21st Century Economics Goes Mainstream in Austria!

The Vienna University of Economics and Business is shaking up how undergraduate economics is taught, with a model that could inspire others to follow suit.

When last week Irish President Michael Higgens drew the ire of mainstream economists by accusing them of “blinkered to the ecological catastrophe… empty…devoid of vision… and..incapable of offering solutions,” he laid particular blame on how economics is taught in universities.

For people like me who studied so-called “mainstream” economics, it’s not hard to see why.

The problem with current economics teaching

Over the last several decades, economic teaching has become increasingly narrow, offering students broadly only one school of thought : “neoclassical economics”. Neoclassicists view the economy in linear terms, whereby resources are allocated according to the “laws” of supply and demand. “Let markets take care of it” more or less sums it up.

The problem: neoclassical economics omits all the “non-market” activities which actually keep our economies running. These include unpaid work such as child-rearing and care (often done by women). They also include the role of our biosphere; clean air and water, fertile soil, a stable climate (you know, the basics).?

To illustrate how little thought most economists give to the environment which supports us: as of 2019 the leading economics journal hadn’t published a single paper –ever–on climate change.

Heterdox approaches are often excluded from core curriculums

As the climate and ecological crisis have risen to existential levels of concern, calls for a shake-up in economics have been growing. A heterodox, pluralistic movement has been flourishing under titles such as Feminist Economics, Complexity Economics, Socio-Ecological Economics, Wellbeing Economics, Doughnut Economics, Post- and Degrowth Economics.?

The big problem is that the vast majority of entry-level economics programmes globally still offer the same mainstream curriculum. Where more “heterodox” subjects are taught, they are usually confined to separate departments, sometimes completely separate faculties or institutions…and often only offered as part of post-graduate or research programmes.

Take PPE, for example. Politics, Philosophy and Economics has been called the degree that rules Britain . The current prime minister, several of his predecessors, plus dozens of senior cabinet ministers, broadcasters and newspaper editors studied PPE at Oxford , many even at the same college. It’s not an exaggeration to say that it has helped shape the world views, the policies and narratives that dominate British society.

Yet the “E” element of PPE offers an exclusively mainstream curriculum. Should someone studying PPE want to learn about ways to tackle the climate crisis, the only option is an elective in “Environmental economics”, which actually belongs to the neoclassical school of thought.

The difference between Environmental and Ecological Economics

Environmental Economics views problems like pollution as “externalities”: negative side-effects of economic activity. To “internalise” these costs, a commonly-used tool is cost-benefit analysis. This weighs up the apparent “cost” of pollution against the “benefit” of putting up with it in return for more economic growth (continued economic growth is fundamental to ALL neoclassical thinking).

Much has been written about the problems of this approach. To name just a few, it is blind to the long-term nature of most pollution, which builds up in the environment. Putting off abatement means more harm to future generations–as we are now witnessing with global warming. And it is blind to questions of equity or justice, especially where environmental problems, like climate change, transcend national borders, hitting poorer countries and communities hardest (even though they pollute least). And it is blind to the fact that we live on a finite planet which we cannot plunder and pollute indefinitely. Indeed, scientists warn we have already transgressed several planetary boundaries which are undermining the conditions for life on earth, triggering a sixth mass extinction .

Perhaps the most famous environmental economist is William Nordhaus. He developed the cost-benefit analysis framework and used it to estimate the “optimal” degree of global warming to be around 4 degrees Celsius . This is roughly the difference between now and the last ice age and is a level climate scientists agree would make much of our planet unlivable . Yet as if to emphasise how little attention economists pay to climate science, in 2018 Nordhaus received the equivalent of a Nobel Prize (don’t worry, he recently reduced his optimal level to +2.7°C, a level at which we are “only” likely to have destroyed the corals and triggered multiple climate tipping points ).

Though they sound like close relatives, environmental economics could hardly be more different to the heterodox subject of Ecological Economics, which sees the environment not as “external” to our economies, but as fundamental to it. The late, great Herman Daly talked of the “embedded economy ”, dependent on our biosphere, which is the source of all our energy, resources and materials, and a sink for all our wastes. To the ecological economist, stability–not growth–are the preconditions to a healthy economy and a healthy and prosperous human race.

Yet, no doubt thanks to how economics is taught and practised, it is this linear, short-termist, growth-addicted, cost-benefit thinking which prevails–among those who surely ought to know better. Just yesterday, Germany’s finance minister wrote on Twitter that our economies must come ahead of environmental or social concerns. As if they are two completely different entities, taking place on separate planets.

Finally, progress!

When I first announced the Vienna Doughnut Coalition had secured an interview with Uni. Prof. Dr Sigrid Stagl, head of the Institute for Ecological Economics at the Vienna University of Economics and Business (and the first person in the world to receive a doctorate in ecological economics!) about a new Bachelors programme, I was worried I was exaggerating. “Groundbreaking”, “21st Century Economics Goes Mainstream” were some of the phrases I used.

It was a relief that Professor Stagl confirmed that what they are doing is indeed “pioneering”, the result of many years of hard work to get interdisciplinary, heterodox studies into the core undergraduate teaching programme.

Like PPE, only heterdox

Sitting in the heart of the Austrian capital, as with Oxford and PPE in the UK, WU Wien has educated many leading figures in government, industry and media.

Most students starting their bachelor programme take the same core subjects in Year 1 and then gradually move along four pathways (business, international, informatics or general economics), all of which stem broadly from the mainstream/neoclassical school of thought.

From September 2023, that will change. Incoming students will have the option of a fifth pathway: Economics - Environment - Politics.

The content actually bears some ressenblance to that famous Oxford degree, and indeed Professor Stagl told us they had initially considered using the same title. But the core, really critical difference is that, unlike PPE and unlike the other pathways the WU currently offers, this new BA will be grounded in pluralistic, heterodox thinking, and an integrated, interdisciplinary approach.

As Professor Stagl explained in our interview, students will be taught subjects such as systems thinking, ecological and social economics. They will learn to take an integrated view of the world, not the linear and often abstract view offered by many mainstream courses. They will be taught to think about the political and social context, about equity and justice.

So just how big a deal is this?

There's not saying right now how many students will sign up, though initial interest appears strong, and the WU is legally bound to take all who meet the entrance criteria. That may be 50, 100, 200, perhaps even more. Still, it is likely only to be a fraction of the almost 4,000 new students who join each year .?

Even so, the course has the potential to more broadly shake up economics teaching. This is because students taking the new pathway will still take many of the core subjects of their peers. They will sit in the same lecture halls, attend the same tutorials. As Dr B?rnthaler, Professor Stagl’s colleague put it: not everything about mainstream thinking is so bad. Unlike most economic programmes around the world, students in the new WU Bachelor programme will be encouraged to embrace complexity and ambiguity, to think critically about what they are learning and hopefully, to engage in a rigorous debate with their educators and peers. Which is, afterall, what true education should be about.?

Exciting as this new programme is, though, it’s hard not to feel we should have started reforming economics decades ago. As Germany’s finance minister’s statement proves, the vast majority of our leaders have received an education that leaves them ill-equipped to comprehend the non-linear, complex nature of our earth system and the impact we are having on it.

Those impacts are increasing rapidly. India'a recent, record heatwave is putting its development at risk , Spain's drought is threatening European food supplies , while recent "freak" ocean warming is alarming scientists , threatening our remaining corals and the food chain of much aquatic life. By the time incoming BA cohort graduates, we could well have overstepped the critical boundary of 1.5°C of global warming . And it will be several more years until graduates start climbing the ladder of the political and economic institutions governing our societies.

And yet however bad it seems, the world is not going to end tomorrow: if the best time to have started reforming economics education was 50 years ago, the second best time is surely today. Moreover, one of the core lessons of the new Bachelors programme is that we live in a dynamic, complex, system. Change is non-linear; pioneering actions in one place can create feedbacks and tipping points elsewhere. Let’s hope the WU's lead can embolden other institutes to follow suit.

Meanwhile, those of us in positions of influence scan do what we can to re-educate ourselves and demand the same from our leaders. Reading Doughnut Economics is a good start and there are many free lectures on the DEAL website and elsewhere. There are also an increasing number of shorter online courses in heterodox economics on offer, such by Australia’s Torrens University, which also runs one of the world’s first online Masters in the Economics of Sustainability . For those in Vienna, there is still time to sign up for this year's Alternative Economic and Monetary Systems summer school, hosted by the University for University of Natural Resources and Life Sciences (BOKU), or the next intake of the acclaimed English-language Masters in Socio-Ecological Economics and Policy (SEEP) also launched by Professor Stagl’s WU institute several years ago.

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On behalf of doughnut.wien I am extremely grateful for Sigrid and Richard for taking the time to speak with us. In particular I want to recognise Professor Stagl’s contribution to promoting pluralism in economics in Austria and Europe more widely. This is what true leadership looks like.

You can view the full interview here in German and the YouTube subtitle function gives a reasonable translation into English.

ABOUT doughnut.wien

The goal of the Vienna Doughnut Coalition (doughnut.wien) is to spread the ideas of Doughnut Economics–an economic system that works for people and planet–within Austria and beyond. Launched at the last Climate Strike in Vienna in March, 2023 we are in the process of building our coalition and welcome anyone to get in touch who shares our vision and values. Email us at [email protected].