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!
Thanks! As for Kaldor, Kalecki, and Sraffa, they did their math many, many decades ago. Modern heterodoxers may cite their papers, but they don't do very much original math. In particular I *never* see them try to do any rigorous empirics.
hmmm, I don't think that's necessarily true. I have examples in mind but I must admit that I am in the learning stage myself and therefore don't want to give a vague answer. I will definitely comeback with concrete examples so that a nuanced discussion takes place and both sides can learn from each other!
Maybe heterodox folks don't engage in more empirical research because economic data is currently collected on the basis of the orthodox model. It seems that it would be pretty expensive to go about collecting new types of data, and the orthodox model has long ago captured government efforts at economic measurement.
For example, Neo-Marxists would have to come up with ways of quantifying oppression or various types of oppression to gage its effect on the economy. Sounds like a tough task.
i think https://realtimeinequality.org/ provides a good one, on this terms, mainstream macro focus on agregate output and believes that growing total output is more important than spreading production equally, but looking on this timeseries, we can see that the bottom 50% in the US didn´t improve much, which is very problematic socially. Another example that comes to my mind is Behavioral Economics, which was heterodox until recently, and have great impact in Micro, Finance and Development, but still not in Macro.
Noah has linked that site before, and discussed Saez et al at length.
You should try selecting "posttax income". You will then see that, since 2000, the bottom 50% has seen the same income growth as the top-10%, and even more since 2010.
This is the bombshell story that Noah has pointed out repeatedly. All those 2016 Bernie headlines about "no growth for the middle/bottom since the 70s" really stuck in peoples heads. The fact that inequality has been falling for two decades doesn't cause any of those raging lefties to adjust their worldview in any way. Ideology over data 100%.
You too, Renan, speak of inequality that is "problematic socially". What are you talking about? How is falling inequality a social problem? I suspect you just bought the exploding inequality narrative and haven't bothered to look at data from the past two decades, even from the website you link,.
i hate this left vs right polarization that is going on worldwide, it seens the extremes are becoming the normal once again. I didn´t see the discussion Noah did on Saex et al, but will look into. But i did give a good look at the data, i think it´s good to analyze the effect of monetary and fiscal policy in given time for each income, for instance, you can see the post GFC were horrible for the bottom 50%, who recovered very slowly, while the top 1% recovered and skyrocketed imediatly. In contrast, during the Covid, the bottom recovered first due to the stimulus given to workers and etc. and if you take into account the beginning of the series in the 80s, all you can see is the top 10% growing almost exponencially while the bottom have little improvement. So yeah, i did give a look at the data, and inequality is worring. Now, about the media and left vs right, i don´t buy that. First of all, i´m not from the US, i´m from Brazil. Here things are way worse, we have both extremes of ideology worsening society, with Bolsonaro who tried a coup d´etat and Lula whose leftist ideology and Economic misconceptions made the worst decade of Brazil´s economy in history, the last decade. So i try to see the dangers of both extremes and be balanced. Certainly the biggest problems of our times are inequality and climate change, and that shouldn´t be a question of ideology or left vs right. And, one last point, i study at a very orthodox Economics school in Rio, FGV, and i remember very well my professor of Development Economics, who did his phd thesis under Robert Lucas himself, saying that most economists agree that the current level of inequality is damaging to the economy growth, in the entire world.
"The biggest problems of our times are inequality and climate change, and that shouldn't be a question of ideology or left vs right".
Actually, calling inequality among the biggest problems of our time (or not) is absolutely a left vs right issue.
In particular, people on the right (in the US) do not see equalizing outcomes as the justified role of government. Moreover, they also tend to point out that the purported rise in inequality within countries exists more in perception than in fact.
I'll ask you again, if inequality (based on your preferred sources and metrics) has been steady for the past 20+ years, why are you mad? You will advocate having government confiscate peoples hard-earned money to fix a problem that fixed itself 20+ years ago?
Kind of funny so much of the economic data we collect was set up by people that would be considered heterodox today, that is institutionalists (the original type, not new institutionalists).
Bowles, Gordon, and Weisskopf's research program over decades on Social Structure of Accumulation Theory and empirical work on the same is work in this direction.
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 think this is right. It's worth noting that Physics is similarly a strong theory discipline (though the theory is a tighter match for the data), and there definitely are "heterodox physicists." A friend who was a physics grad student got emails all the time from people who claimed to have disproven special relativity and wanted him to join them as a coauthor. The difference is that because economists take positions on socially controversial stuff and because our theory isn't as effective as physics theory, heterodoxies are taken more seriously by outsiders.
IANAPhysicist, but it seems to me that at one point, you had an "orthodox" interpretation of quantum mechanics (the Copenhagen interpretation), and various "heterodox" interpretations as well. It seems like no one is happy with the Copenhagen interpretation anymore, but none of the other interpretations have achieved the status of "orthodoxy".
MOND is a heterodox rival to dark matter theory. Alfred North Whitehead formulated an alternative to General Relativity in 1922 that wasn't experimentally disproved until 1971.
The difference is that economics is a social science. Social science is full of rubbish, and usually they don't have a good way to get rid of it, unlike science, so you can never take social scientists views about anything too seriously. This isn't to say that it's impossible for social science to produce good insights into things, but sometimes even the obvious doesn't seem to register, for example, take Noah's series on developing countries, he basically never talks about human capital, although this is obviously by far the most important element of economic development.
Social science is about human behaviour and out understanding of ourselves isn't that great. If you can't predict human behaviour then economic predictions are a waste of time.
Noah starts the article well: economics is deeply entwined with politics. When you start arguing about what we SHOULD do (and it is socially important), not what actually IS (a useful model of reality=science) then inevitably the issue gets corrupted. Think climate change, Covid science....
Climate scientists work with models of the physical world, these models are complex things and they may include different emissions scenarios that depend on human behavior, but in general they have been proven correct.
The problem is that once you go to policy, then yeah, you're talking about what should be done, and that involves politics/ideology based on moral sentiments, and often trade-offs. There is no science that can tell you what should be done. Same goes for Covid. Science can tell you that vaccines are safe and effective, but a vaccine mandate is obviously a policy that depends on all manner of moral considerations.
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.
This is a bit of sane-washing though, right? I don't think anyone disagrees with the idea that monopolies raise prices. The idea of "greedflation" was that that sudden increase in prices occurred due to companies suddenly pursuing profits in a way they could have (but didn't in the past).
It's like if I said "the US government hiding aliens at Roswell, New Mexico." Then people challenged me on it, and I said "woah, I only meant that there's probably aliens in the universe somewhere because it's really big"
No, you've missed the point. They couldn't do it in the past, because it required demand driven inflation to start the process. But, given that, firms with market power can raise prices more than firms in competitive markets.
My understanding is that the argument is that greedflation was enabled due to the relatively unique circumstances of COVID19 and the Russian invasion of Ukraine. No aliens needed. Well, at least no non-human ones....
The article does not provide any metrics to support it's arguments. Proving Noah's original point. Also author does not once address elasticity. Her only cited example is oil prices which, come on now, is famously anti-competitive by design of OPEC.
The research that she cites has reasonably fair conclusions based on microeconomic modeling, but where is the data which supports the theory that currently industries with inflation are either colluding or have firms with too much market power?
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.
Those micro-focused heterodoxies are all pretty old, they haven't done much recently...in my view the most plausible explanation for that is that microeconomics discovered a paradigm, in the form of game theory.
Higher education is going through the "criticalism" era. Critical theories leaked out of the college of letters, are mainstream now in social sciences, and even gaining ground in the physical sciences.
On top of that, lots of ideas that have been accepted into "mainstream" micro are sufficiently large deviations from classical rational choice-based theory that they could have been heterodox, yet were adopted into use by most economists. Behavioral Econ and Econ of Identity are to me the most obvious examples of this.
My sense of why this is is at least in part that micro has better data and more agreement about how to empirically resolve disputes, so new ideas are either shown useful or shown not to be useful fairly quickly. Even with stuff like feminist econ or stratification econ (which is kind of on the borderline of "heterodox" imo), the empirical work tends to look a lot like the empirical work you'd see from mainstream schools of thought and can be judged by the same standards.
So, where would you place Keynes' General Theory? Was it, too, a marginal economics work comprised of words, descriptors, vagueness, glamour, etc.? Actually, it was. I think that great and influential work transcends your scheme. I would say the same of Hayek's "small" paper, "the Use of Knowledge in Society." I don't think your scheme would even recognize Smith's The Wealth of Nations.. Keynes was interesting. As a young man he was a math / statistics prodigy, but in order to writer one of the most important works of the 20th it just wasn't necessary. And that's probably a good thing. I'll draw on a distinction raised by the political theorist William Connolly between scholars and intellectuals. Scholars are the foot soldiers and will push the science forward incrementally, journal by journal, conference by conference, paper by paper. They tend not to move beyond the dominant paradigms and specific zones of research that define their discipline. They are "archival-centered.". Intellectuals try to solve problems and go where they need to go, including crossing disciplines, in order to get there. I don't think many practicing economists in the US university system can afford to be intellectuals. I'm guessing that Noah Smith knows that very well. Think Keynes, Hayek, Gary Becker (he pushed economics into the study of family, crime, etc.). Each was the very definition of a heterodox economist and each flubbed the math now and then, too. Thank God.
What was the status of math and statistics when Smith wrote Wealth of Nations? Doesn’t the rigorous use of math in economics walk hand-in-hand with the development of math/stats theory and the use of computers?
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 mean fundamental questions like: what is wealth?, what is money?, what is inflation? What is the purpose of increasing productivity? Why was did Adam Smith call the discipline "Political Economy"?
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.
I'm interested in historical discussions on the nature of wealth and wondered if you can point out any useful theorists. As far as my mathematical brain can work out, financial wealth is by defintion not something that is created or destroyed and I would be very surprised if someone hadn't already come to the same conclusion. If they did, then the idea was rejected and I'm interested in the arguments against the theory.
Very few orthodox economists know that their beloved American Economics Association was founded by heterodox economists, many of whom were grad students of the leading lights of the German historical school. Poor bastards [as in the original usage of being conceived outside of holy matrimony]. Oh, the irony.
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!
Thanks! As for Kaldor, Kalecki, and Sraffa, they did their math many, many decades ago. Modern heterodoxers may cite their papers, but they don't do very much original math. In particular I *never* see them try to do any rigorous empirics.
hmmm, I don't think that's necessarily true. I have examples in mind but I must admit that I am in the learning stage myself and therefore don't want to give a vague answer. I will definitely comeback with concrete examples so that a nuanced discussion takes place and both sides can learn from each other!
Maybe heterodox folks don't engage in more empirical research because economic data is currently collected on the basis of the orthodox model. It seems that it would be pretty expensive to go about collecting new types of data, and the orthodox model has long ago captured government efforts at economic measurement.
For example, Neo-Marxists would have to come up with ways of quantifying oppression or various types of oppression to gage its effect on the economy. Sounds like a tough task.
i think https://realtimeinequality.org/ provides a good one, on this terms, mainstream macro focus on agregate output and believes that growing total output is more important than spreading production equally, but looking on this timeseries, we can see that the bottom 50% in the US didn´t improve much, which is very problematic socially. Another example that comes to my mind is Behavioral Economics, which was heterodox until recently, and have great impact in Micro, Finance and Development, but still not in Macro.
Noah has linked that site before, and discussed Saez et al at length.
You should try selecting "posttax income". You will then see that, since 2000, the bottom 50% has seen the same income growth as the top-10%, and even more since 2010.
This is the bombshell story that Noah has pointed out repeatedly. All those 2016 Bernie headlines about "no growth for the middle/bottom since the 70s" really stuck in peoples heads. The fact that inequality has been falling for two decades doesn't cause any of those raging lefties to adjust their worldview in any way. Ideology over data 100%.
You too, Renan, speak of inequality that is "problematic socially". What are you talking about? How is falling inequality a social problem? I suspect you just bought the exploding inequality narrative and haven't bothered to look at data from the past two decades, even from the website you link,.
i hate this left vs right polarization that is going on worldwide, it seens the extremes are becoming the normal once again. I didn´t see the discussion Noah did on Saex et al, but will look into. But i did give a good look at the data, i think it´s good to analyze the effect of monetary and fiscal policy in given time for each income, for instance, you can see the post GFC were horrible for the bottom 50%, who recovered very slowly, while the top 1% recovered and skyrocketed imediatly. In contrast, during the Covid, the bottom recovered first due to the stimulus given to workers and etc. and if you take into account the beginning of the series in the 80s, all you can see is the top 10% growing almost exponencially while the bottom have little improvement. So yeah, i did give a look at the data, and inequality is worring. Now, about the media and left vs right, i don´t buy that. First of all, i´m not from the US, i´m from Brazil. Here things are way worse, we have both extremes of ideology worsening society, with Bolsonaro who tried a coup d´etat and Lula whose leftist ideology and Economic misconceptions made the worst decade of Brazil´s economy in history, the last decade. So i try to see the dangers of both extremes and be balanced. Certainly the biggest problems of our times are inequality and climate change, and that shouldn´t be a question of ideology or left vs right. And, one last point, i study at a very orthodox Economics school in Rio, FGV, and i remember very well my professor of Development Economics, who did his phd thesis under Robert Lucas himself, saying that most economists agree that the current level of inequality is damaging to the economy growth, in the entire world.
"The biggest problems of our times are inequality and climate change, and that shouldn't be a question of ideology or left vs right".
Actually, calling inequality among the biggest problems of our time (or not) is absolutely a left vs right issue.
In particular, people on the right (in the US) do not see equalizing outcomes as the justified role of government. Moreover, they also tend to point out that the purported rise in inequality within countries exists more in perception than in fact.
I'll ask you again, if inequality (based on your preferred sources and metrics) has been steady for the past 20+ years, why are you mad? You will advocate having government confiscate peoples hard-earned money to fix a problem that fixed itself 20+ years ago?
Kind of funny so much of the economic data we collect was set up by people that would be considered heterodox today, that is institutionalists (the original type, not new institutionalists).
Bowles, Gordon, and Weisskopf's research program over decades on Social Structure of Accumulation Theory and empirical work on the same is work in this direction.
Kaldor, Kalecki, Sraffa... These are great names, but in a sense they were all "pre-Post-Keynesian" - the hard divide hadn't opened yet.
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 think this is right. It's worth noting that Physics is similarly a strong theory discipline (though the theory is a tighter match for the data), and there definitely are "heterodox physicists." A friend who was a physics grad student got emails all the time from people who claimed to have disproven special relativity and wanted him to join them as a coauthor. The difference is that because economists take positions on socially controversial stuff and because our theory isn't as effective as physics theory, heterodoxies are taken more seriously by outsiders.
IANAPhysicist, but it seems to me that at one point, you had an "orthodox" interpretation of quantum mechanics (the Copenhagen interpretation), and various "heterodox" interpretations as well. It seems like no one is happy with the Copenhagen interpretation anymore, but none of the other interpretations have achieved the status of "orthodoxy".
MOND is a heterodox rival to dark matter theory. Alfred North Whitehead formulated an alternative to General Relativity in 1922 that wasn't experimentally disproved until 1971.
The difference is that economics is a social science. Social science is full of rubbish, and usually they don't have a good way to get rid of it, unlike science, so you can never take social scientists views about anything too seriously. This isn't to say that it's impossible for social science to produce good insights into things, but sometimes even the obvious doesn't seem to register, for example, take Noah's series on developing countries, he basically never talks about human capital, although this is obviously by far the most important element of economic development.
Social science is about human behaviour and out understanding of ourselves isn't that great. If you can't predict human behaviour then economic predictions are a waste of time.
Noah starts the article well: economics is deeply entwined with politics. When you start arguing about what we SHOULD do (and it is socially important), not what actually IS (a useful model of reality=science) then inevitably the issue gets corrupted. Think climate change, Covid science....
Climate scientists work with models of the physical world, these models are complex things and they may include different emissions scenarios that depend on human behavior, but in general they have been proven correct.
The problem is that once you go to policy, then yeah, you're talking about what should be done, and that involves politics/ideology based on moral sentiments, and often trade-offs. There is no science that can tell you what should be done. Same goes for Covid. Science can tell you that vaccines are safe and effective, but a vaccine mandate is obviously a policy that depends on all manner of moral considerations.
Thanks. I gotta say some of my best friends are economists and they’re not all bad. 😉
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/
As an example, here's a perfectly mainstream version of "greedflation"
https://theconversation.com/inflation-is-being-amplified-by-firms-with-market-power-187418
This is a bit of sane-washing though, right? I don't think anyone disagrees with the idea that monopolies raise prices. The idea of "greedflation" was that that sudden increase in prices occurred due to companies suddenly pursuing profits in a way they could have (but didn't in the past).
It's like if I said "the US government hiding aliens at Roswell, New Mexico." Then people challenged me on it, and I said "woah, I only meant that there's probably aliens in the universe somewhere because it's really big"
No, you've missed the point. They couldn't do it in the past, because it required demand driven inflation to start the process. But, given that, firms with market power can raise prices more than firms in competitive markets.
My understanding is that the argument is that greedflation was enabled due to the relatively unique circumstances of COVID19 and the Russian invasion of Ukraine. No aliens needed. Well, at least no non-human ones....
The article does not provide any metrics to support it's arguments. Proving Noah's original point. Also author does not once address elasticity. Her only cited example is oil prices which, come on now, is famously anti-competitive by design of OPEC.
The research that she cites has reasonably fair conclusions based on microeconomic modeling, but where is the data which supports the theory that currently industries with inflation are either colluding or have firms with too much market power?
Yep
“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.
Exactly. I'm simply describing how we would talk if we held the two to the same standards of success and failure.
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.
Those micro-focused heterodoxies are all pretty old, they haven't done much recently...in my view the most plausible explanation for that is that microeconomics discovered a paradigm, in the form of game theory.
Feminist econ?!?!
It's a thing.
Higher education is going through the "criticalism" era. Critical theories leaked out of the college of letters, are mainstream now in social sciences, and even gaining ground in the physical sciences.
Yes--thanks for pointing this out.
On top of that, lots of ideas that have been accepted into "mainstream" micro are sufficiently large deviations from classical rational choice-based theory that they could have been heterodox, yet were adopted into use by most economists. Behavioral Econ and Econ of Identity are to me the most obvious examples of this.
My sense of why this is is at least in part that micro has better data and more agreement about how to empirically resolve disputes, so new ideas are either shown useful or shown not to be useful fairly quickly. Even with stuff like feminist econ or stratification econ (which is kind of on the borderline of "heterodox" imo), the empirical work tends to look a lot like the empirical work you'd see from mainstream schools of thought and can be judged by the same standards.
I find it very hard to take seriously any profession that took rational choice-based theory seriously, let alone gave a Nobel prize for it.
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.
Well, in reality those are things mainstream macro hasn't always done, but which it's doing more of these days...
And I like learning about that!
Thanks
The maths doesn’t really work.
First, assume a can opener.....
Damn, I was 13 hours too late
So, where would you place Keynes' General Theory? Was it, too, a marginal economics work comprised of words, descriptors, vagueness, glamour, etc.? Actually, it was. I think that great and influential work transcends your scheme. I would say the same of Hayek's "small" paper, "the Use of Knowledge in Society." I don't think your scheme would even recognize Smith's The Wealth of Nations.. Keynes was interesting. As a young man he was a math / statistics prodigy, but in order to writer one of the most important works of the 20th it just wasn't necessary. And that's probably a good thing. I'll draw on a distinction raised by the political theorist William Connolly between scholars and intellectuals. Scholars are the foot soldiers and will push the science forward incrementally, journal by journal, conference by conference, paper by paper. They tend not to move beyond the dominant paradigms and specific zones of research that define their discipline. They are "archival-centered.". Intellectuals try to solve problems and go where they need to go, including crossing disciplines, in order to get there. I don't think many practicing economists in the US university system can afford to be intellectuals. I'm guessing that Noah Smith knows that very well. Think Keynes, Hayek, Gary Becker (he pushed economics into the study of family, crime, etc.). Each was the very definition of a heterodox economist and each flubbed the math now and then, too. Thank God.
What was the status of math and statistics when Smith wrote Wealth of Nations? Doesn’t the rigorous use of math in economics walk hand-in-hand with the development of math/stats theory and the use of computers?
Intellectuals don't get funded...except by thinktanks
Vagueness? Assume we have a can opener
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?
Well, because most of the interesting ideas have come from people outside mainstream academia, like Ha-Joon Chang.
Thanks Noah -- quite apart from the sagacity of the content, this is marvellous and entertaining as a piece of thinking and writing.
Aww, thank you...
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 mean fundamental questions like: what is wealth?, what is money?, what is inflation? What is the purpose of increasing productivity? Why was did Adam Smith call the discipline "Political Economy"?
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
Well said
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.
The next tax cut will work, I promise
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.
I'm interested in historical discussions on the nature of wealth and wondered if you can point out any useful theorists. As far as my mathematical brain can work out, financial wealth is by defintion not something that is created or destroyed and I would be very surprised if someone hadn't already come to the same conclusion. If they did, then the idea was rejected and I'm interested in the arguments against the theory.
Very few orthodox economists know that their beloved American Economics Association was founded by heterodox economists, many of whom were grad students of the leading lights of the German historical school. Poor bastards [as in the original usage of being conceived outside of holy matrimony]. Oh, the irony.
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