This is sort of a quasi-international development, part IPE-ish entry of a conference that happened way back in April this year. Unlike my previous entries, it’s going to be told in a more informal manner.
It was during my Easter “break” (study period) that my course mate Yan (whom I was studying with) suddenly remarked that Joseph Stiglitz was coming to town. That was after quite a draining session on development economics and institutional economics and my ears immediately perked at that name.
Joe Stiglitz is and continues to be my favourite economist of all time and I own (no treasure) and have read four of five of his books (well one of them a co-authored book and another an edited book), read his works and reports and listened to audio and video clips of him. But I’ve never met him nor seen him physically from a distance. I turned super excited and my companions and started talking as if he was some famous actor or rock star. Yan’s comment that she’s met Stiglitz before in her previous University made me even more excited and envious.
To see and listen to Stiglitz close up, the procedure initially appeared to be simple, register for the conference which the first Institute for New Economic Thinking (INET) conference held at King’s College. The clutch was that no enterance was only restricted by invitation but there was a side venue at available for students to view. My great chance to actually seeing my favourite economist close up was gone.
That last line however did not last as the next morning, while walking to the business school, I did pass by the man himself!!! It was only for around a few seconds and by the time I tried to cross the road he had disappeared around the corner. Shucks, another missed chance.
Back to the conference. This was actually day two–see the schedule here and I arrived just in time to listen to George Soros give the first speech. Soros in fact was the benefactor of this new institute and the organiser of the conference. given his background you certainly would never expect him to start a economic institute to re-orientate economic thinking to tackle yet another economic crisis. He showed little of it in his speech which talked about the failure of Rational Choice Theory (RCT), Rational Expectations and the Efficient Market Hypothesis. This was the most the same line of thought inthe other three speakers for that session. Soros’s presentation however was the least econometric laden of the four but the general gist was clear: Economic thought and teaching needs an overhaul in light of the “2008-current” crisis.
That got me immediately thinking: While this is all well and noble, such a rehaul in fact should not have been proposed and diffused way before the subprime mortgage crisis. It should have happened even way before the Asian Financial Crisis or any financial crisis. If one steps backs and has a proper look, the market simply cannot function without some form of regulation. Yes, Karl Polanyi provided an excellence treatise onthis but one doe not need to read Polanyi to understand this. Of course, this also depends one’s economic position although supporters of laissez-faire policies increasingly have less of a defence of their views.
The next two sessions were really heavily econometric-economic based with tons of equations that suited masters or doctoral students. The main gist however was the same. My ears perked when they mentioned the works of Keynes vs Hayek, something which these economists and policy makers talked about the previous day. Keynesian and neo-Keynesian thought of course has its flaws but Hayek in my view has no place for a politician or an economist. This mention of Keynes also reminded me of another talk by some Bank of England official in my undergraduate University. It was in early 2009 and he started of with “We are all Keynesian now”. Well, we should definite all not be neo-liberals or neo-classical economics
The second afternoon session was the one I was waiting for–Stiglitz would be presenting on the question “What Kind of Theory to Guide Reform and Restructuring of the Financial and Non-Financial Sectors?” By this time Yan had joined me and after bringing her up to speed I started talking about Stiglitz again. having already missed the chance to view him close, another let down was the audio quality and volume of the live broadcast. Thankfully it improved within a few minutes. I shan’t summarise Stiglitz’s speech–you can view it here and read his slides, however I will say that he’s quite humourous, goes straight point and gives a passionate defence of his arguments. Stiglitz probably pushed the argument that economists need a new economic mindset was urgently needed. Mind you, he himself proposed this way before and during the Asian Financial Crisis. Unfortunately, neo-liberalism and “no government regulation” control has continued to predominant.
We skipped the last session which I should have watched. It wasn’t so much the discussants that i wanted to hear but ther moderator–Justin Lin, the Chief Economist of the World Bank. Lin, as you would have guessed, is the first non-Western academic to be chosen for such a position, although he has been trained in the neo-liberal school of Chicago. Even so, his proposals on industrial policy are something worthy to be examined.
Both of us only attended on session the third and final day–the topic being “The Consequences of Inequality and Wealth Distribution”. This turned out to be a rather excellent choice with James K. Galbraith as the most prominent speaker. An academic Kate Pickett started off arguing about the drastic effects of high inequality, using data primarily from the UK. This wasn’t some Lorenz curve of Gini coefficient manipulation but rather empirical details touch a range of social factors such and physical and mental health, social interactions and intra-sectoral inequality. Galbraith however gave the most unique model on inequality presenting a “wavy” Kuznets curve–you can read his paper and presentation . Basically, he positions countries such as China with a middle income/GDP has a rising inequality thus on the upward part of the first curve. In contrast, social democratic countries like Denmark have a higher Y but much lower inequality level. Eventually however, such countries would still see a rise in inequality in the long run, already represented by the US. That last part of course is a little dubious for me. The next interesting speaker (interesting more in his delivery)was a certain Branko Milanovic who used the literacy work of Jane Austen’s Mr. Darcy and Elizabeth from Pride and Prejudice in his presentation on inequality. His argument, which Yan objected too, was that an individual’s inequality is pre-determined by his geographical position.
Another interesting incident during this conference on rejuvenating new economic thinking was during the speech by IMF Managing Director, Dominique Strauss-Kahn. Mid-way through his speech, Cambridge student protestors mange to break in as unveil an anti-IMF poster IMF is part of the problem not the solution. Strauss-Kahn, as much as he holds some neo-liberal views and is in command of a neo-liberal dominated institution, has proposed an alternative view to tackle this financial crisis. Strauss-Kahn fo course cannot single-handedly alter the IMF to be the global financial assistant it was suppose to be. in this light, civil society action is still needed–but not just protesting!
As I departed from this three day talk, the thought of still not seeing or meeting Professor Joseph Stiglitz still lingered. Other reflections however included:
1) My view that economic thinking should have be shifted away from the “hands-off”, neo-liberal approach long before 2008 and thus alarm bells should have been sounded louder and steps could have been taken to tackle the crisis
2)The conference may have brought together many economists and policy makers, yet because of its theme, it did not include those who still beleive in the “old” economic ways of less government regulation.
3)That like it or not, neo-liberalism still is a dominate paradigm despite the drastic results as shown by economic crisis. INET people and others will have to work harder to push their agenda.
4)Again it was surprising that George Soros was the benefactor and one of the creators of INET.
5)The conference and institute was highly focused on financial economics with only a minute mention of the financial crisis impact on developing and less developed countries (LDCs). This issue should be included in future conferences
6) It was also interesting to note that Kenneth Rogoff was at the conference alongside (though not physically) with Joe Stiglitz. Rogoff, for the less informed, was the main critic of Stiglitiz’s 2002 classic book Globalization and its discontents (see this link) and in political and economic circles, is a neo-liberal proponent. In the INET conference, he may have movement away from the neo-liberal view (see his presentation) but largely is still of this school of thought. Two old opponents at the same venue. I wonder if they talked to each other?
7)IPE-wise, again, while this was clearly showing that neo-liberal, neo-classical economics has failed, neo-liberal thought still prevails in political and economic circles.