Heterodox economics

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Heterodox economics[1] is a category referring to the approaches, or schools of economic thought, that are considered outside of orthodox economics. Heterodox Economics is an umbrella term to cover the coming together of, sometimes long-standing, separate unorthodox projects or traditions. The latter include post Keynesianism, (old) institutionalism, feminist, social, Marxian and Austrian economics, among others.[1]

Orthodox economics is also known as "mainstream economics," or the Walrasian model which has largely developed from neoclassical economics in the late 19th century.

While mainstream economics may be defined in terms of the "rationality-individualism-equilibrium" nexus, heterodox economics may be defined in terms of a "institutions-history-social structure" nexus. Note that there is a different emphasis in distinguishing mainstream and heterodox economics in this way than is involved in distinguishing them as closed-system and an open-system approaches respectively (Lawson,1997);[1] Dow, 2000) [2]

It is difficult to define heterodox economics. The International Confederation of Associations for Pluralism in Economics (ICAPE) has prudently avoided defining its umbrella too specifically, choosing instead to define its mission as "promoting pluralism in economics." All strands of socialism are heterodox, but not all heterodox schools are necessarily socialist. A key challenge for "heterodoxy" is to define itself in ways that move beyond the rubric of "non-neoclassical" economics. In defining a common ground in the "critical commentary" some heterodox economists, such as Steve Cohn (Knox College, USA), have tried to do three things: (1) identify shared ideas that generate a pattern of heterodox critique across topics and chapters of introductory macro texts; (2) give special attention to ideas that link methodological differences to policy differences; and (3) characterize the common ground in ways that permit distinct paradigms to develop common differences with textbook economics in different ways.

Contents

[edit] Rationality

One of the most broadly accepted principles of neoclassical economics is the assumption of the "rationality of economic agents". Indeed, for a number of economists, the notion of rational maximizing behavior is taken to be synonymous with economic behavior (Becker 1976, Hirshleifer 1984). When some economists' studies do not embrace the rationality assumption, they are seen as placing the analyses outside the boundaries of the Neoclassical economics discipline (Landsberg 1989, 596). Neoclassical economics begins with the a priori assumptions that agents are "rational" and that they seek to "maximize their individual utility" (or profits) subject to environmental constraints. These assumptions provide the backbone for rational choice theory, and from this basis neoclassical economists derive the familiar supply and demand functions which, under certain conditions, will lead to a determinate market clearing equilibrium. Under even stricter conditions this equilibrium will be Pareto efficient.

Heterodox economics reject these fundamental assumptions on which most of neoclassical economics theory has been built. Up to 1980 heterodox economics could be defined as:

  1. rejection of the atomistic individual conception in favor of a socially embedded individual conception;
  2. emphasis on time as an irreversible historical process;
  3. reasoning in terms of mutual influences between individuals and social structures.

On 1980 (or thereabouts) significant changes begin to occur in economics; a number of new research programs began, in various ways, to be recognized by the mainstream economics. These include behavioral economics, complexity economics, evolutionary economics, experimental economics, neuroeconomics, and others. As a consequence, some heterodox economists, such as John B. Davis, proposed that the definition of heterodox economics has to be adapted to this new, more complex reality.[3]

The argument of the previous section is that heterodox economics post-1980 is a complex structure, being composed out of two broadly different kinds of heterodox work, each internally differentiated with a number of research programs having different historical origins and orientations: the traditional left heterodoxy familiar to most and the 'new heterodoxy' resulting from other science imports.[3]

[edit] Rejection of Neoclassical Economics

There is no single "heterodox economic theory"; there are many different "heterodox theories" in existence. "What they all share, however, is a rejection of the neoclassical orthodoxy as representing the appropriate tool for understanding the workings of economic and social life. The reasons for this rejection may vary."[4]

[edit] Reasons for the rejection of Neoclassical economics

  • That neoclassical theory is appropriate as a tool only under certain limited conditions, where there is "perfect" or "near-perfect" competition.
    • The Austrian School in particular considers neoclassical theory relevant for conditions of equilibrium
  • That it is useless as a tool for understanding economic and social life.[citation needed]
  • That all theories are valid so long as they are internally consistent.[citation needed]
  • That neoclassical theory is a form of ideology or religion, which is grounded in unscientific concepts.[5]

[edit] Most recent developments

Over the past two decades, the intellectual agendas of heterodox economists have taken a decidedly pluralist turn. Leading heterodox thinkers have moved beyond the established paradigms of Austrian, Feminist, Institutional-Evolutionary, Marxian, Post Keynesian, Radical, Social, and Sraffian economics—opening up new lines of analysis, criticism, and dialogue among dissenting schools of thought. This cross-fertilization of ideas is creating a new generation of scholarship in which novel combinations of heterodox ideas are being brought to bear on important contemporary and historical problems, such as socially-grounded reconstructions of the individual in economic theory; the goals and tools of economic measurement and professional ethics; the complexities of policymaking in today's global political economy; and innovative connections among formerly separate theoretical traditions (Marxian, Austrian, feminist, ecological, Sraffian, institutionalist, and post-Keynesian) (for a review of post-Keynesian economics, see Lavoie (1992); Rochon (1999)).

[edit] Fields or schools of heterodox economics

# Listed in Journal of Economic Literature codes scrolled to at JEL: B5 - Current Heterodox Approaches.

§ Scrolled to at JEL: C73 - Stochastic and Dynamic games; Evolutionary games.

Research is also being done in the multidisciplinary field of cognitive science on individual decision making, information as a general phenomena, distributed cognition and their implications on economic dynamicity.

Some schools in the social sciences aim to promote certain perspectives: classical and modern political economy; economic history; economic sociology and anthropology; gender and racial issues in economics; economic ethics and social justice; development studies; and so on.

[edit] References

  1. ^ a b c LAWSON, Tony. The nature of heterodox economics. Published by Oxford University Press on behalf of the Cambridge Political Economy Society, 2005, in: Cambridge Journal of Economics 2006 30(4):483-505; doi:10.1093/cje/bei093
  2. ^ DOW, S. C. Prospects for the Progress in Heterodox Economics. Journal of the History of Economic Thought 22 (2): 157-170., 2000.
  3. ^ a b DAVIS, John B. The Nature of Heterodox Economics. post-autistic economics review, issue no. 40, 1 December 2006, article 3, pp.23-30.
  4. ^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003 Satya J. Gabriel is a Professor of Economics at Mount Holyoke College
  5. ^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003, Based on lecture's notes at the author's website. Copyright © 1996-2007, Satyananda J. Gabriel, Mount Holyoke College.
  6. ^ A Companion to the History of Economic Thought (2003). Blackwell Publishing. ISBN 0631225730 p. 452

[edit] See also

  • Marc Linder, Anti-Samuelson.
"competition: Austrian conceptions"
  • "biological applications of economics"
  • Francis Green & Petter Nore (eds.), Economics: An Anti-Text.

The following are entries for the above from The New Palgrave: A Dictionary of Economics (1987):

[edit] External links

[edit] Publications on heterodox economics

Books
  • Blatt, John Markus: Dynamic Economic Systems: A Post-Keynesian Approach, Armonk, 1983, ISBN 0710802730
  • LAVOIE, M. (1992) Foundations of Post-Keynesian Economic Principles, Aldershot: Edward Elgar.
  • McDERMOTT, John. Economics in Real Time: A Theoretical Reconstruction, Series Advances in Heterodox Economics, The University of Michigan Press, 2003 ISBN 978-0-472-11357-6
  • ROCHON, Louis-Philippe (1999) Credit, Money and Banking: An Alternative Post-Keynesian Approach, Cheltenham: Edward Elgar.
Articles, conferences, papers
  • LAWSON, Catherine & LAWSON, Larry (1990). Financial system restructuring: lessons from Veblen, Keynes, and Kalecki. Journal of Economic Issues 24 (1): 115-31.
  • MINSKY, Hyman (1996). Uncertainty and the institutional structure of capitalist economies. Journal of Economic Issues 30(2):357-68.
  • SECCARECCIA, M. Early Twentieth-Century Heterodox Monetary Thought», Money, Financial Institutions, and Macroeconomics, ed. by A.J. Cohen, H. Hagemann and J.N. Smithin, Boston: Kluwer Academic Publishers, 1997, pp. 125-39