Critique Of Mainstream Economics Research Articles

On the Inadequacy of Economics for Understanding Housing Markets – A Pragmatic Response

ABSTRACT The focus article of this issue of the journal argues for the need to use tools and concepts from many disciplines of social science when analysing real-world housing market. Lux and Sunega argue that analyses relying only on the toolbox of mainstream economics fail to capture important aspects of the working of the markets, we agree. However, part of the critique of mainstream economics is based on a caricature of economics. In order to arrive at a new pragmatic socio-economics of housing markets, we see it as crucial to arrive at explicit, concise and shared interpretations of core concepts, e.g. the concept of norms is often used differently in different disciplines. Two of the lines of future housing market research proposed by Lux and Sunega that we regard as particular promising is design of surveys capturing variation in expectations, preferences and risk attitudes and use of (stochastic) agent-based models.

The Public Purpose of Political Economy

ABSTRACTFor too long the discipline of political science has ceded research on the dynamics of the national political economy to the field of economics. In this article, we explore the cost of this cession in the context of the public purpose. Following John Kenneth Galbraith, we define the public purpose in terms of its independence from the market economy and the planning system. Political scientists, and especially political theorists, are uniquely qualified to theorize power relations relative to a host of challenges that have emerged in today’s rapidly transforming national economies. Galbraith’s critique of mainstream economics, coupled with his understanding of power as an inescapable and perpetual dialectical process, provide guidance for theorizations that should attend to rather than deny the contested domain of the public interest and collective good.

What is Good for General Motors is Bad for America: The 2009 Bailout Through the Lens of Heskett’s Design-Oriented Theory of Value

This research is an applied case study of the 2009 General Motors bailout using John Heskett’s economics as a starting point for analysis. In 1993, Heskett (1937–2014) wrote in International Design that GM’s myopic design vision at the corporate strategy level led to the company’s stagnation and an inability to compete. Professor Heskett had not only captured GM’s competitive position at the time—he had foretold its future decline. Shortly after that article was published, GM declared losses of $23 billion—the largest in US corporate history. In 2009, despite accumulated losses totaling $35 billion, GM was bailed out and nationalized by the US government in another unprecedented event. Through the lens of the GM bailout, this article examines Heskett’s critique of mainstream economics and uses his research into institutional economics and the national system to help define the rent-seeking asset regime that led to the GM bailout. Key observations will benefit firm management, policy-makers, and those interested in political economics from an historical and institutional point of view.

Reflexivity and equilibria

The failure of models based on rational expectations to explain the ‘boom and bust’ of financial markets does not support Soros' critique of mainstream economics or his call for a theoretical revolution. Contrary to what Soros says, standard rational choice theory has the conceptual resources to analyse reflexivity. The dynamic of feedback loops for example can be described by simple models based on multiple equilibria and informational cascades. The problem is that agents and theorists sometimes lack the information required to identify equilibria and tipping points.

Reflexivity and Equilibria

The failure of models based on rational expectations to explain the “boom and bust” of financial markets does not support Soros’ critique of mainstream economics or his call for a theoretical revolution. Contrary to what Soros says, standard rational choice theory has the conceptual resources to analyse reflexivity. The dynamic of feedback loops for example can be described by simple models based on multiple equilibria and informational cascades. The problem is that agents and theorists sometimes lack the information required to identify equilibria and tipping points.

Kritické zamyšlení nad metodou zkoumání rakouské školy

Článek se zabývá kritickým rozborem hlavních metod zkoumání rakouské ekonomické školy. Nejprve je pozornost věnována metodologickému individualismu a subjektivismu a možných problémů, které jsou spojeny s jejich plně konzistentním uplatňováním. Dále je vysvětlena neoprávněnost kritiky ekonomie hlavního proudu rakouskou školou z hlediska praxeologického zákona. Poslední kapitola se věnuje kritice axiomatického chápání racionality jakožto nutného předpokladu pro metodologický individualismus a praxeologii.

Book Reviews

Karla Hoff of World Bank reviews “Beyond the Invisible Hand: Groundwork for a New Economics” by Kaushik Basu. The EconLit abstract of the reviewed work begins, “Presents a critique of mainstream economics and Adam Smith's idea of the invisible hand, arguing for collective action and a shifting of focus from efficiency to fairness in societies. Discusses speaking in praise of dissent; the theory of the invisible hand; the limits of orthodoxy; the economy according to law; markets and discrimination; the chemistry of groups; contract, coercion, and intervention; poverty, inequality, and globalization; globalization and the retreat of democracy; and what is to be done. Basu is Professor of Economics and C. Marks Professor of International Studies at Cornell University and Chief Economic Advisor to the Ministry of Finance of the Government of India. Index.”

Le réalisme critique de Tony Lawson : apports et limites dans une perspective institutionnaliste

Résumé Cet article est une présentation critique du courant du réalisme critique en économie. Principalement issu des travaux de Tony Lawson, le réalisme critique peut être décomposé en deux moments : l’élaboration d’une critique ontologique de la théorie économique standard et le développement d’une ontologie sociale. Après avoir été présentés, ces deux aspects sont soumis à une analyse critique. Si la critique de la théorie standard pose problème, on montre toutefois que l’ontologie sociale du réalisme critique peut constituer un support d’importance pour tous les travaux s’inscrivant dans une perspective institutionnaliste. Classification du JEL : B15, B41

From mainstream economics to the boundaries of Marxism

In this paper, we explore Marxism and critical realism by addressing Ben Fine's Addressing the Critical and the Real in Critical Realism. We outline and address Fine's main arguments—that critical realism is insufficiently critical, and that it is insufficiently realistic—before turning to analyse the relation between critical realism and Marxism. Taking Fine's argument as a starting point gives us the opportunity to clearly define the parameters of the Cambridge-based critique of mainstream economics, and to highlight some of the problems particular to that critique. It also provides an opportunity to interrogate the significance of the formation of discursive boundaries for the way we challenge conceptual credentials and claims.

Institutionalism, critical realism, and the critique of mainstream economics

Critical realists have gained substantial support within post-Keynesian and Marxian research communities, and it is likely that critical realism's influence in institutionalism will grow in coming years. Post-Keynesians and Marxists have had ongoing discussions regarding the strengths and weakness of critical realism. Institutionalists should have a similar discussion. This paper addresses a key feature of the critical realist program: its critique of mainstream economics. In particular, it criticizes the use by critical realists of the concept of closure, and argues that critical realism is misleading in its identification of the ontology of mainstream economics as Humean. The purpose of the paper is to promote critical discussion regarding the role of critical realism in institutionalism.

Arguing critical realism: The case of economics

Within the discipline of economics critical realism has thus far been advocated to a large extent through a sustained critique of the position of mainstream economics. This article questions these critical endeavours for their analytical shortcomings and suggests an alternative and more constructive approach for developing and arguing critical realism within economics. It is argued that the critique of mainstream economics is wanting due to the fact that it focuses on modes of inference rather than on questions of ontology and that the scope of the analysis is too wide. The consequences of these shortcomings are considered for the future prospects of the critical realist project within economics. Drawing on advances made within the discipline of sociology, a somewhat different strategy is suggested for the task of arguing and developing critical realist approaches within the field of economics. The hallmark of this approach is advocacy of critical realism by way of substantive analyses of relevant questions and issues rather than by critical assessment of competing positions. As it happens, however, although the main focus of this approach is constructive rather than critical, a more fruitful and sustainable critique of mainstream economics and other schools of thought is part and parcel of these endeavours. The argument developed, moreover, indicates the prospects of cross-fertilisation between disciplines in which the critical realist project has now gained a foothold.

What is Behavioral Economics?

This paper is concerned with defining the characteristics of behavioral economics (BE), identifying the different strands of BE, and carefully comparing BE to mainstream or orthodox economics. An important question here is: Is BE an economic school of thought? It is noteworthy that BE is not strongly associated with a political economic ideology or particular substantive propositions as is the case with some other economic schools of thought. What distinguishes BE is its scientific practices and its guiding notions of what good scientific practice ought to be. In other words, BEs practice and espouse scientific methods that are different, at least, from those typical of mainstream economics (ME). This paper develops an approach to comparing BE to other types of economics. The job of comparison is first to identify the key dimensions (related to its approach to science) along which BE, and its different strands, differs from ME, and second to use these dimensions to illustrate the differences. The desired dimensions of comparison are ones for which there are critical and important differences between BE and ME. Further, these dimensional differences are related to BE's critique of ME and how behavioral economists describe their attempts to distinguish themselves from ME. The dimensions selected for this use are: 1) narrowness, 2) rigidity, 3) intolerance, 4) mechanicalness, 5) separateness, and 6) individualism. Comparing economic disciplines using the comparison dimensions is like locating places on a map, except that the map of the economic disciplines is a six dimensional one, not a two dimensional one. To locate a discipline on the map, it is necessary to have judgments of the discipline's location on each of the six dimensions. In a sense, we are discovering what BE is partly by finding out its characteristics, but partly by finding out its differences from certain other well known entities (disciplines). After using these dimensions to characterize ME, they are used to characterize BE's strands starting with the two earliest strands of BE, those emanating from the work of Herbert Simon and George Katona. The other strands of BE considered here are psychological economics, Harvey Leibenstein's x-efficiency theory, George Akerlof and behavioral macroeconomics, behavioral finance, Vernon Smith and experimental economics, and the evolutionary theory of Richard Nelson and Sidney Winter. Other elements of BE that can not be classified in these strands are also considered.

Arguing Critical Realism

Within the discipline of economics critical realism has thus far been advocated to a large extent through a sustained critique of the position of mainstream economics. This article questions these critical endeavours for their analytical shortcomings and suggests an alternative and more constructive approach for developing and arguing critical realism within economics. It is argued that the critique of mainstream economics is wanting due to the fact that it focuses on modes of inference rather than on questions of ontology and that the scope of the analysis is too wide. The consequences of these shortcomings are considered for the future prospects of the critical realist project within economics. Drawing on advances made within the discipline of sociology, a somewhat different strategy is suggested for the task of arguing and developing critical realist approaches within the field of economics. The hallmark of this approach is advocacy of critical realism by way of substantive analyses of relevant questions and issues rather than by critical assessment of competing positions. As it happens, however, although the main focus of this approach is constructive rather than critical, a more fruitful and sustainable critique of mainstream economics and other schools of thought is part and parcel of these endeavours. The argument developed, moreover, indicates the prospects of cross-fertilisation between disciplines in which the critical realist project has now gained a foothold.

Reorienting (Critical Realism In) Economics?

Taken together, Tony Lawson’s Economics & Reality1 and Steve Fleetwood’s edited Critical Realism in Economics: Development and Debate 2 played a large part in defining the project critical realism in economics, which also delineates a particular identity within the project of critical realism in general. The defining features of critical realism in economics are a general ontological critique of mainstream economics for its deductive method, formalism, and closed systems modelling and also a broad constructive (and generally nonpartisan) approach to key heterodox traditions, focused on thinkers such as Veblen, Hayek, Marx and Keynes. Critical realism in economics is significantly different from, firstly, critical realists engaged in other areas of social study such as sociology and, secondly, critical realists that focus on one ‘economist’ and line of thought in particular such as Marx and Marxism. Both these two other strands of critical realism can be seen as other projects within critical realism that share a number of arguments, tenets and insights with critical realism in economics but differ in emphasis, research interests and identity. Two important books were published within critical realism in economics in 2003. The first one was Tony Lawson’s Reorienting Economics 3 and the second one was Paul Downward’s edited Applied Economics and the Critical Realist Critique. The purpose of this review essay is to discuss the latter book in the context of critical realism in economics and its recent development where the former book is a major sign post.4 Tony Lawson’s recent Reorienting

Critical Realism as a Basis for Economic Methodology: A critique

This paper considers the claim that critical realism provides a convincing critique of mainstream economics and offers a sound methodological basis for an alternative approach. It argues that critical realism presents a tendentious definition of positivism and a characterisation of mainstream economics that is misleading, and that it misrepresents the nature and purpose of the work of Hume and modern Humean philosophers. It also argues that critical realism's bold ontological claims lack epistemological support. The paper concludes that critical realism does not provide a compelling basis for economic methodology.