Visions of Mainstream Economics: A Response to Richard Nelson and Jack Vromen

Abstract

I am very grateful to Richard Nelson and Jack Vromen for kindly commenting on my Economics and Utopia and for making such thoughtful and interesting remarks. Both authors raise several important points, but for reasons of space I shall have to confine myself to those that I see as most important. It is interesting that many of their points concern the state of modern economics. Both Nelson and Vromen pick up one of the main themes of Economics and Utopia: that mainstream economics is limited in its capacity to appraise differences between different types of socio-economic system and variations within types. They do not address other aspects of my argument in that book, concerning for example the possible futures for capitalism itself. Vromen poses a number of questions or criticisms and I shall answer these in the first section. Both Nelson and Vromen discuss the state of modem economics and the degree to which it has failed to address some of the big questions concerning capitalism and its future. I discuss their arguments in the second section. In the third and final section I add some remarks of my own concerning the general state of the social sciences, building on some of the more general arguments concerning the future of capitalism that I raised in Economics and Utopia. RESPONSES TO VROMEN I find myself in agreement with much of what Vromen writes. For instance, when he argues that it is important to distinguish between variety in context and variety in substance, I concur without reservation. He also raises some important questions concerning my use of the principle. I agree entirely that, as I have defined it, it refers to impurity of subsystem, and it cannot be transferred without modification to questions of impurity of motive. Vromen questions whether mainstream economics is either an attempt to erect general economic principles applicable to all economic systems, or a more exclusive reflection of a market-based economy. He detects a possible contradiction in my own view when he asks: how can Hodgson maintain at one and the same time that the scope of mainstream economics is not limited to any particular set of socio-economic systems and that its scope is limited to socio-economic systems in which and figure prominently? I welcome the opportunity to respond here. In my view, mainstream economics (especially since Lionel Robbins) is preoccupied with an universalist attempt to erect general economic principles applicable to all economic systems. But this attempt is largely a failure. Part of the reason for this failure is that all economic history is survey through conceptual lenses that have their origin in one type of system only: market society. Even when some economists analyse non-market phenomena, such as feudalism, the modern family, or the interior of important organizations such as the firm, they see implicit contracts and markets everywhere. They analyze these phenomena with a conceptual toolkit that relates more appropriately to the world of commodities, instrumental rationality, and exchange. But even in the modern world there is much that does not fit this vision. And especially from a broad, historical view, much more is ill suited for these theoretical instruments. As I have explained at greater length in a m ore recent volume (Hodgson 2001), such a view of the limitations of mainstream economics was shared (to some extent) by John Stuart Mill, Walter Bagehot, Alfred Marshall, Max Weber, Werner Sombart and Frank Knight. All these writers saw the conceptual tools of mainstream economics as having their place, but this place was exclusively the analysis of a market-based economy. However, I would go further and argue that the core tools of mainstream economics are also limited in their analysis of real markets. I am not suggesting that we have to throw everything mainstream out of the window. …