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Heterodox economics
Economic theories that contrast with orthodox schools of economic thought / From Wikipedia, the
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Heterodox economics is any economic thought or theory that contrasts with orthodox
schools of economic thought, or that may be beyond neoclassical economics.[1][2] These
include institutional, evolutionary, feminist,[3] social, post-Keynesian (not to be confused
with New Keynesian),[2] ecological, Austrian, complexity, Marxian, socialist, and anarchist
economics.[4]
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Heterodox economics family tree.
Economics may be called orthodox or conventional economics by its critics.[5] Alternatively,
mainstream economics deals with the "rationality–individualism–equilibrium nexus" and
heterodox economics is more "radical" in dealing with the "institutions–history–social
structure nexus".[6]
A 2008 review documented several prominent groups of heterodox economists since at
least the 1990s as working together with a resulting increase in coherence across
different constituents.[2] Along these lines, the International Confederation of Associations
for Pluralism in Economics (ICAPE) does not define "heterodox economics" and has
avoided defining its scope. ICAPE defines its mission as "promoting pluralism in
economics."
In defining a common ground in the "critical commentary", one writer described fellow
heterodox economists as trying 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.[7]
One study suggests four key factors as important to the study of economics by self-
identified heterodox economists: history, natural systems, uncertainty, and power.[8]
History
In the mid-19th century, such thinkers as Auguste Comte, Thomas Carlyle, John Ruskin
and Karl Marx made early critiques of orthodox economy.[9] A number of heterodox
schools of economic thought challenged the dominance of neoclassical economics after
the neoclassical revolution of the 1870s. In addition to socialist critics of capitalism,
heterodox schools in this period included advocates of various forms of mercantilism,
such as the American School dissenters from neoclassical methodology such as the
historical school, and advocates of unorthodox
Heterodox monetary
economics family tree.theories such as Social credit.
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Other heterodox schools active before and during the Great Depression included
Technocracy and Georgism.
Physical scientists and biologists were the first individuals to use energy flows to explain
social and economic development. Joseph Henry, an American physicist and first secretary
of the Smithsonian Institution, remarked that the "fundamental principle of political
economy is that the physical labor of man can only be ameliorated by… the
transformation of matter from a crude state to a artificial condition...by expending what is
called power or energy."[10][11]
The rise, and absorption into the mainstream of Keynesian economics, which appeared to
provide a more coherent policy response to unemployment than unorthodox monetary or
trade policies contributed to the decline of interest in these schools.
After 1945, the neoclassical synthesis of Keynesian and neoclassical economics resulted in
a clearly defined mainstream position based on a division of the field into microeconomics
(generally neoclassical but with a newly developed theory of market failure) and
macroeconomics (divided between Keynesian and monetarist views on such issues as the
role of monetary policy). Austrians and post-Keynesians who dissented from this synthesis
emerged as clearly defined heterodox schools. In addition, the Marxist and institutionalist
schools remained active but with limited acceptance or credibility.[12]
Up to 1980 the most notable themes of heterodox economics in its various forms
included:
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.
From approximately 1980 mainstream economics has been significantly influenced by a
number of new research programs, including behavioral economics, complexity
economics, evolutionary economics, experimental economics, and neuroeconomics. One
key development has been an epistemic turn away from theory towards an empirically
driven approach focused centrally on questions of causal inference.[13] 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:[14]
...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
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orientations: the traditional left heterodoxy familiar to most and the 'new
heterodoxy' resulting from other science imports.[14]
Rejection of neoclassical economics
See also: Neoclassical economics § Criticisms
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.[15] The reasons for this rejection may vary. Some of the elements
commonly found in heterodox critiques are listed below.
Criticism of the neoclassical model of individual
behavior
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
(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.
Many heterodox schools are critical of the homo economicus model of human behavior
used in standard neoclassical model. A typical version of the critique is that of Satya
Gabriel:[16][self-published source?]
Neoclassical economic theory is grounded in a particular conception of
human psychology, agency or decision-making. It is assumed that all
human beings make economic decisions so as to maximize pleasure or
utility. Some heterodox theories reject this basic assumption of
neoclassical theory, arguing for alternative understandings of how
economic decisions are made and/or how human psychology works. It is
possible to accept the notion that humans are pleasure seeking
machines, yet reject the idea that economic decisions are governed by
such pleasure seeking.Heterodox
Humaneconomics
beings may,
familyfor example, be unable to
tree.
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make choices consistent with pleasure maximization due to social
constraints and/or coercion. Humans may also be unable to correctly
assess the choice points that are most likely to lead to maximum
pleasure, even if they are unconstrained (except in budgetary terms) in
making such choices. And it is also possible that the notion of pleasure
seeking is itself a meaningless assumption because it is either impossible
to test or too general to refute. Economic theories that reject the basic
assumption of economic decisions as the outcome of pleasure
maximization are heterodox.
Shiozawa emphasizes that economic agents act in a complex world and therefore
impossible for them to attain maximal utility point. They instead behave as if there are a
repertories of many ready made rules, one of which they chose according to relevant
situation.[17]
Criticism of the neoclassical model of market
equilibrium
In microeconomic theory, cost-minimization by consumers and by firms implies the
existence of supply and demand correspondences for which market clearing equilibrium
prices exist, if there are large numbers of consumers and producers. Under convexity
assumptions or under some marginal-cost pricing rules, each equilibrium will be Pareto
efficient: In large economies, non-convexity also leads to quasi-equilibria that are nearly
efficient.
However, the concept of market equilibrium has been criticized by Austrians, post-
Keynesians and others, who object to applications of microeconomic theory to real-world
markets, when such markets are not usefully approximated by microeconomic models.
Heterodox economists assert that micro-economic models rarely capture reality.
Mainstream microeconomics may be defined in terms of optimization and equilibrium,
following the approaches of Paul Samuelson and Hal Varian. On the other hand,
heterodox economics may be labeled as falling into the nexus of institutions, history, and
social structure.[4][18]
Most recent developments
Over the past two decades,[when?] the intellectual agendas of heterodox economists have
taken a decidedly pluralist turn. Leading heterodox thinkers have moved beyond the
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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)).
David Colander, an advocate of complexity economics, argues that the ideas of heterodox
economists are now being discussed in the mainstream without mention of the heterodox
economists, because the tools to analyze institutions, uncertainty, and other factors have
now been developed by the mainstream. He suggests that heterodox economists should
embrace rigorous mathematics and attempt to work from within the mainstream, rather
than treating it as an enemy.[19]
Some schools of heterodox economic thought have also taken a transdisciplinary
approach. Thermoeconomics is based on the claim that human economic processes are
governed by the second law of thermodynamics. The posited relationship between
economic theory, energy and entropy, has been extended further by systems scientists to
explain the role of energy in biological evolution in terms of such economic criteria as
productivity, efficiency, and especially the costs and benefits of the various mechanisms
for capturing and utilizing available energy to build biomass and do work.[20][21]
Various student movements have emerged in response to the exclusion of heterodox
economics in the curricula of most economics degrees. The International Student
Initiative for Pluralist Economics was set up as an umbrella network for various smaller
university groups such as Rethinking Economics to promote pluralism in economics,
including more heterodox approaches.
Fields of heterodox economic thought
American Institutionalist School Buddhist economics
Austrian economics #[22] Complexity economics
Binary economics Distributivism
Bioeconomics Heterodox economicsEcological
family tree. economics §
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Evolutionary economics # § (partly within Political Economy
mainstream economics)
Post-Keynesian economics § including
Econophysics Modern Monetary Theory and Circuitism
Feminist economics # § Post scarcity
Freiwirtschaft Pluralism in economics
Georgism Resource-based economics – not to be
confused with a resource-based economy
Gift-based economics
Real-world economics
Green Economics
Sharing economics
Humanistic economics
Socialist economics #
Innovation Economics
Social economics (partially heterodox
Institutional economics # §
usage)
Islamic economics
Sraffian economics #
Marxian economics #
Technocracy (Energy Accounting)
Mutualism
Thermoeconomics
Neuroeconomics
Mouvement Anti-Utilitariste dans les
Participatory economics Sciences Sociales
# Listed in Journal of Economic Literature codes scrolled to at JEL: B5 – Current Heterodox
Approaches.
§ Listed in The New Palgrave Dictionary of Economics[23]
Some schools in the social sciences aim to promote certain perspectives: classical and
modern political economy; economic sociology and anthropology; gender and racial
issues in economics; and so on.
Notable heterodox economists
Alfred Eichner Anwar Shaikh
Alice Amsden Bernard Lonergan
Aníbal Pinto Bill Mitchell
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Carlota Perez Kate Raworth
Celso Furtado Lance Taylor
Dani Rodrik Ludwig Lachmann
David Harvey Ludwig von Mises
Duncan Foley Lyndon Larouche
E. F. Schumacher Maria da Conceição Tavares
Edward Nell Mariana Mazzucato
F.A. Hayek Mason Gaffney
Frank Stilwell Michael Albert
Frederic S. Lee Michael Hudson
Frederick Soddy Michael Perelman
G.L.S. Shackle Michał Kalecki
Hans Singer Murray Rothbard
Ha-Joon Chang Mushtaq Khan
Heinz Kurz Nelson Barbosa
Henry George Nicholas Georgescu-Roegen
Herman Daly Nicolaus Tideman
Hyman Minsky Paul Baran
Jack Amariglio Paul Cockshott
Jeremy Rifkin Paul Sweezy
Joan Robinson Peter Navarro
John Bellamy Foster Piero Sraffa
John Komlos Rania Antonopoulos
Joseph Schumpeter Raúl Prebisch
Karl Marx Heterodox economicsRichard D. Wolff
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Robin Hahnel Theotônio dos Santos
Ruy Mauro Marini Thorstein Veblen
Simon Zadek Tony Lawson
Stephanie Kelton Yanis Varoufakis
Stephen Resnick
See also
References
Further reading
External links
Economics
Macroeconomics
Schools of economic thought
Authority control: National
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