The Issues at Hand
At this point, I have to say I feel blessedly ancillary to the discussion going on. The people with the most to say and in many respects the best insights into the issues that I tried to chronicle in the article are those who do economics for a living. It is, I think, pretty revealing that there seems to be such a thirst among practitioners of the field to participate in this discussion. It indicates to me that the issues I tried to raise don't routinely get the airing they deserve. (A less charitable observer could also make the case that people who feel aggrieved always like to complain.) I want to respond briefly to something that Tyler Cowen said in his thoughtful response:
There's much talk in Hayes' article about discrimination against heterodox economists, but he gives surprisingly little attention to which of their valid propositions have been neglected. I'd like to see a simple list and start the debate thereEzra Klein over at his blog seconded this point writing:
There's one question as to whether herd-think and job pressures and social influences subtly suppress heterodox work and lead to a misleading impression of the general findings of economists. And then there's another, which Chris went into in his article, as to whether the neoclassical model is a proven failure, and must now be replaced by something different.This is right on the money.
There are two cases to be made against the dominance of neoclassical economics, a substantive case and a sociological one. The substantive case has nothing to do with the mechanics of the discipline, only with the descriptive and predictive value of the neoclassical theory: does it reliably predict certain phenomena, does it explain strange new phenomena, and does it do these things better than competing theories. I, alas, cannot make the best substantive case against neoclassical economics. I can recite some talking points, I can deploy some lay arguments that I've mulled or appropriated, but as I said, I'm not an economist. (Question for the rest of discussants: is there a list you'd submit in answer to Tyler's question? I have my own, but, um don't really want to go first).
The other case to make against neoclassical dominance is the sociological case, which chronicles the professional mechanisms that maintain the model's hegemony, the ways in which certain borders and taboos are enforced, the professional incentive structures that serve to discourage budding economists to adopt or explore other models. The point of the sociological case is to show that merits aside, there's clearly social forces at work maintaining the dominance of neoclassical economics, and social forces such as these are generally impediments to good science. The more it appears that clubbiness is what keeps the neoclassical model in the drivers' seat, the more reason to doubt that the model is winning on the merits.
Now, the problem that Tyler points out is that the sociological case is somewhat trivial if there's not a substantive case to go along. Here, I think, is a useful analogy. You could write a long feature article (in fact it's been done) in which you talked to a bunch of professional midwives about the ways they've been marginalized and condescended to by the medical profession. But that article wouldn't be particularly persuasive, if you generally are inclined to believe doctors, who are, after all, the product of seven years of very expensive education, and use the scientific method, and peer review to establish their methods for delivering children. But, if, in the article, you showed that a number of hospitals were starting to create "birthing wings" in their hospitals decorated to look nothing like a hospital, reject the use of drugs during delivery, and more or less adopt a lot of the major techniques employed by mid-wives, you might then think to yourself: well maybe these midwives aren't so crazy after all. In fact, maybe they were right and the medical establishment was wrong.
The point of the article was to suggest the same about people like David Ruccio and Michael Perelman and Thomas Palley, and many others of their ilk.
Leaving aside the group dynamics of the profession there is the real question of who is paying the economist's salaries. In general this seems to be the capitalist establishment. This is explicit in the case of (mostly conservative) think tanks like Cato or the Hoover Institution, but also indirectly in the case of academia where there are endowed chairs, special funds and even the influence of wealthy alumni.
Outside of this area most economists are employed by for-profit businesses where their principle task is to help the firm make even more money. So where would the support come from for those who are trying to investigate other economic models?
I've cited the work of the small group of ecological economists before. Their premise is that we need to create a social system which is sustainable and not based upon never ending growth. This idea is anathema to Wall Street.
For the curious here are a couple of papers by Herman Daly to give the flavor of their approach:
Steady-State Economics
Sustainable Development
Even the heterodox economists are trying to maximize well being through growth, they are just using a different set of criteria as to what constitutes well being. The planet is finite, capitalism denies this.
--- Policies not Politics
Daily Landscape
May 30, 2007 6:23 AM | Reply | Permalink
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January 14, 2011 4:56 PM | Reply | Permalink
In the end, this seems to be a discussion about
a) research money
b) access to the best students
c) ability to set curricula in departments
d) prestige
I think the heterodox economists have two alternatives:
1. Create a parallel universe - their own departments, publications, conferences and try to attract the best students, the most funding, and to be the most influential in public policy, somewhat in competition with neoclassical economics
2. Change from within - get tenure in the most prestigious universities playing the game with its current rules, and then push the boundaries using their insider's credibility.
Otherwise, what exactly is it that the heterodox economists want? quotas?
C.
May 30, 2007 7:21 AM | Reply | Permalink
It is probably not polite to point it out, but given the anger displayed by James Galbraith and others at the refereeing process and at being shut out from top journals, I feel the need to offer the observation that the vast majority of the work in heterodox economics is of truly miserable quality.
What do I mean by that? I am a behavioral-ish economist and referee several times each year for the AER, JPE and QJE. Once or twice in a year I receive papers for review that are truly heterodox, and so far every single one of them was really bad -- logically flawed, non-identified econometrics (without realizing that to be the case), ignorance of the existing literature, ignorance of the available evidence, and so on.
My own work combines elements from neoclassical economics with elements from psychology and sociology. I am perfectly open to enriching economics with all kinds of new ideas, but I have a strong aversion against bad research. Since I don't want to be rude in my referee reports and hence don't like to write "you have no idea how to do empirical research, so please stop doing it", I often make a few substantive points and then end up saying something to the effect that "this paper goes against current trends in empirical economics" and recommend it for rejection. I am fully aware that this probably re-enforces the heterodox economist’s conviction that s/he is the victim of the bloody mainstream’s conspiracy to ignore the brilliance of his / her work, as so beautifully expressed by Galbraith below.
Since James Galbraith likes to paint mainstream economics with a very broad and pretty offensive brush, let me apply the same brush to heterodox economics, where I believe it represents a closer approximation to the truth: Most heterodox economists are simply not good enough at what they are doing to break into the mainstream. Those that are good enough get absorbed into the ever-changing mainstream and end up re-defining what the mainstream is. The heterodox economists that remain outside the mainstream convince themselves that they are way smarter than all those fools working at Harvard/MIT/Chicago/Princeton/Yale/Stanford and without any doubt the victims of a conspiracy to silence them. Reality is that most of their work is either simply wrong or badly done or both.
May 30, 2007 7:53 AM | Reply | Permalink
What they want is an academy where the neo-classical 'text' should not be the 'Bible' of the profession. Because, and this is particularly frustrating, Keynes and his successors showed, not at all very long ago, that the neo-classical model was deeply flawed. Nonetheless, back in the 60s the economics profession -- being a real academy and not a bible school at the time -- accepted into the mainstream conversation Friedman's revival of neo-classicism. Friedman's and his followers then proceeded to destroy the conversation and the profession.
May 30, 2007 8:01 AM | Reply | Permalink
The problem is not one of access to graduate students. The problem is of access to policy shops. Right now today we have debates over minimum wage, CEO pay, Free Trade and income inequality that are fully infused with a cartoon version of orthodox economics.
I don't care who gets the next grant, I just resent theory laden concepts about minimum wage and the effects of free trade being presented as value free conclusions resulting from a rigorous discipline akin to Physics.
I think the most revealing part of Chris's article was how David Card described his treatment by former colleagues at Chicago: "traitor to the cause". Sciences don't have 'causes', or shouldn't. Ideologies have causes. And in this case the Ideology is clear, the Chicago School and fellow travelors have chose to worship at the alter of Markets. Anything that challenges the ultimate concept of Efficiency, that absent government regulation all Markets Clear becomes in their eyes heresy. In turn heretics are either shunned, exiled or stoned to death. Luckily for Prof Card he was already in exile in a safe place on the Left Coast.
I don't think the Economics profession by and large has been bought off. It is just that it grew up in a society and economy that didn't consider inequality in result to be a problem, that Capitalism returned its rewards overwhelmingly to Capitalists if anything proof of the genius of Markets. Unfortunately for them a system built around Efficiency has a difficult time dealing with issues of Equity in a democratic society.
May 30, 2007 8:30 AM | Reply | Permalink
Here is a basic observation I haven't heard discussed by mainstream economics;
Paul Volcker brought inflation under control by raising interest rates. This led to a serious recession, but by 1982 inflation had peaked and he could take the pressure off.
But if you raise interest rates to the point of causing actual economic harm, doesn't that reduce the growth of the economy and therefore the need for money. How do you reduce an oversupply, if you also reduce demand?
The Federal Reserve fine tunes the size of the money supply by buying and selling government debt.
In 1980, Ronald Reagan was elected on a platform of increased spending and tax cuts. The result was a serious increase in deficit spending. Now ask yourself, if the Federal Reserve sells debt to reduce the money supply, wouldn't the Treasury issuing fresh debt have the same effect? By 1982, the deficit was getting close to 200 billion and that was real money in those days. It would seem obvious the dramatic growth in deficit spending by the US government was a significant factor in bringing inflation under control, but I've never heard it discussed by anyone in the economics profession.
At the time, it seemed like inflation was being blamed on the producers and wage earners who wanted more money, even though the actual cause was loose money policies. By siphoning cash out of savers and spending it on the public sector, the government was taking surplus wealth and putting it back to work at the base of the economy, infrastructure, education, unemployment, and all the other essential and not so essential parts of the economy the private sector will only engage in if they are paid to. Classic Keynesian economics. Yet all we heard about was the Laffer curve. Was that open debate, or not?
In that context, how important is the current deficit spending in supporting the value of the currency and giving all that wealth one more investment vehicle?
May 30, 2007 8:32 AM | Reply | Permalink
In light of the comment above me, I find it appropriate to submit this, a book review by Herbert Gintis, Emeritus Professor of Economics
at the University of Massachusetts, Behavioral Economist & opponent of "neoclassical orthodoxy." He appears in the recent Heterodox economics book "The Changing Face of Economics: Conversations with Cutting Edge Economists" edited by Barkley Rosser. He was recently cited by Christopher Hayes on his weblog re: heterodox economists as saying;
"Undergraduate economics is a joke -- macro is okay, but micro is a joke because they teach this stuff that you know is not true. They know the general equilibrium model is not true. The model has no good stability properties, it doesn't predict anything interesting, but they teach it ..."
Here is a review published May 17th, of a book written by Edward Fullbrook dealing with the "post-autistic" economics movement titled
"A Guide to What's Wrong with Economics."
-----------------------
"In June 2000, several Parisian economics students circulated a petition calling for the reform of their economics curriculum. Their complaint was the inability of the neoclassical economics they were studying to satisfy their need for a deep understanding of the operation of real-life economies. They called for a reform of the university curriculum that would tolerate analytical diversity and foster critical dialogue across contrasting approaches to economics. Their demand was taken up by large numbers of students, and a similar demand was formulated by Ph.D. students at Cambridge University in the UK the next year. This reform movement has grown in Europe, under the rubric of "post-autistic economics." This volume presents their case, but with voices of professional economists rather than students.
My interest in this book and this movement stems from my life-long battle against neoclassical orthodoxy. My conclusion from reading this edited volume is that the post-autistic economics critique is incapable of leading to positive change in how economics is done and taught. The central critique is that neoclassical economics does not describe real-world economies, and must be replaced by or supplemented with other approaches. This is just wrong. While the elementary courses are far from the real world, advanced courses in such areas as labor, international finance, macroeconomic policy, economic development, law and economics, environmental economics, and so on, are quite real-world. If an undergraduate students left with a degree in economics that allowed them to understand The Economist and the Journal of Economic Perspectives, the level of economic awareness in the world would be considerably higher. If the undergraduate curriculum does not bring students to this level, the curriculum is, to my mind, faulty. Perhaps less stress on arcane theories that are relevant only to professional economists should be replaced by a more historical, institutional, and hands-on approach to microeconomic and macroeconomic issues. But, this is a critique of pedagogy, not of economic theory.
Neoclassical theory has displaced other approaches around the world because it is currently the only promising approach to economics. Marxism, Keynesianism, Institutionalism, Syndicalism, Austrian economics, and the like developed strongly for a while and then foundered. They certainly do not present analytically interesting alternatives to neoclassical economics. It is not an accident that all over the world, including India, Japan, China, and many countries in Latin America, the reform of higher education has involved the introduction of modern neoclassical economic theory. With all its flaws, it is the only credible starting point for serious economic analysis.
Neoclassical economics has profound problems, but they can only be addressed from within, not by embracing any "heterodox" alternative that I know of. The pleas for democracy, toleration, and pluralism by the "heterodox" is simply an admission that they can't win the intellectual battle by having better theories, only by having more troups.
Perhaps more damning, the authors seem completely unaware of contemporary economic theoretical research, which addresses many of the serious problems with neoclassical theory. There is a short piece on behavioral economics, which has been one of the most vibrant areas in economics over the past 25 years, but the author assumes that behavioral economics is an alternative to neoclassical economics. Rather, it is a complement to economic theory and a source of empirical data that can be used to generate better models. Behavioral economics uses decision theory and game theory to critique the Homo economicus of traditional economic theory, but the profession is responding by revising Homo economicus, not by rejecting behavioral economics (see recent papers in Econometrica, the Quarterly Journal of Economics, and other journals).
Post-autistic economics ignores the innovative work of Ernst Fehr, Abijit Banerjee and Esther Duflo, Colin Camerer, Samuel Bowles, George Loewenstein, Daniel Kahneman, Benoit Mandelbrot, Edward Glaeser, David Laibson, Matthew Rabin, Bruno Frey, Elinor Ostrom, Armin Falk, Simon Gaechter, Jean Tirole, Aldo Rustichini, and many others. It ignores neuroeconomics, econophysics, and the notion of the economy as a complex system, with its stress on agent-based modeling. These researchers transform analytical economics to meet the empirical challenges posed by new data. Unlike leaders of the post-autistic school, they do not urge a retreat to philosophy or some some defunct 20th century doctrine.
The papers in this book are generally present no challenge for the professional economist. Many are just superficial, and some are egregiously incorrect. Perhaps the most bizarre is the paper by Bernard Guerrien, "Can We Expect Anything From Game Theory?" Guerrien asserts, without evidence, that "game theory models are always `stories', like fables or parables, with no relation to real-life situations." Really? What about auction theory, which has been so successful in organizing the sale of bandwidth in many countries? How does one explain the role of game theory in revolutionizing Industrial Organization? Moreover, game theory is the basis for all of behavioral economics, and accounts for its experimental success in large part. Guerrien's description of game theory is quite faulty. "...players are supposed to choose separately and simultaneously one element of their strategy set...", says Guerrien, and launches a broad critique on that basis. But, he is just wrong. Evidently he never heard of extensive form games or behavioral strategies. In short, the intellectual level of this critique is low.
Neoclassical economics is a flawed doctrine that deserves to be treated with continual hostility---but hostility from within. New and better theories must be capable of convincing young economists with no preconceived notions or special political pleading of the superiority of the new over the old. Taking to the streets with petitions is useful if it stirs up research activity, but not otherwise.
Contemporary economic theory is deep and challenging, It has some of the answers, and will aid in the development of other areas in which its answers are inadequate. For instance, in perhaps the best piece in the book, Geoffrey M. Hodgson asks "Can Economics Start from the Individual Alone?" He argues persuasively that it cannot. However, traditional institutional economics is hardly the remedy. Rather, I suspect that a fundamental theorem of Robert Aumann on the relationship between correlated equilibrium and Bayesian rationality is the key to transcending neoclassical economics' methodological individualism. But, the post-autistic people who contributed to this book probably do not know or do not understand Robert Aumann's contributions. A pity."
http://www-unix.oit.umass.edu/~gintis/
May 30, 2007 8:33 AM | Reply | Permalink
RE "Most heterodox economists are simply not good enough at what they are doing to break into the mainstream."
Most of the heterodox economists I know are better at mainstream economics than the mainstream economists, but these heterodox folks don't want to do mainstream stuff.
But I will admit that lots of heterodox stuff is not very good. But there is a reason for that.
When a mainstream economists wants to do research, his/her goal is to take what exists and add maybe 0.1% to it. That is, 99.9% of the "thinking" a mainstream economist does is merely accepting what others have long developed and perfected.
Heterodox economists, however, are typically independent sorts who find when they do research they try to add 10% of their own stuff to 90% of what has been (not quite perfected as so few poeple have worked on it). Because they are trying do to so much, they obviously fail much of the time. And often fail badly.
Sports anaology time: A mainstream economist runs up to a long-jump bit. He/she leaps into the air spins wonderfully, and sticks the landing. The mainstream crowd goes wild...what a great jump! Impressive. Great spin; great landing. But the distance: 1 inch.
A heterodox economist runs up to the long-jump pit. He/she leaps into the air, awkwardly flails his/her arms, lands and falls on his/her butt getting covered with dirt. The crowd of mainstream economists jeers! "Loser" they chant: bad form, bad landing, all around sad stuff. Pathetic, really. The heterodox economist is driven away as he/she is pelted by rotten fruit.
Other observers note the awkward moves of the heterodox economists but also notes that the heterdox economist had flown 10 feet. But the crowd didn't seem to notice this as all they cared about was the fancy flying.
The moral (sic): Mainstream economists use a standard for research that emphasizes fancy flying and good landings, although the mainstream economist adds almost nothing of any real importance (1 inch). But by having such poor standards for accomplishment (1 inch) the mainstream economist can do really fancy stuff while in the air.
When the heterodox economist does his/her thing, the mainstream judges him/her using the same standard: fancy stuff. The heterodox economist, however, wants to see how far he/she can do and, so, doesn't waste time on the fancy stuff. They come off looking pretty bad sometimes (in the eyes of the mainstream).
Other issues (for lots of what appears to be, and likely is, poor stuff created by heterodox economists) are certainly involved but the above is part of the story.
May 30, 2007 8:40 AM | Reply | Permalink
deleted
May 30, 2007 9:25 AM | Reply | Permalink
I agree, except that for me the most revealing tidbit was when Thomas Palley was classified as a 'heterodox' economist. Since conventional post-Keynesian Thomas Palley is considered heterodox, then simply taking the AFL-CIO perspective on economic policy must make an economist 'heterodox'. (Palley has an excellent critique of Milton Friedman here, by the way.)
May 30, 2007 9:27 AM | Reply | Permalink
To summarize themes heard on several threads:
1. Orthodox and Heterodox economists are not really that different under the skin. They both believe certain axioms which they are unwilling to examine.
2. Human nature is imperfect so those with a stake in their profession are likely to resist ideas that threaten their expertise. This is as true in the physical sciences as in economics or English Lit, for that matter.
3. The scholarly procedures of economics may or may not be broken or unfair.
Where I think the analogies to the physical sciences breaks down is that when a new theory is proposed it must make verifiable predictions. If they are found to be accurate then the theory gains credence, if they fail it is discarded. The fact that those who propose the new theories may get flack from the old guard is just a case of point 2.
In the case of economics the theories are difficult, if not impossible, to test. For each "proof" that some policy based upon a theory worked there are those who claim some other factor was more important. It is also impossible to rerun an experiment with different parameters (at least in the real world) so scientific testing is weak.
As I've said previously most of the economists being discussed here broadly agree on the same goals. What they don't agree on is the specific techniques to achieve these goals. What is also true is that some economic theories are hijacked by politicians and those that finance them for their own purposes, while they claim to be supporting the same goals as everyone else.
This is a sign of a plutocracy. In general this type of government doesn't yield good overall results although the plutocrats may do well. Many think the US has shifted to far in the plutocratic direction and we are now starting to see some discussions about how to rectify this.
Unfortunately history hasn't had many instances of a plutocratic regime giving up power either peacefully or without a lot of social disruption.
--- Policies not Politics
Daily Landscape
May 30, 2007 11:45 AM | Reply | Permalink
I think the most revealing part of Chris's article was how David Card described his treatment by former colleagues at Chicago: "traitor to the cause". Sciences don't have 'causes', or shouldn't. Ideologies have causes.
These 3 sentences deserve '10' ratings.
Ideologies usually aren't as picky about performance outcomes as they are about maintaining their policy lifecycles, no matter what.
Neoclassical economics does not have a great track record. Shortly after an economist wins a Nobel prize, the prize winning theory is discredited or discarded as useless. Where are the discoveries in space, or the advances in medicine like antibiotics and stem cells? For that matter, Darwin's Theory of Evolution has held up better and longer than, say, the Coase Theorem. Economics is still modeling Adam Smith, for God's sake.
If heterodox economists want to break out of the 19th century and look for real world answers to today's world problems, then more power to them. The problems need fixing, not modeling.
On some great and glorious day the plain folks of the land will reach their heart's desire at last and the White House will be adorned by a downright moron. H.L. Mencken
May 30, 2007 12:18 PM | Reply | Permalink
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December 7, 2010 10:12 AM | Reply | Permalink
He appears in the recent Heterodox economics book "The Changing Face of Economics: Conversations with Cutting Edge Economists" edited by Barkley Rosser. He was recently cited by Christopher Hayes on his weblog re: heterodox economists as saying;
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December 12, 2010 3:08 PM | Reply | Permalink
Most of the heterodox economists I know are better at mainstream economics than the mainstream economists, but these heterodox folks don't want to do mainstream stuff.
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Create a parallel universe - their own departments, publications, conferences and try to attract the best students, the most funding, and to be the most influential in public policy, somewhat in competition with neoclassical economics
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December 17, 2010 10:09 AM | Reply | Permalink
It is probably not polite to point it out, but given the anger displayed by James Galbraith and others at the refereeing process and at being shut out from top journals, I feel the need to offer the observation that the vast majority of the work in heterodox economics is of truly miserable quality.
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