Sunday, 10 October 2010

Why is Heterodox Economics a Joke?


Heterodox economics isn't taken seriously by anyone else, is unlikely to be taken seriously at any point in the future, and hardly seems to take itself seriously. Why would you? Heterodox economics has a massive inferiority complex and no self-discipline.

What is Heterodox Economics?

Heterodox economics are those approaches to economics that you don't see in university textbooks, classrooms, or high-level journals and conferences, but still call themselves economics (see here for more background). Most people haven't heard of most of them at all, though the Great Recession has increased their profile somewhat. These days their practitioners are usually found outside economics departments, scattered through the other social science departments (like sociology, geography, and business), or in the case of the lucky Austrians, rightwing thinktanks. In other words, they survive in niches that are less severely restrictive than academic economics about maintaining a single official style (subjects which aren't so 'disciplined').

Heterodox economics includes a number of old schools that were once mainstream but were long ago overtaken by the currently dominant neo-classical school (but not, their practitioners insist, made obsolete), like Marxist, Keynesian, Institutionalist and Austrian economics. There are also some younger schools, like feminist and ecological economics, that just haven't managed to get taken seriously by the economics establishment (partly because they haven't wanted it strongly enough, unlike e.g. behavioural economics - see my previous post) and so remain on the fringes.

Heterodox economics thus includes a variety of quite incompatible concepts and perspectives (Marxists and Austrians!). There has been some attempt to provide a positive identity based on a supposedly shared commitment to 'realism' (cf. Tony Lawson), but this strikes many as rather shallow and ad hoc. There are however some similarities between the different heterdox econ schools: a general concern with social structure and a resulting leftish political orientation (except for those libertarian Austrians); a distaste for, and lack of ability in, formal mathematical methods; and origins in the humanities (note that almost all successful mainstream economics approaches these days originate in the natural sciences).

But heterodox economics, as the very name suggests, basically defines itself in terms of a common negative: exclusion from the establishment. Heterodox economists can't apply for jobs in 'real' economics departments because they can't - or won't - do the kind of work that's expected there (especially the mathematical tricks). They have to publish in their own specialist journals which the Thomson Reuters citation index (typically, in the academic 'market for ideas', a monopoly) doesn't count as economics and so don't receive the attention and status of mainstream economics. This fundamental 'injustice' is at the core of heterodox economists' professional lives and self-identity.

Cognitive dissonance and the inferiority complex

Since heterodox economists are excluded from official paths to recognition as economists, despite believing themselves to be successful economists, they are subject to a certain degree of cognitive dissonance: when people's beliefs clash with their real situation, their beliefs adjust to compensate, but not always in the direction of reality. They declare that they are excluded from official institutions by devious means; that mainstream economists are suppressing the truth; that mathematical economics is the devil's work; etc. In short they can come out sounding like a bunch of crazy people you would never invite to dinner. (See for examples, some of the comments to this post.)

I remember once attending an Association for Heterodox Economics conference of about 150 very lonely looking people who seemed desperately fragile and in need of a hug. The conference appeared their (only?) annual opportunity to get validation of their identity as economists. 2 weeks later I went to a conference of experimental economists. They were markedly younger, brighter, more focussed, and more confident (smug even), reflecting both a more rigorous selection process and their field's position on an inside track to reshaping mainstream economics over the next 10 years. They had no time to talk to a philosopher because they had so many interesting questions to be getting on with already (they didn't need any more) and were quite convinced of the importance of what they were doing, the glorious future of their field, and the tenure-track positions awaiting them.

But the lack of recognition also works further harm. Since no one takes their work seriously except other members of their particular tiny sub-group, heterodox economists are not subject to much open-minded review. They can't really tell whether their work is good, and is being ignored out of laziness or malice, or whether it is actually completely wrong not worth anyone's attention. They can't tell if they are intellectually bankrupt or merely insolvent.

It's the ultimate academic nightmare, and unsurprisingly it takes its toll. Perhaps this explains my observations of heterodox economists' intense emotional oscillations between tremendous hubris and deep depression (sometimes from one moment to the next), and their intellectual turn inwards as they resolutely refuse to engage with the contemporary economics mainstream that refuses to recognise them.This makes it very hard to offer any constructive criticism, since it is often seen as an attack, while the isolationist mentality leads to an increasingly erratic and dogmatic style of thinking. One finds, in short, a kind of existential inferiority complex.

Lack of self-discipline

Since heterodox economists are marooned on the fringes of mainstream academic economics, fragmented in organisation and with their members scattered through business, sociology and geography departments and even wider afield, it is not surprising that their core economics focus goes somewhat adrift, or that they take support where they can find it. So what you find on this fringe is what you always find on a fringe. A few extremely smart people doing great and important work that might one day change everything, surrounded by an enormous number of followers of extremely mediocre abilities and an unusual proportion of wingdings. I recall a paper, since published in one of the more prestigious heterodox journals, seriously arguing that neo-classical economists were all rigid autistic control freaks because their mothers weaned them too early (even their mothers couldn't love them!). Another, recently advertised in the official heterodox economics newsletter, concerned the important issue of what Marxist theory could reveal about the truth of the 9/11 US government conspiracy (discussed in a previous post).

Because heterodox economists realise they have no chance of being taken seriously they have a permanent opposition mentality. And not the 'loyal opposition' of parliamentary democracy: against the present policies, but in favour of the country itself. Many of them cheered as the credit crisis appeared and cheered louder with each further economic deterioration. On the one hand, it is easy to see why heterodox economists are so excited by disaster: it is the only opportunity they have to get any serious attention, when the stranglehold of mainstream economics on the public, academic, and policymakers' understanding of the economy is briefly shaken. On the other hand, that's not necessarily a goal - them being seen to be right - that the public can share. We'd rather keep our jobs. It also seems to discourage the academic virtues of careful and responsible analysis. As the old joke goes, 'Did you know that Marxist economists have predicted ten of the last three economic crises?' It's hard to see how people who act like this may be taken seriously in the future, once they have embraced their anti-establishment status as their own positive identity.

A way out?

This analysis may seem harsh, even cruel. But it is mainly a criticism of the style of heterodox economists these days rather than the value of their ideas. I also don't mean to imply that mainstream economics itself is perfect! Mainstream economics could be much improved by greater pluralism and an influx of different ways of doing things, if only to keep it on its toes (why didn't the neoclassical models see the credit crisis coming?). In fact this is already happening right now in the elite graduate schools and journals where the future of the discipline is really decided [see my post on Economics and the Crisis]. New approaches are appearing in the twilight of the neoclassical hegemony and competing to reshape the field for the next 20 years. They include such relatively well-knowns as behavioural, experimental, and neuro-economics, but also many others, such as complexity economics and evolutionary game theory. These are indeed exciting times for the mainstream!

But heterodox economics is in no fit state to contribute to this reshaping (see here for a similar analysis by David Colander, more politely framed). Its inward turn may make sense as a (psychological) survival tactic, but it has cost heterodox economists the ability to be taken seriously by open-minded mainstream economists, of which there are many. When heterodox economists do meet them they tend to focus on what is uppermost in their minds: telling mainstream economists that their whole approach is wrong (often confusing them with 'neoliberals'); that their mathematical orientation is stupid ('autistic'); and that they have unjustly suppressed/oppressed heterodox economics schools (although mainstreamers have probably never even heard of them). That is surely not the correct attitude to take if you really want to persuade the powers-that-be that your ideas are worth incorporating into their thinking. It may seem unfair that you are not the powers-that-be, but that is the situation you have to work with (especially if you claim to be a 'real-world' economist).

Heterodox economists must recognise that they have no a priori right to be taken seriously, but instead try to think like sellers in the marketplace of ideas who must persuade the customer to part with his shilling (or in this context, his valuable attention). They must court their possible buyers assiduously: pay close attention both to the customer's problems (not those of heterodox econ) and what's going on generally in mainstream econ (know your competition if you want to beat it); provide products in a form that meets the customer's requirements (e.g. in mathematical form); and above all, smile.

56 comments:

  1. It's a cliche but, Joan Robbinson said "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."

    Mainstream economics can only be seriously criticized on the use of its main tool. Mathematics. I agree that this is the competition and that's where they must criticize.
    Now which, from these heterodox schools, can actually do that?(I don't know what you mean as Keynsians, though). Heterodox rhetoric stands on a different ground. In every fight you must meet the opponent on common ground. It is practically a fight against a dummy opponent. You could call them the modern Don Quixotes!!

    However I have a different picture of the customer. I think the customers are the ignorant citizens/consumers. They buy the policy results; pay cuts, inflation, work instability, etc. Good criticism,from a Robinsonian perspective, should also include good explanations of the economists profession to people who are inflicted by their policy advice. From my point of view, being successful in these explanations could provide a big step to be included in the community.Of course, this also requires an ideological pressuposition, which is what some heterodox economists foolishly try to avoid. If you do not hope or are afraid to change the way people look on the economy with your ideas, then the Association should include depression pills with its conference pack.

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  2. Economic literacy is a very different issue. I hereby recommend to the public some of the excellent popular economics made fun books now available, such as Tim Hartford's "Undercover Economist".

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  3. Dear Mr Beard

    I have been studying economics, politics and philosophy for a number of decades now. Unfortunately, I have a whole raft of disadvantages in that I am not an academic; cannot decide whether economics is a science, an art or even black magic; and I do not, at this present time, possess a beard.

    The only thing I only know for sure that I know nothing. A more illustrious predecessor of those who thought thus at least ticked the third box, although Xanthippe probably told him to shave it off.

    Heterodox Economics is clearly central to your thesis here but, despite teasing your readership, you do not appear to have told us what it is. You have certainly stated what it is not but, even allowing for all the Popperian black swans one could wish to find, I could not articulate to someone else what you mean by this description.

    Even the Wikipedia article falls at this elementary fence of informing the enquirer what the basic principles are.

    It is hard to see how one may define anything at all in terms of negativity, save perhaps negativity itself, and that in itself presents a risk of an infinite regress setting in.

    I am even more intrigued as I am currently an Austrian resident and my landlord, a good friend, teaches economics at the local college. Disconcertingly, he is always asking me for my views as he appears to be labouring under the misapprehension that I actually know more about the subject than he does.

    I suppose what I am asking you for is some examples of Heterodox Economics thinking. Of course, if it is heterodox within itself then that will get us nowhere, in which case, why are we mentioning it at all?

    I hope that you can give a complete ignoramus some pointers.

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  4. As the very term surely suggests, the definition of heterodox economics is relational not essential i.e. it includes all the various schools that aren't orthodox. At present neo-classical economics occupies that space, but previously it was the Keynsians (until stagflation made them look like fools).

    If you would like a deeper analysis I can recommend John Davis' work on this. For example this piecepublished in the open access Real World Economics Review (formerly the Post-Autistic Economics Network).

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  5. Can't remember my moniker22 February 2011 at 22:17

    Thank you for that. It is an excellent paper and gave me some of the examples I was seeking, including the expected neo-Ricardianism. The origins of the approaches (the origin stories) I found particularly useful in improving my understanding. The post-1980 approximation, of two groupings, was also helpful to a layman.

    It always intrigues me that the whole concept of orthodoxy depends on a reliance that any formalised position or system can be the last word in the subject in question, whatever that might be. Naturally doctors, economists, central bankers, indeed all of us who engage, have to make decisions that impinge upon others and thus, the need for the appearance of a consistency in approach sustains the belief of others that the correct path has being taken, even ironically when that path subsequently turns out not to be the case. Pluralism appears increasingly unwelcome.

    Agree with your thoughts on Keynesianism, which was plucked dramatically from the cupboard recently by the last, unlamented Prime Minister, and now predictably we appear to be experiencing the onset of prolonged stagflation. It was merely an expedient. We have perhaps become the new Japan minus their productive part, but perhaps I should not be speaking politics here.

    For the future, the choice between the groupings, appears to me, an outsider, as problematic either way, but with the balance in favour of inward-orientation. I shall discuss this further with my landlord!

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  6. Hi,

    I want to first say that I would not adopt the same paradigm with which to look at the heterodox economists. I think there is very little point in the fundamental motivation for this post, because there is very little point in discussing the 'style' of heterodox economists or neoclassical economists, when all that should and does matter is what they have to say. I think that no matter how pitiful heterodox economists seem to be, they defy the hegemonic character of their discipline, and attempt to incorporate the complexity of the real world into economics, which is invaluable in countering the sometimes irresponsible policy that neoclassical economics engenders. I obviously don't mean this as any sort of attack, but I feel like giving heterodox economists the credit they deserve for their work and for accepting the costs of their alienated position is more important than criticizing them for something irrelevant.

    If you like, you could also read this article. It talks about how mainstream economics has become a sort of mafia which weeds out undesirable opinions and restricts the discipline. The implication is that mainstream economics is essentially a group of academics all in search of that big break where they get to influence (or basically decide) US administrative policy.

    http://www.thenation.com/article/hip-heterodoxy?page=0,4

    Thanks for posting,
    Whatsername

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  7. Thanks Whatsername. But my point is that unless Heterdox economists change their style, their ideas are not going to get the hearing that they think they deserve.

    The article you mention was was already linked to in my post, but it's a good one and I recommend it to readers.

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    1. I am completing my PhD in Economics— Are you an economist! This is incredible— I have spent times studying Dynamic Stochastic General Equilibrium Models which are Useless. Create a Model of banking without the banking sector in it. In fact, I am glad the world is not filled with people like you.... other schools must evolve. I read many papers- It so easy to set up a mathematical model, change the assumption, the variable and method, and there you go published and then you can get tenure----- Bad incentives

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    2. Your comment is both charmless and illiterate. This essay is not an endorsement of orthodox economics or a critique of pluralism.

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  8. I'm not sure which heterodox folks youv've been reading....there is extensive use of mathematics in post keynesian, sraffian, and Marxist thought. The only school that rejects mathematics is the Austrian school, but they are arguably an extreme rhetorical right of the neoclassical school.

    I do agree that the style of heterodox economists could be better, but most of the folks in heterodox departments have the mathematical ability to publish in mainstream journals...after all, most of them are trained in mainstream schools anyway.

    As a side note, I like your joke above!

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  9. Are heterodox economists more mathematically oriented than I say? Maybe.... but mainstream economics' fondness for formal modelling is certainly a central criticism of theirs. e.g. The Post-Autistic Economics movement seems obsessed with that

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  10. I would definitely agree. As an aspiring heterodox economist, I know I gnash my teeth to better understand the complexity of the math so that I can be a part of the conversation.

    That is generally where my "critique" comes from; the math isn't a problem as such, but the hegemonic control of economic history and utilizing theories (for policy) that are supported more by ideology than statistical analysis and situational or cultural understanding.

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  11. This is a well intended article but because it lumps all the heterodox schools together it misses the message that each of the schools are trying to get across. If you take out the Austrians, what you have is a very heavy critique of capitalism which tears down the many half-true, or blatantly false assumptions of neoclassicism (perfect competitition, complete information, etc.). In fact, if you compare heterodox schools by analytic rigor, instead of mathematical rigor, you will see a much higher degree of complexity: use of system dynamics, advanced statistics. The claim of realism comes from the idea that humans are more complex than the traditional "economic man" and that they exist in time (equilibrium models don't include that variable). There is danger in rejecting heterodox schools because huge chunks of knowledge are cut out when economics is reduced to equations and numbers - concepts like uncertainty and conspicuous consumption fall through the cracks.

    We also need to look honestly at why neoclassicism is the dominant paradigm in economics. Looking at history, it seemed to make sense to use that approach post-WWII because of full employment. Also the collapse of Bretton Woods in the 70's along with stagnation encouraged moving away from the Keynesian perspective (although that was Hick's IS-LM Keynesianism, not the post-keynesian focus on the ideas of John Keynes). Looking at it from a purely incentive perspective, it makes much more sense for academics to continue studying in what paradigm they were taught in - their reputation and their huge investment in human capital would be at risk. Also, consider who is in power: is it not those who benefit from the current capitalist system? Wouldn't they like to retain that system? Wouldn't they like to have an academic discipline solely devoted to defending the system that keeps them in power?

    These are all important things to keep in mind and they certainly should suggest that heterodox economics deserves a less cavalier denouncement and a much closer look.

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    1. Spot on. If, as PB admits, heterodox economics is a relational field (i.e. defined by what it is not) then he would do better to avoid crass generalisations about what it is. This article rather reminds of discussions of 'postmodernism' in the 1990s.

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    2. I don't see your point.

      I'm focused on how heterodox economists make their contributions, not on content.

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  12. I find your characterization of this extremely diverse field to be shamefully superficial and pretentious.

    Today's mainstream theories were themselves once new and rebellious "heterodox" ideas. From Smith to Ricardo to Keynes, the study of economics has been a continuous revision of mainstream theory. Without this open minded approach, there would be no study economics today at all.

    Heterodox economics is not a joke. It's a continued step towards revising the current monetarist-keynsian mainstream, that, if you haven't noticed, hasn't served too well for the last 70 years. It's various schools may be flawed, and should be open for criticism, but it's through this inquiry of all sides that progress is made.

    Economics is a SCIENCE after all, wherein professionals objectively critique and propose theories and models to support or challenge the status quo. Without this persistent challenge and revision, the world would still be thought of as FLAT, after all. Shutting your ears and throwing a fit when you hear that some wish to study outside the traditional economic regime is nothing short of bigotry.

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    1. Your historical evolutionary model of science points the wrong way. In your metaphor it is the heterodox economists like Marxists and Austrians who are the Flat Earthers, their ideas condemned by history but still unaccountably turning up looking for jobs at university physics departments. The burden is on them to show they have something worth including.

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    2. Have the Marxists or Austrians ever been disproven? No, they've been merely cast aside for political, not economic reasons. And you havnt criticized either school's theory at all, but lumped the heterodox schools of past and present and labeled them as shit.

      Also, I wouldnt say that such different theories can't be compatible. Math isn't what ultimately drives economics, it's the social study of people and the exchange of goods they create. Alfred marshal fucked it all up when he renamed the field "economics" from its original name "political economy" and we've been stuck in that mathmaticaly centered unquestioned mainstream ever since. Mathematics only works within a chosen school of theory. Economists need to drop their god complex and recognize that "To create, you must first question everything" -A. Einstein

      For example, I recognize pieces of validity in both Marxian and Austrian schools and integrate them quite well with each other.

      Because if you look at economics carefully enough and through the right apolitical unbiased lense, you can start to develop beautiful and complex theories of your own that intertwine the activities of markets with your philosophies of good and humanity.

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    3. Why should contemporary economics departments include Marx's outdated disproven ramblings? Did his science of history get anything right? It's as ridiculous as expecting philosophy departments to teach Ayn Rand.

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  13. This is more an opinion piece writing off heterdox because they do not have the right messengers. It would be much more useful if you offered a constructive critique of what ideas you did value with heterdox, as there a so many different ideas, then putting them all in the too stupid basket.In the end, you put yourself in the same basket for not offering anything collaborative. You are just ranting.

    For the record, the fundamental shift I am working in are no-cost currencies. Take out the power of money to validate identity, and it becomes the tool for innovation and progression it was meant to be for, not selective innovation that helps the few while destroying everything else. No pint making moeny if there is nothing to buy.

    At least I offered an idea. What did you do?

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  14. I think you will find that I did make some constructive suggestions about how heterodox economists should make their contributions if they want to be taken seriously. Perhaps you might consider them in your own rhetoric.

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  15. If heterodox economics is a joke, orthodox economics is a baroque fairy tale. Its mathematical rigor is futile - intricate equations in the service of bizarre fundamental errors. I labor in a field (epilepsy research) that has similarly fallen crazy in love with its models. For several decades now, everything that has ever been found to provoke a seizure (excitotoxins, cholinergics, electricity, intracerebral Fe, Co, botulinum toxin, etc.)has been touted as a model of epilepsy. At conferences, intricate technical discussions of the many pathological sequelae of many unnatural seizure-provoking brain insults typically support the insight that epilepsy fundamentally boils down to an imbalance of excitation and inhibition. Despite the apparent Duh-factor, this insight is probably wrong. It's not surprising that when you study it by flooding a brain with toxins that block inhibitory synapses or stimulate excitatory ones, epilepsy looks like an imbalance of excitation and inhibition. Precious few epilepsies are caused by electrical stimulation of discrete brain regions or intoxication with kainic acid or pilocarpine, and these laboratory manipulations may have very little to do with epilepsy.
    Like neo-liberal economics, this hasn't been completely unproductive. Despite the faux insights into mechanisms of epilepsy and fanciful claims about the mechanisms of anti-epileptic drugs (like most CNS drugs, these mechanisms are in fact unknown) a lucky 70% of people with epilepsy can get symptomatic relief from about 2 dozen drugs now on the market. But most people find the drugs unpleasant and they must be taken indefinitely. There is no way to prevent epilepsy, and there is no cure. My shame about this state of affairs would be more devastating if I could not point to economics as a field mired far deeper in fantasy for far longer, and with similar dire consequences. Many of the assumptions incorporated into neoliberal economic models are not only unrealistic, but anti-realistic. No market is populated by rational maximizers with perfect knowledge of the future consequences of their actions. Most of my market decisions are made on the basis of information that I know to be incomplete, inaccurate or deliberately misleading. More fundamentally, economists long ago adopted an equilibrium formalism that is singularly inappropriate to their field. Equilibria exist only in closed systems, and there are few systems that appear less closed than an economy. Economies are immensely complex dynamical systems that doubtless have stable states that might look like equilibria to those who don't realize that equilibrium is not possible. This probably explains why I have lived to see a number of circumstances in which the economy has behaved in ways thought to be impossible (eg. 1970's "stagflation"). Rather than questioning the fundamental validity of their theories, orthodox economists blithely took advantage of the fact that ANY data can be fit arbitrarily well using a sufficient number of parameters. Models were "fixed" and continued to work until the emergence of the next impossibility.
    Models should simplify reality, not distort it. The difference between the bizarre assumptions of orthodox economists and the chemist's fiction of an ideal gas are stark. The chemist takes advantage of the fact that the importance of intermolecular forces are minimized in a gaseous state and can be neglected for many purposes. In most cases, deviations from ideal behavior are small, and theory can account for any deviations that are observed. Orthodox economists are not known for rigorously assessing the reasonableness of their "simplifying" assumptions or examining the sensitivity of their models to serious violations of their assumptions. The heterodox economists who now struggle in academic isolation to put their discipline on a scientific basis are the field's only hope. Orthodox economics is barren.

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    1. Marvellous comment. Yet the fact that neoclassical economics is broken does not mean that heterodox economics is in any position to save economics [previously]

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    2. So, finally a 'real' scientist could shut you up because you couldn't understand a word of what (s)he said. This is what happens when you aspire to belong to the elite group of 'natural' sciences even as you look down upon 'social' scientists!

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    3. The unintelligibility of the natural sciences seems somewhat licensed by their predictive success. The social sciences don't have that excuse. True.

      On the other hand, I don't see that heterodox schools are more intelligible than the mainstream. Marxian economics for example, despite its claim to be about how the world really is, hardly fits with common sense intuitions and hardly provides easy to follow arguments.

      All scientific schools begin from a particular view of the world that is relatively easy to grasp. But they necessarily develop a great deal of complexity in being properly worked out. We need that complexity because the world itself is very complicated, and the social world is much more complicated than the natural world. Only high school teacher and charlatans will tell you that genuine scientific explanations are simple.

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    4. Yea, That underlying simple concept is called a base case in an induction. Got it. But do me this one favor before you think about writing a rant again. If Marxism is so rediculous and dated. Then next time site instances from Das Kapital as to why. Maybe when u give Exact and Direct examples will anybody Orthodox or Heterodox actually give your pissant article any real time. This article is fluff. I can't believe people are bothering to entertain your BS. You have claimed the Heterodox need to carry a more preofessional angle. Give me an example. Is Wray's MMT not good enough for you? Does Richard Wolfe rub you the wrong way. Cause frankly, all I see is a general snobbery thrown in the face of interdisciplinary approaches. Infact do me a favor and start by explaining to me what a proof by induction is Mr Math Man. Then maybe we can get the ball rolling on some deeper discussion. Dont wiki it. I want a real example in PROOF Form. Give me that please and thank you. Maybe I am an ogre but im an ogre looking for improvements in econometrics myself and your unwavering Glen Beckesque stock in the Orthodox doesn't do it for me. Sorry Bud.

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    5. It is this kind of earnest self-caricature which makes heterodox economics a joke. And that's a pity, because, as my actual post argued, heterodox economics has much that the rest of economics could benefit from.

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  16. The definition of heterodox economics (i.e. that which is not orthodox or neoliberal) makes it difficult to explicitly argue its prospects for saving the field. One can, however, glibly assert that if it is the dominant school of thought that is broken, it is ideas and methods from non-dominant (heterodox, by definition) schools that are most likely to repair the field. More seriously, if there is a theme that seems to unify many diverse heterodox economists, it might be that a separation between politics and the "science" of economics is unnatural, and that the field could benefit from a step back to its origins in political economy. This makes sense to me. The quicker economists can back off from the notion that "unfettered" markets are global maximizers and that we should just sit back and watch the magic as the "perturbed" market settles into its optimal-by-definition equilibrium state, the better off we will all be. In my view, the fundamental question that economists should be asking is how to use market mechanisms in the service of essentially political goals such as prosperity,stability, equality, liberty, etc. There are strains of heterodox economics that could potentially help build a theoretical framework and rigorous methodology in support of such a program. A number of (by definition) heterodox economists have abandoned the ridiculous equilibrium formalism to take a dynamical systems approach to analyzing economic phenomena. Others, dubbed econophysicists, appear to be making use of insights and techniques derived from fields like thermodynamics and statistical mechanics. Still others borrow from ecology. Most of these cannot be said to represent a retreat from mathematics - a desire of many heterodox economists - but the mathematical tools do not seem so obviously ill-suited to the tasks at hand.

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    1. Yes, the economics mainstream is abuzz with new ideas brought in from the sciences. But the collection of self-described heterodox schools, like the Marxists and Austrians, aren't part of that.

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  17. Hmmm...I'm not sure I understand why Austrians are regarded as heterodox, or what would make them self-identify as such. The dogma they adhere to seems to be pretty similar to that of mainstream economics. What exactly separates a prototypical Austrian, say Hayek, from the mainstream? Do Austrians actually have difficulty publishing in mainstream journals? Marxists are clearly outside the mainstream. While I'm sure I find Marxist analyses of just about anything as painful to read as you do, I am not sure that their contributions are any less valuable than those of mainstream economists. I hardly have my finger on the pulse of mainstream economics, but I haven't heard anything to suggest that it is "abuzz" with any new ideas. With regard to the interest of mainstream economists in new ideas from the sciences, my impression is that their interest is pretty much restricted to niche tasks like picking stocks, and does not extend to any uses that might challenge mainstream orthodoxy. Because they ignore or deny the standard unjustifiable assumptions of mainstream economics (the ones that essentially invalidate all the conclusions of mainstream scholarship), economists who put these techniques to important uses generally cannot publish in prestigious mainstream economics data. This sort of work is more often found in physics journals or in heterodox journals that have little impact.

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    1. I'm afraid your impression is out of date. It sounds like mainstream economics in the 1980s. There's experimental, evolutionary, complexity, behavioural and neuro-economics and yet others all competing to transform the future of the field.

      By the way, Austrians do think they're radical, and do feel discriminated against, to the extent that they are excluded from mainstream academic respectability. The public's impression is different, of course, since the political right finds their work convenient to refer to.

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  18. It is quite possible that you are correct about the currency of my impression - the economics text that most recently offended my sensibilities has a mid-80's copyright date. It is equally possible that we do not understand "mainstream" in the same way. I am at least vaguely aware of all of the non-neoclassical approaches that you mention. I remain skeptical, but open to persuasion, that they have significantly impacted mainstream economics. What is most commonly taught to Econ students at the undergraduate and graduate levels? I thought that Samuelson's textbook still dominates introductory curricula. Do they learn about the rational "homo economicus" and bizarre equilibrium theories; or do experimental, behavioral, complexity, neuro- economics, etc figure prominently in their education? Is work from these fields that does not pay homage to the standard set of otherworldly assumptions commonly published in the prestigious economics journals in which ambitious academics strive to publish? In general, how is serious deviation from neoclassical orthodoxy greeted by peer review for funding/publication?
    As our conversation does not appear to have generated much interest (pretty much the point of a blog), I will thank you for your polite attention, and maintain silence until someone else weighs in.
    --cheers

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    1. At the research and publishing level non-neoclassical schools are really making their mark. They have their own journals (included in the 'economics' index), conferences, chairs, research institutes, and lots of media nad government attention.

      Yet you are right that this is only slowly getting into the undergraduate textbooks. Econ 101 is still neoclassical in most universities, I believe. But that kind of delay is normal. e.g. Biology textbooks still teach the 'new synthesis' account of evolution, despite the field being in flux.

      In any case, my perception is that graduate students are moving very quickly to these new schools since they see that is where the future of economics and their careers lies.

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  19. Heilbroner called heterodox economics 'the economic underworld' and traces it to the very beginning of the academisation of economics in the mid-19th century. It is the shadow of respectable academic economics and always has been, because it insists on trying to ask questions that are too big or too awkward for the academy to address.

    What is capitalism? Where is it going? Is there something better? What justifies property? What is a just price? Where does value come from? What determines who gets what? What is the place of the economy in the human condition? Who are we as economic agents? And so on.

    Henry George, Marx, Veblen, and so on were all asking these kind of big questions. There can never be space for them within the pettifogging bureaucratic pedantry of respectable academic life

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  20. I agree that there is a strain of the kind of attitude you are talking about in "heterodox economics," specifically in journals like the Journal of Post-Autistic Economics and the like. But I think the whole idea of heterodox economists needing to "sell themselves better" is kind of flawed. Let's be honest: there isn't a huge market for academic economics of any kind. Even the "big" econ journals are filled with articles nobody cares about or reads. I think one reason why economics as an academic discipline is in a specific rut is because, unlike highly mathematical papers authored in a field like physics or computational neuroscience, the highly-elaborate mathematics found in today's economics papers generally don't have any potential application nor do they tell us anything about the world. You can say that this isn't the job of economics i.e. to tell us about how real economies actually work. But then what is the point of all the technical mathematical work if you are still operating on assumptions like perfect competition or perfect rationality? I also think you underestimate the mathematical proficiency of the "heterodox" economists, at least the good ones. Look at the work of guys like Duncan Foley, Edward Nell, Anwar Shaikh, Luigi Pasinetti. No, that's not an exhaustive list in any sense; those were the first four names that jumped to my fingers in the 10 seconds it took me to complete the list. These are all men with mathematical proficiency and they do use mathematics in a lot of their published work. But simply being able to master mathematics seems like a pretty shallow measure of how good of an economist you are. Adam Smith wouldn't get published today. Nor the kind of work in Keynes' General Theory since the math included is (oh no!) only simple calculus. But all this is really besides the point. I don't think that heterodox economists will ever be able to "sell" their ideas. Not as long as orthodox economics remains the perfect business opportunity for a slew of failed pure mathematicians who have no intention of ever understanding how real economies work. You point to more successful "alternative" economics and that is a good point for a number of reasons; 1) It indicates that the only real challenge to orthodoxy can come from highly mathematical (or statistical) approaches and 2) Even if these approaches receive some kind of acceptance, they are basically only used to augment the existing neoclassical textbook theories. Game theory is now being used a lot to study oligopoly. Well, that's cool and everything (and has a cool name) until you actually take game theory and start to see how complicated it gets to model even the simplest of multi-period dynamic games. It's a good approach, but again, it has very limited use in relation to how real economic decisions are made.

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    1. Great comment!

      Adam Smith was a professor of rhetoric. I'm pretty sure he could adapt.

      Actually, the newly mainstream non-orthodox schools are changing the character of economics. For example, studying oligoply in the first place. Behavioural economics, in my opinion, sneaks into mainstream economics by putting its psychological claims in the right rhetorical (mathematical) style, but is ideologically revolutionary because it dethrones the sovereignty of the rational agent [previously]

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    2. *This is the same Anonymous who posted the comment you replied to.

      I want to open this comment by referring you to a great panel discussion on heterodox economics that includes a few of the people I mentioned in my first post:http://www.youtube.com/watch?v=I-gPi18gp0c
      It is very long (2 and a half hours), but I would encourage you to at least check it out if you want to hear from some prominent economists outside of the orthodoxy.

      It's interesting to note that one of the panel members (Christian Proaño) does advocate an approach similar to what you are talking about in your post; he talks about encouraging heterodox economists to master the language of contemporary economics (for instance the DSGE model) as a way of using that framework to explode the problems with the orthodox approach. But as others on the panel point out, this is very difficult because eventually there has to be some kind of reductionism at work; you can do something like take the textbook-accepted Solow growth model and adjust it to incorporate things like class dynamics, but what does this actually accomplish? For one, there is going to be a kind of reductionism at work because you are, in a sense, trying to quantify something like class dynamics. The other issue is that this new model, which is supposed to explain long-run economic growth, still has no place for effective demand. An implication of the Solow growth model is that technological progress drives economic growth in the long-run and that shortfalls in aggregate demand are only short-run problems. This is a serious issue because it does have important policy implications and you can see this kind of thinking in ill-advised austerity measures that only serve to worsen depressions.

      With respect to Adam Smith.. Perhaps he "could adapt," but I think it is important to note that he, first and foremost, considered himself a moral philosopher. The Wealth of Nations is deeply connected to the virtue ethics embraced in his Theory on Moral Sentiments. Obviously, this is all pure conjecture, but I don't think Adam Smith would even be interested in solving the kinds of problems that normal economists solve today because his economic philosophy is, at heart, an extension of his moral philosophy with an emphasis on practical public policy. I don't think he would be content with the mere puzzle solving activities of normal economists today. But this is besides the point. My point was that a work like the Wealth of Nations is an important work of economic theory, but it isn't written in the language of contemporary economics and it wouldn't be considered of value, despite the richness of its content.

      Studying oligopoly isn't exactly new, but you are correct in that non-orthodox schools had a hand in bringing about the changes in the first place. But the entire reason that "modifications" like imperfect competition or imperfect information needed to be made in the first place is because of the orthodox insistence on modeling for the opposite: perfect competition and perfect information. Does it not seem ass backwards that something like dethroning the rational agent is to be considered some kind of triumph? Or that it has taken the next new fad in economics (I don't mean this in a bad way) like behavioral economics, to give validity to the idea of imperfect decision making? Because these ideas have been entertained by the heterodox schools since their inception. In reality, they were starting from a far better position, whereas neoclassical economics has so much work cut out for it because of how tied down it is to completely unreasonable assumptions.

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  21. You don't even know what heterdox economics is. If you think Austrian school is heterodox (yes wikipedia is wrong, OMG!!1111) you know nothing about economics

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    1. The Austrian school isn't part of orthodox academic economics, any more than the Marxists, etc. Therefore, logically, it must be heterodox.

      Austrian economics is usually included in lists of heterodox economics schools, such as here. Heterodox economists are members of the Association for Heterodox Economics, and attend their conferences, as I have seen for myself.

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    2. proper definition of heterodoxy means accepting that distribution is exogenous, and prices do not reflect relative scarcities, and that output and employment are demand determined in the long run, both positions that the Austrians would not accept..

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    3. You provide no justification for your definition.

      I understand that you intensely dislike the Austrian school and don't want them in your club. But that's not a good reason to try to change the meaning of words. (In fact it reminds me of the foundational heterodox economics complaint that mainstream economists use the definition of 'economics' as a weapon to exclude approaches they don't like without having to bother disproving them.)

      You are still free to argue that Austrian economics is intellectually bankrupt and mainly sustained by funding from right wing political institutions, etc.

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  22. If you knew nothing about heterodox economics before you read this blog, you know less than nothing now.

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  23. This is very interesting! Though also very vague.... the main problem is that neoclassical economics is in many ways subject to the same type of critique you are offering here....to say that it is based in the natural sciences? What do you mean by this? Neoclassical economics is based within the framework of methodological individualism, which assumes that people are rational, completely self-interested being with perfect information about the environment in which they operate...suggesting that they will always be capable of choosing the choice that maximizes their self-interest, and by extension (perhaps paradoxically), the entire welfare of society. This is plain vanilla neoclassical economics. On the production side, the main components of macroeconomics that we assume as "modern" or "mainstream" are in fact based off the work of early economists like Keyne's General Theory!! The Cobb-Douglas production function is what we still use today, developed at the beginning of the 19th century! The point is...even the neoclassical model is in fact itself heterdox if you think about! From Adam Smith's very simple outline in Wealth of Nations, this view has adopted fringe discoveries time and time again, simply utilizing the ones that are deemed "mainstream", largely now due to the heavily political nature of economics.

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  24. The framework is just so much more arbitrary than you make it out to be....the great things economics has offered us....the law of demand, elasticity, decreasing marginal returns, the conditions of competition, externalities, social welfare, profit maximization MC=MR=P, Cobb Douglas, GDP, HDI, Technological Productivity Factor...these are the great things we need to praise within the tradition...and they have nothing to do with the political "free-market" economics of the neoclassical school today. Look at what is happening....neoliberal/neoclassical predictions and solutions are failing... Capital is replacing labor, inequality is shooting up, concentration of capital and high-tech service industries, environmental degradation, austerity....how can you say that the current trend of traditional economics is the end all be all?

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  25. Heterdox economics at the very least offers a perspective from outside the methodological individualist, rational actor model...and should be appreciated for what it offers...insight into the structural inconsistencies of the current system. Ignore it all you want.... there are serious contradictions within the current economic tradition that need to be corrected. And the problem isn't with the math my friend, these descriptive models always behave perfect on paper that is, but with the real application of the neoclassical foundation. For further insight into this topic I will recommend several authors. I respect your opinion, but I also ask that you keep an open mind and urge you to learn more about heterdox economics! Karl Polanyi- The Great Transformation. Shumacer- Small is Beautiful. Galbraith- Affluent Society and American Capitalism Heilbroner- The Wordly Philosophers and obviously Wealth of Nations, Principles of Political Economy and taxation, Das Kapital, Principles of Political Economy (Mill), Principles of Political Economy (Malthus), but at the very least PLEASE read the classics.... what we are taught the very first economists said is actually very very different from what they actually said...Thank you for your post and for the stimulating intellectual discussion that has taken place below... I am a student of Economics and have studied both Classical and Heterdox Economics extensively!

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    1. I'm afraid I don't understand how your comments relate to my post.

      Neoclassical economics is orthodox just because it is, for the moment, the paradigm of the academic economics establishment. Like the doctrine of the trinity is in the Catholic church. If heterodox economists want their school to be influential in that way then they have to engage in persuading mainstream economists to take them seriously. It is not enough to convince yourself that you are right.

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    2. Well then I believe you are weighing in on an apparent tension between "mainstream" and "heterdox", when you know little about the details of the positions behind them. If you could study the ideas proposed by both sides you would see that mainstream's popularity and acceptance are based not on a more correct or accurate description of human behavior and societal organization, but because of vested interest and a newly assumed political nature within economics.

      The paradigm you speak of, is for the moment, is staunchly defended by those who have a lot to lose by admitting they are wrong.... so it is interesting that you place the need for change on the heterodox side, rather than the classical side. Once again I am confounded by encountering statements like "Heterodox Economics is Joke", when frankly, it is people's understanding of true economics that is a joke. Writings and opinions on economics can therefore be reduced to poorly disguised political opinions and assumptions. Good day to you sir.

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    3. Yes yes. It's all a conspiracy and everyone who disagrees with you is an idiot.

      That's what the heterodox economists have been saying since they began in the underworld of 19th century economics (as Heilbroner put it). That rhetorical strategy hasn't worked yet.....

      (BTW what would it take to persuade a heterodox economist - a Marxist, say - that he was wrong? Don't they equally have a vested interest in maintaining that their life's work has been worth something?)

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  26. I didn't say that haha but perhaps my response was rather stereotypical...I think you will find that all economists (mainstream or heterodox) all share a certain frustration with non-economists haha. Though it is equally cliche of you to cleverly label anyone who digresses from the established norm a conspiracist. I was merely referencing your desire to boldly label an article "Why Heterodox Economics is a Joke", while you base your critique from a non-economic framework that has mainstream as rigorous, based in "natural science" (wtf?), and essentially "right", while heterodox is undisciplined, non-rigorous, and essentially "wrong".

    What I am trying to impress upon you is that economics is not a natural science, and therefore there is no approach that is the "right" one. Mainstream is based on a specific assumptions that lead to specific conclusions, which posit specific actions and organization. Heterodox approaches are in turn based on different assumptions that lead to different conclusions, which end with different ideas about action and organization.

    There is no inherent reason why mainstream is the current paradigm other than it is the school of thought that currently controls the institutions which dictate what the paradigm is... i.e. the assumptions it makes are not inherently better or more accurate than the assumptions a Marxist makes.

    You reference to Heilbroner is interesting because he actually points out this arbitrary occupation of the "norm" in economics... he in fact outlines why this occurred..."Hence the Victorian boom gave rise to a roster of elucidators, men who would examine the workings of the system in greatest detail, but not to men who would express doubt as to its basic merits or make troublesome prognostications as to its eventual fate." (156) Prior to this period, there was no such thing as heterodox simply because economics as a discipline included the practice of challenging the assumptions of the models that were employed. It was only after this period that the practice was labeled "heterodox" and done away with...


    To respond to your question about a Marxist.... I would say that by nature, true Marxist economics isn't really interested in offering a normative approach, but rather seeks to analyze the assumptions of classical economics in a way that underlines the inconsistencies with the model. You can't really be a "Marxist" economist without also being a "classical" economist... they go hand in hand. Marxist economists learn and study the classical model, and then offer a further level of analysis that goes beyond what neoclassical economics is interested in doing. There is not the same vested interest in maintaining their life's work because the approach is not interested in establishing a model, defending its assumptions, and then making sure no one deviates from them... but rather a dedication to a specific framework of analysis. In that, I would believe it would be very difficult to persuade a Marxist that they are wrong....but at least they are willing to challenge the assumptions haha....

    I would also go to say that today, despite how much they are quoted, even the approaches of early Economists like Smith, Ricardo, Malthus, and Bentham would have a serious problem with the way neoclassical economics attempts to portray itself as immune from critique....even from a traditionally classical perspective such as this (i.e. basic conditions of competition) the neoclassical model's mainstream position is very strange. This is a useful starting point for people like yourself who don't like heterodox approaches. Just compare what Smith's ideas and conditions were for working capitalism with the actual practices of the neoclassical/neoliberal institutions of today.... I think that really underlines how arbitrary mainstream and heterodox labels are.

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    1. The surprising thing about modern economics is not that it excludes 'undisciplined' underworld economics, but that it became dominated by a single orthodoxy (neo-classical) whose hegemony peaked in the 1980s. But the mainstream of contemporary economics is lively and broad, if you would care to look.

      Just because mainstream economics is criticisable does not mean that it is all a failure. Just because it proceeds mainly through models (which are always false, but may be useful) and so makes those famous false assumptions doesn't mean it is any less scientific than the hard natural sciences (with their theoretical paradigms). Furthermore, just because heterodox schools are dogmatically assertive of the Truth of their theories does not make them either true or useful.

      I'm all for pluralism, for bringing multiple informative perspectives to bear on real world issues. I think the complexity of the subject matter of the social sciences (which is so much greater than for e.g. physics) requires no less. But for heterodox schools to contribute to that they really have to stop whining about how unfair academia is, drop their pretentions to Ultimate Truth, and engage positively and civilly with mainstream economists.

      Otherwise, heterodox economics will remain a joke, like Ayn Rand in philosophy.

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  27. And why should one take the opinion of this essay seriously?

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    1. If you already took the trouble to read this essay, it doesn't seem to require much further of you to consider for yourself ("take seriously") the reasons and arguments provided in support of its claims.

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  28. Actually rather enjoyed the read, nothing quite like a good rant. I'm not an economist .. I'm an organisational behaviourist who got off to a roaring start by rubbishing a hundred years worth of leadership theory ... and I'm not finished yet (having identified what was wrong, and why - at undergrad and postgrad - I'm now expanding and extending my research in order to figure a workable solution - PhD).

    I think I veer towards heterodoxy although perhaps in its subtler form ... I'm in the social sciences which is an absolute mire of epistobabble ... indeed refusing to toe the line in regard to mixing paradigms seems to automatically get you sent to the Naughty Step ... even when the boundaries seem to serve no useful purpose - is it 'real' or is it 'socially constructed'? quite honestly I don't give a monkeys ... if it supports or constrains, mediates or moderates, and directly or indirectly impacts on behaviours ... then it's 'real' enough for my purposes ... but then would say that .. I'm a dissident. :)

    Fun original post, thanks.

    Ryan James Curtis, Cheltenham, UK

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  29. The mainstream (neoliberal) establishment failed to see the Great Moderation's end. These economists predicted a "good future" right before the financial crisis of '07 hit. The fact of the matter remains that conventional wisdom will always be wrong - for as socio-economic contexts evolve and change, previous assumptions and rules become null and void.
    Mainstream economists DO NOT understand double-entry bookkeeping. They DON'T understand how the banking system works under a free-floating nonconvertible fiat regime. They don't know that loans create deposits. They don't understand that QE is NOT money printing; that it doesn't create new net assets within the economy. They don't understand what money is, the purpose that public debt serves, and the purpose of taxation. They don't understand that fiat money is tax-driven money. That there's no such thing as apolitical money. They don't understand that unemployment is a monetary/macroeconomic phenomenon - a government policy choice. They don't understand that governments (currency issuers) are NOT households.
    Mainstream economists are simply preachers of religious dogma. Their basis is largely ideological, and most unscientific vis-a-vis their lack of understanding of the modern monetary system. The only heterodox options that show promise and cohesion between empirical reality and theoretical framework are Chartalism (MMT) and Postkeynesian thought.

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  30. Maybe if top economists knew how to program an Excel spreadsheet before they pontificate on sovereign debt the discipline would be taken more seriously.

    Methinks heterodox economists is not the problem.

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