- Heterodox economics
Heterodox economics refers to the approaches, or schools of economic thought, that are considered outside of mainstream, that is, orthodox economics. Heterodox economics is an umbrella term used to cover various separate unorthodox approaches, schools, or traditions. These include institutional, post-Keynesian, socialist, Marxian, feminist, and Austrian economics, and
thermoeconomicsamong others. [http://www.bresserpereira.org.br/Terceiros/05.5.Heterodox_Economics.pdf 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] ] These views may be contrasted with the framework used by the majority of economists, commonly referred to by its supporters as "mainstream" and by critics as "orthodox". This framework consists of the neoclassical synthesis, which combines a neoclassical approach on microeconomics and Keynesian approach to macroeconomics, with varying degrees of emphasis.Barry, C. (1998). "Political-economy: A comparative approach". Westport, CT: Praeger.] Case, K. & Fair, R. (2008). "The principles of economics". New Saddle River, NJ: Pearson.]
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
socialismare heterodox, but not all heterodox schools are 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.
A number of heterodox schools of economic thought challenged the dominance of
neoclassical economicsafter 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 (economics)dissenters from neoclassical methodologysuch as the historical school, and advocates of unorthodox monetary theories such as Social credit. Other heterodox schools active before and during the Great Depressionincluded Technocracyand Georgism. In the case of Technocracy a Non-market economicssystem was proposed based on Energy accounting. In recent years more attention has been given people such as Frederick Soddywho in "Wealth, Virtual Wealth and Debt", turned his attention to the role of energy in economic systems. He criticized the focus on monetary flows in economics, arguing that "real" wealth was derived from the use of energy to transform materials into physical goods and services. Soddy's economic writings were largely ignored in his time, but would later be applied to the development of biophysical economicsand ecological economicsand also bioeconomicsin the late 20th century. [http://www.eoearth.org/article/Soddy,_FrederickSoddy, Frederick - Encyclopedia of Earth]
The rise, and absorption into the mainstream of
Keynesian economics, which appeared to provide a more coherent policy response to unemploymentthan unorthodox monetary or trade policies contributed to the decline of interest in these schools.
After 1945, the 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.
Up to 1980 the most notable themes of heterodox economics in its various forms included:
#rejection of the atomistic individual conception in favor of a socially embedded individual conception;
#emphasis on time as an irreversible historical process;
#reasoning in terms of mutual influences between individuals and social structures.
From 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. [http://www.paecon.net/PAEReview/issue40/Davis40.pdf DAVIS, John B. "The Nature of Heterodox Economics". post-autistic economics review, issue no. 40, 1 December 2006, article 3, pp.23-30.] ]
::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. [http://www.paecon.net/PAEReview/issue40/Davis40.pdf DAVIS, John B. "The Nature of Heterodox Economics". post-autistic economics review, issue no. 40, 1 December 2006, article 3, pp.23-30.] ]
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." 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 economicsis 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 economicsdiscipline (Landsberg 1989, 596). Neoclassical economicsbegins with the a prioriassumptions 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 economicusmodel of human behavior used in standard neoclassical model. A typical version of the critique is that of Satya Gabriel [http://www.mtholyoke.edu/courses/sgabriel/heterodox_defined.htm GABRIEL, Satya J. "Introduction to Heterodox Economic Theory." , June 4, 2003] Satya J. Gabriel is a Professor of Economicsat Mount Holyoke College] :
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. Human beings may, for example, be unable to 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.
Criticism of the neoclassical model of market equilibrium
Given market rationality, mainstream economists derive the familiar supply and demand functions which, under certain conditions, will lead to a determinate
market clearingequilibrium. Under even stricter conditions this equilibrium will be Pareto efficient.
Heterodox economics reject these fundamental assumptions on which most of
neoclassical economicstheory has been built. The concept of market equilibrium has been criticised by Austrians, post-Keynesians and others.
Hence, 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); [http://www.bresserpereira.org.br/Terceiros/05.5.Heterodox_Economics.pdf 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] ] Dow, 2000) DOW, S. C. "Prospects for the Progress in Heterodox Economics." Journal of the History of Economic Thought 22 (2): 157-170., 2000.] It is often claimed that neoclassical theory is appropriate as a tool only under certain limited conditions, where there is "perfect" or "near-perfect" competition. While there is a large body of neoclassical analysis of imperfect competition, this terminology may be seen as incorporating the assumption that non-competitive markets represent minor deviations from an ideal or perfect norm
Criticism of the neoclassical model of labor markets
Marxists view capitalism as inherently exploitative of labor, and regard neoclassical theories of the labor market as ideological devices to rationalise exploitation.
*That it is useless as a tool for understanding economic and social life. [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.]
*That all theories are valid so long as they are internally consistent. [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.]
*That neoclassical theory is a form of
ideologyor religion, which is grounded in unscientific concepts. [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.]
Most recent developments
Over the past two decades, the intellectual agendas of heterodox economists have taken a decidedly
pluralistturn. 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)). 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. [Colander, D. (2007). [http://ideas.repec.org/p/mdl/mdlpap/0724.html Pluralism and Heterodox Economics: Suggestions for an “Inside the Mainstream” Heterodoxy] ] Energy economicsrelating to thermoeconomics, is a broad scientific subject area which includes topics related to supply and use of energyin societies. Thermoeconomists argue that economic systems always involve matter, energy, entropy, and information.Baumgarter, Stefan. (2004). [http://www.eco.uni-heidelberg.de/ng-oeoe/research/papers/Baumgaertner%202004%20ModEE.pdf Thermodynamic Models] , Modeling in Ecological Economics (Ch. 18)] Thermoeconomics is based on the proposition that the role of energyin biological evolutionshould be defined and understood through the second law of thermodynamicsbut 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. [ Peter A. Corning1 *, Stephen J. Kline. (2000). [http://www3.interscience.wiley.com/cgi-bin/abstract/71007254/ABSTRACT Thermodynamics, information and life revisited, Part II: Thermoeconomics and Control information ] Systems Research and Behavioral Science, Apr. 07, Volume 15, Issue 6 , Pages 453 – 482] [ Corning, P. (2002). “ [http://www.complexsystems.org/abstracts/thermoec.html Thermoeconomics – Beyond the Second Law] ” – source: www.complexsystems.org] As a result, thermoeconomics are often discussed in the field of ecological economics, which itself is related to the fields of sustainabilityand sustainable development. Georgescu-Roegenreintroduced into economics, the concept of entropyfrom thermodynamics(as distinguished from the mechanistic foundation of neoclassical economics drawn from Newtonian physics) and did foundational work which later developed into evolutionary economics. His work contributed significantly to bioeconomicsand to ecological economics. [Cleveland, C. and Ruth, M. 1997. When, where, and by how much do biophysical limits constrain the economic process? A survey of Georgescu-Roegen's contribution to ecological economics. "Ecological Economics" 22: 203-223.] [Daly, H. 1995. On Nicholas Georgescu-Roegen’s contributions to economics: An obituary essay. "Ecological Economics" 13: 149-54.] [Mayumi, K. 1995. Nicholas Georgescu-Roegen (1906-1994): an admirable epistemologist. "Structural Change and Economic Dynamics" 6: 115-120.] [Mayumi,K. and Gowdy, J. M. (eds.) 1999. "Bioeconomics and Sustainability: Essays in Honor of Nicholas Georgescu-Roegen". Cheltenham: Edward Elgar.] [Mayumi, K. 2001. "The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen". London: Routledge.]
Fields or schools of heterodox economics
*American Institutionalist School
Austrian economics"#" (partly within, and partly outside of mainstream economics) ["A Companion to the History of Economic Thought" (2003). Blackwell Publishing. ISBN 0631225730 p. 452]
Political economy(the term is used in various ways, also to describe certain kind of economics)
*Sraffian economics "#"
Evolutionary economics"#"§ (partly within mainstream economics)
Institutional economics"#" (partly within mainstream economics)
Technocracy Incorporated( Energy Accounting)
Econophysics Journal of Economic Literaturecodes scrolled to at .
§ Scrolled to at .
Research is also being done in the multidisciplinary field of
cognitive scienceon individual decision making, informationas a general phenomena, distributed cognitionand their implications on economic dynamicity.
Some schools in the social sciences aim to promote certain perspectives: classical and modern
political economy; economic history; economic sociologyand anthropology; gender and racial issues in economics; economic ethicsand social justice; development studies; and so on.
* 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 " (1987):
* [http://www.open.ac.uk/socialsciences/hetecon/ Association for Heterodox Economics]
* [http://www.rep.org.br/default.asp "Brazilian Journal of Political Economy" (bilingual)]
* [http://cje.oxfordjournals.org/ "Cambridge Journal of Economics". founded in the traditions of Marx, Keynes, Kalecki, Joan Robinson and Kaldor]
* [http://www.cseweb.org.uk/ Conference of Socialist Economists]
* [http://www.economics.laurentian.ca/lprochon/Links%20of%20interest.htm Departments of Economics With Heterodox Interests]
* [http://www.dollarsandsense.org/ "Dollars and Sense"]
* [http://www.debunking-economics.com/ Debunking Economics]
* [http://www.themeister.co.uk/economics/evolutionary_economics.htm Evolutionary Economics - John P. Birchall]
* [http://www.greeneconomics.org.uk Green Economics Institute (links, aims, activities)]
* [http://www.orgs.bucknell.edu/afee/hetecon.htm Heterodox Economics Web]
* [http://cepa.newschool.edu/het/thought.htm#alternative "The History of the Economic Thought Website"]
* [http://www.msu.edu/user/schmid/instecon.htm Institutional & Behavioral Economics]
* [http://www.econ.usyd.edu.au/content.php?pageid=2269 "The International Journal of Development Issues", Faculty of Economics and Business, University of Sydney, Australia]
* [http://www.inderscience.com/ijge "International Journal of Green Economics" (publisher's description)]
* [http://cepa.newschool.edu/het/schools/lse.htm The London School of Economics at the HET website]
* [http://www.paecon.net/ Post-Autistic Economics Network - heterodox economics: sanity, humanity and science - pluralism in economics]
* [http://aix1.uottawa.ca/~robinson/english/publications_subjects/history_economics_thought.htm"ROBINSON: Research On Banking International and National Systems Or Networks", University of Ottawa, History of Economics Thought]
* [http://cepa.newschool.edu/het/profiles/rousseau.htm ROUSSEAU, Jean-Jacques.Page at The History of Economic Thought Website]
* [http://www-sul.stanford.edu/depts/hasrg/frnit/pdfs_gimon/stedman_jones.pdf STEDMAN-JONES, Gareth. Saint Simon and the liberal origins of the socialist critique of Political Economy. King's College, Cambridge University]
* [http://www.economicsnetwork.ac.uk/handbook/heterodox/ "Teaching Heterodox Economics Concepts", Andrew Mearman (2007)] in "The Handbook for Economics Lecturers"
* [http://www.urpe.org/ Union for Radical Political Economics]
* [http://www.econ.utah.edu/hesa/links/links.htm#archives LINKS: University of Utah. Economics Dept. Heterodox Economics Student Association]
Publications on heterodox economics
* LEE, Frederic S. "heterodox economics," "
The New Palgrave Dictionary of Economics, 2008, 2nd Edition, [http://www.dictionaryofeconomics.com/search_results?q=heterodox+economics&button_search=Search Abstract.]
* Blatt, John Markus: "Dynamic Economic Systems: A Post-Keynesian Approach", Armonk, 1983, ISBN 0710802730
* [http://www.mesharpe.com/mall/resultsa.asp?Title=Reintroducing+Macroeconomics%3A+A+Critical+Approach COHN, Steven Mark. "Reintroducing Macroeconomics: A Critical Approach." M. E. Sharpe, Inc, December 2006] ISBN 978-0-7656-1450-6 ISBN 978-0-7656-1451-3
* [http://books.google.com/books?id=XnHERR2uQ1MC&dq=heterodox+economics+book DAVIS, John, editor. "The Theory of the Individual in Economics: Identity and Value." Routledge, 2003] ISBN 0415202191
* [http://www.accessmylibrary.com/coms2/summary_0286-17616611_ITM FULLBROOK, Edward, editor. "A Guide to What’s Wrong with Economics." London: Anthem Press, November 2004] ISBN 1843311488
* [http://www.press.umich.edu/titleDetailDesc.do?id=171896 HARVEY, John T. and GARNETT JR., Robert F. Garnett, Editors. "Future Directions for Heterodox Economics", Series Advances in Heterodox Economics, The University of Michigan Press, 2007.] ISBN 978-0-472-03247-1
* 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.
* [http://www.economics.laurentian.ca/lprochon/ModernTheoriesofMoney.htm ROCHON, Louis-Philippe and ROSSI, Sergio, editors. " Modern Theories of Money: The Nature and Role of Money in Capitalist Economies". Edward Elgar Publishing, 2003 ISBN 1840647892]
;Articles, conferences, papers
* [http://www.paecon.net/PAEReview/issue18/Cohn18.htm COHN, Steve. "Common Ground Critiques of Neoclassical Principles Texts.", 2003] .
Knox College (Illinois).
* [http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0237.pdf COLANDER, D. "The Death Of Neoclassical Economics". Journal of the History of Economic Thought, 2002, 22 (3), pp. 127-43. Online readable, free link - Copyright JHET, All rights reserved]
* [http://www.journal-intervention.org/seiten/englisch/download/Lavoie_Intervention_Vol_3_No_1_2006.pdf LAVOIE, Marc. "Do Heterodox Theories Have Anything in Common? A Post-Keynesian Point of View."]
* LAWSON, Catherine & LAWSON, Larry (1990). Financial system restructuring: lessons from Veblen, Keynes, and Kalecki. Journal of Economic Issues 24 (1): 115-31.
* [http://www.bresserpereira.org.br/Terceiros/05.5.Heterodox_Economics.pdf 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]
* MINSKY, Hyman (1996). Uncertainty and the institutional structure of capitalist economies. Journal of Economic Issues 30(2):357-68.
* [http://www.accessmylibrary.com/coms2/summary_0286-29687573_ITM RANSON, Baldwin "Heterodox theoretical convergence: possibility or pipe dream?" (Notes and Communications)(Report). Journal of Economic Issues, 01-MAR-07]
* 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
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