Reader in Economics and Finance
Teaching with historical perspectives allows us to move beyond the idea that finance is a set of specific distributionally neutral techniques. It supports the diversification of the curriculum by reflecting on both the historical evolution of specific financial techniques or vehicles, and the historical evolution of the theories underpinning our understanding of those techniques.
The teaching approach known as Teaching with Historical Perspectives (THP) can be used in a number of ways. It can help in contextualizing the genesis of a model or theory and to introduce pluralism. It can support an in-depth analysis of a model which considers the evolution of its applications in real financial practice.
Building on this, THP can provide a helpful framework for explaining the evolution of a model/theory, while also locating various models within the same or competing schools of thought.
First, students need to acknowledge how financial markets have gained a predominant role in society. Of course, students may recognize that financialization is the main reason they want to study finance! ‘Financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’ (Epstein, 2005, p. 3). Recent data illustrate the increase in the profits of financial corporations relative to non-financial corporations, the share of economic growth relative to the other sectors of the economy, the increase in non-tangible assets relative to tangible assets, increased wage inequality between the financial and non-financial sectors, and the creation of the students’ loan market.
Second, students are exposed to the existence of competing theories about the players in the markets and how they behave. For example, in mainstream textbooks, banks are considered as important agents, acting as intermediaries that transform short-term liabilities, such as households’ deposits, into medium- or long-term assets, such as loans to firms. Students can then be exposed to Keynes and to how, after his death, competing interpretations and adaptations of his theory emerged, such as the neoclassical synthesis and the post-Keynesian school of thought. In contrast to the neoclassical synthesis, for post-Keynesians (Lavoie, 1999), the causality runs in the opposite direction: ‘One common misconception is that banks act simply as intermediaries, lending out deposits that savers place with them. In this view, deposits are typically “created” by the saving decisions of households and banks “lend” out those existing deposits to borrowers’ (McLeay, Radia and Thoms, 2014, pp. 15–16). ‘Commercial banks create money, in the form of bank deposits, by making new loans’ (ibid.). Third, it is essential that students grasp the idea of power and privilege in financial relations and understand how different and competing theories have competing interpretations about the distributional implications of specific evolutions of financial practices both within countries and between countries.
This case study is based on a chapter in Teaching the History of Economic Thought - Integrating Historical Perspectives Into Modern Economics.
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My experience of attending a module taught with historical perspectives was illuminating in many respects.
The approach was pluralist: there were different ways to conceptualise the very same issue from various points of view and various schools of thought. This not only enriches the analytical toolkit of any economist in terms of debate skills but also in terms of the technical apparatus underpinning our understanding of specific current economic issues. Here are three examples of how looking at the evolution of three concepts (value, distribution theory and the role of the state) across various schools of thought: value creation, distribution theory and the role of the state can provide useful insight to account for curriculum decolonisation and diversification.
Teaching with Historical Perspectives - Daniela Tavasci and Luigi Ventimiglia