There were three data releases from the Australian Bureau of Statistics today and all showed that the Australian economy is continuing to weaken. The – Business Indicators, Australia – showed that company gross operating profits fell for the fifth consecutive quarter (7 our of the last 10). Second, the data for – Building Approvals, Australia – which is one indicator of the strength of the housing market and the construction industry, showed that the seasonally adjusted estimate for total dwelling approved fell by 2.4 per cent in January, the second consecutive monthly fall. Finally, the – Mineral and Petroleum Exploration, Australia – showed that “mineral exploration expenditure decreased by 10.2% in the December quarter 2012”. What this data tells us is that private spending is weak and probably weakening. It tells us that fiscal policy should be expansionary rather than following its present course of austerity. It tells us that unless the government reverses its current strategy, the Australian economy will weaken further. It also tells us that commentators and politicians that think fiscal rules such as “balancing the budget over the cycle” are sound strategies to adopt are either operating in a cloud of ignorance or deliberately misleading the public as to the likely outcomes that would follow from pursuing such a rule.

This is Part 3 (and the final part) of my mini-series of blogs – “Learning Standards in Economics”. In this blog I consider the way in which learning standards have evolved in the United Kingdom. I propose that they privilege the curriculum development in favour of a monistic approach – which biases programs to advance the competiive, neo-classical model as the way the real world operates. These standards deter universities from offering pluralistic approaches to economics that promote its broad social science qualities. The narrow monist approach, of-course, serves to reinforce the neo-liberal dominance in economic policy making. Such an approach has been one of the principle reasons the world is mired in financial and economic crisis and doesn’t appear to be able to find a way out. The policy framework being imposed by governments is closing the door to growth and increasing unemployment and poverty rates. It is based on the mainstream textbook models that dominate economics education. I hope the Australian exercise in developing so-called “learning standards in economics” will reject the neo-classical textbook monistic approach and come out in favour of a radical rethink of the way economics is taught in Australian universities. However, given the real politic that surrounds these exercises and the bodies that are key players in the development of the standards I won’t be holding my breath on that one.

Today is Part 2 of my little mini-series on “Learning standards in economics”. It might appear to be a break in continuity from yesterday’s blog but when I get around to Part 3, I think you will see the way in which today’s discussion fits well. Last month (January 24, 2013), the Peter Peterson Foundation – which is just a propaganda front for people with too much money and influence designed to advance spurious ideas about the economy – released a statement – College Students Launch Campaigns Across the Country to Activate a New Generation on the Nation’s Fiscal Challenges. When I delved into what it was about the story became very mirky indeed. Teams of students are being assembled under the banner of what we might call the “we are self-important and want to show it” banner and being coaxed into action The essential part of education – the search for knowledge – is the missing part. The myth that the US government is going broke is the starting point not the enquiry.

I am working in Dili (Timor Leste) today until Friday. With various travel and official obligations I haven’t much time today. Internet connectivity is also not flash at present. So this blog might be spread out over two or even three days because the issue I plan to address will take some time to articulate. One of the projects I am pursuing in my 2-year period working at CDU (in Darwin) is the development of a new program in Economics. The proposal is to develop a broad, pluralist social science degree program aimed at encouraging students to think critically about conceptual and policy-related issues and see the economy as being serving society rather than the more narrow focus on the “business” sector. The program will emphasise history, philosophy, politics, place and space, culture, be quantitatively focused, and ensure that operational realities within the monetary system are understood clearly. So, for those who know how economics curricula has developed over the years – this proposed course will be somewhat innovative and run against the tide, which in the main has focused on narrowing down economics to be just a service program in a business course (I was about to type education but quickly substituted course instead). At this point of my work I have run into the latest craze – the development of qualifications and learning standards.

The Australian government is demonstrating to all of us that they are mishandling fiscal policy. The background is simple. Australia saw its growth vanish and unemployment start rising in December 2008 as the financial crisis spread into the real economy. The government responded, mostly correctly, and introduced a swift and significant fiscal stimulus. The economy resumed growth, the rise in unemployment was pegged (although there wasn’t enough done to generate sufficient jobs growth), and the budget deficit rose. Before the private sector had demonstrated it could take up the spending slack and support the growth process, the Federal government became obsessed with “returning the budget to surplus”, erroneously thinking that this would separate them, politically, from the Opposition. They were wrong. The imposition of fiscal austerity has caused economic growth to slow and tax revenue growth to fall well below projections (declining world commodity prices have also not helped). First, the government abandoned their surplus promise realising that the revenue side was not going to improve sufficiently. Now, they are implying they need to hike income taxes to cover the “revenue shortfall”. If they ever had any credibility as responsible fiscal managers then it is safe to conclude they have none now. Their continued claims about maintaining a “strict fiscal policy” (read: procyclical fiscal stance) are not only moronic but they are also leading to policies which are killing growth and employment.

I have spent almost the entire time I have been in academic life – from the time I was a fourth-year student, onto Masters, then PhD and subsequently as an teaching and research academic – studying, writing, publishing, and teaching about the Phillips curve and the link between labour markets and inflation. I have published many articles on how full employment was abandoned and how it can be restored taking care to consider how an economy that approaches high pressure might cope with the increasing nominal demands on real output. I have advanced various policy options to resolve the problem of incompatible nominal demands on such output and provided the pro and con of each. I have published some very detailed papers on those questions and my recent book – Full Employment abandoned – went into all the tedious detail of how inflation occurs and what can be done about it. But, apparently, Modern Monetary Theory (MMT) ignores “the dilemmas posed by Phillips curve analysis” as one of its many alleged sins. I wonder what the hell I have been writing all these years

Sometimes one agrees with a conclusion but realises the logic that was used to derive the conclusion was false. Which means that the person will get things wrong when applying the logic to other situations. This is almost always the case when we encounter the reasoning offered by so-called deficit doves. These are economists who do not out-rightly reject the use of deficits but typically believe them to be cyclical phenomenon only and should thus be offset at other points in the economic cycle by surpluses – the so-called balanced budget over the cycle rule. While many progressives think that is a sensible strategy – the reality is that it is an unsustainable fiscal rule to try to follow. The same economists talk about the dangers of pro-cyclical fiscal positions but fail to appreciate that such positions are desirable in certain cases and there is a fundamental asymmetry that applies to evaluation the desirability of a “cyclical” position. Fiscal austerity (pursuing surpluses when the economy is contracting) is never appropriate whereas expanding the deficit when the economy is growing might be. It all depends. This blog aims to clear up some of these misconceptions.