Great post as usual! As a current masters level student pursuing a "heterodox" econ degree in India, I wanted to share some of the things that I have observed in these circles. First, heterodox is insanely political by its very nature, to the point where serious, nuanced discussions can spiral down the drain very quickly. The sad part is that most of the absurdity stems from the students who have been made to believe that everything about modern econ is wrong and oppressive and blah blah (your usual marxist narrative). What ends up happening is that a typical heterodox econ class starts resembling a socio or an anthropology class, which is just tragic for reasons that are too long to list out. Second, ironically, heterodox cannot tolerate heterodox itself, because that would mean accepting the Austrians too, now show me a "Post-Keynesian" who is comfortable with that. Third, I would strongly disagree with you that heterodox deals mainly in texts as opposed to the mathematical mainstream, that is just not true. You have Kaldor, Kalecki, Sraffa and so many more who have gone beyond the usual constraints optimisation techniques and yet produced quite important theoretical work. I do agree though that some in the heterodox are unfairly against mathematical econ and therefore if one has to bet on which side will forego mathematical formalism first in a hypothethical world, it will be the heterodoxy, but still there is considerable mathematical work on both the sides. All in all, a serious form of reconciliation between the sides is needed, only then will Econ progress towards the true science it claims to be.
PS: Not too long ago on a talk of this exact topic, Arjun mentioned that you, Akerlof and him had a similar discussion on this very thing!
From an outsiders perspective it’s seems that a big part of the issue is that economics is a “strong theory” discipline. Lots of effort goes into formalizing theoretical positions and building mechanisms to ensure “purity”. Lots of rituals embedded in graduate education, external language use, boundary policing, approaches to policy development and use, etc. As a result of this strong theory paradigm econ gains external credibility but opens itself to internal schisms as competing approaches appear heretical. It further opens opportunities for outsiders - like journalists - to use their own frames (eg both sides, quasi-sensationalism) to question the power associated with the strong theory position. It’s interesting. I always felt the strong theory paradigm while great for elegance and power amassing introduces a brittleness to the structure.
I generally agree, with the proviso that mainstream economics has survived by absorbing lots of ideas that were once heterodox, most notably Keynesian macro. The real problem is with self-conscious heterodoxy.
Lots of great points but it’s not quite fair to see all heterodox on macro. Feminist Econ isn’t macro. Institutional economics mostly isn’t. Nor evolutionary economics, even if it then gets applied to things like growth. Austrian economics has an explicitly different “Austrian macro” but Kirzner who is the biggest living name in the school did price theory, IO, and entrepreneurship.
I don’t think that takes away from your points too much about why macro is prime for heterodoxy.
A bit surprised that you assigned "industrial policy" to heterdox.🤔
We've explicitly emphasized industrial policy in modern economies to greater or lesser degrees over time and place since, like, forever.🤷
I studied at (very) "mainstream" economics and business schools several decades ago, and industrial policy was part of the curriculum every bit as much as, say, "labour economics" (which, obviously, you didn't categorize as "heterdox").
Just curious as to why you categorized industrial policy this way?
It felt like you were setting up for a really nice discussion of how theory should be developed, but I think you stopped short. There is generally so little real conversation between mainstream and heterodox folks, so hopefully you'll return to the topic again.
All theories should be asked what evidence supports them and how do we test them.
You may not be trying to make the case, but it comes off like you're saying quantitative=rigorous. Economics over the 70 years shows us that the presence of equations doesn't say anything about the validity of the science.
The distinction in purpose is useful: tools versus policy.
The label heterdox has a reference to a departure from received orthodoxy. That could exist, or does it, in the two great areas of macro, namely, monetary and fiscal policy.
But it has a reference to time and when the version labelled heterodox currently appears. No review is made of past schools with a relabelling as heterodox. Or is there?
What would be said of Smith, Malthus, Keynes or Austrian thought now, if they appeared now?
You excel in these sort of posts. A lot of people who read this are, at least I am, here to learn. Economic history and the history of economics is worth explaining too.
You know why the others you mention don't have a heterodox? They are actual sciences. Economics is not. And in any case they have had plenty of heterodox strands of actual science in the past; did the sun revolve around the earth? Did the lord create the earth in 6 days and rest on the 7th? Is earth flat and if you sail too far you fall off?
"mainstream theories of business cycles just aren’t that useful — they can’t forecast the economy, they have pieces that don’t work, many of the assumptions are fairly absurd, and nobody outside the discipline uses them. The theories missed the 2008 crisis and the Great Recession, and they can’t agree on the causes of the current inflation" so you got all that wrong and still think you're better than MMTers, and still hold idiots like Summers up as some sort of doyen.
You mention towards the end that your were right vs the heterodox economists, how do you measure that? In science, you test theories and publish a result, when did we run with a full Kelton sweep to judge the results? About the only thing that economics has been able to test is micro finance / UBI - guess what, they work, why aren't the mainstreamers shouting from the rooftops for their implementation?
Mainstream eco did not get the results your texts said they would. Interest rates went up, inflation kinda came down, does correlation equal causation? Your theories say that by increasing rates unemployment goes up to stifle demand, that didn't happen, you can't pat yourself on the back for being half right and for the half you were 'right' about was that because supply chains have fixed themselves and a few billion people all don't need a new laptop at the same time? Having hugely complex mathematical models makes you better at maths, not economics.
Not angry, just baffled. What I knew about economics controversies is that Paul Krugman complained about the freshwater school hitting a point in the Bush2 years where they'd just snicker and eye-roll at "Keynesian economists" who had presumably been downgraded to a "heterodox" position. And that the Keynesians had won back most of their respect, particularly lately.
Certainly, Krugman's main complaint is that there are TWO "mainstream" economics professions:
1) the one that actually publishes peer-reviewed papers and is respected by people who can follow the models and check the data
2) the one that is accepted in Congress, by Kruman's "Very Serious People". The one where the Laffer Curve is used to make policy, though PK contends it was never published anywhere but a cocktail napkin; the one that is accepted on the main pages of big papers, including Krugmans: the one where government deficits bring disaster, and trickle-down really works. The one with the "confidence fairy"'; the one promoted by billionaire-funded PR firms (sorry, "Think tanks"..) The economic "zombie" ideas.
The story I'd understood up to now, including the "economic theory" behind the latest Trump tax cuts and the limits to the tax agency funding, is that the politically correct economics are very different from the academically-correct economics - and have been proven wrong by academics, over and over.
I think post Keynesians at least would dispute that heterodox econ isn't maths based - the point is just that it uses a different style of mathematical modelling than the one mainstream macro uses (I. e. DGSE). Their complaint is that the mainstream defines their modelling as not really economics.
1) You should probably take a history of economic thought course - but this has become increasingly difficult for any economics student at the undergrad and graduate level in the past 30 years. Such a course is scarce as hens' teeth at the graduate level. Some would say I had the "misfortune" of being able to take and complete both. That HET course, at least a good one, would introduce a student to not only the past contributions to the discipline but also link them to the present work in various fields in economics.
2) For those pounding on about math in economics, reading Alfred Marshall on the place of mathematics in his own work and that of the profession is worth a first-time read or a re-read. I get to read it every year when I introduce my undergrad students to it for the first time.
3) What "heterodox" journals and monographs are you browsing, better still, reading? Some will be more macro in orientation but others carry a mix. The micro-macro distinction is seen by most heterodox schools as artificial because of the danger of a titanic-compartmentalization problem. I doubt Keynes would have accepted it, at least based on a reading of his own research program over his long career. Minsky clearly didn't either.
4) Which "heterodox" association conference sessions do you and others sample at the annual ASSA meetings? It's far from all macro. A number of heterodox associations have had their number of sessions and overall participation restricted by ASSA and AEA over recent decades. But there are at least 4-5 such associations that still offer sessions. One of them deals with labor econ. Which one?
5) Many of the heterodox economists are making their contributions outside the mainstream economic flow, eg economists working on the Italian industrial districts (using Marshall's early work on the topic) have worked just as much if not more with sociologists, political scientists, and others than fellow economists. While many economists might not be familiar with the industrial districts work, they will recognize the terms industry clusters, path dependency, network effects, external economies of scale, etc.
Personal observation: if your post is a good indicator, there's a small niche for another heterodox newsletter on Substack. Something I've been musing about this past year. If only time & effort could be spliced n ways.
Excellent contrast between economists who use numbers, and economists that use words. To paraphrase Orwell, beware of the seductions of language. If thought can pollute language, language can pollute thought.
With heterodoxing aside, maybe some detoxing is in order. I wish somebody would put an ankle bracelet on Larry Summers so an alarm will sound if he crosses the threshold of the White House:
Great post as usual! As a current masters level student pursuing a "heterodox" econ degree in India, I wanted to share some of the things that I have observed in these circles. First, heterodox is insanely political by its very nature, to the point where serious, nuanced discussions can spiral down the drain very quickly. The sad part is that most of the absurdity stems from the students who have been made to believe that everything about modern econ is wrong and oppressive and blah blah (your usual marxist narrative). What ends up happening is that a typical heterodox econ class starts resembling a socio or an anthropology class, which is just tragic for reasons that are too long to list out. Second, ironically, heterodox cannot tolerate heterodox itself, because that would mean accepting the Austrians too, now show me a "Post-Keynesian" who is comfortable with that. Third, I would strongly disagree with you that heterodox deals mainly in texts as opposed to the mathematical mainstream, that is just not true. You have Kaldor, Kalecki, Sraffa and so many more who have gone beyond the usual constraints optimisation techniques and yet produced quite important theoretical work. I do agree though that some in the heterodox are unfairly against mathematical econ and therefore if one has to bet on which side will forego mathematical formalism first in a hypothethical world, it will be the heterodoxy, but still there is considerable mathematical work on both the sides. All in all, a serious form of reconciliation between the sides is needed, only then will Econ progress towards the true science it claims to be.
PS: Not too long ago on a talk of this exact topic, Arjun mentioned that you, Akerlof and him had a similar discussion on this very thing!
Really interesting piece.
From an outsiders perspective it’s seems that a big part of the issue is that economics is a “strong theory” discipline. Lots of effort goes into formalizing theoretical positions and building mechanisms to ensure “purity”. Lots of rituals embedded in graduate education, external language use, boundary policing, approaches to policy development and use, etc. As a result of this strong theory paradigm econ gains external credibility but opens itself to internal schisms as competing approaches appear heretical. It further opens opportunities for outsiders - like journalists - to use their own frames (eg both sides, quasi-sensationalism) to question the power associated with the strong theory position. It’s interesting. I always felt the strong theory paradigm while great for elegance and power amassing introduces a brittleness to the structure.
But what do I know, my PhD is in sociology.
I generally agree, with the proviso that mainstream economics has survived by absorbing lots of ideas that were once heterodox, most notably Keynesian macro. The real problem is with self-conscious heterodoxy.
https://johnquiggin.com/2007/06/01/heterodoxy-is-not-my-doxy/
“Generally speaking, mainstream macro uses math, while heterodox macro uses literary text with no math.”
The maths has to work, otherwise it’s just an experiment in pure maths.
The successes of macro mentioned at the end didn’t depend on the math.
Lots of great points but it’s not quite fair to see all heterodox on macro. Feminist Econ isn’t macro. Institutional economics mostly isn’t. Nor evolutionary economics, even if it then gets applied to things like growth. Austrian economics has an explicitly different “Austrian macro” but Kirzner who is the biggest living name in the school did price theory, IO, and entrepreneurship.
I don’t think that takes away from your points too much about why macro is prime for heterodoxy.
Very clear and very helpful. My takeaways:
Mainstream Macroeconomics - maths, data, theory, predict, explain, review, iterate.
Heterodoxy Economics - words, descriptors, vagueness, yelling, glamour, fear. Not self-evident.
Enjoyed this article. Thanks.
A bit surprised that you assigned "industrial policy" to heterdox.🤔
We've explicitly emphasized industrial policy in modern economies to greater or lesser degrees over time and place since, like, forever.🤷
I studied at (very) "mainstream" economics and business schools several decades ago, and industrial policy was part of the curriculum every bit as much as, say, "labour economics" (which, obviously, you didn't categorize as "heterdox").
Just curious as to why you categorized industrial policy this way?
Thanks Noah -- quite apart from the sagacity of the content, this is marvellous and entertaining as a piece of thinking and writing.
It felt like you were setting up for a really nice discussion of how theory should be developed, but I think you stopped short. There is generally so little real conversation between mainstream and heterodox folks, so hopefully you'll return to the topic again.
All theories should be asked what evidence supports them and how do we test them.
You may not be trying to make the case, but it comes off like you're saying quantitative=rigorous. Economics over the 70 years shows us that the presence of equations doesn't say anything about the validity of the science.
Great article as ever, Noah!
The distinction in purpose is useful: tools versus policy.
The label heterdox has a reference to a departure from received orthodoxy. That could exist, or does it, in the two great areas of macro, namely, monetary and fiscal policy.
But it has a reference to time and when the version labelled heterodox currently appears. No review is made of past schools with a relabelling as heterodox. Or is there?
What would be said of Smith, Malthus, Keynes or Austrian thought now, if they appeared now?
You excel in these sort of posts. A lot of people who read this are, at least I am, here to learn. Economic history and the history of economics is worth explaining too.
You know why the others you mention don't have a heterodox? They are actual sciences. Economics is not. And in any case they have had plenty of heterodox strands of actual science in the past; did the sun revolve around the earth? Did the lord create the earth in 6 days and rest on the 7th? Is earth flat and if you sail too far you fall off?
"mainstream theories of business cycles just aren’t that useful — they can’t forecast the economy, they have pieces that don’t work, many of the assumptions are fairly absurd, and nobody outside the discipline uses them. The theories missed the 2008 crisis and the Great Recession, and they can’t agree on the causes of the current inflation" so you got all that wrong and still think you're better than MMTers, and still hold idiots like Summers up as some sort of doyen.
You mention towards the end that your were right vs the heterodox economists, how do you measure that? In science, you test theories and publish a result, when did we run with a full Kelton sweep to judge the results? About the only thing that economics has been able to test is micro finance / UBI - guess what, they work, why aren't the mainstreamers shouting from the rooftops for their implementation?
Mainstream eco did not get the results your texts said they would. Interest rates went up, inflation kinda came down, does correlation equal causation? Your theories say that by increasing rates unemployment goes up to stifle demand, that didn't happen, you can't pat yourself on the back for being half right and for the half you were 'right' about was that because supply chains have fixed themselves and a few billion people all don't need a new laptop at the same time? Having hugely complex mathematical models makes you better at maths, not economics.
All models are wrong, some are useful
Not angry, just baffled. What I knew about economics controversies is that Paul Krugman complained about the freshwater school hitting a point in the Bush2 years where they'd just snicker and eye-roll at "Keynesian economists" who had presumably been downgraded to a "heterodox" position. And that the Keynesians had won back most of their respect, particularly lately.
Certainly, Krugman's main complaint is that there are TWO "mainstream" economics professions:
1) the one that actually publishes peer-reviewed papers and is respected by people who can follow the models and check the data
2) the one that is accepted in Congress, by Kruman's "Very Serious People". The one where the Laffer Curve is used to make policy, though PK contends it was never published anywhere but a cocktail napkin; the one that is accepted on the main pages of big papers, including Krugmans: the one where government deficits bring disaster, and trickle-down really works. The one with the "confidence fairy"'; the one promoted by billionaire-funded PR firms (sorry, "Think tanks"..) The economic "zombie" ideas.
The story I'd understood up to now, including the "economic theory" behind the latest Trump tax cuts and the limits to the tax agency funding, is that the politically correct economics are very different from the academically-correct economics - and have been proven wrong by academics, over and over.
I think post Keynesians at least would dispute that heterodox econ isn't maths based - the point is just that it uses a different style of mathematical modelling than the one mainstream macro uses (I. e. DGSE). Their complaint is that the mainstream defines their modelling as not really economics.
1) You should probably take a history of economic thought course - but this has become increasingly difficult for any economics student at the undergrad and graduate level in the past 30 years. Such a course is scarce as hens' teeth at the graduate level. Some would say I had the "misfortune" of being able to take and complete both. That HET course, at least a good one, would introduce a student to not only the past contributions to the discipline but also link them to the present work in various fields in economics.
2) For those pounding on about math in economics, reading Alfred Marshall on the place of mathematics in his own work and that of the profession is worth a first-time read or a re-read. I get to read it every year when I introduce my undergrad students to it for the first time.
3) What "heterodox" journals and monographs are you browsing, better still, reading? Some will be more macro in orientation but others carry a mix. The micro-macro distinction is seen by most heterodox schools as artificial because of the danger of a titanic-compartmentalization problem. I doubt Keynes would have accepted it, at least based on a reading of his own research program over his long career. Minsky clearly didn't either.
4) Which "heterodox" association conference sessions do you and others sample at the annual ASSA meetings? It's far from all macro. A number of heterodox associations have had their number of sessions and overall participation restricted by ASSA and AEA over recent decades. But there are at least 4-5 such associations that still offer sessions. One of them deals with labor econ. Which one?
5) Many of the heterodox economists are making their contributions outside the mainstream economic flow, eg economists working on the Italian industrial districts (using Marshall's early work on the topic) have worked just as much if not more with sociologists, political scientists, and others than fellow economists. While many economists might not be familiar with the industrial districts work, they will recognize the terms industry clusters, path dependency, network effects, external economies of scale, etc.
Personal observation: if your post is a good indicator, there's a small niche for another heterodox newsletter on Substack. Something I've been musing about this past year. If only time & effort could be spliced n ways.
Excellent contrast between economists who use numbers, and economists that use words. To paraphrase Orwell, beware of the seductions of language. If thought can pollute language, language can pollute thought.
With heterodoxing aside, maybe some detoxing is in order. I wish somebody would put an ankle bracelet on Larry Summers so an alarm will sound if he crosses the threshold of the White House:
https://nymag.com/intelligencer/2023/06/larry-summers-was-wrong-about-inflation.html