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Heterodox economics or political economy?

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By Frank Stilwell

Frank Stilwell

 

 

 

 

 

 

 

 

 

 

Seven years after the onset of the global financial crisis, when it was widely said that orthodox economic thinking had failed and should change, it is evident that that any such changes have been far from decisive. Some would say it looks pretty much like business as usual. This is not just the case in the academy, where the core courses in university economics departments continue to emphasise basic training (some would say indoctrination) in neoclassical economic principles. It is also evident in the realm of economic policy which continues to be dominated by a neoliberal agenda, augmented by the post-crash politics of austerity. This resilience of mainstream economics makes it essential for dissenters to continually reconsider how best to challenge orthodoxy both in theory and practice.

Active participants in the WEA recognise the inadequacies of mainstream economics and the need for progressive alternatives in economics education, public debate and policy formulation. But how is progress to be achieved? A major lesson from the experience of struggles to establish alternative teaching and research programs is that doing so within territory occupied by orthodox economists is extraordinarily difficult. Intervening in broader public discourse is also a big challenge, given the entrenched interests and institutions that continue to shape its direction. Profound questions need to be considered for future strategy.

In this context, labels matter, as they do in marketing. They construct imagery and signal strategic choices. The two particular labels with which this article is concerned are ‘heterodox economics’ and ‘political economy’. Is the ongoing challenge to mainstream economics better mounted under the former or latter rubric? Are the two terms synonymous? Is it just a matter of terminology? Or does the question touch on a bigger strategic choice – between seeking space for research and teaching of non-neoclassical economics or seeking to promote political economy as part of a broader interdisciplinary social and political project? Dissident groups commonly confront the questions of focus and self-identification and much may hinge on it. While the terminology itself is not crucial, it has implications for strategy.

In making the case for political economy, this article briefly explores five interrelated considerations, relating to issues of pluralism, politics, professional status, academic partnerships and public recognition.

Identifying as Pluralist

The need for a pluralist perspective, both in economics education and in economic policy formulation, has become a widely accepted view among critics of orthodoxy. Because the monist character of orthodoxy is the problem, pluralism is the solution. This case has been extensively elaborated in the last two decades, including in my own writing. As John King argues, ‘economics is unique among the social sciences in having a single monolithic mainstream, which is either unaware of or actively hostile to alternative approaches’ (King 2013: 17). This has had deeply unfortunate educational consequences, limiting the understanding of political economic processes and events. It marginalizes consideration of economic history and the history of economic thought, producing an ahistorical approach that creates a sort of professional amnesia. Worse still, social harm results, such as the dysfunctional policies enacted in the name of ‘sound economics’ since the onset of the global financial crisis. Concurrently, the official university research evaluation processes marginalise non-mainstream approaches, thereby operating to compound the above problems. This is a process of circular and cumulative causation, whereby monism in the mainstream excludes the very elements that could lead to better explanations of real-world economic phenomena. It is a vicious cycle. Only the widespread embrace of pluralism can correct it.

Such observations may be taken as supporting the case for challenging mainstream economics under the banner of ‘heterodox economics’. On this reasoning, self-identifying as heterodox economists signals our concern that non-mainstream views should get a better hearing as alternative analyses of how the world actually works.  In practice, it means confronting the dominant mainstream neoclassical economics with critical alternatives, including various strands of post-Keynesian economics, Marxist economics, institutional economics and analyses from feminist, ecological and various other perspectives. Indeed, this is what heterodox economists do. Moreover, a ‘heterodox economics’ label fits well with claims about pursuing academic practices that are conducive to an ‘open society’ in which freedom of expression exists and innovation and creativity flourish. It is also an antidote to right wing politicians’ claims that ‘there is no alternative’.

However, more careful consideration reveals that conflating the case for pluralism with the advocacy of heterodox economics raises three tricky problems.

First, heterodoxy and pluralism are not synonymous. Pluralism is a methodological position that embraces diversity as a matter of principle: it would normally include both the mainstream and a broad range of other viewpoints. Heterodoxy, on the other hand, usually entails opposition to orthodoxy: individual heterodox economists may also be hostile to approaches other than their preferred alternative. In struggles for progress in economics, heterodoxy and pluralism may seem to be close relatives, but it is pertinent to identify this conceptual difference. Pluralism is an ‘in principle’ position, based on ontological, epistemological and ethical propositions (as discussed by Mariyani-Squire and Moussa 2013), whereas the movement for heterodox economics is, more pragmatically, about creating space for preferred alternatives to the orthodoxy.

Second, there is the question of which alternatives should get that hearing. What is to be included in ‘heterodox economics’? There seems to be reasonable consensus about the presence of contributions from Marxism, post-Keynesianism and institutional economics. Embracing ecological economics and feminist economics is also widely advocated, although neoclassical economists also assert their presence in these territories. But what about Austrian economics, with its right-wing libertarian ‘free market’ implications: should it also be included? And what of contributions in the distinctive traditions of Karl Polanyi or Henry George: shouldn’t they also be in the mix? A ‘heterodox economics’ that simply accommodates all these elements may be quite eclectic, potentially dissipating or even blunting the challenge to the neoclassical paradigm. Some stronger conception of ‘unity in diversity’ may be necessary for progress.

The third difficulty is that some economists claim that the mainstream has itself already become heterodox. Diana Coyle (2007) and David Colander (2009) are among those who have propounded this view. They posit that the embrace of game theory, new growth theory, behavioural and experimental economics, complexity economics and other theoretical innovations have reduced the dominance of neoclassicism (Thornton 2015). Personally, I find the argument unconvincing for at least three reasons. First, while these analytical developments give the appearance of some diversity within the mainstream, the underlying assumptions of methodological individualism and systemic stability through market forces remain pervasive. Indeed, invoking the novelty of pluralism within neoclassical economics as a response to the deficiencies of the discipline ignores the diversity that has characterised the discipline since its inception, without this ever entailing a paradigm shift in, or a radical break from, these underlying presumptions. Second, these elements of product differentiation have not generally displaced neoclassical economics from the core curriculum that is taught to students, although they often form the basis for electives in later years of study. Because what is taught in the foundation years determines the basis on which the discipline and profession is defined and reproduced, the changes are neither fundamental nor transformative. Third, if an academic profession is to be judged ultimately by its external influences and effects, it is evident that it is still largely ‘business as usual’ for an orthodox economics that functions as capitalist ideology. The close association between neoclassicism in the academy and neoliberalism in the realm of public policy remains much in evidence. Even Diane Coyle, notable for her previous emphasis on the flexibility of the economics discipline, has conceded that the catastrophic impact of the global financial crisis of 2007-08 has had little impact on how the academic orthodoxy in economics is constructed and reproduced (Coyle 2013). Nevertheless, the assertion of an ‘internal heterodoxy’ within mainstream economics unfortunately muddies the waters. Maybe that is its purpose.

These considerations illustrate the importance of pluralism in challenging the orthodoxy, but also indicate some of the associated tensions. Seeking more unity, analytically and organizationally, would be helpful in a conflict situation like this. This entails working together to extend and broaden the critique of mainstream economics and challenging its influences, both on students and in the wider worlds of economic discourse and public policy. Concurrently, seeking common elements, even partial syntheses, of the principal progressive, non-neoclassical currents of analysis is important in developing effective and influential alternatives. The following considerations indicate why the embrace of a broader ‘political economy’ can contribute to this more assertive strategy for challenging the mainstream.

Being Explicitly Political

Self-identifying as a movement for ‘political economy’ points to the inherently political character of the undertaking, explicitly challenging mainstream economists’ claim to be pursuing ‘value-free’ lines of inquiry. Talking of political economy necessarily raises questions about ‘what politics?’ and ‘whose values?’ It also signals the quest for finding commonalities among the currents of thought that are critical of the mainstream. This shared ground may be ontological, as Tony Lawson has recurrently emphasised in making the case for a critical realist approach (Lawson 2006, Morgan 2016). Thus, the unity may come from a ‘world view’ of the capitalist economy structured by power relations and prone to inequality and crises. The common ground may also be methodological, emphasising a shared commitment to analysis of the historically-contingent character of economic phenomena rather than ‘equilibrium’ conditions. The common ground may also be explicitly political, emphasising the mission of putting democratic politics in command vis-a-vis­ market forces, as posited by Higgins and Dow (2105). It may be, and probably should be, all three.

Conventional claims and protestations to the contrary, mainstream economics is inherently value-laden and political. So too is challenging and changing it. Signalling this in the labelling of the challenge is a healthy antidote to spurious claims about economics being a value-free science. As Gunnar Myrdal (1953) strongly emphasised, the development of economic thought has always and everywhere had a political character. In the real world economics and politics are intertwined. Therefore, successfully challenging the dominant orthodoxy cannot be just a matter of developing ‘better’ economic models (claiming higher values for explanatory capacity). It also has to be a political process.

Asserting Professional Status

Another advantage of the term ‘political economy’ is its long and respectable lineage. Indeed, political economy has a strong claim to actually be the mainstream, running from the eighteenth through to the twenty-first century and including seminal contributions from Smith, Ricardo, Marx, Veblen, Keynes, Kalecki, Robinson, Myrdal, Galbraith, Heilbroner and modern contributors to that broad tradition of social inquiry. From this perspective, neoclassical economics may be regarded as an initially interesting side-track that became a cul-de-sac (albeit one with a massive volume of traffic).

This claim about the status and centrality of political economy is contested by modern mainstream economists, of course. If the term political economy is mentioned at all, it is usually treated as being of purely historical interest, relating to the characteristics of economic inquiry in a pre-scientific era. Or it may be taken as referring only to the analysis and prescription of public policy. That use of the term by practitioners associated with the Virginia School, the Chicago School and contemporary ‘public choice’ theory is a common source of confusion in the USA, in particular. In historical usage, political economy has also been the label given to concerns with policies that may modify or regulate the economy’s functioning in pursuit of specified social objectives, contrasting with economics as the study of how the economy works. These are terminological difficulties that unfortunately muddy the waters, once again. However, trying to avoid these issues by retreating to ‘heterodox economics’ seems to accept marginal disciplinary status as all that is ever likely to be on offer. This is indicated by the usual inclusion (at best!) of ‘heterodox economics’ in a residual ‘other economics’ category in official research publication classifications. Challenging this marginalisation, and defining a positive agenda for alternative economic analysis rather than merely reacting to the mainstream, is a substantial long-term concern that requires redefining the relevant territory – in effect, challenging the nature and limits of the discipline.

Building Interdisciplinary Partnerships

Even if the economics profession continues to deflect the challenges posed by heterodox economists, substantial progress can be made in relation to cognate social sciences. This is a necessary element in a strategy for progress because mainstream economists working in universities usually resist attempts to reconstitute their discipline on genuinely pluralist principles. Marxist political economy, for example, can usually only get a hearing as an historically discredited view; while ‘old’ institutionalism, if mentioned at all, is merely a precursor to ‘new institutional economics’, which is more compatible with a neoclassical approach. Heterodox economists may get jobs in economics departments: some do, especially if their ‘deviance’ develops after secure employment has been achieved, but they are often not replaced by people of similar inclination when they retire or move on.

Establishing more secure territory for teaching and research in political economy can be easier in other areas within the social sciences where there is concern to deal with the economic dimensions of social problems and public policy. In my experience, political economists are usually welcomed into the latter territories (if they eschew the imperialist ambitions that have been evident when neoclassical economists seek to invade other territories in the social sciences). Thus, it is the mutual-learning relationship of political economy with subjects like sociology, geography, politics or history that is crucial. Interestingly, it is the commitment to interdisciplinary studies, rather than the commitment to pluralism in economics, that is more important in building these partnerships.

In other words, establishing a foothold for political economy, whether as a university department separate from economics (as in the University of Sydney’s Department of Political Economy where I taught for over four decades) or in conjunction with other social science disciplines, is a precondition for heterodox economics having a sustainable place in university education and research. Having established any such foothold, good teaching can show that political economy has the potential to provide a richer learning experience than straight mainstream economics (O’Donnell 2014). Similarly, research and policy advocacy can usually get a good hearing where political economists contribute to interdisciplinary studies on matters of public significance and concern.

Achieving Public Recognition

The challenge to orthodox economics will always be marginal if it remains a purely academic concern. Beyond the universities are important avenues for public influence. Education within the labour movement is one such focus (Stanford 2015). Political economic writing for popular magazines and websites is also important, as is participation in the media and working with political parties and progressive NGOs. Preparing submissions to government inquiries – and concurrently using that material in academic and/or journalistic contributions – are activities that fit well into this strategy. Being in tune with the concerns of, and having an identity that is recognized by, a broader public is crucial for challenging the influence of mainstream economics.

In this last respect, the term ‘political economy’ clearly has the edge over ‘heterodox economics’. Political economy signals a broad conception of how we understand the economy in a historical, social and political context. It has substantially greater potential for public recognition, being a label that is reasonably intelligible to non-specialists. It contrasts, in this respect, with the typically bemused response of members of the general public when hearing the term ‘heterodox economics’ – ‘huh, what’s that?’.

Conclusion

Challenging mainstream economics does not produce a simple or straightforward clash, like that between two sporting teams seeking to score more runs or goals to determine the winner. The rules of the contest are not agreed beforehand and there is no agreed venue, nor impartial umpire. Even the criteria by which success is judged are contestable.

For dissident economists to label themselves as heterodox is academically respectable but may be strategically weak. On the positive side, the big plus of heterodoxy is its apparent association with pluralism, indicating aversion to dogma and openness to alternative ways of seeing. However, there is a tension between pluralism and heterodox economics, as I have argued in this article. The strategic problem is that arguing for heterodox economics presumes the centrality of an orthodoxy: almost by definition, therefore, it is consigned to the outer. This tends to put advocates of heterodox economics ‘on the back foot’, seeking shelter for an array of different views whatever their coherence or relationship to each other. Pushing for political economy to have a central place in economic discourse is a more assertive strategy. It is compatible with the embrace of pluralism, but more emphasis is placed on unity in diversity, the political elements that infuse the competing currents of economic thought, the potential for gaining strength through interdisciplinary partnerships and the need for broader public recognition and influence.

I do not present these views in the expectation that individuals and associations will abandon their current self-identification as ‘heterodox economists’. That is not the principal point of this article. Rather, it is to locate heterodox economics as part of a broader political economy project that is concerned with understanding how economies function in relation to social processes and developing political practices that can contribute to more equitable and sustainable arrangements for the future. This is an inherently interdisciplinary and explicitly political project. It matters because it opposes a misleading and class-biased economic orthodoxy and because of its critique of ‘actually existing capitalism’ and neoliberal policy practices in society at large. This political economy project cannot properly be an exclusively academic concern, partly because of the internal constraints within academia but, more positively, because there is considerable thirst for it in the broader society. Indeed, whether under the rubric of heterodox economics or political economy, there is much work to be done.

 

Note: This short article has been developed from a paper presented by the author to the conference of the Society for Heterodox Economics (SHE) held in December 2015 in Sydney, Australia, and the editorial written for the special issue of The Journal of Australian Political Economy on the theme of ‘heterodox economics’. I thank participants at the conference and colleagues who provided constructive feedback on an earlier draft of this article.

 

References

Colander, D. (2009), Moving Beyond the Rhetoric of Pluralism: Suggestions for an ‘Inside the Mainstream’ Heterodoxy, in R. Garnett, E.K. Olsen and M. Starr (eds.), Economic Pluralism. London and New York: Routledge.

Coyle, D. (2007), The Soulful Science: What Economists Really Do and Why it Matters. Princeton NJ: Princeton University Press.

Coyle, D. (2013), The State of Economics and the Education of Economists, World Economics Association Curriculum Conference, The Economics Curriculum: Towards a Radical Reformulation. At http://curriculumconference2013.weaconferences.net/papers/the-state-of-economics-and-the-education-of-economists/, accessed 22 May 2013.

Higgins, W. and Dow, G. (2013), Politics against Pessimism. Berne: Peter Lang.

King, J.E. (2013), A Case for Pluralism in Economics, Economics and Labour Relations Review 24, pp. 17-31.

Lawson, T. (2006), The Nature of Heterodox Economics, Cambridge Journal of Economics, Vol. 230, No. 2, July, pp.483-507.

Mariyani-Squire, E. and Moussa, M. (2014), Fallibilism, Liberalism and Stilwell’s Advocacy for Pluralism in Economics, The Journal of Australian Political Economy, No 75, Winter, pp.194-210.

Morgan, J (2016), The Continued Relevance of Neoclassical Economics and the Mainstream, World Economics Association Newsletter, January. At http://www.worldeconomicsassociation.org/newsletterarticles/relevance-of-neoclassicism

Myrdal, G. (1953), The Political Element in the Development of Economic Theory, London: Routledge and Kegan Paul.

O’Donnell, R. (2014), What do Graduate Attributes Have to do with Political Economy? in S.K. Schroeder and L. Chester (eds.), Challenging the Orthodoxy: the Contributions of Frank Stilwell to Political Economy, Heidelberg: Springer-Verlag.

Stanford, J. (2015), Towards an Activist Pedagogy in Heterodox Economics: the Case of Trade Union Training, Journal of Australian Political Economy, No.75, Winter, pp. 233-256.

Stilwell, F. (2015), Editorial: Heterodox Economics and Political Economy, Journal of Australian Political Economy, no. 75, Winter, pp. 5-10.

Thornton, T. (2015), The Changing Face of Mainstream Economics, Journal of Australian Political Economy, No. 75, Winter, pp. 11-26.

From: pp.2-6 of World Economics Association Newsletter 6(1), February 2016
http://www.worldeconomicsassociation.org/files/Issue6-1.pdf

 

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7 responses

  • Gerry Toner says:

    The word heterodox is an orthodox label for errants and as such those ‘economists’ using that label are deviant. They are also adopting the orthodox ideological frame of reference. Stilwell’s article makes very interesting reading. Interesting is what an academic is after. Change of outcome / results / impact is what many of us may be after. I suggest that elaborating heterodoxy will only serve to promote academic elitism and perpetuate the core issue which is political. The elephant in this room is that the heterodox ’cause’ is a challenge to capitalism as a system of human arrangements. The very term economic is suspect and subject to challenge as ideology. The purpose of economics and of policy is at stake in this debate. Unfortunately academics can contribute but populists will decide. Mr Trump is likely to shape this debate more that academicians. Yes politicians ‘use’ academicians as experts but they chose the ones that agree with them. The true heterodoxy is to challenge private property and wage relations as no longer sound basis for what is today called ‘economy. I think students who wish to see change will get that more from the political space than the academic space.

  • Bryan Kavanagh says:

    As the field of political economy has been vacated by neo-classicists, as Frank Stilwell says it is open for heterodox economists to appropriate the term for themselves. Why don’t reformist/dissident economists adopt both ‘political economy’ and ‘heterodox’ interchangeably and see which term gains the greater currency? Anything to distinguish what I hold to be a science from hopeless, ‘value-free’ economics.

  • tom abeles says:

    As a “non-economist” the article (and the current comments) seem to say that the current neoclassical theories and operational models are the status and all the efforts to repair them since the recent crash are like folks patching their cars to make them presentable and functional. The heterodox academics are enamored with alternative models and want to explore other possibilities. On the other hand, the political economists have an “agenda” such as environmental/ecological issues, social justice, etc and are trying to reframe economics as a path as opposed to one element in an armamentarium to validate. Both heterodox and political economics are still thinking in terms of “science or scientific models” that will allow for a grand theory in which to bring the various beliefs into a cohesive whole as an alternative to a patched neoclassical “theory”. Both seek legitimacy in such models and are focused there rather than on the issues at hand which may not yield to a scientific model. Many have argued the the social studies arena is not a science and should not evoke “science” in order to build a functional agenda. Maybe the idea of economics as the “queen of the sciences” needs to be honestly put to rest.

  • David Harold Chester says:

    There is a crying need for the establishment of economics, particularly macroeconomics on a proper scientific basis. Regardless of its name (political science, political economics, social science, etc.), the formal study of macroeconomics was begun by Adam Smith and seems to have become muddled after gallant attempts by David Ricardo, Karl Marx, Henry George and others were made to develop this logical progress of thought into a science.

    The trouble began when capitalism was deliberately forced to include landlordism, by John Bates Clark around 1900. The political move was introduced by the capitalistic organizations, so that their exploitation of the natural resources (especially rising land values) by a small minority of greedy landlords and their supporters the banks, would be hidden from the general public. Since the higher institutions for teaching and research were supported financially by these commercial organizations, there was introduced a corruption of our “dismal science”, with a lack of direction (see “The Corruption of Economics” by Fred Harrison and prof. Mason Gafney). Students of macroeconomics are easily confused and since today all they want to do is pass their examinations, the opposition to this failure to promote true knowledge continues to flourish. It is partly for this reason that the unstable nature of our “business cycles” has never been properly understood, nor the problems that result from this instability of our social system satisfactorily solved.

    The need for the development of the science being there, and the failure of humanities teachers and researchers to achieve this goal, it falls to the engineering profession to take what is actually a man-made phenomenon (not a natural one) and use their methods (systems anaylsis in this case) to show formally and logically of what it comprises and how it works. Readers and sympathizers of this trend of thought can follow these developments more thoroughly through my work on this basic theory. My recent book can be obtained as a reviewer’s e-copy for free by writing (with explanation of the reason for the interest) to me at chesterdh@hotmail.com . I should add that I am concerned about the spread of scientific knowledge on this vital subject, and not on any royalties or financial inducements.

  • Cynthia Lepthien says:

    I completely agree – reinstate political economy as a discipline. I think it is critical that the general public understand that economics is not and has never been a value free science, and maybe this would help. The pervasiveness of the neo-classical model, with its definition of “rational” behavior has, I believe, changed how people actually behave and how willing they are to accept the economic arrangements we have now. I’m not an economist, though, and I understand that those in academia may have concerns about how the institutions they work for will perceive “political economists’ as opposed to “heterodox economists”.

  • Peter Söderbaum says:

    I like the emphasis on pluralism in Stilwells article. Pluralism in economics can be understood as recommending an open attitude to other theoretical perspectives than the one(s) that you prefer. Pluralism is about democracy in the scientific community and is based on the understanding that each kind of theoretical perspective is specific in ideological and political terms. “Political economics” is therefore a label that applies to mainstream neoclassical economics as well as the different “heterodox” approaches mentioned by Stilwell.
    In you article you refer to “political economy” as your preferred perspective. But all kinds of economies, including the pressent ones are political economies, suggesting that the term is not very informative when attempting to make distinctions. Taking pluralism seriously means that we need to move away from the Kuhnian “paradigm-shift” idea to one of “paradigm coexistence”. Just as there are different citizens and political parties in a democratic society, there must be advocates of different paradigms in a community of economists or other social scientists. From a democratic point of view (and also in relation to the potential for creativity) there is a strength in diversity of theoretical perspectives. Having suffered enough from the present (close to) neoclassical dictatorship, my question is if we should aim at a new dictatoship or leave the door open for pluralism and competition.

  • wtf you jacked my disciplin says:

    I have concerns about “political economy”. We have a highly specialized, diverse economy and people with skills and experience in certain areas make decisions about that area. Political economy is different from legal government studies, it’s different from mainstream economics. This discipline is suppose to be more specific and regulated it’s NOT government, it’s Not the mainstream (militarized) non-political economy. I’m not sure political economy is appropriate. A lot of people are misusing this discourse. Industry trends come from within industries and skilled qualified professionals, non neo liberal alternative academics.

    I would suggest to change the name of the discipline “helping economy” or “alternative economy” since there is so much confusion. The mainstream economy is studied in economics. Political economy started in the USA, it’s designed to help people from alternative backgrounds participate in the economy in a way that is comfortable for them. These alternative backgrounds include reserves and cults, or prison populations. It’s used to get them to use money on a local level, recognize the private and public spheres in society. Be able to apply for grants or apply for small loans. Recognize local and regional economies vs international and mainstream. Recognize and study the helping economy (outside of the mainstream competitive economy). Population growth and finical dependence is a big problem in the helping economy. Help them run local alternative business like co-ops and small eco stores or run charities like a food bank. It’s outside of the government and outside the regular mainstream economy. It’s the helping alternative economy. It’s a free for all cross disciplinary whatever discipline. It’s not about political parties (it’s the economy that is in itself political). It’s a serious and professional discipline and it’s needs to be regulated. What is this article even about? That’s not “alternative economics” that’s economics or finances, about political parties. Organics used to be alternative now it’s more main stream which is cool. Please be respectful of establish specialized discourses – the economy is outside of the government, it has nothing to do with the government outside of financing and following regulations.
    I would suggest changing the name of this discourse since there are so many abuses. ALTERNATIVE ECONOMY??? It’s Alternative economy or political economy – it’s about small business and local or helping economy. It’s about providing alternative goods and services and making money. It’s not equal.
    Political orientation like political science with an emphasis on law would be a separate discipline. Maybe there are misuses of this discourse because of the name.
    That being said Looking for advocates to save farmland from developers!!

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