A comment on Stilwell, Heterodox Economics or Political Economy?
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By Susan K. Schroeder and Lynne Chester, Department of Political Economy, University of Sydney
Frank Stilwell’s note ‘Heterodox economics or political economy?’ raises a number of interesting questions for heterodox economists. Stilwell contends that “labels matter” in order “to challenge orthodoxy both in theory and practice” and he argues that the term “political economy” is preferable on a number of counts because: “heterodoxy and pluralism are not synonymous” and pluralism is important “in challenging the orthodoxy”; political economy signals “the challenge is a healthy antidote to the spurious claims of value-free science”; political economy has a “long and respectable lineage” whereas heterodox economics “seems to accept marginal disciplinary status” as the norm; political economy has the “potential to provide a richer learning experience”; and political economy has “substantially greater potential for public recognition”. We are of the view that this argument is flawed for ontological and methodological reasons which we outline in this short comment.
Stilwell’s discussion of pluralism, upon which a large part of his argument rests, is one of implicit containment. Does heterodox economics contain pluralism or does pluralism contain heterodox economics? This binary poses also implications for defining the scope of ‘political economy’. Stilwell’s discussion is grounded in the notion that heterodox economics has a pluralist character, yet pluralism is not necessarily heterodox economics. While we, as heterodox economists, recognize that pluralism has a broader scope than heterodox economics, the scope of and methods associated with political economy depend upon the objects of analysis.
Stilwell observes, correctly, that heterodox economics is often defined in terms of departures from neoclassical economics. Yet, Stilwell does not follow through to draw the implication, as we do, that this manner of casting the heterodoxy essentially places neoclassical economics in a position of primacy, that is, as the benchmark from which all else is compared. By comparing particular features of heterodox economics against those of neoclassical economics a common misconception is propagated which is that the methods underlying heterodox and neoclassical economics are similar. Stilwell notes how neoclassical economists view their recent innovations, such as the happiness concept, game theory, behavioural economics, and so on, as ‘heterodox’. Nothing could be further from the truth. The failure to recognize that methodological misconception renders the efforts of heterodox economists, such as the post-Keynesians, vulnerable to being ‘absorbed’ into the methodological realm of mainstream economics. Thus, we arrive at the importance of (political) economic method for discerning the distinctiveness of heterodoxy from the orthodoxy, something to which Stilwell alludes but does not elaborate.
Heterodox economists employ open systems of thought in order to exploit the advantages of class-based, sector-based, or industry-based analyses. As such, we are able to weave together strands within the traditions of political economy to arrive at a consensus about what drives the phenomena associated with market economies. Heterodox economics is able to accommodate, where appropriate, aspects of closed systems grounded in analyses of individuals. However, the heterodox treatments of time, uncertainty, equilibrium, money, expectations, etc. are radically different from orthodox economics (Dow 1996). Time, for instance, is cast as mechanical and/or logical for mainstream economics, whereas it is historical for heterodoxy. Heterodox economics is, thus for example, able to more fully capture the dynamics associated with cumulative causation as an essential process for understanding cyclical fluctuations. Moreover, the chains of reasoning are not confined to mathematical deductivism as with neoclassical economics. The chains of reasoning underlying Keynes’ construction of aggregate and effective demands are prevalent examples of the structure of analysis associated with an open system.
With respect to the relationship between heterodox economics and pluralism, something similar underlies Stilwell’s position. If heterodox economics has a pluralist character, yet pluralism is not heterodox economics, then – according to Stilwell’s argument – pluralism envelopes heterodox economics as a ‘special case’. What is it that makes heterodox economics ‘special’? Pluralism and heterodox economics employ open systems of analysis. Pluralism emphasizes the interdisciplinary aspects of economic, institutional, political and social phenomena. While heterodox economics also recognizes these aspects, there is at least an implicit, if not explicit, reference to an underlying vision of how markets operate, that is, to a price mechanism and its relationship to value. Orthodox economics views price and value as synonymous. In contrast, pluralism, which, again, seeks to integrate elements from a variety of disciplines, essentially de-links the need to hold an ontological view of social reality – a vision of a market mechanism, that is, a theory of value. As such, the range of social phenomena that can be examined under pluralism is much wider than with heterodox economics. Further, value becomes associated with ethics, not markets.
Should, as Stilwell infers, pluralism be the realm of political economy (which raises a number of inferences)? First, to do so risks reverting ‘political economy’ to a state that existed prior to Adam Smith. Smith’s key contribution was to locate the market mechanism at the heart of understanding how capitalism functions, and the phenomena that emerge from it. Moreover, the market mechanism came to be represented by a theory of value as the regulator of market prices. This is a tradition which heterodoxy has upheld in terms of method. Second, heterodoxy is not a political strategy per se, but a vast collection of combinations of the strands of political economic traditions that involve open systems. ‘Political economy as pluralism’ jettisons the need to understand the market mechanism for analysing economic phenomena and for designing – and justifying – economic policies. While heterodox economics and pluralism are not synonymous, they are also not distinct. Another key difference between heterodox economics and pluralism, besides ‘value’, is scope.
Should political economy maintain a concept of value as a basis for understanding the determination of prices, i.e., how markets work, or should political economy cast value within the realm of ethics? Here, Stilwell seems to proffer an answer. According to his very broad view, political economy involves an analysis of how an economy functions, that is, how it produces, distributes and consumes goods and services. The implication is that a political economist must establish for herself the operation of markets as expressed through the determination of price. Heterodox economists offer a range of options about the relationship between value and price. Thus, heterodoxy is something more than simply a political strategy to provoke a shift of economic thought away from neoclassical economics, which is what Stilwell is seeking. Heterodoxy provides space for the creation of alternative views which attempt to arrive at a consensus of how a capitalist market economy functions. Far from blunting a challenge to the orthodoxy, it seeks to sharpen it.
While it is contestable that that the challenge to the orthodoxy needs to become more explicitly political as Stilwell contends, it should not – in our view – if this means relinquishing an analysis of the engines of market economy – markets, themselves – which means relinquishing methodology (which in turn reflects an ontological view of social reality). Without an understanding about how a society organizes its production, distribution and consumption of goods and services via markets, a serious intellectual challenge to the orthodoxy is placed beyond reach.
* Readers are encouraged to see Chester and Schroeder (2015) for a discussion of the nomenclature of political economy, and the issues arising from the conflation of heterodox economics and international political economy.
Chester, L. and S. Schroeder (2015) “Conflation of IPE with Heterodox Economics? Intellectually Negligent and Damaging.” Journal of Australian Political Economy, 75: 153-176.
Dow, S. (1996) The Methodology of Macroeconomic Thought: A Conceptual Analysis of Schools of Thought in Economics. Cheltenham, UK: Edward Elgar.
From: pp.11-12 of World Economics Association Newsletter 6(2), April 2016