economics programme owen university wo …

ECN 431 2020-2021 ECONOMICS PROGRAMME, BOWEN UNIVERSITY, IWO

INTRODUCTION (UPDATED)

Abdul-Ganiyu Ajani Garba

January 11,2021

1

TALKING POINTS 1. Conceptualization

2. Nexus: Economic History and History of Economic

Thought

3. Evolution of Economic Thought

4. Essential Nature of Economics

5. Current State of Economics Thought, Practice and

Economies

6. Why Study History of Economic Thought and

Alternative Approaches

AG Garba, 2020; BOWEN UNIVERSITY, IWO 2

CONCEPTUALIZATION

What is History of Economic Thought? • History of economic thought is the history of economic

ideas, theories, theologies, philosophies,

methodologies, thinkers and the religious, social,

economic and political conditions that shaped their

thoughts.

• HOET = {Economic Ideas; Theologies, Philosophies,

Methodologies, Theories, Thinkers and Conditions}


KEY BIBLICAL AND HISTORICAL TIMELINES 1.Biblical Times (15th Century BC): Egypt; Canaan;

Israel, Assyria, Babylon (606-539 BC), Medo-Persian

(539-331BC), Grecian (331-146 BC) and Roman (146

BC – 476 AD)

2.Lower Middle Ages (350 – 1049 AD)

3.High Middle Ages (1050 – 1300 AD)

4.Renaissance (14th -16th Century)

5.Modern (17th -21st Century) AG Garba, 2020; BOWEN UNIVERSITY, IWO

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TIMELINES: EVOLUTION OF ECONOMIC THOUGHT

1.Biblical Times: Biblical Foundations (Themes, Doctrines and Principles)

2. Greco-Roman Times: Greek and Roman Philosophy – Sophists (Rhetoric,

Ethics and Epistemology); Socrates (Epistemology and Ethics), Plato

(Metaphysics, Epistemology and Ethics), Aristotle (Metaphysics,

Epistemology and Ethics), Xenophon , Epicureans, Stoics and Skeptics

3.High Middle Ages (Scholastics)

4.Renaissance (Curiosity and Objectivity, Individualism and Humanism) –

5.Modern: (i) Pre-Classical (Mercantilism -1500-1750) and Physiocrats

(1750-1780 ); (ii) Classical (1776-); (iii) Neo-Classical (1871- ); (iv)

Keynesian Revolution (1936 -); (v) The Synthesis and Debates(1937 - );

(vi) The Counter-Revolution; (viii) Crisis (2008- ); (ix) COVID –Pandemic

AG Garba, 2020; BOWEN UNIVERSITY, IWO

5

FROM PHILOSOPHY TO ECONOMICS

• Philosophy: Sophists, Socrates, Plato, Aristotle, Xenophon

• Scholastics: St Thomas Aquinas; Don Scotus Philosophy

• Pre-Classical: Mercantilist/Physiocrats

• Moral Philosophy: Jeremy Bentham, Adam Smith

• Classical (Political Economy): Adam Smith, D Ricardo, Jean Baptist Says; Malthus;

Political Economy and Moral Philosophy

• Neoclassical: Cambridge; Lausanne and Austrian Schools

• Keynesian Revolution

• The Aftermath

• The Current

Economics-Grand Theorizing and the

Aftermath

6 AG Garba, 2020; BOWEN UNIVERSITY, IWO

EVOLUTION OF ECONOMIC THOUGHT: THE HOURGLASS METAPHOR

1.1776-1900: Political Economy and Moral

Philosophy

2.1930-1980: Economics as Technical

Science and Tool of Social Control

3.1990- Economics and Political Economy Source: Peter J. Boettke, Peter T. Leeson, and Daniel J. Smith. “The Evolution of Economics:

Where We Are and How We Got Here”.


ESSENTIAL NATURE OF ECONOMICS: CONTENDING POSITIONS

1. A Moral Science? JM Keynes

2. A Social Science? Lord Robbins – Study of human behavior as a relationship between means and ends

– A separate an inexact science? Mark Blaugh

– A pseudo science TW Hutchinson

– Cause-Effects Determinism and the Free Will Problem

3. Synthesis of Science and Art? JM Keynes

4. An Evolutionary Science? – History of Economic Thought

5. A Tool of Rebellion and Deception? - Garba AG Garba, 2020; BOWEN UNIVERSITY, IWO 8

TEACHING OF ECONOMICS: TYPICAL CURRICULAR

1. CORE: Equilibrium Theory (Micro and Macro)

2. Extensions: Micro (Strategic Behaviors; Economics of

Information; Information Economics) and Macro (Short

Run; Medium Run and Long Run Analysis)

3. Tools: Logic; Mathematics; Statistics and Econometrics

4. Applications: Development Problems; Industrial

Economics; Monetary Economics, Public Sector Economics;

International Trade and Finance; etc.


ECONOMICS PRACTICE Opportunities:

1.Public Sector: Executive, Legislative and

Judiciary

2.Private Sector: Entrepreneur; Services;

Industry; Agriculture; etc.

3. International: UN System; Global Finance and

Global Corporations; Others AG Garba, 2020; BOWEN UNIVERSITY, IWO 10

UNIQUENESS OF BOWEN ECONOMICS PROGRAMME

Foundations of Theonomics I Foundations of Theonomics II

1. Review of foundation of Economics for easier

comparison with the foundations of Theonomics.

2. Review of Real Number Line; Set Theory and

Cartesian Products: to illustrate Omniscience,

Ignorance and Basic Divine and Human

Relationships

3. Basic Questions of Life and Alternative Answers:

Origin, Meaning, Morality, Eschatology (Future)

and Identity

4. Concepts that darken or enlighten reasoning and

confidence: dogma, sermon/lecture, science,

principles, doctrines, theory, reason, sense

experience, revelation

5. Inter-Disciplinary Relations: Economics;

Theology; Philosophy; Science, Theonomics

6. Frameworks for Theonomics and Economic

Analysis

1. Review of ECN 247

2. Truth, Knowledge, Wisdom and

Understanding: Serpentine Dialogue; Two

Paths; Biblical and Non-Biblical sources;

natures and foundations of Truth,

Knowledge, Wisdom and Understanding

3. Meaning, Elements and Domains of

Economics and Theonomics

4. Principles of Economics and Theonomics

5. Christian World View (Created Order) vs.

Secular World view (The Contemporary

World Order)

6. Theology of Philosophy, Science,

Theonomics and Economics

7. Decision Making Time 11

CURRENT STATE OF ECONOMICS THOUGHT 1.The Mainstream: Neoclassical, Classical, Keynesian, Neoclassical

Synthesis, The New Successors (Keynesian, Classical, Business Cycle)

2.Key Issues in the 20th Century: Risks and Uncertainties; Risk

Based Models; Imperfections and Evolutionary Economics;

Information Economics, Economics of Information, Strategic

Behaviour (Game Theory, Auction Theory, Negotiations, Strategic

Planning, etc)

3.The Heterodox: Austrian School, Evolutionary Economics,

Institutional Economics, etc.

4.State of Economics in Nigeria: Training, Practice, Research and

Academic Writing



Aspects The Core Principles of Mainstream Economics

1. HOW AGENTS

CHOOSE

1. The Trade-Off Principle: economic agents face trade-offs.

2. The Opportunity Cost Principle - cost of what agents have is what

they gave up to have it

3. The Cost-Benefit Principle - rational economic agents think at the

Margin i.e., agents compare MC to MR.

4. The Incentive Principle - people respond to incentives

2. HOW AGENTS

INTERACT

1. Trade can make everyone Better Off.

2. Markets are Usually a Good Way to Organize Economic Activity.

3. Government Can sometimes improve market outcomes: public

goods, market failure and market power.

3. HOW THE

ECONOMY

WORKS

1. Production of goods and services is the key determinant of a

country’s standard of living.

2. Prices rise when government prints too much money.

3. Economies face a short run trade-off between Inflation and

Unemployment.


Period Questions Core Problems Markets Applications Extension Policy Issues Short Run o What

happens to

economy

from year

to year?

o IS-LM

Determination

of SR

equilibrium

levels of output,

income,

employment,

wages, price

and interest

o Goods

and money o Evaluation of the

effects of fiscal

and monetary

policies on

equilibrium

o Open economy – BB o Expectations

1. Autonomy of

policies 2. Effectiveness of

policies 3. Uncertainties

and Policy 4. Expectations and

Policy 5. Art of Monetary

Policy Medium

Run o What

happens to

the

economy

over a

decade?

o AS-AD Determination

of Output in

medium term

(Aggregate

Supply and

Demand)

o Goods,

Labor and

Money

o Relation between

output and

inflation, roles of

fiscal and

monetary policy

in short run and in

medium run

o Open economy – BB o Expectations o Pathologies (business

cycles and high

inflation)

o Same as above

Long Run o What

happens to

economy

over half a

century?

o Growth

Theories Determinants of

Growth, capital

accumulation,

technological

progress

o Interaction

between

technological

progress, wages

and

unemployment

o Open economy – BB o Expectations o Pathologies (business

cycles and high

inflation)

o Same as above

OVERVIEW OF MACROECONOMICS


Evolution of Macroeconomics

and Leading Builders

Enabling Events Ethical Commitment Innovations Influence Contestations

1. Keynes (J. N. Keynes) o Great Depression

o Failure of the Classical theory

o Revolutionize economics

o Full employment

o Greater equality

o Global peace

o Units of quantities for macro analysis o Marginal Propensity to consume, o Multiplier o Aggregate Demand o General Theory of Employment o Liquidity preference function o Role of expectations o Theory of Interest o Paradox of thrift o Paradox of poverty in the mist of plenty

1936 – 1970s o Classical

postulates

2. The Neoclassical Synthesis (John Hicks, Alvin Hansen, Paul Samuelson, Milton Friedman, Franco Modigliani, James Tobin, Lawrence Klein, Anna Schwartz, Edmund Phelps)

o Keynesian Revolution

o Post-War Economic Growth

o Consensus among economics

o IS-LM framework o Theories of consumption, investment and money o Growth Theory o Macro-econometric Models

1940s -1970s o Monetary Policy

vs. Fiscal Policy

o The Phillips

Curve

o Role of Policy:

discretionary vs

policy rule

3. The Rational Expectation Critique (Robert Lucas, Thomas Sargent and Robert Barro)

o Economic crisis of stagflation

o Failures of the synthesis

o Revolutionize Macroeconomics

o Restore confidence in neoclassical economics?

o Nobel Prize?

o Lucas critique o Explicit integration of rational expectations into

Keynesian frameworks to take account of implications of forward looking behavior by people and firms

o Random walk consumption (Robert Hall) o Overshooting model of exchange rates (Rudiger

Dornbusch) o Wage and Price Setting under staggering of wage and

price decisions (Stanley Fischer and John Taylor). o Game Theoretic Theory of Policy

From 1970s o Micro-

foundations of

Keynesian

Economics

EVOLUTION OF MACROECONOMICS IN THE 20TH CENTURY


CURRENT STATE OF MACROECONOMICS Evolution of Macroeconomics

and Leading Builders

Enabling Events Research Programs Summary of Problem

(a) New Classical Economics

and Real Business Cycle

Theories (Edmund

Prescott)

o Rational Expectation

Critique

o Explaining fluctuations as the effects of shocks

in competitive markets with fully flexible prices

and wages

“Identifying how much of fluctuations in

output can be thought of as movements in

the natural rate and in the natural

unemployment rate”.

(a) New Keynesian

Economics (George

Akerlof; . Gregory

Mankiw and Ben

Bernanke)


Critique

o Efficiency of wages (George Akerlof)

o Imperfections in credit markets (Ben Bernanke)

o Nominal Rigidities and menu costs explanation

of output fluctuations (George Akerlof and N.

Gregory Mankiw)

“Identify the precise nature of

imperfections and nominal rigidities that

give rise to deviations of output from its

natural level.”

(a) New Growth Theory

(Robert Lucas, Paul

Romer, Phillipe Aghion,

Peter Howitt, Alwyn

Young)


Critique

o Resolve unanswered

questions

o Endogenizing technological progress in growth

models

o Interactions between technology and

employment

“Identifying the factors responsible for

technological progress and growth in the

long run.”

(a) Engendering

Macroeconomics

(Cagatay, Grown, Elson,

and a diverse range of

economists)

o Feminism

o Rising Gender Inequality

and poverty

o Economic crisis

o Beijing ‘95

o NGO advocacy

o Analyzing interactions between reproductive

and productive economies

o Gender Accounting

o Gender aware Budgeting

o New Economics of the Household

o Gender and the Institutional Framework of the

Macro-economy

Endogenizing gender relations in trade,

finance and macroeconomic, models

Source: Garba and Garba (2003) - organized by authors from Blanchard, O. 2003. Macroeconomics, Third Edition. New Jersey: Prentice Hall.

CURRENT STATE OF ECONOMISTS

1.Academic Economists: teaching, research,

supervision, mentoring and community service

2.Professional Economists: research, policy analysis

in Private Sector (Finance, Services and Real Sectors)

and Public Sector

3. Issues Incentive System in public and private sectors

Role in the Economy: how effective?

Capacity Building: type, quality, effectiveness, efficiency

Challenges (see Slide 18) AG Garba, 2020; BOWEN UNIVERSITY, IWO 17

CURRENT CHALLENGES OF ECONOMISTS 1.Understanding of the shifting

theologies, philosophies, methodologies

and ethical commitments of Economics

2. Intellectual Skills: weak capacity for

analysis, systematization and evaluation

3.Poor Intellectual Habits: particularly,

unwillingness to study analyze,

systematize and evaluate original texts

4. Lack of interest in understanding the

history of economic thought


5. Understanding differences

between Methods and

Methodology

6. Additional Skills Gaps:

– Skills for Basic and Applied Research

– Applications of Relevant Statistical,

Econometric or Programming

Softwares

– Academic Writing Skills

7. Capacities for Relevant Research

8. Lack of Confidence and a Habit

of Dependence

CURRENT STATE OF ECONOMIES

1.Nigeria: ?

2.Africa: ?

3.North America: ?

4.South America: ?

5.Europe: ?

6.Asia: ?

7.Australia and New Zealand: ?

8.Regional and Global states: ?


WHY STUDY HISTORY OF ECONOMIC THOUGHT 1. To acquire insights into the theological, philosophical,

methodological and historical origins of the core theories and policy menu in economics today

2. To understand the evolutionary paths of economics and the main influences on contemporary economic thought.

3. To know more about the thinkers whose thoughts shaped the evolution of economic thought and how their faiths shaped their thoughts.

4. To acquire capacity to analyze and systematize and evaluate economic theories and their policy recommendations.

5. To acquire capacity to chart a newpath for economics.


HOW TO STUDY HISTORY OF ECONOMIC THOUGHT 1. Focus on thinkers: Greek Philosophers, Scholastics, Islamic Thought,

Economists before and After Keynes

2. Focus on Shifting Philosophy and Methodologies: Metaphysics,

epistemology, ethics, political theory, etc.

3. Focus on Schools: mainstream (mercantilist, physiocrats, classical,

neoclassical, Keynesian, IS-LM synthesis, Monetarist, Ratex, New Classical,

New Business Cycle and New Keynesians) or Heterodox (historical, Marxist,

institutional, evolutionary, experimental, etc)

4. Focus on evolving socio-cultural context and its influence of economic

thought -Sociology of knowledge.

5. Focus on the Shifting Theologies (Pagan, Christian, Atheists, Agnostics)

6. Some combinations of 1 to 5. above.


REVIEW QUESTIONS 1.What is History of Economic Thought and how does it differ from economic history?

2.How does History of economics interact with economic history? How is the COVID 19

creating economic history and history of economic thought simultaneously? What is your

role as a student of economics in the interface between COVID 19, economic history and

history of economic thought?

3.What may we gain from a study of history of economic thought and how should we study

history of economic thought to maximize the gains?

4.Discuss four reasons why a study of History of Economic Thought is useful and discuss at

least seven approaches to the study of History of Economic Thought.

5.Evaluate Boettke, Leeson, and Smith’s hour glass description of the evolution of economic

thought.

6.What challenges are you likely to face as a Nigerian economist? What should you do to

overcome them?

7.Why is the personality and the faith of economic thinkers relevant in the evaluation of

their thoughts and their influences?


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