The Mint: Good afternoon, Tony. Thank you very much for giving time to talk to The Mint.
Tony Myatt: It’s my pleasure, Henry.
The Mint: Brilliant. Well, I really was taken by the title of your textbook, The Anti-Textbook. I’ve had a number of conversations about textbooks, whether they’re good, bad, or you should get rid of them altogether. So, I was really interested to discuss your textbook, and also find out, what was the beginning of the idea to have a anti-textbook?
Tony Myatt: Yeah. Well, in brief, it was probably the fact that I was teaching mainstream economics, and I was disgusted with it. Unless, maybe I was increasingly disgusted with myself for teaching stuff that I didn’t believe to be true. So this is probably, I had that feeling most strongly when teaching macroeconomics, because I’m a Post-Keynesian, would be my brand that I would probably subscribe to or identify myself as most strongly, though I’ve done an awful lot of work in mainstream neoclassical economics too. Probably, I’ve had my best articles printed, published, using mainstream neoclassical stuff. But what bothered me the most in teaching macro is, at least in the years gone by, used to start off by getting students attention, by talking about the Great Depression and the policies that were implemented, which were actually making the situation worse.
The classically economists from their view that wage flexibility would guarantee or market clearing apples where you need to decrease the price of apples if you’ve got a surplus of apples and decrease the price, the wage of carpenters, if you’ve got a surplus of carpenters and if you’ve got a general surplus of unemployed workers mass and employment, then you need to push the average level of wages down. Of course actually that happened in the Great Depression. It didn’t do a bit of good and this was at least a certain point when we taught macro, this used to be the introduction, but Kane solved the problem. We realised that you need to pump money into the economy needs to get going. So that’s great and that all works fine to begin with. But then eventually, the thing kind of comes back and eats its own tail. By the time you’ve developed aggregate demand and aggregate supply and you discover that actually the reason why you have an employment is because wages don’t fall or fall fast enough at least.
The Mint: Yes, sticky wages.
Tony Myatt: Yes, sticky wages. I just go, “No,” I’m just dreading that students will put their hands up and say, “Excuse me, sir.”
The Mint: Wait, did you feel you were forced because you had to teach that curriculum? Did you think if you developed your own anti textbook that would give you licence to teach differently?
Tony Myatt: Absolutely, it did. Of course, it took many years to gel and the Anti-Text really came, started to move when the colleague, a colleague of mine at UMB St. John, because I’m at University of New Brunswick in Fredericton. So colleague named Rod Hill came to give a paper in Fredericton and his paper was on the Easterlin Paradox. I just suddenly went, the light went on, I said, “Well, we should work together and we should just produce a book.”
The Mint: YoubBetter remind the listener what the Easterlin paradox is.
Tony Myatt: Yeah. So the Easterlin Paradox is that a certain point, economists or least one economist, Richard Easterlin, decided he was actually going to use all this data that have been generated for years and sitting ground unused where people were asked about their happiness, how happy are you? So he just looked at the average happiness of income groups at a single country at a point in time and discovered that the richer the income group, the happier they are. No surprise there. But then he looked at two other types of data. He looked at the average happiness of a country over time. So as the real GDP grew over time, did the average happiness in that country increase? The answer was, “No, it didn’t.” Then he compared the average happiness of countries at a point in time, rich countries and poor countries, and found that rich countries weren’t happier than poor countries in an average term.
See, you have these two pieces of data suggesting that more money doesn’t make you happier and one piece of data that suggests more money does make you happier. He resolved the paradox by saying that this is perfectly consistent with relative income being the thing that matters. Then that was kind of the start of the literature and the exploration of that idea. Is relative income all that matters? Eventually you get a Richard Layard and I think he still has an ongoing website on this that for a while there the consensus was that no relative income isn’t the only thing that matters at low levels of income. More money does bring you more happiness, but there’s a limit to this. So it goes, it’s got this kind of curve, this align does.
The Mint: So how come that was the thing that sparked the idea for the anti textbook?
Tony Myatt: Well, because that struck the kernel of the whole thing really. So economics for microeconomics, when we talk about preferences for example, going to preferences are clearly rather important in microeconomics because we need demand curves and all of this. We say, “Well, we don’t know what people’s preferences are. Well, one thing we do know though is that people want more.” More is better. As soon as you have more is better, well, that gives you the emphasis on efficiency and growth. So you need that to explain the importance of efficiency and growth. Although growth of course is a subsidiary item in the microeconomics bit becomes more important in the macroeconomics bit.
The Mint: So you started then, this first textbook with Ron Hill?
Tony Myatt: Rod Hill.
The Mint: Rod hill. I’m sorry. So when do you actually start? When did that start then?
Tony Myatt: So we started it … Well, the first one was published in 2008 and Rod was a task master and he was on sabbatical while I wasn’t. He really whipped me in shape. I’m a terrible procrastinator and I’ve never read enough before I start the writing, but he really cracked the whip. So I don’t quite know when we started it, but it didn’t take us that long and it came out in 2008. But the macroeconomics book then took a good deal longer because despite N treaties, many N treaties to Rod to co-author that one with me, he refused saying that he’s not a macro economist and doesn’t know enough about macro. So yeah, that-
The Mint: Left you as a procrastinator to finish it. So how did the first textbook go? How was it received, particularly by your colleagues who were presumably mainstream? Many of the mainstream economists?
Tony Myatt: Yeah. Well, the nature of the department where I’m situated has changed drastically over the last, what is that? 14 years. So I mean at the time they didn’t really notice. Other colleagues in other departments like sociology and political science and history, they were much more supportive and enthusiastic. I mean had a copy in the Deans Wall of Fame and all of that sort of thing. But the colleagues were a little bit oblivious of it where whereas this one we got to mention the heterodox the new or economics Anti-Text got to mention in the Heterodox economics newsletter. Many colleagues are very supportive and said notes of congratulations. So yeah, I don’t know quite why that is, but my department is more supportive than it was.
The Mint: All right. Good. The first one, did it sell well or do you know who bought it?
Tony Myatt: Well, with regard to selling, and I don’t quite know how the publishers, the original publisher of this was Zed Books and they’ve since been taken over by Bloomsbury, but it’s claimed to fame. The ebook version of it was the most illegally downloaded book they’ve ever published. So that-
The Mint: Illegally downloaded?
Tony Myatt: Illegally downloaded book, yes. So this is our claim to fame. Well, it did get taken up by some universities by, I mean I used to be able to remember which universities it was.
The Mint: Which countries might be?
Tony Myatt: Well, one in England and there was one in a couple in Canada. So it was dotted around, I mean not awfully much. Actually, there was on our same campus as ours in Fredericton, there’s another university called St. Thomas University. There was a professor there who actually took it up. He had it as the textbook in his course, which actually gives rise to a little anecdote about what happens to these when students ask the questions.
The Mint: I was very interested in that, yes.
Tony Myatt: Questions for your professor.
The Mint: Yeah.
Tony Myatt: Yeah. So this colleague of mine, Andy Secord at St. Thomas, he adopted the book and he had a very, very good student who went on to do an honours degree in economics, then went on to do a master’s in a mainstream university in Ontario and she became a tutor. So they had these mass lectures of 500 students that break them up into small tutorials and then employ the graduate students for one hour a week to run these tutorials. Because she loved the economics anti textbook, she would introduce it to the students and she told the students about the questions for your professor and they were discussing them at all.
So what happened is that in this guy’s mass lecture, students started putting their hands up asking these questions. Of course the guy, depending on the nature of the professor, you had welcomed these questions because they were really well honed questions, like straight to the point. But this chap didn’t, and he got most annoyed and sort of decided he was going to have to find out where these questions were coming from and eventually trapped it down to this young lady’s tutorial. She got fired.
The Mint: Seriously? She got fired?
Tony Myatt: She got fired. Well, it wasn’t all bad for her because she sort of got redeployed to some sort of marking assignment. So she still had her a bursary. But yeah. No, they weren’t going to put up with having really difficult questions being asked in these lectures. So it’s kind of alarming, but … Well, how should I confess that Rod and I were really secretly pleased?
The Mint: Yes. Well, it certainly is all celebra. I mean it’s interesting that to some extent what sparked the creation of rethinking economics, the student movement in the UK was the fact that I think it was 20 … 2010 or something like that, when the students were looking to learn about the crash, there was only one course that was called Boom & Bust, which was taught by a guy who was on a temporary short-term contract who was then sacked because no one knows quite why. The university said it was for undisclosable HR reasons, but the students thought that was the one course that they felt was interesting and relevant. The university stopped him sack the guy.
Tony Myatt: Which university was this?
The Mint: Manchester.
Tony Myatt: I think Gramins is not at all surprising that he’d be sacked.
The Mint: But he was terminated. He wasn’t renewed. I think his contract wasn’t renewed.
Tony Myatt: Yeah. I know is it surprising that he was the only one dealing with the crash. In fact, I mean the astonishing thing about macroeconomics textbooks is that they portray the financial sector as a source of great wealth creation.
The Mint: Oh, yeah.
Tony Myatt: The channel through which savings is the mechanism rather through which savings are channelled into investment. Because it’s all the loanable funds diagram is the one that explains what’s going on in the financial sector with your demand and supply. That’s of course as soon as you have demand and supply, you’re basically depicting an efficient market.
The Mint: Yes.
Tony Myatt: Right. So yeah, it’s a complete whitewash of the financial sector in the textbooks. That’s one of the reasons why we call it an anti textbook as opposed to anti mainstream economics. Because the reasons why the financial sector isn’t efficient and practically can’t ever be efficient are well explained by mainstream economics. But they don’t affect the textbooks. The textbooks ignore, it’s panglossian, I mean it’s obviously imperfect and asymmetric information, right? Which is rife in the financial sector, which gives rise to your three big problems. The principal agent problem and the insurance problem. That’s called adverse incentive effect and a third one. But yeah, so … Yeah.
The Mint: So why do you think that textbooks, and presuming this is still true, do this panglossian thing that they ignore the critiques even within the mainstream and they gloss over any issues to make it seem as though everything’s largely sorted and they tell us almost a good story as they can about how it’s all going to be fine?
Tony Myatt: Well, that’s a tough question. I mean, for one thing, how would I know? But if they ask me what I think, I mean is it that mean? May the textbooks, you got the incentive to sell textbooks for one thing, and then that means that you can’t go too far from the average textbook and all the textbooks practically clones of one another because you’re trying to position yourself in the middle of the market. Then there’s the aspect of-
The Mint: One thing there, why no product differentiation? Because you think if you’re cloning everyone else, well, why would they buy yours if you come along with a new one? Why would they buy that rather than stick with the one that was there already?
Tony Myatt: Yeah, so you do differentiate yourself, but it’s really, really minor. You have to stick to the … It’s like political parties, right? I mean the parties that’s got its platform, right in the median position of the voters is going to get votes to the left and to the right and then, okay, so the right wing is way over to the right and the left wing if it can actually creep towards the middle and actually even a little bit to the right is going to get all those voters to the left of it and some of those voters to the right. So it’s that kind of thing that’s going on. So you’ve got minor product differentiation, but they’re still really, really grouped towards the centre trying to capture that median thing, the votes to the left and to the right. But I think the other thing is that perhaps it’s just not … I don’t think that the generalist economist that is teaching this stuff, frankly I don’t think they’re really aware of it.
They’re not really aware of these endemic problems in the financial sector, for example. Otherwise, why would the mainstream textbooks when they’re talking about the financial sector and nowadays, because the financial crashes, what is it? 14 years ago. So it’s just getting a mention now. Whereas it used to have a whole chapter about 10 years ago. Now it’s just a brief mention and they talk about reforms and they say, “Oh, well, these reforms, it’s all good, it’s all good now. Don’t worry.” Of course, it’s complete nonsense. The reason why it’s complete nonsense is because the fundamental, not only do you have the problems of imperfect asymmetric information, but what’s driving the financial instability besides all kinds of Minsky stuff, Minsky’s cycles and super cycles. But what’s really driving the financial instability is the leverage.
The Mint: Yes.
Tony Myatt: Banks got a leverage ratio are about 50 times higher than the average corporation, the average non-financial corporation. That is so that they can make a tonne of money when things are going up. That also gives them just this tiny fraction of stability when things are going down before all their further underwater.
The Mint: Then they’ll get framed by the government.
Tony Myatt: Then they get saved by the government. So now, what’s her name? Admati, this wonderful American economist Admati, she has written an awful lot of stuff on this, trying to get people to understand that the fundamental reform is that they need just way more equity being injected into the banking system. If you keep the same leverage ratios that you have, then the fundamental cause of the instability remains. But because this is when we get into political economy, because the banks have got so much lobbying power over governments, it’s almost impossible to get them to increase the equity component of the banks. In fact, there was a commission set up that was looking at this and the banks lobbied this commission lobbied, lobbied, lobbied against recommending any increase in footy funding for banks. In the end, the commission … This is in the UK, it managed to recommend 1%.
The Mint: Yes.
Tony Myatt: 1%. Whereas actually what you need is probably a 30-fold increase.
The Mint: Yeah.
Tony Myatt: Even that 1% was not implemented because of further lobbying of the government by the banks. So yeah, the more you look at this, the more you understand that there’s going to be another financial crash. I mean it’s a question of when, not if, because the fundamental problem hasn’t been resolved.
The Mint: Just going back, I mean your fundamental motivation with your anti textbook as far as I understand it, is to promote critical thinking. From what you’re saying then, are you saying that maybe there was a brief opening post crash to a bit more critical thinking or a bit more opening. So is that closing, do you think?
Tony Myatt: I do, I do. Yeah, I do. So I mean, I don’t know those students that demanded more pluralism, I don’t know if that movement is … Well, in your opinion, because you are more, I think in touch with that.
The Mint: Well, the numbers of groups around the world have been generally increasing over time. There’s over a hundred, but I haven’t seen any evidence that there’s much of a response from the teaching profession as such. I mean I’d certainly, I don’t think they can trumpet that. I think they make sure that their people in their groups are able to access other learning outside the courses they’re doing and aware of the limitations of the courses they’re doing. But in terms of the actual nature of the courses themselves, they stay basically the same. And they’ve had lots of different campaigns to try and change that. I’m not aware of any real success.
Tony Myatt: Yeah. So there we are. Well, what I tell my students is that if you … As various approaches, I mean I had a superb graduate student and we looked at the natural rate hypothesis and hysteresis, because this is another thing that really strikes to the heart of the mainstream model, I mean if you don’t have a stable equilibrium to which the economy is always tending, then the whole thing goes up in smoke and it’s wide open for multiple equilibria and all this stuff. So we looked at that and he, after doing that as his thesis, he went off to a mainstream university and did mainstream neoclassical economics and graduated with a very good PhD. But now, he’s a prof. He can do more what he’s interested in. I do think it’s extremely valuable to know the mainstream economics inside out because you have to know it inside out to be a good critic. But do you agree with me?
The Mint: Sorry. I’m just thinking, do you market your programme on the basis that it is more critical and do you think you get more people interested in coming to study economics at your university because of the anti textbook and promoting more critical teaching?
Tony Myatt: I don’t think so. I don’t think we’re that well known. I do remember we got one graduate student and in the party where we were welcoming them, everyone said, “Well, one is [inaudible 00:23:56] UMB.” It was music to my ears when this one particular student, so I chose UMB because I read the economics anti textbook and the authors were here at UMB. It’s like, “Oh, yes. This is good.”
The Mint: Way. But that’s a pretty rare event. Is it?
Tony Myatt: Extremely rare. But within the universities, students have a choice to take the mainstream course or the critical perspectives courses. I actually teach both. So I do the mainstream where I’ll just teach them the mainstream stuff and a couple of things underneath Mahan [inaudible 00:24:32] by the way, that’s the letter of it. Then I actually do the critical perspectives course where we get into it. The hope is that … Well, so I’ve taken various approach, various alternative approaches to teaching introductory economics. The most successful one is this one, the critical perspectives one. I find that this attracts the most, the better students. The best students, actually.
Then if I can get them interested in economics, then we can bring them into the main programme, which is actually where I was going when you stopped me and asked the question, which is that, I mean fortunately there are graduate programmes available around the world and in Canada that are heterodox, that are pluralists. So you don’t have to go off and do mainstream economics if you’re doing graduate work. But yes, so the idea is to stimulate their interest and bring them in, get them in doing economics, make them realise that economics is way more interesting than they would’ve thought. Actually there is room for heterodox views and for critical thinking within the economics camp. There is, definitely, there’s journals and stuff.
The Mint: Is that increasing, do you think, is the more room for …
Tony Myatt: Well, it’s a bit of a worry that perhaps the profession is becoming increasingly siloed. We do need to keep talking amongst ourselves, but I mean within the Canadian Economics Association, there’s a little group that has its meetings on the side, but it’s advertised for everyone and the heterodox group and the economics education group and so on. So that aspect and the number of journals where one can publish one’s ideas without being just thrown out because it’s critical of the mainstream has increased. Yeah, I think that has increased.
The Mint: Well, I Think that’s a good positive point to end on. I really hope that your new anti textbook macroeconomics book is really successful and people do ask your questions around the world, and I’m certainly going to promote it around rethinking economics and all their groups because I think it’s fantastic material for them, for them to use.
Tony Myatt: Well, thank you very much, Henry. It took a long time to write it and I am actually very pleased with the results.
The Mint: Brilliant. I was too.
Tony Myatt: Lovely.
The Mint: Okay.
Tony Myatt: Okay.
The Mint: Thanks, Tony.
Tony Myatt: Bye-bye.