Is there a core of heterodox economics that we can all believe in?
from Asad Zaman
In January 1997, the annual convention of the American Economic Association included a session entitled “Is There a Core of Practical Macroeconomics That We Should All Believe?”. Several prominent macro-economists presented their takes on this issue. Since the authors were macroeconomists, it is not surprising that many of them start their papers with a “resounding” yes. However, reading the papers, we find only a host of confusions and contradictions. When asserting a core belief, each author discusses many controversies surrounding that core belief. Furthermore, the core varies from author to author. Also, after the Global Financial Crisis of 2007-8, none the core beliefs appear to be tenable. None of the extant Macro models contains any suggestion of the possibility of such a severe macroeconomic disturbance.
Readers of the RWER blog have been treated to a virtually inexhaustible collection of critiques of conventional economic theories. Furthermore, the blog posts are only a small sample of critical materials gathered at length in many books and papers. Nonetheless, there is no doubt that conventional economics remains firmly entrenched in universities as well as governments, international institutions and all corridors of power. Given that conventional economics is seriously defective, why is this the case, and what can we do to change thing?
As Thomas Kuhn noted, conflicts and contradiction do not dislodge prevailing paradigms; only the emergence of an alternative paradigm can do that. Heterodox economists need to agree on a core set of ideas which can be used as foundations for an alternative paradigm. Currently it seems that each heterodox economist is a one-man church. We are all agreed on the idea that conventional economics is wrong, and applaud each other when mud is thrown on the naked emperor. However, we do not even agree on the critique. To shift metaphors, if the gigantic contradictions and incoherences in conventional economics are the elephant in the room, the heterodox economists are the blind men who each see different parts as a rope, a pipe, a pillar, a wall, etc. and cannot reach agreement.
To construct an effective response requires going beyond critiques. Based on the blog posts, my judgment is that we are not at a stage where we can offer an alternative; there is too much disagreement. I would like to propose a moratorium on pure critiques, and a focused search for points of agreement regarding the required foundations for an alternative paradigm. The particular points chosen as core beliefs are not necessarily the most critical defects of conventional theories, but rather those which command the greatest consensus. The imperative of a united front is more important than particular ideologies.
In my post on WEA Pedagogy Blog: Three Goals for Pedagogical Change I presented three points which could serve as a basis for a new approach to economics. I do not insist on any of these, but rather them put them forth as a tentative starting point.
- It is necessary to re-incorporate moral considerations into economic theory.
DISCUSSION: Conventional economics pretends to be a positive discipline, but is in fact normative. See The Normative Foundations of Scarcity for a detailed argument. The Pareto principle is a normative judgement that the right to property is more important than the rights to basic needs. We don’t need extensive discussions of morality, which would create controversies. A minimal set of principles is sufficient. For instance, all human beings should be provided with equal opportunities for creating a good life for themselves. This involves providing basic needs, healthcare, and educational opportunities to all.
- It is necessary to re-incoporate history into economics.
DISCUSSION: I have now moved beyond this position. My paper on The Methodology of Polanyi’s Great Transformation argues that Social, Political and Economic domains of our lives are closely linked, and cannot be studied in isolation. History was removed from economics because it was “un-scientific” – scientific laws are universal, equally applicable to the Aztecs, England, Botswana and India, and invariant across time, holding equally in the Medieval period and in the twenty first century. We must reject this idea, and recognize that history, context, culture, and geography play an essential role in economics.
- We must move beyond the ideological battles of free markets versus governments.
DISCUSSION: It is clear that governments are needed. Nobody wants anarchy. Post GFC 2007, there is general agreement that regulations are needed; the un-regulated free market is crisis prone. The question is: what should the scope of the government be? This can be treated as an empirical question; look at historical experience to determine what has worked. The main point is that government activity should not be dismissed on a prior ideological grounds.
I don’t know if these three ideas are the right place to start for building consensus. I do know that consensus is required for an effective counter to conventional economics. It seems clear that we will need a “rainbow coalition”. Given the huge diversity of views expressed on this blog, we will have to agree to cooperate on a limited set of issues on which we have agreement, while each one is free to have sharp disagreements on issues we put outside the bounds of our united endeavor. The first task is to delineate those areas where we can reach agreement and consensus. After discovering common grounds of agreement, we may be able to start building theories which would support, enable, and empower us to achieve common goals.