Home > Uncategorized > Teaching heterodox microeconomics

Teaching heterodox microeconomics

from Lars Syll

In memoriam: Frederic S. Lee (1949-2014), el adiós a un “economista  blasfemo”[*] | LumpenproletariatClearly, neoclassical economists believe that neoclassical microeconomic theory is theoretically coherent and provides the best explanation of economic activity; therefore there is no good reason to not teach it, if not exclusively. Many heterodox economists also broadly agree with this position, although not with all the particulars. However, sufficient evidence exists showing that as a whole neoclassical microeconomic theory is theoretically incoherent and without empirical support (see Lee and Keen, 2004; and Keen, 2001). Moreover, the methodological underpinning of neoclassical microeconomics is open to criticisms. The methodological approach of neoclassical economics is based on a pre-vision of supply and demand and/or a Walrasian general equilibrium all combined with scarcity and constrained maximization. Accepting this vision as a matter of faith, neoclassical economists construct axiomatic-based arguments via a deductivist methodology (with or without the use of mathematics) to articulate this pre-vision. There is no attempt to establish that the pre-vision has any connection to or is grounded in the actual capitalist economy it purports to explain. Hence the method of constructing theory is not tied to or informed by the real world, which means that the axioms qua assumptions used are not chosen because of their realism or some other way grounded in reality but solely because they contribute to articulating the pre-vision. Therefore with a methodology unconcerned with the real world, the theories derived therefrom​ are theoretically vacuous and hence not really explanations. They are in fact non-knowledge. Consequently,​ the methodology of neoclassical economics is not just wrong, it is also misleading in that it cannot inherently provide any understanding of how the real works or even predict outcomes in the real world.

Fred Lee

Fred was together with Nai Pew Ong, Bob Pollin and Axel Leijonhufvud one of those who made a visit to University of California such a great experience for a young economics scholarship holder back at​ the beginning of the 1980s. I especially remember our long and intense discussions on Sraffa and Neo-Ricardianism. It is now more than five years since Fred passed away. I truly miss this open-minded and good-hearted heterodox economist.

  1. ekkeweis
    February 4, 2021 at 7:34 pm

    Thank You, 100% agreed…, I just wrote a Paper on such stuff…
    World-Ecology vs. Economics (:>) Facing the Spectre of A New World: A Tentative Obituary on the Terminal Crisis of Global Capitalism (https://oeaw.academia.edu/ekkeweis)

  2. Yoshinori Shiozawa
    February 5, 2021 at 3:45 am

    The book that Fred Lee wanted to complete but could not during his life is now published:
    Frederic S. Lee Microeconomics theory: A heterodox approach Abingdon, Oxfordshire and New York, NY: Routledge, 2018.

    We must say thanks to Tae-hee Joo, the editor of the book, for his enormous efforts to make Fred’s manuscripts publishable.

    Fred Lee presented a clear idea for an alternative economics. I do not claim that his book shows the final solution, but he presented much more concretely a picture of an alternative economics. It would be time to discuss the strategy to build a new alternative economics more affirmatively than eternally criticizing neoclassical or mainstream economics.

  3. February 7, 2021 at 7:12 am

    At around the same time that Fred Lee and Lars Syll visited the University of California and talked long on Sraffa with Axel Leijonhufvud, a paper by Avi J Cohen appeared in Eastern Economic Journal: “The Laws of Returns under Competitive Conditions”: Progress in Microeconomics since Sraffa (1926)? (Vol. 9, No. 3, 1983, pp. 213-220).

    It was a short paper that counts only eight pages, but a decisive criticism of economics of perfect competition that was understandable for new economics students. After two sections of persuasive arguments, Cohen concluded that

    Thus, on both short and long run levels, there is no adequate resolution of contradictions between the partial equilibrium theory of perfect competition and the empirical evidence of non-increasing costs. Instead of a constructive resolution, perfect competition continues to be justified by the unsatisfactory verbal and logical contortions, denials of empirical evidence and proofs by assertion that originated more than fifty years ago.

    However, this was not a real conclusion, but a premise of his true inquiry:
    How are we to account for this extraordinary state of affairs?

    After a few words on John Hicks’s position, Cohen noted this state of affairs could be understood as a normal state of scientific research:

    Recent work in the philosophy of science sheds additional light on the situation. Hicks, while recognizing the dangers of the assumption of perfect competition, cannot conceive of any alternative for theoretical analysis. This restricted vision suggests Kuhn’s (1970) concept of normal science — problem-solving activity within the context of an accepted theoretical framework or paradigm. As the passage by Hicks implies, it is only the acceptance of the equilibrium paradigm (including perfect competition) that allows the posing and solution of theoretical problems.

    Normal science is a period of steady refinement of the basic theoretical framework. During this period, contrary evidence does not lead to the rejection of the basic theory, but instead leads to the development of more detailed, secondary hypotheses that account for discrepancies between facts and the basic theory. Lakatos (1978), in developing Kuhn’s ideas about secondary hypotheses, formulated the concept of a “protective belt” of auxiliary
    assumptions that protects the basic theoretical framework from empirical refutation.

    The conclusive observation Cohen made is this:

    Probably the most significant reason why the theory of perfect competition has persisted despite its problems is that no acceptable alternative theory has come along to take its place. According to Blaug (1978, p. 703), “Economists abhor a theoretical vacuum as much as nature abhors a physical one, and in economics, as in the other sciences, theories are overthrown by better theories, not simply by contradictory facts.”

    This observation was made after a little less than 60 years after Sraffa’s paper, but it was also predictive because there was no big difference after the paper, for about 40 years.

    What Cohen observed is not new. In fact, he only reconfirms the old dictum, i.e. it takes a theory to beat a theory. To beat mainstream economics, repeating criticism is not enough. We should build and present a theory that can surpass it.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.