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Home > Human and Intellectual Capital Viewpoints > Poverty of Thinking in University Economics and Accountancy Departments

Human and Intellectual Capital Viewpoints

Poverty of Thinking in University Economics and Accountancy Departments

by Richard Murphy

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Richard Murphy believes that the way in which accountancy and economics are currently taught is fundamentally flawed since it is based on a false premise—that markets are perfect and investors rational. A graduate in economics and accountancy from Southampton University, Murphy was articled to Peat Marwick Mitchell & Co., a forerunner of KPMG in London. Since 2003 he has been researching and campaigning on economic and taxation policy issues. He founded the Tax Justice Network and is director of Tax Research LLP, which undertakes work on taxation policy for aid agencies, unions, NGOs, and others in the United Kingdom and abroad.

Murphy has helped to reshape the debate on international tax policy, for example through the creation of country-by-country reporting. As principal researcher of the Tax Justice Network until 2009, he helped to put tax havens on the international agenda. He is a coauthor of Tax Havens: How Globalization Really Works (2009) and the author of The Courageous State: Rethinking Economics, Society and the Role of Government (2011).

Is there one overarching flaw in how economics, finance, and accountancy are taught?

Yes. There is a hegemony of ideas. Anyone who wants to teach economics or accountancy these days has to subscribe to neoliberal economic thinking. There was a time when you didn’t have to be a mathematician to become an economist. However, that changed in the 1970s. Economics—and as a consequence accounting—moved on to a different plane, with everything becoming “rational.” Everything had to be reduced to something that could be measured—and if it couldn’t be measured, then it didn’t really matter. A. J. Ayer’s logical positivism became orthodox thinking, giving rise to a mathematically-based, value-free approach that led to some extraordinary assumptions being made.

Who else was instrumental in ensuring that this sort of thinking became mainstream?

Milton Friedman and the Chicago School came to dominate economic thinking from the 1970s. Going back a little earlier, immediately after the Second World War, Paul Samuelson built a model of what he called “Keynesian” economics around mathematical analysis. This was very useful for educationalists since it became possible to set exams with right and wrong answers, which are considerably easier to mark than answers to open-ended questions. That drove the educational agenda in a fundamentally wrong direction.

When economics is taught in this way, it’s easier to exclude anyone who lacks the required technical skill and to rubbish anything that interferes with the models as “not economics.” This undermines the truth and validity of the entire system.

One of the more surprising aspects of the system for teaching economics and accountancy is the navel-gazing. About one-third of research undertaken by UK accountancy faculties is into the performance of UK accountancy faculties. That is a terrible waste of resources when you think of the areas that could do with analysis and study.

Are there any pockets of resistance to the way accountancy and economics are taught?

No, this way of teaching has swept all before it, largely because it’s so easy to do. The teachers do not need to be particularly well trained. In accountancy degrees, the seminars are run by pre-PhD students, many of whom are teaching accountancy to earn some extra cash merely because they happen to be competent in mathematical analysis. Very few have any experience of the world outside. They’re not qualified accountants. This has led to a dumbing-down of teaching.

When and where did you study, and how do you feel you were taught?

In my first year of economics and accountancy at Southampton University in 1976 to 1979, I realized that the assumptions that underpinned the course—including that competition was “perfect” and that this would always lead to “correct” outcomes in the markets—bore no relation to reality. I had the advantage of arriving at university with some previous experience of accountancy. I started my accounting career at 17 with a summer holiday job at a local accountancy firm. Even then I realized that what was actually happening in businesses bore no relation to how the economists were describing it.

However, one positive aspect was that the teachers on the accountancy course were practitioners who had transferred into academe—the audit teacher had trained with Deloitte and had done six years in the profession. So it was a very experience-based approach. I found the economics teaching staff much more frustrating. And that was before maths was universal. I fundamentally questioned the assumptions.

One of the things I recognized as exceptionally dangerous was the discounting of future cash flows, which entered mainstream economic theory in the 1950s and became prevalent in accounting from the 1970s onwards. What I found extraordinary about this was the assumption that you could dismiss the future consequences of current behavior and appraise it only with regard to its impact on the present. Of course that drives a short-term mind-set where business pays no heed to future consequences of its actions, one where all that matters is peak performance now.

Modeling is now the bedrock for the teaching of all financial disciplines. However, future consequences are never built into the models, since they are literally “discounted,” which is a very close synonym of “dismissed.” Students are told that the only thing is now, that future consequences are irrelevant.

This is taught universally across all business teaching, and it does have a pervasive influence. It gave rise to the current policy-making framework of intense short-termism in business decision-making. It focuses people on a personal assessment of the present, and it drives businesses to manipulate the data—including discounted cash flow and internal rate of return—to maximize current returns.

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Further reading


  • Aldred, Jonathan. The Skeptical Economist: Revealing the Ethics Inside Economics. London: Earthscan, 2010.
  • Judt, Tony. Ill Fares the Land: A Treatise On Our Present Discontents. London: Allen Lane 2010.
  • Keen, Steve. Debunking Economics: The Naked Emperor of the Social Sciences. London: Zed Books, 2001.
  • Palan, Ronen, Richard Murphy, and Christian Chavagneux. Tax Havens: How Globalization Really Works. New York: Cornell University Press, 2010.
  • Skidelsky, Robert. Keynes: The Return of the Master. London: Allen Lane, 2009.


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