Heterecon Bleg

I would like to understand the current controversy going on over at many more-read blogs than this one regarding “orthodox” and “heterodox” economics. At least, I’d like to understand it better. I’m sympathetic to a general critique of what we’re apparently obliged to describe as “orthodox” economics – unrealistic standard assumptions, unrealistic views of rationality, fetish maths, ponyism – but I am, to say the least, very unclear on how “heterodox” differs from either a) just good economics, b) J.K. Galbraith, or c) critical theorist blethering.

No doubt this is unfair, but there are so many strawmen being bayonetted in this debate that I thought I might find time for a spot of close-order drill myself. Also, I was frightened by Post-Autistic Economists as a child – well, as an exchange student at Vienna University in the autumn of 2001, which is much the same. The PAEs were highly popular there, for reasons which usually added up to “no more quantitative methods class! Woo! And you’re a fascist.”

If you think that’s unfair, well, it wasn’t me. More recently, I followed a lunk to the Robert Vienneau blog and his critique of comparative advantage. Now, I’m not sure whether the problem was like the dog listening to music – I’m not bright enough to understand it – like the man listening to music through a pile of socks – the exposition clouded the clear, not the other way round – or whether it actually is what it seemed to me to be. That being a weird corner case strongly at variance with history, and based on assumptions even odder than neoclassical ones.

Curiously, this weekend I was talking to a Canadian writer about Social Credit among other things, and it struck me that historically you’re more likely to be crazy if you think you’ve discovered a new economic principle than if you think you’ve discovered a new law of physics, so I think my scepticism is justified.

So, can anyone show me where to reswitch the Light on, the Provisional Truth, and the Path-Dependent Way? This is basically a great big wolf-whistle to Dsquared, naturally.

  1. dd

    extremely good article by Jamie Galbraith here:


    more to come … my basic view is that (the good bit of) heterodox economics is what the whole profession ought to have been, and would have been had it not been for the masive sulk that economists went into over Keynes, a sulk which is now entering its seventh decade.

    A lot of Rob’s stuff does describe what look like corner cases at variance with normal experience; but so does neoclassical economics! The comparative advantage bit isn’t one of them though; it makes all the same assumptions as the standard model, apart from assuming that the rate of profit is positive. In general, neoclassical models can’t cope with a non-zero rate of profit; they tend not to solve.

    This is why profits appear so rarely and sketchily in an economics degree and are relgated to “cost of capital”. Dealing face to face with profit is doubly intolerable for economists because 1) it raises lots of political issues that are best swept under the carpet and 2) it means that economics can explain a lot less than it could if the rate of profit was zero and all the textbook models solved.

    The neoclassical approach to this issue has basically been the same solution adopted by seven year olds to the existence of Daleks; they hide behind the sofa. This has resulted in such intellectual triumphs as “almost completely giving up on macroeconomics!”, “retreating from thinking about industrial organisation into mazes of game theory!” and “Freakonomics! It’s like economics, but it’s not about economics!”.

    The best writers in the heterodox tradition have, by and large, rolled up their sleeves and started to think about what can be salvaged from the whole enterprise and how, which is why I like them. The answer is “quite a lot”, by the way; you can come up with some quite surprising and important results simply by considering the nature of a double-entry book-keeping system, if you’ve got your accounting set up right.

  2. Kevin Carson

    Heh. Do you think the reasons for Austrian economics’ popularity add up to “no more quantitative methods class! Woo! And I’m a fascist”?

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