Mainstream economics, heterodox economics, and the Left

Posted: 12 January 2015 in Uncategorized
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HE-Brochure-1

Most mainstream economists are not on the Left. Most wouldn’t know heterodox economics if it bit them on the proverbial nose. And most heterodox economists do identify with some kind of left-wing politics.

Yet, Chris Dillow (with whom I have found myself in agreement on many occasions) just can’t seem to disentangle the relationship among mainstream economics, heterodox economics, and the Left.

Let’s see if I can’t offer a bit of assistance. First, most mainstream economists with whom I’m familiar (at least the sort one finds in the U.S. academy) tend to locate themselves somewhere in the center of the political spectrum—some more to the liberal side (like Arrow, Solow, Tobin, and Samuelson, the economists named by Dillow), others to the more conservative side (like Mankiw, Cochrane, Taylor, and so on). But they’re certainly not on the Left, if by that we mean critical of the capitalist system and supportive of one or another kind of socialism (a pretty traditional definition of the Left for much of the past century, it seems to me).

Mainstream economists also don’t know much, if anything, about heterodox economics. Perhaps a previous generation did (if only for having studied the history of economic thought) but not the current generation. A friend of mine reported the following story from the most recent meetings of the American Economic Association/Allied Social Science Association meetings:

On Monday morning I was hanging out in the exhibition hall at ASSA, at a table shared by Dollars and Sense and the Heterodox Economics Network. About once an hour, some professional economist looked perplexedly at the banner saying “Heterodox Economics” and asked what that meant. They genuinely, honestly did not know.

The current generation of mainstream economists don’t know because they weren’t exposed to heterodox economics as undergraduate or graduate students, it doesn’t appear in the journals they read, and they simply aren’t forced to learn about it. Ever.

Heterodox economists are in a very different situation. They may reject mainstream economics but, as I’ve written before, they have to know it—and know it even better than mainstream economists themselves. Why? Because they have to teach it (often alongside their own, quite different approaches) and they have to engage it in public debate (precisely because mainstream economics dominates the debate within the academy, the media and policymaking circles).

Finally, most heterodox economists do, in my experience, identify with some kind of left-wing politics. Not the Austrians, of course—although it’s not clear they’re not part of mainstream economics these days. But all the other heterodox economists—of the sort one will find on the Heterodox Economics Directory—are located somewhere on the Left (in the way I define it above). The names may have changed over time—when I was young, we were called “radicals,” now it seems “heterodox” is the more accepted term—but the support for left-wing politics doesn’t seem to have changed.

So, what distinguishes liberal mainstream economists from left-wing heterodox economists? To my mind, it comes down to focusing on market imperfections (which can, at least in principle, be fixed within capitalism) versus focusing on the problems with capitalism as a system (which require, for a solution, the creation of noncapitalist practices and institutions).

Here’s the definition of heterodox economics I gave back in 2010:

Heterodox economics comprises all those theories that academic economists and others use to criticize and develop alternatives to mainstream (neoclassical and Keynesian) approaches. Heterodox and mainstream theories differ in terms of their starting points, methodologies, and conclusions. Thus, for example, Marxian economists start with class and use Marxian value theory to criticize capitalism, whereas neoclassical economists start with a set of given preferences, technology, and resource endowments and use a framework of supply and demand to celebrate capitalism. The problems of capitalism and mainstream economic theories, now as throughout their history, create the space for and interest in heterodox approaches.

To practice that kind of left-wing heterodox economics means one does have to know something about Marx, Kalecki, Sraffa, and Minsky—because their work (and that of many others) constitutes the foundations (or at least some of the foundations) of nonmainstream, heterodox analysis.

Heterodox economists reject economic orthodoxy not, as Dillow believes, because they’re ignorant of what the orthodoxy is or because of some kind of halo effect, but because, when they look at the world through the lens of Marx, Kalecki, Sraffa, and Minsky, they see an economic and social system that continues to discipline and punish the vast majority of people in order to benefit a tiny minority at the top. They see, in other words, an economy that is inherently unstable, fundamentally unequal, and profoundly unjust.

Hence, heterodox economists see that another economics—another economic theory as well as another economic system—is both necessary and possible. Mainstream economists, for their part, don’t.

Comments
  1. Chris Dillow says:

    I agree that heterodox economists have much to tell us about “an economy that is inherently unstable, fundamentally unequal, and profoundly unjust”: I am a Marxist for a reason. And, of course, it is totally deplorable that some mainstream economists are so arrogant and closed-minded not to be aware of this.
    However, you don’t need to be heterodox to see that the economy is unequal and unjust. You only need a pair of eyes. :
    Of course, it’s questionable whether these flaws are fixable within capitalism: I suspect not. However, someone who believes – on the basis of mainstream econ – that they are is well to the left of mainstream politics in both the UK and US. In this sense, it would be a good thing if politics were closer to mainstream econ. It would, of course, be even better if it embraced some heterodox econ. But,hey, one step at a time.

  2. David F. Ruccio says:

    Chris (if I may), you may be right: it’s possible to put together all the flaws of capitalism–all the ways contemporary capitalism is unstable, unequal, and unjust–from within mainstream economics and find oneself in a position to the left of mainstream politics in the UK and US. Maybe.

    However, most mainstream economists, at least here in the US, don’t and won’t go there. In fact, the opposite is more often the case.

    A friend just sent me a concrete example: an op-ed piece by one Charles W. Calomiris, a professor of financial institutions at Columbia University and a research associate of the National Bureau of Economic Research (http://www.bostonglobe.com/opinion/2015/01/09/greece-next-crisis/ESh5p2uG0iaGhwEMkx0FRO/story.html), which is quite typical of mainstream economics here in the US.

    Calomiris bemoans the potential election of Syriza, and reiterates that only orthodox policies can save Greece—from itself, apparently. Not a word about who’s suffering or how much they’ve been suffering, just proposals like “redenomination” (basically fiat confiscation of bank balances and lowering of wage obligations, in order to “improve businesses’ balance sheets”) and government “decentralization” (accompanied by the takeover of government at both national and regional levels by the European Commission—basically financial fascism—in the name of fighting “corruption”).

    I’m not sure what else to call this but good, old-fashioned class warfare, which is characteristic (although perhaps, in Calomiris’s case, in a more open, nasty fashion) of much of the mainstream of the economics profession in the US.

    My point: it’s much more likely you’ll get to that kind of analysis and policy, and not to a position you and I would recognize as anywhere on the Left, from the starting point of mainstream economics.

    I appreciate your point that mainstream economists probably should open their eyes and follow the political implications of their analysis and ultimately identify with the Left. But they don’t and, barring a few exceptions, I doubt they will. Certainly not in the US.

    That’s why heterodox economics—especially the Marxian critique of political economy we share—is so important.

  3. […] week, in my discussion with Chris Dillow on the differences between mainstream and heterodox economics, I cited the example of one Charles […]

  4. […] economists, wouldn’t know left-wing economics if it bit him on the proverbial nose (as I explained in early 2015). What he’s really referring to is liberal economics, the […]

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