Do Heterodox Economists Straw-Man Mainstream Economics?

One of the most common rebuttals by mainstream economists is that critics have ‘straw-manned‘ them, accusing them of supporting policies such as wanton deregulation and environmental neglect, when they don’t. Sometimes, this is a valid complaint. Reading some heterodox books would have you thinking every economist is Milton Friedman (and even he supported some regulations, particularly in the banking industry).

The problem, though, is that this objection has become little more than a stock reply and is rarely accompanied by much substance. Similar stock replies include assertions that economics is value free, just a tool for analysis, with no ideological implications, as well as accusations of ignorance. These kind of dismissive replies lead the heterodox economists to accuse the mainstream economists of arrogance and blindness, say they are beyond help, and give up trying to communicate with them.

In fact, heterodox economics could do itself a favour by acknowledging that much of mainstream economics isn’t the kind of dogmatic stuff you find on the internet. Many economists are centre left in their views, and in most universities a fair amount of time is given to environmental considerations, limitations of models are acknowledged, assumptions are laughed at and so forth. Many policy conclusions economics comes to are also favourable: regulate oligopolies, tax carbon emissions  redistribute wealth and income. In fact, the problems economics suffers from are fairly subtle, which is perhaps why its proponents don’t see them in the same way an outsider might.

For example, a major problem is the way it is taught. You are told the area you are studying and the name of the model. You are then presented with a list of  assumptions, followed by a diagram. It misses out two points that are crucial in a science:

a) Which problem was the model built to solve, and did it solve it? Why has it survived the test of time? What are/were competing theories?

b) How do you derive the diagram from the assumptions? What exact impact does each assumption have on the analysis?

This ‘here’s how the economy works, learn it’ method tends to instil students with the feeling that they have been gifted with the knowledge of how the economy works. This is why you see so many people deride the public for being ignorant of ‘economics’, when in fact what they mean is neoclassical theory.

Wider context is also incredibly important. Though economics presents the economy as some sort of neutral, ubiquitous entity, it is in fact an emergent property of complex political and social institutions, human psychology, historical context – much of which was characterised by war and empire, areas rarely mentioned by economics – and of course, is contained in and limited by the environment and natural resources. The characterisation of the economy as an emergent property rather than an entity in its own right would be far more accurate and could potentially make economics a lot more interesting.

Then there are the numerous other problems I have covered - equilibrium models, assumptions, and perhaps most importantly, framing.

The point is that correcting these failures doesn’t mean sweeping absolutely everything away, as most of the qualitative material taught in economics does not need to be changed. However, reforming economics does mean ditching the diagrams and many of the assumptions required to derive them. It means putting capitalism in its historical context: how it came about, its flaws, why its rivals failed, rather than taking it as a given. More attention must also be paid to the history of thought: how and why different thinkers came up with their theories, which ones have been discredited and which ones have survived the test of time. Finally, extensive discussion of the failure of economics to explain the recent crisis would be a major positive step.

The problem with the mainstream vs heterodox debate is that there isn’t a debate. According to mainstream economists, heterodox economists are ignorant cranks who straw man their theories. According to heterodox economists, mainstream economists are arrogant and so deep into an ideological hole that they cannot be saved. Perhaps heterodox economists are at risk of overstating their case and alienating the people they are trying to engage – they should be more ready acknowledge the strengths of mainstream economics before they attack its shortcomings.

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  1. #1 by Mandos on December 7, 2011 - 4:06 pm

    Perhaps. I have a problem with mainstream centre-left economists. I feel like they’ve just accept the role of “exception-enumerators”. That is, they accept the underlying substructure of equilibria, etc, and then decide to identify/enumerate the exceptions, known as “market failures”. That seems to me to be a large concession. So I don’t think that the bulk of mainstream economists are moral cretins; I just think they aren’t sufficiently ambitious.

    • #2 by Unlearningecon on December 7, 2011 - 4:28 pm

      Yes that is a valid point. Noah Smith actually said something similar in a recent article:

      The whole notion of thinking of each interesting feature of the economy as a “friction,” and then of considering only one or two “frictions” at a time, has been very detrimental. For one thing, it makes it hard to develop a useful model of the economy, since the actual economy contains many, many “frictions” (so many that the “frictions” together are usually more important than the “frictionless” dynamics that supposedly “underlie” them). Also, the “one friction at a time” approach makes it very difficult to generate any alternatives to the classical “core theory” of Walrasian general equilibrium.

      Paul Krugman, Brad DeLong and Mark Thoma are examples of blogging economists whose hearts are in the right place but fall into the neoclassical trap of the ‘real world as a deviation from models’ (something I mentioned in my first post).

  2. #3 by Blue Aurora on December 8, 2011 - 12:45 pm

    I feel that heterodox economists have an even worse problem than straw-manning the mainstream – namely, mathematical aptitude. If these economists have trouble integrating and differentiating, or claim that Keynes used partial derivatives when he clearly did not use any in the General Theory, then how can they stand up to a mathematically-adept orthodoxy that is based on Subjective Expected Utility?

    Out of curiosity Unlearningecon, will you do a post on the works of Michael Emmett Brady? And can I e-mail you?

    • #4 by Unlearningecon on December 8, 2011 - 1:26 pm

      Mathematics for economics is taught in an incredibly weird way compared to normal mathematics and I think this shows as many economists – both heterodox and mainstream – are pretty bad at maths. Keynes was, of course, formally trained in maths and I believe Brady is too.

      Yes I do but I’m fairly busy at the moment so my posting will be sporadic. I am very interested in his views on the EMH and have bookmarked his papers on SSRN.

      EDIT: Never mind, I can see your email on your comment. Is this the one I should use?

    • #5 by Guillermo on December 8, 2011 - 1:31 pm

      Many of the criticisms aimed at mainstream economists don’t really have anything to do with mathematical correctness though, they are usually related to disagreements over methodology or basic features of the economy
      (e.g. neutrality of money, relevance of debt). It is certainly worrying that an economist might not understand differentiation or integration correctly,
      but I don’t believe those are pre-requisites for meaningfully debating certain points.
      I planning to follow up on some Emmett-Brady’s claims about PK economics by looking over the relevant sections of the GT that he claims
      PK economists are misrepresenting. Until then I’m withholding judgement on his work. IMO it would be helpful if he would conduct his
      debate via a blog or other proper forum instead of copy-pasting essays into Amazon reviews (I’m aware that he has some papers on SSRN). Has he ever directly addressed Paul Davidson etc. and allowed them to reply to his arguments?

      • #6 by Blue Aurora on December 8, 2011 - 2:33 pm

        @Unlearningecon: Yes, you can use that, though I’m thinking of changing to another e-mail address. But go ahead.

        @Guillermo: Yes, he has engaged in correspondence with Post Keynesian economists like Paul Davidson, or so I’ve been told.

  3. #7 by Guillermo on December 8, 2011 - 1:19 pm

    Yanis Varoufakis and Christian Arnsperger wrote an article touching on this issue in the “Post Autistic Economics Review” (now Real World Economics Review) issue 38:
    It’s well worth a read.

    • #8 by Unlearningecon on December 10, 2011 - 6:48 pm

      That is an excellent article, thank you.

  4. #9 by Lao Tzu (@isomorphisms) on January 19, 2012 - 1:07 am

    I don’t know, Post Autistic Economics struck me as a slew of heterodox essays that failed to make forward progress.

    • #10 by Unlearningecon on January 19, 2012 - 12:21 pm

      I enjoyed that essay, and no heterodox economists have really made a dent in the mainstream in a long time – I don’t think it’s specific to them.

  5. #11 by Lao Tzu (@isomorphisms) on January 19, 2012 - 1:08 am

    Very much agree with (a).

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