Home > Uncategorized > Expanding heterodoxy in economic analysis

Expanding heterodoxy in economic analysis

from Robert Locke

Asad Zaman in his “summary of the Great Transformation by Polyani,” lauds the work especially because it “shows that the economic, political and social spheres are closely inter-linked and cannot be studied in isolation, as the current structure of the social sciences assumes. USING Polyani’s methodology would lead to substantially deeper understanding of current events, as well as to better tools for research.”  To mainstream economists Polyani’s analysis is heterodox because it includes political and social sphere in economics, which neoclassical economics excluded from its purview. To non-neoclassical economists, Polyani’s approach is a breath of fresh air in the stultifying atmosphere of our current discussions, which have boiled down to sic et non evaluations of the validity of neoclassical economics. 

Historians have been aware of the inter-link that Zaman’s analysis of Polyani emphasizes for a long time, because of their preoccupation with the economic and institutional structures of nation states.  Within the historians’ ranks awareness of the interconnectedness of political, economic, and social (and we could add cultural) spheres has significantly increased recently brought on by the rapid expansion of world history and world civilization programs.* The inter-link has been the theme of famous texts, i. e. James Breasted’s The Conquest of Civilization (1926), William McNeill’s The Rise of the West: A History of the Human Community (1963), and Jerry Bentley and Herbert Ziegler’s Traditions and Encounters: A Global Perspective on the Past that is currently being used as a text in world civilization courses in many US colleges and universities.  

In addition, there has been an expansion of periodical literature that enhances our knowledge about the inter-links between political, economic, and social spheres.  To illustrate:  In the late 20th century two journals in the University of Hawaii at Manoa began to explore these inter-links globally.  One is the Journal of Chinese Philosophy, founded in 1973 in the Department of Philosophy, whose articles are particularly enlightening for economists interested in the linkage between Chinese moral philosophy and the Chinese attempt to find a moral compass in their own traditions, as an alternative to the West’s neoliberalism (articles like “New Confucianism a Philosophy of Humanity and Governance,” or “Contemporary Moral Education and Zhu X’s Neo-Confucian Ethic”), which strive to make Confucianism the basis of moral education in business schools.  The second example is the Journal of World History, created in the Department of History in 1989, whose articles globalize the inter-link between political, economic, and social spheres (e.g., “The Global Financial Crisis in the Asian Context” or “Chinese Money in Global Context”) 

The recent advances in teaching and research of world history and comparative world civilizations not only permit heterodox economists, who take advantage of them, to explore better the linkages between political, economic, and social spheres but to shift the debate from Euro-US-UK centrism to one that includes historical developments in the nonwestern world. After all, Polyani’s “Great Transformation” is a UK-centric treatment, because it claims that “markets have been of marginal importance in traditional societies throughout history,” that “the market economy emerged after a prolonged battle against these traditions,” that it emerged from the London based global trade emporium established in the 18th century, and that, “as Polanyi clarifies, this is not a good development,[ because] the commoditization of human beings and land required by the dominance of the market has done tremendous damage to society and environment.”  (Quotes from Asad’s article).   

Much of the discussion among world historians discounts this sort of UK centricism.  Their scholarship shows, for instance, that the view that”markets have been of marginal importance in traditional societies,” is not true — 17th-18th century Togukawa Japan is an obvious example of market dynamism.  The history of “traditional societies” has not been static.  As the late Jerry Bentley, co-founder of the Journal of World History, wrote: “Recent scholarship on commercial, biological, and cultural exchanges suggests… that during the millennium from 500 to 1500 C.E., cross-cultural interactions fostered the integration of societies throughout the Eastern Hemisphere.” (“Hemispheric Integration, 500-1500,” 1998) 

The “Great Tranformation” of which Polyiani speaks was not the source of change in the world outside a UK, US, British Empire context.  Nonwestern societies have been able to transform themselves dramatically without embracing free markets in principle or reality or accepting the organizational ethics or the political idea of English liberalism. The transformations of Japan and China, which could be considered the two most significant economic events since WWII, are not based on the Great Transformation Polyani  talks about, but on political (authoritarianism), economic (protectionism), and social (Confucianism, Buddhism) linkages rooted in non-liberal , nonwestern histories.

  1. Peretz
    December 7, 2015 at 8:12 pm

    If you want to obtain a quite finished model of the economics, you have to study sociology of course. But to go farther, the best is to study people psychology. This is the beginning of sociology and dynamic monetarism. Read my book, you’ll have the keys for it.

  2. blocke
    December 7, 2015 at 9:24 pm

    Addition. In my posting there is an asterisk that refers to information, which was not included in the post. That information is as follows:
    *Robert B Townsend, in “The Rise and Decline of History Specializations in the Past 40 years,” (Perspectives on History, American Historical Association. December 2015), observes that “World history has grown faster than all other geographic specializations—from 1 percent of the faculty listed in 1990 to 5.1 percent today. And specialists in the subject can now be found in 58 percent of departments, up from less than 20 percent as recently as 2000.” Within departments of history in US colleges and universities, he added, “Asian history continues to have the largest percentage of faculty outside of the United States and Europe, reaching 9.4 percent in 2015.”

  3. December 8, 2015 at 6:15 pm

    A historical misunderstanding
    Comment on ‘Expanding heterodoxy in economic analysis’

    The theory of fire explains fire as an interaction of certain materials and oxygen and the laws of energy transformation. And it tells us, for example, that there is no fire on the moon.

    In contradistinction, the history of fire tells us which cities burnt down at which point on the time line and what the casualties where and perhaps who set the fire. From these events we can derive some truisms about fire but no matter how many fires the historian studies he will not arrive at the theory of fire.

    Science is not concerned with individual historical events except as a singular manifestation of a general law. A concrete historical event can either corroborate or refute a general law. But the historical fact that Nero burnt down Rome (if it is indeed a fact and not propaganda) is irrelevant for the theory of fire.

    In particular, the information in which the historian and the general public are most interested in — who burnt Rome, and why, and how was it done — are completely irrelevant for the theory of fire.

    The relationship between history and economic theory is not different from the relationship between history and physics: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire. (Popper, 1960, p. 139)

    Heterodox history should therefore not be confounded with heterodox economics. Heterodox economics can tell historians for example that they have no idea of the fundamental Law of Profit as they have no idea of the Laws of energy transformation.

    Economics is neither psychology, nor sociology, nor history. Economics is the science which studies how the monetary economy works.* Science looks for what remains unchanged in time, i.e. ‘eternal’ laws, history looks at what changes over time. “That is why Descartes said that history was not a science – because there were no general laws which could be applied to history.” (Berlin, 2002, p. 76)

    Historical facts can be important for corroboration/refutation of a theory but history is not a substitute for theory. Because of this, Robert Locke and Asad Zaman are methodologically on the wrong track. For the correct synthesis of theory and history see (2014).

    Egmont Kakarot-Handtke

    Berlin, I. (2002). Freedom and Its Betrayal. London: Chatto Windus.
    Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL
    Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.

    * See ‘The ur-blunder of economics and its rectification’

    • blocke
      December 9, 2015 at 4:51 pm

      In my Collapse of the American Management Mystique (1996, p. 117) I write about the Japanese approach to logic: “Thomas P Rohlen observed that ‘theoretical debates and logical dialogues are simply not part of the [Japanese] approach to education’ and that ‘Western observers, including myself, find reason to be amazed at the Japanese tolerance for contradictory and even ludicrous explanations and meaning [given by others]. (Thomas P Rohlen. Japanese High Schools, UC Press, 1983, p. 261) Robert J Smith, echoing these sentiments, observes that Japanese regard people who argue ‘with logical consistency as immature,’ and that the pejorative term rikusuppoi (reason freak) is a part of the Japanese lexicon. (Robert J Smith, Japanese Society: Tradition, Self and Social Order, CUP, 1983, p. 59) This anti-rational impulse is implanted firmly in Japanese history. (An example: the importation of the Neo-confucian doctrines of Wang Yang-ming (Oyomei) ideology, a branch of Neo-Confucianism originally introduced in Japan by Nakae Toju (1608-48) that emphasized the importance of personal intuition and moral sense over rationality and intellect, an idea that received official sanction during the Tokugawa period because of the government’s interest in Neo-Confucianism as a social ethic.) Social situations, not reason, guide interpersonal actions.”

      Are you a Western-centric ‘reason freak’, Egmont. I fear so, if you reject the historians’ analysis which, includes the unknown, the nonrational, and nonwestern views in their explanations.

  4. December 9, 2015 at 12:15 am

    In Anti-Duhring, Engels said the negative is bound to the positive as the conservation of energy is bound to the transformation of energy. Market radical ideology idolizes the market as a panacea and fails to see interconnection, history, relativity and context.

  5. December 9, 2015 at 8:26 pm

    Surveying the history of the relationship between scholastic science and economics in “The Advancement of Learning” (1604, decades before Descartes and well over a century before Hume’s philosophy of science initiated today’s solipsistic theory that science is what scientists agree they do), Francis Bacon, Father of Modern Science, wrote at Book 1.11:

    “But the greatest error of all the rest is the mistaking or misplacing of the last or furthest end of knowledge. For men have entered into a desire of learning and knowledge, sometimes upon a natural curiosity and inquisitive appetite; sometimes to entertain minds with variety and delight; sometimes for ornament and reputation; and sometimes to enable them to victory of wit and contradiction; and most times for lucre and profession; and seldom sincerely to give a true account of their gift of reason, to the benefit and use of men: as if there were to be found in knowledge a couch, whereon to rest a searching and restless spirit; or a terrace for a wandering and variable mind to walk up and down with a fair prospect; or a tower of state for a proud mind to raise itself upon; or a shop for profit or for sale; and not a rich storehouse for the glory of the Creator and the relief of man’s estate. But this is that which will indeed dignify and exalt knowledge, if contemplation and action be more nearly and straightly conjoined than they have been …”.

    In other words, the point of pure science is applied science, which is about finding out what is necessary to make technology work. Then as now, Bacon needed to create new trades in which the many at the time vagrant, dispossessed by the rise of the wool trade and post-Reformation seizures of common and church (i.e. community) land, could find a livelihood. Today they are being left vagrant by fraudulent finance and callous bankers. Egmont should perhaps remember that, while no two situations are exactly the same, the patterns of history do repeat themselves.

    • blocke
      December 10, 2015 at 3:40 pm

      “In other words, the point of pure science is applied science, which is about finding out what is necessary to make technology work.”

      This is the point of the post. Forty plus years ago I and many millions of others were concerned about the development of the productive forces of France and Germany (c. 1850-1950) that led to Germany’s eclipse of France as the dominant nation state in Europe. The system of economic analysis that orthodox economists call “scientific” and which has been associated with the neoclassical economics that grew up in the London world-wide market emporium of the late 18th and 19th century could not provide an answer to my question, because a market based system of analysis could not deal with questions about nation states. Forced to look elsewhere for explanations by the insufficiency of neoclassical theory as applied science, I embarked on an investigation of educational systems in France and Germany, focusing on what Germans call the 3rd science, the amalgamation of Koennen (tacit knowledge) with Wissen (knowledge) into networks of human capital.
      The people I questioned about the links were not economists, but people living during the period in question: engineers, politicians, journalists, parliamentarians, etc. who were preoccupied with and directly affected by the changes in great power relationships. In other words, historical personages drew me to the subject of examining the inter-links between education and the economy to find “out what is necessary to make technology work.”

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