Each paradigm in economics is a scientific and ideological paradigm
These days I am reading a thought-provoking PhD-thesis “Essays on the History and Philosophy of Ecological Economic Thought” by Marco Paulo Vianna Franco (2019). He raises the issue of paradigms in economics and discusses the theoretical framework of Thomas Kuhn with ‘paradigm-shift’ as a central concept (Kuhn, 1962). Kuhn´s ideas were primarily presented for physics and other natural sciences.1 Are they relevant for economics and other social sciences?
Kuhn´s conceptual framework suggests that there is only one relevant (or true) paradigm at a time. Either one relies on an existing mainstream paradigm or advocates some alternative conceptual framework and theory with a claimed improved explanatory power. The idea is to get closer to truth in an essentially value-neutral manner.
In his historical study Marco Vianna Franco points to two theoretical perspectives in ecological economics, i.e. a “biophysical approach” based on thermodynamics and energy accounting and the “allocative approach” (of mainstream neoclassical economics). He also makes the observation that there is a considerable diversity of perspectives in ecological economics these days and refers to a judgement by Clive Spash that we are paying a high price by not uniting behind one single approach as an alternative to the neoclassical paradigm. Appeals to pluralism should be respected but many different perspectives might lead to confusion and attitudes of “anything goes”.
I will here argue that it would be a risky project to unite on one single paradigm as the alternative to the neoclassical mainstream. Two reasons will be put forward. One is that ‘paradigm’ can be understood in more ways than one and that following Thomas Kuhn’s ideas literally may not be a good idea for economics. Another reason is that values and ideology are involved in each paradigm and that we all claim to live in democratic societies where listening to actors who differ with respect to ideological orientation is a virtue. Moving from the allocative approach to another kind of dictatorship is perhaps not such a good idea. A degree of diversity in terms of paradigms is here defended.
Economics is a social and political science where values and ideology are always present. I am back to Gunnar Myrdal and his statement that “values are always with us” in economics research and education (1978). This is true also at the level of paradigms. Each paradigm in economics is specific not only in scientific but also in ideological terms. There is no neutrality in terms of values and ideology. Attempts to distinguish between ‘descriptive statements’ and ‘normative statements’ are not convincing since even so called descriptive statements are ultimately based on decisions about what to describe.
Paradigm as conceptual framework and language
A ‘paradigm’ may stand for a holistic scientific approach in a discipline or at a transdisciplinary level to a set of problems. As ecological economists we hope to contribute to the handling of various environmental or sustainability problems. Climate change, loss of biological diversity, pollution of soil and water are examples. Health issues are often related to environmental problems and the story can continue by including additional elements of sustainable development in the sense of the 17 UN sanctioned Sustainable Development Goals (SDGs). Actually, ecological economics can broadly be defined as “economics for sustainable development”.
A Kuhnian approach to ecological economics is very ambitious. The idea is to explain behaviour of actors at the micro level and also development at the macro level preferably in quantitative terms. To arrive at these quantifications far-reaching simplifications are needed. Policy options at the national level are formulated for firms or individuals as mechanistic entities. Neoclassical environmental economics exemplifies the Kuhnian tradition of understanding paradigm. As I see it, the neoclassical paradigm has proven insufficient in dealing with present challenges.
Rather than attempting final and complete explanations, a partly different idea of paradigm is to focus on conceptual framework and language in attempts to understand sustainability issues. Instead of looking upon individuals as mechanistic entities, we may view the individual as ‘actor’, guided by an ‘ideological orientation’ and the organization as ‘actor’ guided by its ‘ideological orientation’ or ‘mission’. In a role as actor, policy-making and practical behaviour becomes partly the responsibility of individuals and organizations. Corporate Social Behaviour (CSR) and Fair Trade become meaningful concepts and the ideological orientation of individuals (organizations) is something to be investigated in each case rather than be assumed as given.
This reasoning suggests that a case study approach to the study of differences between individuals (organizations) is relevant. Just as individuals and organizations are looked upon in new ways through a new terminology and language, we can go on to redefine ‘economics’ as “management of multidimensional (and limited) resources in a democratic society”. ‘Democracy’ stands for the idea that we should listen to many voices (actors with different ideological orientations) rather than dictate one ideological orientation for each specific category of actors (consumers, organizations).
A diversity of ideological orientations
Mainstream neoclassical economics is a scientific but at the same time political paradigm. It is based upon specific normative assumptions about the individual, focusing on self-interest and maximizing utility, the firm maximizing monetary profits, and at an aggregate level, growth in Gross Domestic Product (GDP). Focus is on markets and behaviour in relation to markets. Markets are understood mechanistically in terms of the forces of supply and demand.
When taught at universities and elsewhere, neoclassical economics plays a role of making a specific ideology legitimate not only for students but also politicians and in society more generally. Self-interest is good for society, increased monetary profits in business is believed to be good for all of us by strengthening the economy. Something similar holds for ‘economic growth’ in GDP- terms. Entrepreneurship in monetary terms is celebrated and policy issues can be solved by privatization of public assets or the social construction of new markets. In this way neoclassical theory and method is close to mainstream neoliberalism as political ideology.
Heterodox economists connected with the World Economics Association and other associations may question not only the scientific but also the ideological orientation of neoclassical theory. For each assumption made as the basis of neoclassical theory, it is possible to point to alternative assumptions with connected ideological orientations. And while heterodox economists may agree broadly, there are also differences in interpretations and arguments that represent a resource for future progress. By questioning neoclassical theory and method, it is possible to take steps toward an alternative paradigm:
- Why is there such a focus upon self-interest in understanding the individual in the economy? Individuals often consider impacts upon others, even in market relationships. Cooperation and partnerships are relevant phenomena and individuals in specific roles and situations can consider their ideological orientation.
- Why is there such a focus on ‘firms’ among all kinds of organizations? Social movements and NGOs, such as Greenpeace, deserve increased attention and can even influence the missions of business corporations.
- Why is the understanding of markets limited to supply and demand? Markets can be understood in other ways for example as networks of actors. “No business is an island” is the title of a book (Håkansson and Snehota, 2017).
- Why should preparation of decisions concerning investments in infrastructure be approached according to neoclassical Cost-Benefit Analysis (CBA) with its specific ideological orientation (monetary trade-off philosophy and ideas about correct market prices for specific impacts)?
- Why are so many issues of institutional change avoided by neoclassical economists? Also the present political-economic system may need to be challenged. Are transnational corporations miss-constructed in relation to present sustainability challenges? What about continued urbanization and globalization in a world where COVID- 19 and other health issues have been experienced?
The story can continue with additional questions that by themselves suggest possible responses. A political economics paradigm in terms of concepts and terminology can socially be constructed. Such a language may partly exist in other social sciences but needs to enter into economics as an alternative to neoclassical theory or as part of a pluralist philosophy.
In Sweden (and I guess elsewhere) there is a close to monopoly position for neoclassical theory in university departments of economics. One implication is that such departments of economics tend to represent propaganda centres for neoliberalism as ideology. Some existing political parties in Sweden benefit considerably from this narrow and monopolistic idea of economics education.
Fortunately there are other social science departments that are not so closed in their understanding of economics. In my experience Departments of Economic History and Departments of Management (or Business Economics) are a bit better. Management departments still rely on traditional ideas of accounting in monetary terms but for other fields, such as organization theory, there are more openings.
A move away from the “allocative approach” to the “biophysical approach” in ecological economics is perhaps of interest but may mean that one kind of reductionism (monetary reductionism) is replaced by another (reductionism in energy terms). Multidimensional and ideologically open analysis appears to be needed which includes monetary and non-monetary impacts of various kinds.
In the present crisis situation concerning climate change and other environmental problems I believe that there are reasons to welcome a diversity of approaches to ecological economics and economics more generally. One part of this is to reconsider the idea of ‘paradigm’ and warn against attempts to bring everything together in mathematical terms. Analysis need to be open in scientific as well as ideological terms.
Håkansson, Håkan and Ivan Snehota, 2017. No Business is an Island. Making Sense of the Interactive Business World. Emerald Publishing, Bingley, UK.
Kuhn, Thomas S. 1962. The Structure of Scientific Revolutions. Chicago University Press, Chicago.
Myrdal, Gunnar, 1968. Institutional Economics, Journal of Economic Issues, Vol. 12, No 4 (December), pp. 771-783.
Vianna Franco, Marco Paulo, 2019. Essays on the History and Philosophy of Ecological Economic Thought, PhD-thesis. Universidade Federal de Minas Gerais, Centro de Desenvolvimento e Planjamento Regional, Faculdade de Ciências Econômicas, Belo Horizonte, Brazil.
1 The relevance of Kuhn’s ideas for natural sciences will not be discussed here.
From: pp.9-10 of WEA Commentaries 11(2), July 2021