders, and that his ideology, based on the presumption that markets regulate themselves, was not working.

Forecasting Failure Failure of academic studies in predicting economic crises has been highlighted by several studies. Nordhaus (1987) introduced the concept of forecast efficiency, defined as the extent to which all information available at the time of the forecast is incorporated into the forecast. Loungani and Rodriguez (2008) extend Nordhaus’ analysis and examine economists’ performance in predicting recessions. They find that most forecasts lag behind and catch up only when the recession is occurring. The authors argue that it seems forecasters chase the events instead of anticipating them, and claim that this is caused by economists’ excessive caution. They point out that forecasts must be continuously revised in order to incorporate immediately new available information. However, the assessment of forecast performance indicates that new information is not directly reflected in forecasts; as a result, changes to forecasts when new information is available are usually smooth. Loungani and Rodriguez refer to Nordhaus (1987) who pointed out that inefficient forecasts are smooth as new information flows into the forecast slowly, whereas efficient forecasts are irregular because they use and include all newly available information very quickly. Loungani and Rodriguez conclude that forecasters are unwilling or unable to indicate that the economy is moving towards a recession, and, when they predict a recession, they initially undervalue its negative effects. Dovern et al. (2014) use a test of forecast revisions for real GDP growth with a large panel from 36 countries in the period 1989–2010, and find very similar results, i.e. information rigidity in average forecasts and persistence in average forecast revisions. Stekler (1972) argues that the failure to predict turning points derives from the excessively low probability which forecasters attach subjectively that such an event occurs. Loungani (2001) provides further evidence of the lack of predictive records of economic forecast. He looks at economic forecast for the period 1989–1998 and at how well forecasters predict recessions. He finds that forecasts are all much the same, and, more importantly, the

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predictive records have been poor. In fact, only two of the 60 recessions occurred in the sample have been predicted a year in advance, two-thirds of recessions were unpredicted by the April of the year in which the recession took place, and in around 25% of all recessions the prediction in October showed positive economic growth. Loungani and Ahir (2014) analyse record of professional forecasters in predicting economic recession over the period 2008–2012. In this context, a recession is defined as a year in which real GDP decreases on a year-over-year basis in a given country. The authors divide the period into three sub-periods. They found that in the sub-period 2008–2009, 62 recessions occurred and none was predicted; in 2010, eight recessions were predicted, and it turned out to be correct in three cases; and in the sub-period 2011–2012, 19 recessions happened and came largely as a surprise to forecasters. Loungani et al. (2013) analyse the features of forecasts of real GDP growth for a large set of advanced and emerging market economies and find that forecasters’ ability to correctly predict turning points in economic activity is rather poor. The work finds that most recessions are detected when they are well in progress, and that this predictive failure characterises crises in the US and advanced countries. Sinclair et al. (2010) analyse the Fed current quarter and one-quarter-ahead forecast for the period 1965IV–2003IV for three variables: real output growth rate, the inflation rate measured through the GDP deflator, and the unemployment rate. They find systematic forecast errors made by the Fed, and they also find that the Fed knows the state of the economy only in the current quarter, but this information is not incorporated into the next quarter forecast. An et al. (2018) point out that, whereas recessions are not rare— economies are in a state of recession about 10–12% of the time—ability to predict a recession in advance is very small. They also find that forecasters miss the size of the recession by a large amount until the year is nearly over, and that in recession years, the revision of the forecast speeds up to include new information but it is not fast enough to elude large forecast errors. The authors do not provide an explanation for failure in forecasting recessions; however, they propose three possible explanations: data and information available to economists are not enough to make a reliable forecast; forecasters do not have incentive to predict a crash due to reputational costs; forecasters adjust and revise their predictions slowly and inadequately when new information becomes available.

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Togati (2016) provides an explanation for the failure of mainstream economics to analyse economic phenomena and argues that the standard macroeconomic paradigm is in crisis because it assumes, as a matter of faith, that the market economy is internally stable, and this results in a very restricted and inadequate understanding of the recession. He proposes a new framework which he calls “balanced stability approach”. This new approach does not regard capitalism as a priori stable or unstable, but instead as a source of both positive and negative effects that should to be analysed within the actual empirical contexts. Colander, Föllmer, et al. (2009) provide a very insightful and deep analysis of the problems and challenges faced by the economic profession in recent years. They argue that economists failed to understand the emergence and the development of the 2007 financial crisis, and, once the crisis had started, they underestimated its size and hence its negative impact on the economy. The authors claim that a misallocation of research efforts is the cause of this failure, and that its source lies in the persistence of mainstream economists on formulating and designing models which neglect the main features driving and determining economic phenomena. Colander, Föllmer, et al. also argue that economists did not succeed in informing and explaining the general public the weaknesses and the limitations of the most common models used in macroeconomics. The authors, therefore, claim that a drastic readjustment in economics research is imperative if economists want to cope with contemporary challenges. They also call for the creation of an ethical code requesting economists to understand the drawbacks and deficiencies of economic models. The authors also highlight that mainstream economists try to assess and to explain economic phenomena such as unemployment, business cycles and financial crises, but the prevailing theoretical framework neglects many features which contribute to cause those phenomena, while works by economists who studied crises have been disregarded and ignored. In particular, Kindleberger (1978) and Kindleberger and Aliber (2005) analyse the history of financial crises beginning with the tulipomania in the seventeenth century, they highlight the irrationality of markets driven by panic and mania, and they also assess the impact of fraud and corruption on markets, which are instead ignored by mainstream models. Colander, Föllmer, et al. (2009) finally argue that economists’ failure to explain and assess crises has profound methodological roots, and that the definition of economics is misleading and inadequate, as it reduces economics to “the study of optimal decisions in well-specified choice

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problems”. They claim that economics does not take into account of the dynamics which are intrinsic to economic phenomena, of the instability resulting from these complex dynamics, and conclude that the failure of the economics profession is “systemic”. Colander, Goldberg, et al. (2009) argue that economists have failed to forecast the 2007 recession, but furthermore they point out that economists are also partially responsible for the crisis as they have constructed and used economic models which are based on unproved assumptions and disregard the inherent risk factors. This encouraged market participants and policy-makers to regard financial markets as stable whereas in reality they are intrinsically characterised by uncertainty and volatility. The authors also maintain that the 2007 recession created intellectual and ethical challenges to economists, and at the same time, it provided economists the opportunity to change their discipline and to construct models based on more sensible and realistic assumptions. The crisis also showed the necessity for policy-makers to reform radically the policy tools to regulate financial markets. The authors conclude that the 2007 recession highlighted the “systemic failure of the economics profession”, and the responsibility for the crisis should be shared not only among policy-makers and market operators, but also among economists. Hendry (2000) argues that forecast failure is caused by unforeseen big changes in deterministic variables; he claims that in this non-stationary environment, agents are not able to understand how new relevant information becomes available in the joint data density, and hence, the assumption of rational expectations has no sound theoretical foundation as agents cannot anticipate many of these events. Gadea Rivas and Perez-Quiros (2015) focus on the role played by credit in triggering crises. They find that credit has a negative effect on economic growth, both during expansion and recession, it raises the probability that the recession persists, and decreases the probability that the economy grows during an expansion. They also find that the above impacts are largely brought about by the most recent crisis. Finally, they examine and compare the forecast results of models including models with other models, and conclude that the role played by credit in explaining the business cycle is unimportant. Bernanke (2018) recognises that economists were not able to predict the 2007 financial crisis and underestimated the magnitude of its negative effects on the global economy, and that the crisis demonstrated the failures of both economists and policy-makers in making predictions. He argues that macroeconomists should examine more closely and pay more attention to the disruptions in the credit

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market, and he concludes that the 2007 crisis effects have been extreme due mainly to the panic in the credit market. Lewis and Pain (2014) focus on OECD forecasts for economic growth and inflation rate during the period 2007–2012. They find that there was an overestimation of GDP growth in the projections, which resulted in the failure to predict the magnitude of the economic downturn and the slow speed in GDP increase after the crisis. In his book “The End of Theory” (2017), Richard Bookstaber maintains that traditional economic theory, bound by its own methods and structure, cannot predict crises. He argues that the economy is subject to four phenomena that make traditional economic models ineffective: (i) the sum of human interactions can produce unexpected results that are not related to the intentions of the individuals involved, (ii) probabilities change constantly, (iii) the range of future events are unknown, and (iv) the future is too complex, and models cannot anticipate the outcome. If Keynes thought of economists as dentists, Drautzburg (2019) compares economists to doctors, who cannot forecast crises, but they can help understand and explain why crises occur, and this has important implications for policymaking. He argues that most economists consider fluctuations in the economic cycles as determined by random shocks, which are unpredictable by their nature. But if the forces driving business cycles are random, then investigating and analysing business cycles is a futile and ineffective exercise. However, Drautzburg argues that not all random forces are identical, e.g. demand and supply shocks. Hence, Drautzburg argues that, as different types of random shock affect the economy differently, identifying the type of random shock which hits the economy is crucial in order to construct and to use the appropriate model; and using the right model is essential for setting up and implementing the correct and relevant policy response during an economic recession. Greenwood et al. (2022) use data on financial crises from 42 countries for the period 1950–2916 and show that financial crises are to a large extent predictable. They utilise two variables—past credit growth and past asset price growth—and formulate a model to relate the variables to the probability that a financial crisis occurs in the next three years. The results show that the combination of fast growth of credit and asset prices is associated with around 40% probability of the occurrence of a financial crisis within three years—defined as “danger zone”—whereas this probability is about 7% in times when there is no increase in credit or asset price growth. Greenwood et al. note that in 2006, the United States and many other

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advanced economies were well within the danger zone, a clear indication of the coming crisis, which provides evidence against the common belief that financial crises are not foreseeable. The predictability of financial crises has very important policy implications: as the economy is exposed to boom-and-bust cycles which are the results of credit excess and asset price growth, governments should intervene with early and appropriate policy actions to react to overheating of credit and asset markets. The authors conclude that “A little more policing, and a little less firefighting, would do the world some good”.

Heterodox Economics Due to the failures of orthodox economic theories, an alternative set of what is referred to as “heterodox” and “pluralist” economic ideas has begun to emerge over the past few years. Heterodox comes from the Greek words “heteros” which means “the other” and “doxa” which means opinion, so it has to do with ideas which are not in accordance with the established doctrine. Therefore, heterodox economics refers to economic theories and groups of economists that are an alternative to mainstream or orthodox economics. Pluralism, in both teaching and research, should result in studying different schools of thought within the discipline of economics, which are broadly considered to encapsulate a wide range of economic ideas. Many of these ideas still remain linked to and embedded within neoclassical economic principles; however, pluralistic approaches should largely move away from models based on the assumption of perfect competition. The 2007 financial crisis has also triggered an intense debate—even within the community of mainstream economists—about the necessity to look for alternative approaches to the orthodox economics. As seen in the previous section, many authors wonder why most predictions made by economists turn out to be wrong and many recessions could not be predicted. Krugman (2009) is very critical of the economics profession and explains the predictive failure of economics by the unrealistic approach adopted by most economists, who have an idealised and romanticised vision of the economy. More importantly, he argues that economists have been blind, and never considered the possibility that market economy could fail and cause a catastrophic crisis such as the one which occurred in 2007. Krugman claims that financial economists were not able to foresee the 2007 crisis because they assumed that market were intrinsically stable, and that all assets

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were always priced correctly. Krugman also points out that mainstream economic theory neglects limitations of human rationality which lead to speculative bubbles and markets imperfections (particularly financial markets), which in turn determine sudden and unpredictable crashes. He explains the economists’ failure because “economists as a group, mistook beauty, clad in impressive-looking mathematics, for truth”. Krugman argues that economists should recognise that human behaviour can be irrational and unforeseeable, and accept market imperfections. As a result, policy advice should be more cautious and prudent, calling for an increase of government intervention in the economy through fiscal and monetary policy, rather than being driven by the faith that markets can solve all problems. Krugman emphasises the great importance of “The General Theory of Employment, Interest and Money” by Keynes (1936) in radically changing macroeconomic theory and in dismantling the blind faith in markets. Keynes’ insights were able to explain economic crashes, and more importantly, they could be used as tools to prevent depressions. Very importantly, Krugman also warns of the dangers created when regulators do not believe in regulation. The arguments developed by Krugman generated further discussion within the economists’ community. Quiggin (2012) argues that for decades mainstream economics has been monopolised by theories based on the assumption that markets provide solutions to all economic problems. He points out that proponents of these theories dominated the debate in economics and developed a view of the economy in which a blind faith in markets encouraged investors to consider speculation as an intrinsically safe activity. Consequently, the ideological assumption that markets are efficient promoted laissez-faire economic policies, which are the causes triggering the events leading to the crisis. Quiggin compares market liberalism to dead ideas, which have been demolished by the 2007 crisis; however, these dead ideas are still among us. Quiggin concludes that an alternative to market liberalism is necessary in order to avoid future economic crashes and stresses that moving back to Keynesian macroeconomics and welfare state politics might not be enough to prevent future depressions. In recent years, not only students and academics question the validity of neoclassical economics, but even orthodox economists based at the International Monetary Fund (IMF) doubt if economic policies based on neoclassical theories, such as reduction in regulation and government

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intervention, deliver the outcomes expected by supporters of neoliberalism. In the paper “Neoliberalism: Oversold?” (IMF, 2016), Ostry et al. heavily criticise the neoliberal agenda and provide empirical evidence against fiscal austerity. They point out that since the 1980s there has been a strong and widespread global trend towards market fundamentalism and neoliberalism, which has resulted in the so-called Washington Consensus set of policy prescriptions promoted by the IMF. However, some aspects of the neoliberal agenda have not delivered as expected, they resulted instead in increased inequality, and they produced negative impacts on the level and sustainability of growth. The authors argue that there should be some trade-off between economic growth and equity effects of some features of the neoliberal agenda. Hence, even if economic growth is the main objective of the neoliberal agenda, advocates of that agenda should pay attention to distributional effects. This paper focusses also on another aspect which is central in the neoliberal agenda, i.e. the reduction of the size of the government by constraining government spending (e.g. debtto-GDP ratio below 60% in the Maastricht criteria set up by the European Central Bank). The support for fiscal austerity is based on the assumption that reduction in public debt can be expansionary; however, austerity policies affect demand adversely, they increase income inequality, and as a result, they have a negative impact on employment. The authors argue that empirical evidence suggests that 1% reduction of debt-to-GDP ratio leads to 0.6% increase in long-term unemployment and to 1.5% increase of Gini coefficient of income inequality. As mentioned above, the Post-Crash Economics Society (PCES) was established by undergraduate students at the University of Manchester in 2012 to challenge the dominant mainstream approach in teaching economics in British universities. The PCES stresses the necessity to reform economics teaching by including alternative and heterodox methods and theories in order to address contemporary needs of economics students. Within the academic community, economics students and lecturers founded several other networks, such as Rethinking Economics and International Student Initiative for Pluralist Economics, which aim to encourage pluralism in economics. In reality, pluralist and alternative approaches have characterised the work and the ideas of many economists who have played a central role in forming and framing economic theories during the last centuries, e.g. Adam Smith, Karl Marx, Piero Sraffa, Joseph Schumpeter, John Maynard Keynes, Henry George, Friedrich Hayek, Hyman Minsky, and Paolo Sylos Labini.

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In particular, Schumpeter (1976) departs from the traditional and classical approach, focusses on market disequilibrium, and proposes the revolutionary concept of creative destruction. He argues that capitalism is by nature a form of economic change and can never be stationary, and it is a dynamic process of wealth creation and change driven by technological innovation. He highlights the importance of innovation, and he focusses on disequilibrium analysis. Schumpeter’s creative destruction is a process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new structure, and it involves an innovation mechanism by which new production units replace outdated ones. Schumpeter maintains that this process of creative destruction is the essential fact about capitalism. The disequilibrium analysis stresses the role of the entrepreneur in economic growth, maintains that the economy is far from being a static condition of equilibrium in production, that entrepreneurial ability causes disequilibrium which drives income and wealth creation. Schumpeter concludes that constant innovation of these economic agents changes and reorganises the economy, breaking down old methods and building up newer and more efficient ones. Sylos Labini (1962) focusses on oligopoly. He argues that competition is determined by the classical view based on the lack of entry barriers. Hence, the type of entry barriers is the crucial point of the theory of market. Sylos Labini asserts that the general case of market form is expressed by oligopoly, which is between the two extreme market forms, i.e. perfect competition, characterised by no entry barriers, and monopoly, defined by insuperable barriers. Keynes (1933, p. 373) claims that the economists should not let themselves overestimate the importance of economic issues, or sacrifice to its presumed needs other concerns which are more significant and more important. Keynes concludes that it should be a matter for specialists, like dentistry, and “if economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”. In fact, we do not expect a dentist to be able to predict the future pattern of tooth decay; instead, we expect them to offer practical advice on dental health and intervene to fix problems. Likewise, we should expect economists to provide advice about how to keep the economy working properly and solutions when the economy does not function well, rather than predicting future economic events. In his seminal paper “The Making of an Economist Redux” (2005), Colander maintains that economists are shaped, educated and influenced

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through formal and informal training. This training determines how they approach questions, use information and carry out research. This, in turn, influences the economic policies they advocate and the role they play in society. The training has a dynamic impact on the profession, which changes as old-style training cohorts of economists are replaced with new-style training cohorts. The paper reports the results of surveys with graduate students in seven top-ranking economics programmes in the US in 2003. The findings show two remarkable features. First, when asked to agree or disagree on the statement “Economics is the most scientific of the social sciences”, 50% of respondents strongly agreed and 27% agreed somewhat. This can be interpreted as a superiority complex of economists on other social sciences. Second, 44% of respondents strongly agreed and 45% agree somewhat that “Neoclassical economics is relevant”. This is possibly due to the fact that the debate on teaching is dominated by the neoclassical approach, and hence, economics students are taught only or mostly neoclassical theories. Fourcade et al. (2014) analyse and examine the dominant position which economics has within the structure of the social sciences in the United States, and argue that economists differentiate themselves from other social scientists through their better material conditions, their more individualistic Weltanschauung, and in the belief that economics has the capacities and skills to fix the world’s problems. Fourcade et al. also assert that the position of social superiority of economists creates self-confidence, which in turn allows the discipline to hold a relative epistemological bias against other social sciences, and which inspires a sense of privilege. Hayek (1956) states that a great economist cannot be only an economist, and those who are only economists might become a nuisance or even a danger. Keynes (1924) defines the master-economist as one who has an exceptional combination of talents and abilities. The master-economist must achieve a high degree of expertise and competence in many different areas. They must be mathematician, historian, statesman and philosopher; they must understand mathematical symbols and communicate in words; they must consider specific details in terms of the general picture; they must combine abstract and real; and they must use past events to explain the present in order to consider the future. While many economists believe that economists should behave like dentists, engineers, surgeons and plumbers, Su and Colander (2021) suggest that economists should play all these roles and more, as economic science is a system with multiple and different parts, and each part has

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diverse objectives, methodologies and boundaries. Economic policy falls in the domain of applied economics, but it requires ethical and normative judgements; hence, it needs to be outside the field of economic theory. Guest (2019) recalls again the well-known assertion by Keynes in which he stated that economists should think of themselves as humble and competent people like dentists, and proposes a sensible advice: introducing a professional accreditation for economists, which is required in many professions, like engineers, dentists, nurses, doctors and lawyers. Very importantly, members of the Post-Crash Economics Society (2015) argue that economics is not a religion and that economists should not be looking for a doctrine or a prophet to tell them what to believe, still less a crowd of prophets. According to them, pluralism plays a crucial role by providing multiple perspectives that give “different, valid answers” among which students are encouraged “to come to reasoned judgements about the best answer”. Students should be taught to be economists, not devoted disciples of one specific school of thought. The authors also point out that economies are complicated, and a model is a simplified description providing insight and explanation, and perhaps predictions or guidance on policy; she claims that economic models should not be necessarily mathematical or statistical, and, very importantly, the test of a model is not whether it is right—as it can never be a detailed, accurate and definite description of all aspects of reality—but whether it is useful, if it helps us to understand, clarify and explain evidence. They conclude, therefore, that an economic model can only be judged and criticised in relation to the question to which it is applied. The PostCrash Economic Society criticises the mainstream economics for using tools such as indifferent curves, marginal product and opportunist costs without reference to alternative viewpoints. However, the authors argue that these are merely tools: the question is whether the model using these tools is useful. Dow (2018) defines science as a “systematic procedure for establishing reliable knowledge, involving evidence-based enquiry and critical thinking”, and provides strong support for pluralism in economics by arguing that pluralism contributes to enrich the understanding the idea of reliable knowledge in economics, and that restricting economics to only one approach implies constraining the ambit for reliable knowledge and therefore decreasing the scientific competency of economists. Dow claims that in economics different ideas about theories, approaches and methodologies coexist, and hence establishing reliable knowledge requires

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pluralism. Kahan (2012) carefully analyses the view of Max Weber on capitalism. Kahan argues that Weber thinks that the market replaces robbery with trade, and that, according to Weber, capitalism is the best economic structure available to society, even better than socialism, because capitalism is more rational. However, rationality in capitalism is a two-edged sword: on the one hand, it boosts efficiency in production, but, on the other hand, it deters and restrains the development of individuality. Kahan criticises Weber’s view on capitalism by challenging his idea that within capitalism the period of commerce and of charismatic entrepreneurship was coming to an end. Kahan suggests that Bill Gates and Warren Buffett are evidence that the charismatic entrepreneur is far from being extinct. Kotz (2015) points out that Marxists traditionally define an economic crisis as the interruption in the accumulation process, and that one of the main claims of Marxism is that crises are intrinsic to capitalism. Kotz focusses on long-run crises or structural crises, which are interruptions in the accumulation process characterised by a sustained period of lower accumulation. Such crises require substantial economic restructuring and cannot be solved by internal mechanisms of capitalism. He argues that to use the potential power of Marxism for explaining capitalist crises, it is essential to take four different levels of abstraction which can be utilised to analyse the capitalist system: (1) capitalism-in-general; (2) the particular form of capitalism at a given time and place; (3) state policies; and (4) contingent events. The 2007–2008 crisis provides indication of being a long-run, or structural, crisis. This is suggested by several indicators including the annual GDP growth. In order to examine the causes of the 2007–2008 crisis, Kotz notices that in the period 1997–2007, the United States have been characterised by three fundamental economic developments: (1) increasing gap between profits and wages and higher inequality among households; (2) a series of asset bubbles; and (3) a shift in the activities of financial institutions towards speculative and highly risky investment. These three developments interact each other and determined economic trends which became unsustainable in the long run. The housing bubble deflation acted as the spark which started the crisis by causing insolvency of financial institutions and decrease in consumption and investment. Kotz argues that the cause which has determined the three economic developments is neoliberalism, i.e. the form of capitalism that emerged after 1980. Kotz asserts that neoliberal capitalism is based on an extremely individualistic conception of society, on the idealisation

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of markets, and on the view that the state is the enemy of individual freedom, private property and economic efficiency.

Ethics Ethics is a branch of philosophy that analyses and investigates morals and values, and studies the differences between right and wrong. While descriptive ethics describes the values and moral reasoning of individuals and groups in order to understand the ethical decision-making process, normative ethics answers the general moral question of what ought to do. The inadequate analysis of ethical issues within economics can be seen in several academic papers dealing with slavery efficiency. Gray (1930) claims that during the eighteenth century in the South of the United States slavery replaced servitude and other forms of labour as most important labour basis of the plantation system, and argues that this issue does not include ethical features of slavery, and advantages and disadvantages from the perspective of economic welfare. White (2008) argues that common criteria used by economists to estimate allocative efficiency are not able to assess and to rank a slave-labour system against a freelabour system, he claims that explicit ethical criteria are necessary to compare the two systems, but he does not address any ethical issues, and indeed, there should not be any trade-off between economic efficiency and ethical values. Fogel and Engerman (1971, 1977) present data evidence in support of the economic efficiency of a large-scale scheme of forced labour. Wright (1979) challenges the studies by Fogel and Engerman by arguing that they misinterpreted the data, but fails to raise any ethical argument. However, other authors address ethical issues in economic theory and incorporate ethics in the debate on economic policy. Brower and Saunders (1990) claim that in our societies, there are increasing concerns about the lack of ethics in the behaviour of firms. The authors argue that behaviours determined by individual optimisation deny the importance of community in the decision-making process, and that decisions driven by individual optimisation may bring benefits to some individual but cause welfare loss on aggregate, e.g. monopoly. Debeljak and Krkac (2008) analyse and discuss interpretations and objections against egoism, and argue that current arguments supporting egoism in business cannot be accepted. They also highlight the neutral viewpoint of Adam Smith about egoism and point out that altruistic behaviour is compatible with

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free-market ideology. Victor and Stephens (1994) argue that business ethics should be a single subject of normative ethics and descriptive ethics. They claim that neglecting the descriptive features of ethics might lead to unrealistic philosophy, and that ignoring the normative elements might result in unethical social science. Werhane (1994) also argues that both normative ethics and descriptive ethics should play an important role in business ethics, and that each methodology is related and dependent on the other. “An Inquiry into the Nature and Causes of the Wealth of Nations” by Adam Smith (1776) is one of the fundamental works in economics and focusses on factor productivity, division of labour and free market. One of its key insights is that people are better off when they put their sympathy aside. This view has always been considered a justification for selfish behaviour, and a support for the abstract concept of the “invisible hand” theory of free market and hence for unregulated markets. The policy implication is that regulations on trade are counter-productive. However, in his previous book “The Theory of Moral Sentiments” (1759), Smith addresses moral issues, emphasises the importance of ethics, and concludes that ethics is natural and stems from our social nature, and that sympathy for others is the basis for ethics. The two works can, therefore, be considered as complements rather than antagonistic. A deep analysis of Smith’s works suggests also that the ethics of being an economist and the ethical consequences of economic policies determine the necessity to question values, norms, assumptions and beliefs. As economists can influence the society and shape the political debate, with this influence arise significant ethical questions, e.g. what economists should do when the market-clearing wage is below subsistence level? These ethical questions should play a fundamental role in economic theory and should be introduced into the structure of economic modules, and philosophy of economics should be a central part of core economics modules. Dow (2008) correctly points out that mainstream approaches in economics ignore ethical issues derived from market outcomes, and she calls for pluralism and heterodox ideas with a specific emphasis on ethical aspects of economics. Dow believes that pluralism should be the result of evolutionary processes, which are identified with four characteristics: ethics, evidence, variety and inevitability. Hence, pluralism evolves from a recognition of and engagement with the world which economists try to explain. Dow (2013) discusses the design of a code of ethics for economists and argues that the development of such a code involves potential obstacles from a pluralist point of view.

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She argues that any code of behaviour of economists assumes a specific belief about the nature of human beings and of professional expertise, and that matters of socio-economic power within the profession present questions about the understanding and the application of different principles. Therefore, a code of ethics should be defined as a set of general instructions, with primary importance given to the ethics of pluralism, consisting of tolerance, fairness and open-mindedness, representing the foundations upon which all other ethical judgements lie. Dow (2020) also analyses the philosophical foundation of macroeconomics by looking at how real economic systems are perceived and how knowledge about them is augmented and evaluated. Dow acknowledges that mainstream macroeconomics has changed in the aftermath of the 2007 financial crisis in order to respond to policy needs, but she also claims that the dominant theoretical approach has restrained changes as it imposes internal methodological constraints, which are usually inconsistent with the external conditions determined by evidence and policy application. Mackenzie (1893) argues that economics is concerned with that what we value as means to something else, e.g. consumption goods, that consumption seems central to economic theory, and that economics can be defined as the science of consumption. He also claims that, if economics deals with means while ethics is engaged with end, then studying the former without dealing with the latter, as something which is initially considered a means can begin to be seen as an end. Colander (2012) points out correctly that economics has a serious ethical problem, which is lack of humility. Economists are inclined to communicate a much greater amount of confidence and assurance in their policy implications than theory and empirical evidence justify. He also argues that many economists make apparently conclusive scientific statements on policy advice based on theories and models which are inexact and flawed. Colander believes that, in order to solve this problem, economists should think of themselves as engineer rather than as applied scientists, and concludes that if economics is substantially engineering, then a code of ethics for engineers should easily translate into a code of ethics for economists.

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Teaching Economics in the Twenty-First Century The 2007 financial crisis and the COVID-19 pandemic have sparked a debate within the academic community about the need to revise not only how economic research should be conducted, but also about the urgency to change the approaches and the methodologies used to teach economics at university, and to provide students with a critical, alternative and pluralistic perspective. Chang (2014) makes the case for pluralism and identifies nine different schools of economic thought: Austrian, Behaviourist, Classical, Developmentalist, Institutionalist, Keynesian, Marxist, Neoclassical and Schumpeterian. He argues that these schools are not necessarily antagonists, because borders between schools are not completely transparent; rather, each school represents a specific and different approach to perceiving and explaining the economy. As each theory entails some degree of abstraction and hence cannot catch all complex features of the real world, it follows that each theory has specific strengths and weaknesses, and no theory can explain all economic phenomena. Chang concludes that economics is always a political argument, that it cannot provide objective and impartial truths, and that these truths are conditional to political and ethical judgements. Wolff (2019) makes a point for considering economics as a political argument, profoundly analyses socialist experiments in history, and proposes a path towards socialism based on democracy in the workplace. He argues that the post-capitalist economy that Marx envisaged involves a crucial and necessary shift in the design of production in order to eliminate the dichotomy between a tiny minority of capitalists who make all decisions in the production process and earn profits, and the mass of workers engaged in the production who produce the surplus which is appropriated by the capitalists. Socialism aims to create a different economic environment, where production decisions are taken democratically by all workers, and where exploitation stops because those who produce surplus become effectively appropriators and distributors of surplus. Wolff concludes—based on Marx’s analysis—that for an authentic political democracy an economic democracy is a necessary requirement, and that democracy implies democratisation of workplaces. Wolff (2020) further emphasises that socialism relates to production reorganisation, it implies that labourers generating surplus are those who earn and share that surplus, and it represents the negation of economic exploitation. Wolff also claims that, after the shock brought about by

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the COVID-19 pandemic, instead of returning to normality, a deep transformation towards a new economic order is necessary and imperative. In recent years, many economics professors have changed the way they teach economics and have taken some steps towards more pluralistic approaches, which depart from the orthodox and traditional positions. Blanchard (2016) asks himself the question “How should we teach macroeconomics to undergraduates after the crisis?” and focusses on the IS-LM model. He argues that the original LM equation—based on the assumption that central banks’ monetary policy tool is money supply— should be replaced with the choice of interest rate subject to zero lower bound. Blanchard also claims that the same interest rate appearing in both IS and LM curves is an unrealistic assumption. Therefore, he thinks that the IS-LM model should be extended to include two interest rates, the central bank rate entering the LM equation and the interest rate on borrowing which appears in the IS equation. He also proposes to eliminate the traditional aggregate demand-aggregate supply (AD-AS) model and to adopt instead Phillips Curve (PC) relation determining the supply side, in which agents’ expectations and central bank interest rate choice will determine the output level. The IS-LM model augmented with the PC relation would include the realistic assumption of zero interest rate bound and to explain the spread between the borrowing and central bank interest rates. Brancaccio and Saraceno (2017) comment on the work by Blanchard (2016) and notice the controversial evolution of Blanchard, who has been an enthusiastic and fervent supporter of orthodox economics for decades, and after the 2007, financial crisis proposed a re-examination and a revision of some fundamental features of mainstream economics by discarding the aggregate demand-aggregate supply (AD-AS) model and using the IS-LM model with the Phillips curve. Brancaccio and Saraceno argue that this change introduces the possibility of instability, but they also claim that this model may be inconsistent and irreconcilable with the main theoretical foundations of the neoclassical approach. Bellido (2017) points out that in recent years, there have been several attempts to replace the traditional IS-LM-AS-AS model of intermediate macroeconomics with New Keynesian alternatives. However, he notices that most macroeconomics textbook still present the traditional model. The author proposes the IS-MR-AD-AS model—where MR represents monetary policy rule—a New Keynesian model which includes the short-term bonds market, captured by the MR curve. The model uses the similar approach of the traditional IS-LM-AD-AS model and

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keeps its simplicity, but at the same time it can address complex issues as the general model consists of four parts which deal with short-term equilibrium, steady-state equilibrium, transit towards steady-state equilibrium and rational expectations. Bofinger (2011) highlights the flaws of the traditional economic textbooks and the deficiencies the standard IS-LMAD-AS model, which is still currently used as main instrument to teach undergraduate macroeconomics. Bofinger argues that the IS-LM-AD-AS model contains many theoretical inconsistencies, and it assumes that the economy is intrinsically stable and can be destabilised only by downward wage rigidities and exogenous policy shocks. Bofinger claims that the typical textbooks disregard the fundamental instability of the market economy, and hence, they are responsible for spreading the perception by most economists that the world economy had moved into a condition of stability called the “Great Moderation”, and that the problems of macroeconomic fluctuations and depression prevention had been solved. Ortlieb (2004) strongly criticised the use of graphs in economics; he looks at the Mankiw’s textbook “Principles of Economics” (2001) and found that in 850 pages the same graph appears 91 times, and it is used for all areas of application. However, he argues that the graph makes sense only if specific conditions are satisfied: perfect competition, monotonically decreasing demand and monotonically increasing supply curves. De Grauwe (2017) addresses the discrepancy between market equilibrium and distribution. According to De Grauwe, the market economy produces great material prosperity; however, many people are dissatisfied because individual happiness is not achieved. The conflict between individual and collective well-being can in turn lead to the rejection of the market economy. De Grauwe uses a simple model of supply and demand to provide an alternative interpretation of the market equilibrium. The traditional interpretation provided by the classical economic theory is as follows: one group of consumers buys a good, say bread, for the equilibrium price and consists of those individuals who attach a high value to bread; another group of consumers does not buy bread because these individuals attach less value to the good. According to this traditional analysis, free market ensures that bread reaches those who care the most about it and those most willing to pay, and it leads to the optimal solution. However, De Grauwe argues that willingness to pay is just one possible interpretation of the difference between the consumers who buy bread and those who do not. This was Marie-Antoinette’s (Queen of France before the French Revolution) interpretation when told that the Parisians were protesting

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at the high price of bread; her response was “Let them eat cake” and suggests there is nothing wrong with the market economy. However, De Grauwe assumes that the second group consists of consumers who are ill or disabled and have no income. These individuals may attach great value to bread and might be willing to buy it, but they may lack the financial means to buy bread at the equilibrium price, i.e. the equilibrium price is too high. In a free-market system, this leads exactly to the same equilibrium as the market is completely indifferent to the underlying reason why one group of consumers does not buy bread, i.e. whether it is because they do not want bread and prefer cake or because they cannot afford it. However, De Grauwe concludes that based on this interpretation the result of the free-market equilibrium cannot be considered socially optimal.

Conclusions This chapter has examined the debate generated by the recession brought about by the 2007 financial crisis on economic research and their implications for teaching economics at university. It makes a case for a transformation of the way economics is taught, and for a need of innovative and pluralistic approaches in order to offer students alternatives to the neoclassical economics view. Though the neoclassical approach in economics is not supported by empirical evidence and is characterised by theoretical inconsistencies, it is still the predominant paradigm in both research and teaching. The demand for alternative approaches from both academics and students has increased in the aftermath of the 2007 recession, and calls for a complete change in the discipline. As pointed out in chapter one, Kuhn (1962) made one of the most influential statements in philosophy of science about the progress of academic disciplines by arguing that science does not advance linearly or smoothly, but through paradigm shifts. Each paradigm shift results in an update of the previous paradigm, and the new paradigm becomes the new dominant one. Finally, the discussion about economic approaches necessarily involves also ethics, and therefore objectivity and honesty. Sylos Labini (1974) argues that scholars of social disciplines in their intellectual and political activities are necessarily influenced by the education they have received and by their ideology. They must be well aware of this in order to reduce the

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distortions that in their analysis are caused by their ideology. Sylos Labini (1974) claims that those scholars of social disciplines who are proudly objective, unbiased or impartial are pathetic characters, because they are victims of an ideology without knowing it and without the possibility of opposing its pressures. Then, he distinguishes between “objectivity” and “intellectual honesty”: if scholars cannot hope to be strictly objective (which is impossible), they can and must nevertheless strive to be intellectually honest, i.e. they can and must try to see all aspects of a problem, even those aspects which are unpleasant for them, and not only the aspects which match their ideology or are beneficial for their political side.

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Index

A Africa, 56 African, 50, 53, 56, 60, 71 Akerlof, G.A., 95, 108–110, 112, 113 Austerity, 2–4, 11, 59, 165 Austrian, 90–92, 151, 173 B Bangladesh, 35, 37–40, 42 BBC, 21, 23 Behavioural, 11, 50–52, 61, 79, 108, 120 Behavioural economics, 8, 50, 115, 137, 138 Bernanke, B., 156, 157, 161 Blanchard, O., 2, 156, 174 Bofinger, P., 175 Bookstaber, R., 162 Brancaccio, E., 11, 174 C Califano, A., 11

Chang, H.J., 53, 173 China, 26, 51, 96 Chinese, 26, 72 Cohen, G.A., 13 Cohen, M., 13 Colander, D., 160, 161, 166, 167, 172 CORE, 5, 86, 93, 97, 98, 100, 125 Covid-19, 1, 2, 7–10, 14, 19–24, 28, 33, 38–42, 50–53, 55, 57–62, 64, 69–72, 74, 78–80, 173, 174 Cox, H., 33–35, 37, 40, 136, 143–146, 149 Cultural hegemony, 136, 140–150, 152

D De Grauwe, P., 175, 176 Development economics, 50–52, 55, 56, 59, 61, 62, 64, 65, 79 Disequilibrium, 53, 166 Dornbusch, R., 86

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Yusuf et al. (eds.), Post-Crash Economics and the Covid Emergency in the Global Economy, https://doi.org/10.1007/978-3-031-31605-0

183

184

INDEX

Dow, S., 168, 171, 172

E Edgeworth Box, 94, 116 Edgeworth, F.Y., 94 Education, 4–6, 13, 14, 20–27, 34–38, 40–42, 54, 69, 70, 72–74, 76–80, 124, 125, 132, 136, 140, 142, 147, 149–152, 176 Educational inequality, 14, 70, 71, 73–75, 78–80 Efficiency wage, 109, 110, 112, 113, 115 Einstein, A., 13 Equilibrium, 90, 93, 94, 98, 108, 110, 113, 115, 127, 129, 132, 166, 175, 176 Ethics, 139, 170–172, 176

F Fiscal policy, 9, 59 Fisher, M., 136, 143, 146–149

G Game theory, 11, 88, 93, 94 Global financial crisis, 56, 59 Gramsci, A., 140–142 Great Depression, 4, 6, 12, 52 Greenspan, A., 157, 158 Gross Domestic Product (GDP), 56, 100, 104, 157–159, 162, 165, 169 Guardian, 4

H Hayek, F.A., 96, 165, 167 Heterodox economics, 8, 11, 163

Higher education, 19–25, 27, 28, 54, 72–74, 136, 142 Hodgson, G.M., 5, 6 Human capital, 20, 25, 26, 28, 56, 61 Human Development Index (HDI), 72

I India, 56, 71, 72 Indian, 72 Industrial policy, 50, 53–55 Inequality, 5, 6, 8, 10, 11, 14, 52, 55, 61–64, 70–73, 76, 80, 124, 139, 140, 165, 169 Inflation, 107–110, 113, 117, 156, 159, 162 Interdisciplinary, 3, 14, 15, 151 International Monetary Fund (IMF), 2, 3, 164, 165 Invisible hand, 86, 98, 99, 171 IS-LM model, 174 Italy, 11, 12, 77

J Japan, 9

K Kalecki, M., 104–109, 112, 117–120 Keynesian, 13, 94, 104, 108, 145, 164, 173, 174 Keynes, J.M., 3, 4, 50, 52, 104, 108, 111, 112, 162, 164–168 Kindleberger, C.P., 160 Kotz, D.M., 169 Krugman, P., 2, 129, 163, 164 Kuhn, T.S., 15, 176

L Laissez-faire, 2, 107, 164

INDEX

Lockdown, 10, 19, 27, 34, 39–41, 51, 56 Loungani, P., 158, 159 Lucas, R.E., 2, 156

M Mackenzie, J.S., 172 Mankiw, N.G., 61, 86, 88, 90, 175 Marshall, A., 90, 98 Marxian, 12, 103, 104 Marxist, 12, 63, 118, 151, 169, 173 Marx, K., 3, 4, 13, 50, 103, 165, 173 Mattei, C.E., 11 Mazzucato, M., 10, 12 Minsky, Hyman, 4, 165 Monbiot, G., 77 Mundell-Fleming model, 129 Myanmar, 33–35, 37, 40, 42

N Neoclassical economics, 3, 6, 10–12, 50, 53–55, 62, 92, 164, 167, 176 Neoliberalism, 11, 54, 136, 149, 165, 169 Nordhaus, W.D., 158

O Occupy Wall Street, 10, 12 OECD, 74, 162 Online learning, 20–22, 25, 76 Opportunity cost, 86, 88–93, 97, 99, 100 Ortlieb, C., 175 Oxfam, 34, 59

P Pareto, 62, 93–95 Pigou, A.C., 62

185

Piketty, T., 6 Podemos, 10 Post-Crash Economic Society, 168

R Remote teaching, 21, 72, 76 Research and Development (R&D), 54 Rodrik, D., 11, 12 Rohingya, 33–42 Romer, D., 61

S Sachs, J., 128 Schumpeter, J., 3, 165, 166 Sen, A., 78 Slavery, 141, 170 Smith, A., 5, 94, 98, 113, 116, 165, 170, 171 Socialism, 6, 12, 13, 128, 169, 173 Social policy, 50, 54, 59–62 Sraffa, Piero, 3, 165 Stiglitz, J., 109, 129 Sylos Labini, P., 165, 166, 176, 177

T Tobin, J., 89 Togati, T.D., 160

U UNCTAD, 56, 58 Unemployment, 12, 93, 95, 108–110, 113, 115, 120, 157, 159, 160, 165 United Nations International Children’s Emergency Fund (UNICEF), 34–37, 39–42 Utility, 54, 61, 63, 89, 90, 92, 105, 118, 119, 127, 131

186

INDEX

V Varoufakis, Y., 6, 7 Virtual Learning Environment (VLE), 74

World Economic Forum, 22 World Health Organisation (WHO), 39

W Washington Consensus, 2, 165 Welfare, 11, 61–64, 90, 164, 170 Weil, D.N., 61 Wolff, R., 12, 13, 173 World Bank, 50, 56, 58, 59, 63

Y Yemen, 28

Z Žižek, S., 147, 151