Heterodox Economics Research Articles

Heterodoxy, the Mainstream and Policy

The article discusses the difference between mainstream and heterodox economics in terms of their implications for a theory of economic policy. It characterizes these two strands of thought according to two criteria: how to assess economic performance and how to envisage economic coordination. They underlie the distinction between a price-centered approach of the mainstream and a heterodox institution-centered approach. The distinction is not only important for theoretical clarity. It also points to a major conclusion, that is, that if heterodox economists neglect the differences between these two approaches and rely on a commonly shared "playing field," the risk is that they may disregard the potential economic and societal change that a heterodox perspective warrants.

Epistemology in Heterodox Economics?

The epistemology of Heterodox Economics has been described as a type of methodological pluralism where its relativism is taken as consistent with new versions of science. However, methodological pluralism has severe drawbacks as a means of inquiry. Whereas Economics is often understood in positivist terms as a closed set, Heterodox Economics includes additional concepts and methods. As an open set of ideas, Heterodox Economics is a means to doubt or to not-know and comprises Einfühlung or the creative intuition for the introduction of new ideas into the epistemology of Economics.

Pan American: New Directions in Heterodox Economics

Pan American: New Directions in Heterodox Economics

On Dutch disease and its neutralization: a classical perspective

A particularly influential group among heterodox economists argues that a ‘competitive’ real exchange rate by itself triggers economic growth. New Developmentalism, a sub-group within this broader view, makes a valuable contribution to the discussion by assigning two different roles to the ‘competitive’ or ‘equilibrium’ exchange rate: first, it acts as a ‘light switch’ by allowing tradable sectors that employ ‘state of the art’ technology to earn the normal profit rate of the economy by selling their goods in global markets. And, second, to ensure that domestic firms have ‘access to foreign demand’, growth is accelerated through several mechanisms. This paper exclusively focuses on the first role, which has received much less attention in the literature. To do so, the authors present a formal framework inspired by the classical approach to prices and distribution that (a) captures the idea of the exchange rate as a ‘light-switch’ and (b) allows the examination of the scopes and limits of the concept of ‘Dutch disease’, the main structural feature that, according to New Developmentalism, may cause the systematic overvaluation of the exchange rate.

Волны Кондратьева и макроэкономика

Contemporary mainstream macroeconomics tends to ignore the phenomenon of K-waves in dynamic economic modelling. The relevance of this article lies in the fact that it describes the conditions in which it is possible to implement K-waves in macro- and meso-economic modelling. The purpose of the study is to show that K-waves manifest themselves not in the dynamics of output (as macro-economists think) but in the behavior of technical, economic, and socio-economic indicators, reflecting the interaction of the two forces. The first force is the radical technological changes that accompany the transition from one technological mode to another and that trigger K-waves of technical and economic indicators, such as capital productivity. The second force is generated by the countercyclical response of the state and market to radical technological changes. The statistical analysis was used to identify the sinusoidal dynamics of the US capital intensity based on the data for 1946–2019. The research also applied a SMR model, which differs from orthodox macro-models in that it captures the effects of the coexistence of different generations of fixed capital. This model was used to calculate various variants of the interaction between the two above-mentioned forces. The calculations showed that the regulator has sufficiently powerful instruments to dampen the fluctuating dynamics of technical and economic indicators caused by shifts in technological modes at the GDP level. Thus, it is possible to use K-waves in macroanalysis. Moreover, such a possibility can be successfully implemented with the help of a heterodox model of switching reproduction mode. This fact signifies a noticeable advantage of heterodox economics, which recognizes K-waves, over mainstream macroeconomics.

Why ecological economics should not adopt Marxian value theory

In their attempts to challenge the view of neoclassical economics that economic value is determined by subjective preferences, heterodox economists have posited objective measures of value based on abstractions such as “socially necessary labor time” or embodied energy. Such approaches seem intuitively to be valid ways of understanding capitalist exploitation, unequal exchange, and accumulation, but are analytically flawed. As the concept of economic value assumes a monetary metric, it cannot be applied to biophysical resources such as labor time or energy, which are measured in hours or Joules. The critics of neoclassical economics have thus remained constrained by the conceptual universe of the discipline that they are criticizing. To transcend this impasse, we must recognize that the capitalist pursuit of exchange-values is propelled by the artifact of general-purpose money and that its encouragement of endlessly expanding production and economic growth conflicts with the Second Law of Thermodynamics. A coherent understanding of ecologically unequal exchange in the world-system means criticizing neoclassical economics without advocating an alternative theory of value. What are being unequally exchanged in the world-system are not “underpaid values” but material resources. Such a perspective on global inequalities implies a fundamental reconsideration of the mainstream view of technological progress.

Theory Without Measurement or Some Finishing Touches on The Creative Portrait of Douglass North

The article examines some of the key features of the scientific work of Douglass North. It is argued that the popular image of North as an adherent of this or that school of economic thought is not highly relevant. The authors believe that one of the key features of North's research style is his "theory-centricity". The article demonstrates that the most important milestones in North's career (fling with Marxism in his youth, participation in the Сliometrics revolution, the transition from neoclassical economist to one of the founders of neo-institutionalism, a turn towards cognitive science), despite the seeming lack of continuity served as kind of steps of the ladder along which North went to the creation of a comprehensive theory of social development. Based on the results of qualitative content analysis of North's works of the 1950s and 60s, the authors show that even in the years of his affinity for quantitative economic history, the economist always put the ability to theorize above the skills of quantitative analysis. This feature, combined with the recent empirical turn in economics, which raised the prestige of empirical work to unprecedented heights, made it difficult for modern mainstream economists to perceive the ideas of the "late" North. The authors' analysis of the citation structure of North's last major book, "Violence and Social Orders. Conceptual framework for the interpretation of the written history of mankind" confirms this trend. This book generates greater interest among heterodox economists, historians, and political scientists than among representatives of mainstream economics. In the article's conclusion, the authors speculate about the prospects of the Northian theory-driven style of doing economic research in the face of the progressive "empirization" of modern economics.

Reflections on neo-Kaleckian growth regimes: a Marxian reproduction perspective

PurposeThe neo-Kaleckian model follows the ideas of Marx, Keynes and Kalecki, that investment is a key influencing factor in the dynamics of the capitalist mode of production. Through the discussion of different forms of investment decision function, this paper constructs the analysis framework of wage-led and profit-led economic growth regimes.Design/methodology/approachThe model has become an important theoretical paradigm for current Western heterodox economists regarding the research on the impact of functional income distribution on economic growth, and it has a very large impact on both theoretical and empirical research. Starting from Marx's reproduction theory, this article discusses the theoretical shortcomings of the neo-Kaleckian growth regime model.FindingsThis paper mainly focuses on three aspects: (1) the ideological legacy of “Smith's Dogma”; (2) neglecting the restrictions on income distribution from the organic composition of capital and the surplus value rate; (3) technological progress and the formation of a new long economic wave.Originality/valueThe authors believe that the neo-Kaleckian model unilaterally emphasizes the demand-side factors in the economy and, unconsciously or not, ignores the role of the supply-side, which makes it encounter certain limitations in explaining long-term growth. Even if some empirical conclusions are employed to bridge functional income distribution and technological progress, there is still a lack of a theoretical basis for accurately describing long-term economic changes using this model. In order to better promote high-quality economic development and accelerate the formation of a new pattern of economic development in which the domestic large-scale cycle is the mainstay and the domestic and international double cycles promote each other, the authors need to adopt a policy combination with the supply-side as the main and the demand-side as the supplement, and to work from both sides.

Econophysics: making sense of a chimera

The history of economic thought witnessed several prominent economists who took seriously models and concepts in physics for the elucidation and prediction of economic phenomena. Econophysics is an emerging discipline at the intersection of heterodox economics and the physics of complex systems, with practitioners typically engaged in two overlapping but distinct methodological programs. The first is to export mathematical methods used in physics for the purposes of studying economic phenomena. The second is to export mechanisms in physics into economics. A conclusion is drawn that physics transfer is often justified at the level of mathematical transfer but unjustified at the level of mechanistic transfer.

Amplifying Heterodox Economics With Video Clips

Many Economics 101 students do not major in the subject partly to the subject content that emphasizes abstract models over contemporary issues including climate change, inequality, and financial crises. This critique is of both content and presentation. To this end an unorthodox review of salient ideas of text book by Reardon et al., Introducing a New Economics, is undertaken and paired up with video clips from movies and cartoons to amplify their reach.

The System Paradigm and the Prospects for “Institutional Synthesis” in Economic Theory

The constant adaptation of economic theory to changing practice at certain stages requires a theoretical synthesis, during which various (sometimes competing) research programs are combined in order to develop a more adequate methodology. In orthodox economic theory the two most important syntheses were: the neoclassical synthesis of the 1940–1960s and the new neoclassical synthesis of the 1990s. Both were intradisciplinary in nature. However, the developed toolkit of neoclassical orthodoxy still does not allow the study of the “risks of the system as a whole” and making confident long-term forecasts of economic development. This current situation determines the relevance of research within the framework of the system paradigm, with the help of which such problems can be solved. This paper discusses the characteristics of the system paradigm and analyzes why this paradigm is poorly represented in neoclassical orthodoxy. The paper considers barriers to the spread of the system paradigm, associated with the worldview of modern economists-theoreticians The paper also analyses the methodological prerequisites of neoclassical orthodoxy, the specifics of which also act as a barrier to the development of the system paradigm in economic research. This paper outlines, for the first time, the general shape of the interdisciplinary institutional synthesis, the formation of which has been observed in Russia since the beginning of the 2010s. Its distinctive features are as follows. First, it develops outside economic orthodoxy, in the course of research cooperation between heterodox economists and representatives of social, humanitarian and natural disciplines – that is, it is an interdisciplinary (polydisciplinary) synthesis. Second, the main subject of research within its framework are institutions or, more broadly, meso-level structures that ensure the integrity, reproduction, and development of socio-economic systems. Third, the methodological basis of interdisciplinary cooperation within the framework of the institutional synthesis is provided by a system paradigm and holistic approach which are different from the neoclassical orthodoxy. Some examples of the institutional synthesis presented in Russian economic literature and its practical results are shown. The prospects for the further development of the theoretical interdisciplinary institutional synthesis are outlined.

The green investment paradigm: Another headlong rush

In this article we shed light, analyze and question a very broad consensus among economists. Beyond some divergences (on the amounts and tools), most mainstream and heterodox economists present green investments as a necessary and first condition to solve the ecological crisis. We first examine the Green Investment Paradigm and its coalition to explain its importance in contemporary debates. The main part of our research focuses on its theoretical origins and pitfalls. We highlight its reductionist, normative, disembodied, ahistorical and depoliticizing vision that is strongly related to its problem-solving framework. We hence prove that it constitutes another dangerous headlong rush of economic thinking. We finally discuss what is outside of the box and present some debates that can contribute to a serious interdisciplinary assessment of the socio-political causes of ecological crises.

Integration of Knowledge (IoK) Methodological Reasoning of Islamic Economics (IE) as the Wisdom of Humanity: A Heterodox Economic Approach

The world increasingly needs an alternative approach to economic development. This paper endorses the Integration of Knowledge (IoK) approach as the wisdom of humanity through Islamic Economics (IE). A review of relevant literature through qualitative methodologies of library research, discourse and critical content analysis highlights the civilisational practices of integration, how development of economics diverged from such practices and how heterodox approaches reacted to such divergence. A section on learning the wisdom of humanity from each other emphasizes the inevitable historical civilizational integration (IoK) and exchange of knowledge. It follows with a literature review of the development of mainstream economics, how it abandoned such historical civilizational practice and its sound foundations, namely ontology, epistemology, axiology and methodology. A highlight of heterodox economics (HE) responses reveals the alternatives to the mainstream-focused positivistic approach to economics. The inadequacy of those alternatives led us to demonstrate Muslim responses and the centrality of IE as a comprehensive alternative heterodox economic approach. The analysis shows how IE grew along Islamisation of Knowledge (IOK) as two parallel and major intellectual iṣlaḥ (reform) and tajdīd (renewal) movements. A brief review of the development of each shows the potential of IE’s IoK methodological reasoning to revive the IoK approach in economics as the wisdom of humanity. The sound IE philosophical foundations, namely ontology, epistemology, axiology and methodology, have a major impact in that process. Thus, utilising the core IoK objective within IOK together with IE contributions shape the process of overcoming problems and issues of mainstream economics. Actionable recommendations to practitioners and academics depict how the IE approach to economics could be implemented and sustained along SDGs agenda.

David Ruccio: An Appreciation

In expressing his appreciation for the work of David Ruccio’s blog, Occasional Links & Commentary, Richard Wolff discusses the common experiences of faculty members working from heterodox economics theories in the U.S. university system following the turn to neoclassical economics. After the marginalization and eventual removal of the notable heterodox economics department at the University of Notre Dame, Ruccio turned to blogging as a way of translating academically formulated concepts into and for general discussion with a wider readership that includes activists, social critics, academics, journalists, and a new generation of leftist politicians. This work of “popularization,” rather than nonscientific, has constituted an important contribution to long-overdue social change.

Remembering Eugenia Correa and Her Vision for the Future: Introduction

The purpose of this introductory piece is to offer readers an understanding of Eugenia Correa, who was one of Mexico’s foremost heterodox economists, and her important ideas. In the article, we describe our professional association with her for over 30 years and identify some common research agendas that were pursued over this long period. We also highlight some key elements of Eugenia Correa’s economic thought and why some of her ideas from the 1990s prove to be prescient since they are so appropriate to understanding our times.

Teaching Heterodox and Pluralist Economics – Some Useful Books

This review highlights the strengths and weaknesses of three recently published useful resources for teaching economics from a pluralist and/or heterodox perspective. The introduction provides an overview of other helpful (text-)books for this purpose. Based on a historical approach, Geoffrey Schneider’s book describes and differentiates the characteristics of a broad range of economic ideas and systems. The core chapters on Smith, Marx, Veblen, and Keynes (+ Hayek) provide a brilliant concise, very well written and easily accessible overview of the plurality of major economic ideas in their historical evolution. Moreover, this explanation is shown as intricately entwined with the epochal eventful history of economic systems.

Andrew Mearman, Sebastian Berger and Danielle Guizzo, What is Heterodox Economics: Conversations with Leading Economists

This volume is a collection of interviews, in question-and-answer format, conducted in 2017 and 2018 with sixteen economists, mostly senior or emeritus academics, who share a cautious willingness to accept the designation “heterodox” as applied to their theoretical orientations. The interviewees are Sheila Dow, the late Fernando Cardim de Carvalho, William Darity, S Charusheela, Karma Ura, Rolf Steppacher, Julie Nelson, Tony Lawson, Joan Martinez-Alier, Esther-Mirjam Sent, Gary Mongiovi, Anwa...

Households Behaviour towards Sustainable Energy Management in Poland—The Homo Energeticus Concept as a New Behaviour Pattern in Sustainable Economics

The presented article belongs to the research school of sustainable development economics as a relatively new science discipline within the broader area of heterodox economics. This paper is based on literature studies of homo concepts in economics, sociology and psychology. It identifies a research gap in sustainable economics, especially in sustainable energy management, formulating a novel concept of an economic man involved in energy management called homo energeticus. Homo energeticus concept is verified by empirical evidence at a local level-quantitative research conducted on a sample of 500 households in Lower Silesia region in Poland. The research’s first objective is to build the original author’s methodology on which the shift patterns from homo oeconomicus (neoclassical economics) to homo sustinens (sustainable economics) may be presented and may be used by scientists worldwide. After preparing a method for identifying concept, the second goal is to identify and describe the new concept of behaviour. The main conclusions are the sustainable behavioural pattern is dominating trend observed among households’ local energy management (homo energeticus). The homo energeticus behaviour was confirmed by every third respondent (critical threshold of 70%) or less restrictive and sustainable behaviour model homo sustinens (critical threshold of 50%) by more than 91.8% of whole respondents.

Attribute Substitution, Counterfactual Thinking, and Heterodox Economics

This paper examines how attribute substitution (AS), central to the psychology of choice and behavioral economic reasoning, can be understood when combined with counterfactual thinking (CFT), often called ‘what if’ or ‘if only’ thinking, and how their combination creates important opportunities for the seeing heterodox economics as a single research program alternative to mainstream economics. The first section of the paper discusses AS, CFT, and what a AS-CFT behavioral framework involves, and then emphasizes how this framework departs from fundamental assumptions mainstream rational choice theory employs. The second section reviews the foundations of behavioral thinking regarding AS, describes what it involves when it includes attention to CFT, distinguishes between more automatic and more reflective types of behavioral adjustment. It notes that heterodox economics has generally emphasized ecological rationality and bounded rationality in its use of AS. The third section then discusses how six prominent heterodox approaches can each be understood to draw on this combination of AS and CFT, and how this represents common ground for a shared critique of the mainstream economic approach. What distinguishes them is how they differ regarding the weight and emphasis placed on more automatic versus more reflective types of behavioral adjustment. The fourth section argues that within this shared framework these different heterodox approaches practice a division of labor in how they address different aspects of economic life understood in behavioral and counterfactual terms.

On Joan Robinson’s role in creating the myth that R. Kahn originated the multiplier concept

An enduring myth accepted by all Orthodox and heterodox economists is that it was Richard Kahn who discovered and originated the concept of the multiplier. Kahn then supposedly showed Keynes how the multiplier concept could be specified mathematically so as to provide hard support for Keynes’s views in the late 1920’s about increased initial government spending on public infrastructure generating much larger increases in total spending than the original injection, leading to decreasing levels of unemployment. There are three major problems with this story. First, Kahn, himself, in a 1936 response to Hans Neisser in the Review of Economics and Statistics stated that most of his ideas about the multiplier concept came from Keynes. Second,the mathematical and logical development of the multiplier concept had already been formalized and formulated precisely by Keynes in 1921 on p. 315 in footnote 1 of the A Treatise on Probability in section 8 of chapter 26. Third, Keynes provided an arithmetic example of the mathematical technique worked out in the A Treatise on Probability in May,1929. There is simply no foundation for the myth, promoted by Joan Robinson, that Kahn was the author of the multiplier concept. Kahn went along with Robinson because he was involved in a 54 year old relationship with Joan Robinson. Keynes taught Kahn the theory of the multiplier concept and left it up to Kahn to write a full blown article on it, which was then published by Keynes in the June,1931 issue of the Economic Journal.