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What is ʻHeterodoxʼ Economics?

Matthew Coutts
June 2010
University of Auckland

creating doctrines or ideologies outside the mainstream. it could also be argued that heterodoxy was absent at this time as different schools of thought could easily coexist (Backhouse. There were a great number of different approaches to economics at this time (see Mitchell 1969) but there simply didnʼt exist an orthodoxy from which to rebel. Marxist economics could be classified as being heterodox since its inception. The 1750s orthodoxy of protectionism and regulation became the heterodoxy of 1825. but now as we enter a pluralist age the very notion of an orthodoxy is beginning to be questioned. conventional thought within the discipline has been dividing. 1999) it shouldnʼt be regarded as a heterodox tradition in this period. and particularly in the latter part of the twentieth. notwithstanding Keynesʼs (1936) claims to the contrary. Socialist political movements provided the foundations for Marxists to differentiate their work from what they perceived as being an orthodoxy. the nature of this division as well as the very nature of heterodox thought remains. unclear. However. . In attempting to define the characteristics and demarcate the constantly shifting boundaries of orthodox and heterodox economics one must first look at the idea of heterodoxy in the history of economic thought. 2000). Throughout the centuries. The nineteenth century was a time dominated by the academic schools.Introduction Ever since the inception of the political economy there has been a divergence of thought accompanying its development. each internally differentiated with different historical origins and orientations. However. It was throughout the interwar period that heterodoxy became an even less appropriate way of classifying branches of economics. was defeated in the political upheavals of 1775-1825 bringing forth the laissez-faire economic liberalism of the classical economists such as Adam Smith and David Ricardo. exemplified by those of Schmoller in Germany and Marshall in England. Karl Marx created. Heterodox economics is a complex structure being composed of many different kinds of work. While many differences did exist between the schools these could easily be described as local phenomena. and even though institutionalism did come to be identified as a distinctive movement (Laidler. in the context of a political economy dominated by the rich and powerful. in many peoples minds. Today there is an increasing trend to refer to these as ʻheterodox economicsʼ. This is but one example among many of how orthodoxy often becomes heterodoxy and vice versa as political economies and the social context behind them changes. Both American micro and macro economics were pluralist (Morgan and Rutherford 1998). Historical Context “No science has been criticized by its own servants as openly and constantly as economics” (Georgescu-Roegen. In the past there has been relatively little cross-communication between schools. an economic ideology at odds with the then accepted “bourgeois” system. using the ideas of fellow socialists. 1971: p1) Dissatisfaction with an orthodox or mainstream can be traced back to the eighteenth century where late mercantilist theory.

1994). among others. By the 1970s when economists trained before 1950 ceased to dominate the discipline a neoclassical orthodoxy was firmly established. the re-thinking Marxist school. Joan Robinson. 1988) or even constructivist programs at all (Peukart. and even changes in the technology and economics of publishing (Backhouse. The term was used sporadically throughout the rest of the century though it is only in the last three decades that we have witnessed a rapid growth in the terms use. and others) backing Lawsonʼs remark that the vitality of heterodox economics is “alive and flourishing” (Lawson. these traditions hold in common. the challenge of the Vietnam war. 2006. While the concept of economic heterodoxy has always been with us. et al. Debreu. John Hicks. and feminist economics. new evolutionary currents. It is often perceived that ʻin economics. and others promoting a post-Keynesian alternative to neoclassical thinking. for example the changing economic environment. The 1970s saw the proliferation of heterodox thought with Kregel. feminism. While it is very difficult to discern any unifying elements between different schools or even academics practicing heterodox . Various explanations have been put forward in an attempt to explain this change in thought. Searching for Commonalities The many schools that comprise heterodox economics have their own journals. Eichner. Austrian. organizations. if any. networks and academic institutions in which they dominate. At the same time Austrian economics was established as being heterodox (Vaughn. Marshall. The notion of ʻheterodox economicsʼ has expanded hugely over this time through the creation of associations. the intellectual landscape of the time. and Patinkin (Blaug. Since 1980 new ʻtraditionalʼ heterodox research programs have emerged (for instance. heterodox economics. 492). and Paul Samuelson paved the way for the emergence of a microeconomic orthodoxy in the same way Keynes did for macroeconomics. SABE. roundtables. Beginning in the 1930s economic theory became simpler and more formal (Backhouse. post-Keynesianism. 2004 p. 2000). the growth of higher education in the developing world. p. although not the first time proposed. 2001). and Mitchell to those of Arrow. can be seen as a collection of specific styles of economics that has been excluded from the neoclassical mainstream. the term made its first published appearance in Allan Gruchyʼs Modern Economic Thought in 1947 (1967 reprint: 621). and conference sessions. These separate projects or traditions include institutionalism. There is even a great deal of debate as to whether these various schools constitute coherent projects (Hamouda and Harcourt. In defining what heterodox economics is one must then determine the commonalities and virtues.483). at least.The “Keynesian Revolution” can be seen to mark the emergence of an orthodoxy as a result of the mathematical structure advanced by the General Theory (Backhouse. Thus as it now exists in the academic world. Marxian. The countervailing schools of thought presented by these groups. Hawtrey. 2000). now became institutionalized as heterodoxies. beyond [the] rejection of the orthodoxy there is no single unifying element that we can discern that characterizes heterodox economicsʼ (Colander. As time progressed this orthodoxy gradually became less “Keynesian” and more “neoclassical”. 1985) moving away from the ideologies of Chamberlin. 1999).

g institutionalism). By exploring different research approaches it is possible to analyze the origins of both heterodox and orthodox traditions and characterize them by types of dynamic process. there are those that assert the existence of certain commonalities. .economics beyond this initial observation. (2) much school-specific theory. this dynamic perspective on the history of economic thought shows us that there are different origins to different research approaches. for a program to become orthodox it typically requires a school to move from an entirely research based program to an established teaching program. 2003 and Pasinetti. an economist could be said to heterodox if they claim to be working in a manner or offering an alternative that does not fit or is incompatible with the mainstream. and (3) a difficulty in generating wide agreement on specific “alternative” theories within each school. Thus according to Davis and Sent (2006) heterodoxy arises because of (1) the failure to become orthodox following a period of pluralism1 (e. realism versus instrumentalism. neither treat heterodox economics as a selection of dynamic or changing ideologies. 2005). feminism and social economics). While these two contrasting suggestions can be useful on the one hand for describing a point-in-time contrast of heterodox commitments and on the other for describing shared commonalities. post-Keynesianism). It is also the case that a number of heterodox thinkers adhere to these presuppositions (for example. procedural rationality versus substantive rationality. While parallels could be drawn from religious heterodoxies this such definition is not ahistorical and could often fail as those working in heterodox schools often face more 1 There is certainly an argument that neoclassicism's assent to orthodoxy was a result of the interwar period of pluralism (see Morgan and Rutherford. and (3) reasoning in terms of mutual influences between individuals and social structures. (3) the failure to redirect orthodoxy from outside orthodoxy (e. (2) emphasis on time as an irreversible historical process.g. Davis (2006) suggests another three commonalities that are useful when drawing the dividing line between neoclassical and heterodox economics circa 1980 (1) the rejection of the atomistic individual conception in favor of a socially embedded individual conception. Lawson (2001) suggests three prominent commonalities observed in each school (1) a set of recurring abstract themes or emphases. A more complex structural analysis that emphasizes the changing nature of this division in a historical context is needed. Setterfield. It should also be added that the history of economic teaching is of great importance. In moving away from a point-in-time comparison of different approaches. analysis and methodology. 1992b. 1998).g. free markets versus regulation. Providing these demarcations are not interpreted rigidly such methods of categorization can be useful. Lavoie (1992. (2) the loss of the status of orthodox when a new orthodoxy emerges (e.g. Further than simply suggesting commonalities between different schools of thought. Marxism and radical economics). and (4) the failure to redirect orthodoxy from inside orthodoxy (e. making the idea of ʻheterodox economicsʼ considerably more heterogeneous. 2006) supposes that the distinctiveness in heterodox economics can be formulated from five pairs of presuppositions: organicism versus methodological individualism. and production versus exchange. This would make being heterodox a matter of deliberate choice requiring more than dissent from orthodox beliefs.

1992). researchers from different schools have been working to advocate for increased interaction and the bringing together of schools. Such formalization also constrains the direction of future developments in orthodox economics. Blackhouse 1998). This position helps orthodox economists legitimize the tendency to ignore elements of heterodox economics not mathematically expressed. Heterodox economists have a tendency to be skeptical of most ideas put before them. are either seen to be poorly expressed or not economically grounded at all. organizing concepts for orthodoxy (see Weintraub. does the same (Dow. there have been fragmentations in the content of orthodox economics making general equilibrium one concept among many (see Coats. 1985. 1999). as it constrains the application of subject matter to those factors that can be mathematically expressed (see Chick. 505). p. It is therefore only possible to see the current state of orthodox economics as . 2000). Arguments that are not backed by mathematical expression. 1998). is an area widely accepted by the mainstream not contributing directly to the general equilibrium project. Hausman. Such is true particularly amongst American Radicals (Marxists) and post-Keynesians in monetary and macro economics. for many orthodox economists. p. especially those from different schools (Andreff 1996). such as lower wages. Mathematical formalization is a common thread that can be seen to remain as a methodological ground stay for all forms of orthodox economics.challenges than their orthodox counterparts. Hodgson. Perhaps as a result of the peril found in being a minority. 1989. equilibrium. The fundamental problem is that game theory is based on the direct interdependence of agents that is not compatible with the ideas of ʻoptimalityʼ. programs and institutions to help bring the different heterodox schools together. until parts are unified within a single uniform whole (Blanchard & Fisher. Recent years have in fact witnessed the creation of various groups. For example the International Confederation of Associations for Pluralism in Economics (ICAPE) seeks to group all heterodoxies and their literature. 2000. It has been argued that such formalism is needed for the progression of economics (Krugman. Steve Fleetwood based at the University of Lancaster has also launched a program to help generate more intellectual exchange between heterodox economists from different schools. 160) Given that there are several schools of thought classified as heterodox as well as numerous economists working in an unconventional or unorthodox sense. with its evolutionary potential. 2006). In the past it would have been acceptable to see equilibrium and general equilibrium as unifying. a dividing line could also be created by taking the literal interpretation of ʻheterodoxʼ and saying that anything in economics not defined as orthodox has to be heterodox. Recent pluralist trajectories in this sense can only be regarded as transitional states. and stability (Davis. For instance game theory. However. 2000. The Mainstream “it could be argued that orthodox economics has embraced a pluralism that has been advocated by heterodox economists themselves” (Dow. However. there is a spectrum of possible interpretations regarding the nature and definition of orthodox economics. a smaller job market. difficulty publishing and obtaining research grants. While this can make unity between schools seem difficult to imagine a counter tendency has begun to emerge. 1998. Likewise experimental economics. in questioning the specification of rational behavior.

2001). valuing the diversity of views and narrative heterodoxy provides (Hargreaves-Heap. 2000. Rutherford. in that it would likely reinforce the marginal status of non-mainstream ideas within economics. as dangerously misguided. Garnett. 2001). 2006. philosophically and organizationally. 2003. 2002. p. 2 Those who provide an ontology deduced from the fact of intentional human action. particularly at the graduate level.(Earl. Fullbrook. . to provide better learning outcomes for future generations of economic thinkers. p. a state of doubt may not be very comfortable. but a state of certainty would be ridiculous” Voltaire Analytically. 91). While teaching is the most fundamental and important role of professional economists. Dow. 8-9). 2006). Davidson regards the optimism in the Fullbrook/ Dow assertion. Many of todayʼs heterodox economists see pluralism as a central normative commitment. Without a methodological rethinking it is not clear how orthodoxy can sustain pluralism. 2002. “Dominance for one theory over all the others with the possible result that all the rival theories are extinguished amounts to advocating scientific regress” (Kurz & Salvadori. 2003) argues that heterodox economists will only be able to improve their standing if they develop a superior paradigm and “unite behind a single ʻgeneral theoryʼ”. Even the mainstream is beginning to call for a more plural approach to teaching as the narrowness and homogeneity of current practice are seen to be creating a pedagogical crisis (Coats. 2003). Open-system realists2 have provided the most rigorous justifications for heterodox pluralism (Lawson. Fullbrook. and that they “[reject] the ideas of theoretical monism and theoretical universalism” (Herrmann-Pillath. 2000. culturally. Sent (2003) doubts that heterodox economists are serious about pluralism in that they are unable to treat mainstream economics in a pluralistic manner. 2001. This said many leading heterodox economists remain committed to their individual paradigm. seeing their main role as a search for the demarcation criteria that would render a distinctiveness and superiority of heterodox economics over that of the orthodox mainstream. Such thinkers see the role of economic enquiry as an “open ended network of institutions and processes so complex that no single idiom can adequately represent it” (Garnett. Herrmann-Pillath. 2000). 2000. From Competing Paradigms to Pluralism “In a subject as difficult as economics. Feiner. mathematization and formalization (Goodwin. that pluralism could help the introduction of heterodox economics into mainstream teaching. 2000. The heterodox tradition should work to provide the increasing demand for critical thinking and real-world-complexity in economic education. 2001. 237). nor how useful it is to draw a distinction between orthodox and heterodox economics. 528). recent trajectories in heterodox economics have revealed a marked shift away from the school of thought individualism to pluralism where there is no possibility that “any school could possess final or total solutions” (Fullbrook. Davidson (2002. The ascendance of pluralism has generated numerous criticisms. 2003. 2004b. p.progress in a qualified manner. 1997. 1997. today many educators and curricula at graduate and undergraduate level are still criticized for their degree of uniformity. p. 2004a.

A History of Modern Economic Analysis.Conclusion “pluralism and intellectual progress are complements and that each [heterodox] school of thought (Austrian. information economics. (1985). Important aspects of todays mainstream economistsʼ thinking. neoclassical. Sraffian. social and Sraffian economics to expand new lines of dialogue. At the same time the intellectual agendas of leading heterodox economists are beginning to move beyond the established paradigms of post-Keynesian. new growth theory. & Fisher. Backhouse. O. 2: 149-155. Marxian. Backhouse. old and new institutionalist. (1998). etc) adds something unique and valuable to economic scholarship” (Harvey et al. containing such elements as evolutionary game theory. especially in heterodox schools. Blanchard. Cambridge. R. E. MA: MIT Press. W. are being conducted outside the generally accepted orthodoxy of the profession. Austrian radical. The bewildering diversity of different views and intellectual niches in economics ensures that there will always be intellectual minorities and majorities and how we classify them matters little as long as they continue to flourish exploring new fruitful aspects of economic and social life. R. Backhouse. including those such as George Akerlof. If Mathematics Is Informal. criticism and analysis throughout dissenting schools of thought. R. is corroding the need for the categorization and even definition of economic thought as being ʻheterodoxʼ. A History of Modern Economic Analysis. 2008: xi) The nature of economic thought is expanding away from an ʻorthodoxʼ or accepted core. the past two decades have seen an increasing variance of acceptable views. Journal of the History of Economic Thought 22. (2000) Progress in Heterodox Economics. Then Perhaps We Should Accept That Economics Must be Informal Too. Lectures in Macroeconomics. and Thomas Schelling. Marxian. often without much examination. William Baumol. . References Andreff. new institutionalism. feminist. Economics Journal 108. The falling regard for disciplinary boundaries. Many of these approaches are being increasingly adopted by other disciplines. A new generation of scholarship is being created by the cross-fertilization of these ideas allowing novel combinations of heterodox thinking to be applied to important historical and contemporary problems. E. (1996). R E. However. (1985). expanding the variance of acceptable views within economics. institutionalevolutionary. Oxford and New York: Basil Blackwell. Oxford and New York: Basil Blackwell. (1989). Blackhouse. and public choice. post-Keynesian. 451: 1848-58. Truman Bewley. the ideas they generate are accepted and debated within the mainstream. Paul Krugman. E. Modern economics is becoming an ever more fuzzy set. S. feminist.

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