Rethinking the Role of Banks

What is it?

Our friends over at Pluralism in Economics (PINE) Maastricht recently wrote a letter to the University of Maastricht about how the role of banks in money creation is taught in their curriculum [find it here].

The letter highlights that professors and textbooks at UM teach the neoclassical but faulty theories of “loanable funds” and “money multiplier effect”, even though central banks and commercial banks openly admit that those concepts are misleading. Citing literature from the Bank of England, Deutsche Bundesbank, and research conducted with commercial banks, the letter demonstrates how this empirical evidence contradicts the textbooks they use. It also points out that this has potentially far-reaching consequences for undergraduate economics students of University of Maastricht in their future careers as economic decision-makers.

Their letter has already received coverage in the Dutch press [here and here], German Politics and Business editorial, Makroskop, Danish media, and English-language outlets [Observant, Diplomat, and Alliance for Just Money]. The strength of evidence backing-up the letter has encouraged the University of Maastricht to create a discussion group involving student representatives and members of the teaching staff.

What will Rethinking Economics do?

We know that this phenomenon is not limited to a small number of universities, but that these faulty theories are widespread in undergraduate economics teaching. Aiming to build on the initial success and attention the letter has attracted in the Netherlands and elsewhere in Europe, Rethinking Economics is planning a campaign to support our network to submit similar letters to our own economics departments. We plan to use our broad geographic scope and influence to shine a light on the faulty teaching on the role of banks in economics curricula across the globe.

Getting involved

To plan this campaign action and make is a success, we need your help!

Over the next few months, we will be asking you to develop your own letters to submit to your universities. Look out for more on this soon.

Additionally, we want to invite members of the Rethinking Economics network to be part of a steering group which will guide the development of the campaign action. As well as a small number of representatives from the Rethinking Economics network, the steering group will include allied organisations who are working on the topics of finance, banks, money and their role in economies.

The steering group will:

  • Establish timelines for creation and submission of the letters across the RE network of university groups.
  • Establish and support media engagement campaigns in national and local contexts, including by developing press releases and coordinating media engagement.
  • Determining how Rethinking Economics can work with its allies to draw attention to this issue in economics education and its widespread consequences for policy-making.

What is expected of those involved in steering group?

The steering group will have an important role to play in growing the campaign over the next three-to-six months. This will require a level of commitment.  As a participant in the steering group, you will be committing to:

– take part in regular steering group meetings via Zoom or Skype (these are likely to take place once every two or four weeks until September)

– taking on a share of responsibility for developing the campaign. For example, helping draft press releases, creating lists of key contacts, and other action points agreed in the steering group. Rethinking economics staff will provide support for you, if needed.

This is an exciting opportunity for the Rethinking Economics network to push for reform of a key element of economics education and to ensure it is grounded in the real-world. We hope you will get involved in the action and in the steering group if you are able.

If you are interested in being involved in the steering group, please email by Monday 22nd April.