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The Maastricht Diplomat

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Student Initative Challenges UM’s Finance Teaching in Open Letter

What makes a good university? Is it the amount of informational knowledge it manages to shove into its paying clients’ minds? Is it not rather how well the institution encourages the critical and sceptical minds of its students? When looking at the student group PINE UCM, it appears that Maastricht University (UM) managed the latter objective quite well. However, the students now redirected their academic scepticism towards UM itself.

PINE UCM is a student initiative which works towards a more “pluralist” teaching of economics at universities. The group of about 10 members believes that most Dutch universities follow a strong neoliberal bias which translates into their classrooms and students’ beliefs. In their minds, a university should teach a diverse and interdisciplinary set of theories.

For more details on this, check out this study conducted by Rethinking Economics, the principle assessment PINE founds its beliefs on.

PINE, which has undertaken numerous successful efforts in the past in incorporating alternative and new theories into UCM’s courses, now penned an open letter to UM and the School of Business and Economics faculty. It went sort of viral, sitting at currently over 8000 views and, according to PINE, was shared Europe-wide in multiple foreign newsletters and by a New York-based publication.

Essentially, PINE argues that the way UM approaches the issue of banking, loans and money creation faultily. The textbooks, theories and thinkers commonly used cannot reasonably be supported by empirical evidence, according to PINE.

The core problem is a misconception of how banks handle loans. PINE puts it this way: ‘banks are merely intermediaries […] collecting savings in the form of deposits that are then lent out to willing borrowers. It implies two crucial things.

First, it implies that money is a scarce resource and, second, that savings are necessary to grant loans, from which follows that savings finance investment. […] individual banks are mere financial intermediaries that cannot create money individually, but collectively end up multiplying reserves through systemic re-lending and thereby create money. However, the amount of money that could be created is limited by the amount of reserves, which is supply determined by the central bank.’

So far the conventional idea.

However, what happens in reality, PINE argues, is that banks essentially create money out of nothing. They simply hand out checks with real purchasing value, without actually subtracting the money from a figurative pile of reserves. Then, they make a profit by receiving the loan back with interest. No central bank reserves constrain them, nor do any legal provisions. PINE maintains that this is not a hush-hush-in-the-dark mechanism, citing banks ‘public reports and other evidence, but rather a common misconception that is perpetuated in UM’s curriculum and does not fulfil UM’s usually high standards.

Consequently, PINE then encourages UM to undertake its own inquiries and respond accordingly.

But you should really read all about it in the letter itself. It is a relatively easy read even for laymen, but if you care about the way UM handles its economic education, you should give it a go.

At the MD, we welcome a vibrant student debate culture. In my mind, students critically engaging with their curriculum is essential to academic life. And just like in all parts of life, it’s also fine in academia to respectfully disagree.

Thankfully, PINE has thus far reported a positive response with little toxicity arising. UM and SBE announced that they were working on a full-fledged, thought-out response. While SCOPE declined, UM’s Green Office did share the letter. PINE also reported interest in the letter coming from Dutch political parties, by bankers confirming the theses, and open, engaging feedback by SBE’s academic staff. Yay for debate! What are your thoughts?

Disclaimer: All MD pieces, and particulary Sunday Summaries, are reflective of their author’s view only. They do not represent UNSA’s or any of its committee’s beliefs.

Full disclosure: Simon used to be part of PINE a while back, so he is positively biased. Now, he is head editor at the MD.


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