Judging heterodox economics: A response to Hodgson’s criticisms

Download full paper

Abstract

The renowned institutionalist Geoffrey Hodgson has claimed inter alia that heterodox economics has failed to define its nature and scope, does not take pluralism seriously, and lacks expertise concentration to ensure quality which means it has made limited progress and is held in variable esteem. To address these alleged problems, Hodgson proposes four alternative strategies: the creation of heterodox economics academic departments; for heterodox economists to enter non-economics academic departments; for heterodox economists to ‘organise’ around a successful approach with future potential; or, to encourage the study of economic institutions by other social science disciplines or by using prominent mainstream techniques and approaches.

A response to these criticisms and proposed strategies is warranted for several reasons. These criticisms are not trivial and, as an assemblage the import is much greater than a singular criticism. Hodgson is very influential within the economics discipline and he reiterates, in part, past criticisms from the mainstream as well as presenting his criticisms to a wide range of audiences. These criticisms intersect with longstanding debates within heterodox economics about the role of pluralism, the definition and project of heterodox economics, its relationship to the changing form of mainstream, and the merit of synthesis or convergence of different heterodox schools of economic thought. The suitability of mainstream measures to judge heterodox economics, and the relationship of ideology and economic theory, are also raised by these criticisms as well as the feasibility of proposed strategies to support heterodox economics within the academy.

It is argued that several fallacious claims lead Hodgson to misconstrue the nature and evolution of heterodox economics, and inherent flaws in each of his proposed alternative strategies will further marginalise—not advance—the project of heterodox economics.

Posted for comments on 4 Oct 2018, 8:22 am.

Comments (6)

  • Arturo Hermann says:

    I agree with your points, I will just propose few additional remarks to make perhaps things a bit easier.
    In a synthetic way, economists can be defined orthodox (or mainstream) if they adhere, more or less explicitly, to the following tenets of (in particular) neoclassical theory:

    (i) Economic agents behave in a “rational way” in order to maximize their utility function.

    (ii) Markets are appraised as self-sustaining and “perfect” mechanisms amenable, if not unduly interfered with by public action, to the maximization of social welfare.

    (iii) The above tenets are employed by orthodox economists ─ no matter how much really convinced about them ─ for building mathematical models basically appraised as “closed systems”.
    In fact, this constitutes for such economists the only “scientific” way for analysing economic phenomena.

    (iv) The “dynamics” of such “economic laws” can be “scientifically” (and positivistically) assessed only by considering “measurable phenomena”.

    Of course, I am aware of the presence of various versions of neoclassical theory, but it is also true that all of them consider the above points, and in particular (i) and (ii), as the fundamental assumptions of their theories.
    With regard to point (iv), it can be interesting to note that, even when quantitative analysis is heavily employed for investigating real situations ─ also as a way to provide a more impressive “scientific outlook” to these analyses ─ the results so obtained can never change or refine postulates (i) and (ii), just because they have the nature of a (metaphysical based) wishful thinking.
    For instance, if an empirical analysis indicates that individuals behave rationally according to some proxy (for instance, if consumers choose the lowest price of an item), then the theory is “confirmed”.
    If, however, empirical observations point out the presence of “irrational behaviour” (when, for instance, consumers systematically do not choose the lowest price), this does not impinge on the prime postulates, but tends to be “explained away” by treating these results as exceptions due perhaps to some unwelcome “exogenous” factor.

    Heterodox economists depart from this picture as they do not accept the above mentioned aspects. There are different grounds of criticism ─ for instance, in Institutionalist, Marxist, Keynesian and Ecological perspectives ─ but all agree on the necessity to overcome the reductionism and simplification of orthodox analysis by constructing theories more aware of the complex evolutionary relations between human motivations and economic systems.
    In this respect, an uncritical adoption of orthodox techniques and criteria would be suicidal for heterodox economics, as it would trap it in the same reductionist stance of orthodoxy. Conversely, a good strategy for promoting heterodox economics would start from pointing out the importance of a broader conception of empirical analysis, embracing also the qualitative and non-measurable aspects of economic contexts. The consideration of such aspects ─ neglected in orthodox analysis ─ by allowing the study of the cultural, social and psychological dimensions of economic action, would help to acquire a more far reaching picture of the manifold aspects of economic action. In that connection, two intertwined aspects seem relevant:

    (I) Overcoming the limited collaboration often present in heterodox economics (and in other social sciences as well). As observed by the famous sociologist Karl Mannheim, a landscape can be seen only from a determined perspective, and without perspective there is no landscape. In this sense, observing a landscape (or phenomenon) from different angles (or disciplines) can help to attain a much clearer insight into the features of each considered perspective.
    This implies considering heterodox schools ─ for instance, Institutionalist, Marxist, Keynesian and Ecological approaches ─ not as “closed systems” but, in full respect of their identities, as theoretical perspectives open to comparison with other ideas/theories, also in an interdisciplinary spirit. This would help build a stronger common ground for the analysis of economic imbalances.

    (II) A more systematic attention to policy issues. As a matter of fact, if we present our activities as a forum for pluralism, this looks fine, but risks to be perceived both by the more informed audience and by the lay people as an interesting intellectual venture with, however, no tangible results in terms of better policies. And this in a period where there is a high, explicit and latent, demand for new policy solutions for the major economic and social problems of our time.

    • Lynne Chester says:

      Dear Arturo
      Thank-you for reading my paper and for your comments.
      I agree with your comments about the tenets of neoclassical theory and the difference with heterodox economics.
      Your point about ‘an uncritical adoption of orthodox techniques and criteria being suicidal for heterodoxy because of being trapped into the same reductionist stance of the orthodoxy’ is very important and I think extends to the use of the orthodoxy’s ‘success criteria’ such as orthodox/mainstream highly-ranked journals or even institutional affiliations.
      Your points about strategy raise a number of challenges, I think.
      Many heterodox economists would agree with ‘the need for advocating a broader conception of empirical analysis that embraces the qualitative and non-measurable aspects’. Yet how do we achieve that advocacy to be of a sufficient scale to have an impact? And, how do we measure/judge if there is an impact?
      You refer to ‘limited collaboration across heterodox economics and the other social sciences’. How are you measuring/judging this ‘limited collaboration’? I find evidence of collaboration. Is it limited? That is a difficult question to answer. Perhaps we need a research project to investigate the ‘extent’ of collaboration within heterodoxy and between heterodoxy and other social sciences, and the reasons why or why not?
      You also suggest ‘policy issues need more systematic attention’. Many of our heterodox colleagues would contend that they do continually address policy issues. Nevertheless, the editorial focus of many journals sympathetic to heterodox analysis is not compatible with policy issues per se which, in turn, raises the ‘publish or perish’ conundrum for our heterodox colleagues. The same, I think, applies to the institutional pressure for competitive research grants.
      Thanks again for your comments and maybe we can discuss further at the 2019 EAEPE Conference in Warsaw?
      Best wishes, Lynne

  • Arturo Hermann says:

    Dear Lynne, thank you for your comments. I wish to remark that all my observations are provisional and not based on systematic enquiries (which are of course much needed).
    Now I will put forward some complementary remarks.

    True, I believe that a distinctive trait of heterodox economics is the adherence to a humanistic and interdisciplinary approach. This implies considering economic action not as an impersonal matter moved by an abstract notion of rationality but as an evolutionary aspect of human action which is coextensive with social, cultural and psychological factors. Such perspective demands ─ in order to avoid the well known dangers of simplification and reductionism of orthodox analysis ─ a broader conception of empirical analysis. This would include not only quantitative (and allegedly “more scientifically verifiable”) aspects but also qualitative aspects of economic and social phenomena (I have addressed these issues in a recent article of Economic Thought). On that account, a plurality of methodologies is needed. For this reason, statistical data should be coupled with case studies, historical analysis of larger contexts, focus groups on particular problems, also with a view of obtaining a more active involvement of the actors implied.
    This perspective would mark a strong difference, in respect to orthodox realm, in the analysis of: (i) microeconomic sphere (for instance, consumption and investment behaviour); (ii) collective action of various economic and social groups; (iii) how people interpret economic phenomena and how this would impinge on their expectations and on their opinions about the effects of different courses of policy action.
    On that account, considering these phenomena in their real complexity would make it easier a comprehensive comparison of different economic theories. This perspective, by improving the process of social valuation, would also lead to a more effective policy action.

    As for other relevant aspects of the debate: yes, there is a growing collaboration between various strands of heterodox economics, but in the main, at least in my view, fragmentation between these fields remains relevant.
    One reason for this is that the main heterodox fields of economics ─ in particular, Marxist, Institutionalist, Keynesian, Green and the related sub-fields ─ embody partly different and competing perspectives.
    In this situation, one can ask, what is the utility of promoting a better collaboration within heterodox economics?
    One reason can lie in the circumstance that these theories deal with the same phenomenon─the study of the economic system, especially in its evolutionary dimension. And that such theories, however different in many respects, present notable complementarities, in the sense that the aspects more overlooked by some are more completely considered by the others.
    An instance of such collaboration would be the following: in addressing the imbalances of our economies, Marx’s analysis of capitalistic contradictions cast light on many aspects of these problems.
    Marx’s account, however, is chiefly based on the hypothesis of perfect competition, and the state, although considered as a superstructure of capitalism, plays in such analysis a rather limited role. However, as noted by some observers, what prevents the state from enlarging its role in order to respond to capitalistic interests? And in fact, what has come about from Marx’s time onwards has been a continual expansion of the role, functions and economic weight of public sector. This process has gone in tandem with a growing relevance of big corporations and the market power associated with them.
    Hence, the “pure capitalism” of the industrial revolution (if ever existed even at that time!) has been replaced by the “mixed economies” or “concerted capitalism” of our days. In this situation, Marxism, while retaining many useful aspects, can well be complemented by institutionalist, Keynesian, and green economics for casting light on the economic imbalances and environmental unsustainability of our mode of production. And, within this ambit, on the role of public sector in providing, (i) the legal and institutional framework for the working of capitalism; (ii) various important and interrelated policies; (iii) material and immaterial infrastructures; (iv) public spending as a largely irreplaceable means of creating effective demand.
    Needless to say, these aspects and the related policy conclusions are open to different interpretations.
    In this respect, I agree with your remark that many heterodox economists pay attention to policy issues. However, it is more likely that these economists tend to do so more as exponents of a particular strand ─ for instance, Marxist, Institutionalist, Keynesian, Green ─ than as “heterodox economists”. The same applies in public debates and in the wider media coverage where the notion of an alternative or heterodox economics is rarely heard of.
    In order to promote a pluralistic perspective on these complex issues, a better collaboration within heterodox economics can have two beneficial effects: (a) bringing out the distinctive aspects of various heterodox strands; (b) helping to build a wider heterodox economics’ paradigm for interpreting and finding solutions to the most pressing problems of our time.
    Happy to discuss further these issues also in the next events.

  • Geoffrey M. Hodgson says:

    GENERAL POINTS

    I have been writing and publishing in economics for 50 years and much of my work has been debated and criticised. But I think that this is the first time that someone has honoured me by a full-scale article criticising an unpublished working paper.

    This working paper went through several versions, of which the one download and criticised from the WINIR website by Lynne Chester is not the final version. It is clearly marked ‘Draft of 12 July 2017’. Perhaps the importance of its argument is signalled by the exceptional attention that Lynne has devoted to it?

    In fact, the working paper has now turned into a book on Is There a Future for Heterodox Economics? which is nearly finished and will be published by Edward Elgar later this year (Hodgson 2019). Lynne’s criticisms are really useful at this stage and I wish to thank her for them. They help me to attempt to make the text clearer and deal with some misunderstandings that have arisen.

    One reason which I turned the essay into the book was the multi-faceted nature of my argument, and the need to greatly expand and clarify on key points. The need to do this is confirmed by the fact that Lynne gets several things wrong in her critique and there are several misleading formulations as well.

    Below I identify some major errors in Lynne’s account. I do not identify them all. I leave others aside, possibly for later.

    DETAILED POINTS

    The title of Lynne’s essay is misleading. ‘Judging heterodox economics …’ will be misconstrued by some readers about the content of heterodoxy, about the merits and demerits of particular theories. Neither my 2017 working paper nor my forthcoming book are on that topic. Instead, the aim is made clear in the abstract of my 2017 working paper:

    ‘This paper addresses the possible meanings and potential of “heterodox economics” as an organizing label.’

    And in its opening paragraph:

    ‘This essay explores the nature, boundaries and future of “heterodox economics”. The aim is not to appraise particular heterodox theories, whatever they may be, but to examine the use of the “heterodox economics” label to organise opposition to mainstream economics and to develop alternatives to it.’

    Here I make it clear that I do not criticise the content of heterodox economics. The title of Lynne’s paper should be changed to avoid this potential misunderstanding.

    An error appears in the abstract, where Lynne claims that I allege that heterodox economics ‘does not take pluralism seriously’. I do not say that. In fact, I say that the common advocacy of pluralism is one of the things that binds heterodoxy together. Instead, the 2017 working paper has the following claim, which appears towards the end of the draft:

    ‘heterodox economists also need to take pluralism itself more seriously.’

    A plea to take something ‘more seriously’ does not imply that it is not already taken seriously. On the contrary it suggests that it is already taken seriously, but not seriously enough. Also, Lynne makes prominent in her abstract an issue that is not given equivalent prominence in the 2017 draft.

    Lynne’s abstract includes another misleading formulation: ‘To address these alleged problems, Hodgson proposes four alternative strategies’. It is true that I do consider four strategies for heterodoxy in the 2017 paper. But I do not ‘propose’ them in sense of advancing them as equally feasible or desirable. The strategies are put forward for discussion. They are neither fixed nor final.

    Indeed, in the forthcoming book I consider eight strategies, and suggest that four of them are more plausible than the other four. But I also make it clear in the book that strategy in a complex social system must rely on experiment and not merely design. We must humbly admit that we do not know in advance for sure what works best.

    Section one of Lynne’s paper repeats the misunderstanding that is betrayed in her title. She writes: ‘This paper responds to the criticisms of heterodox economics made by the renowned institutionalist Geoffrey Hodgson.’ Again, the 20017 draft clearly states in its opening paragraph:

    ‘THE AIM IS NOT TO APPRAISE PARTICULAR HETERODOX THEORIES, whatever they may be, but to examine the use of the “heterodox economics” label to organise opposition to mainstream economics and to develop alternatives to it.’

    The second error appearing in the introduction is this:

    ‘Hodgson treats the issue of pluralism as some sort of “quality control” measure needed by the heterodox economics community.’

    I say no such thing. The 2017 draft makes clear that pluralism has a quite different role. I wrote:

    ‘Some internal pluralism or diversity within any academic school or discipline is vital. Internal debate is necessary for theoretical advance: diversity and dissent provide the fuel for theoretical innovation.’ (p. 10)

    Nowhere do I say that the role of pluralism is for quality control. On the contrary, I argue that quality control depends on some degree of consensus. This, to a degree, and in ways I explore, runs against pluralism. Both pluralism and consensus are necessary, but for different reasons.

    A third error appearing in the introduction is:

    ‘Hodgson summarily ascribes “leftist political leanings” to all heterodox economists’

    The ‘all’ here is incorrect. Nowhere do I say ‘all’. For example, Austrian economics can legitimately be regarded as heterodox and most of them are not leftists, as conventionally defined.

    A fourth error appearing in the introduction is:

    [Hodgson] infers all heterodox economists are ideologically-driven and all mainstream economists are politically neutral.

    Both parts of this statement are false. Nowhere do I say that all heterodox economists are ideologically driven. (In fact, some are. But that is not necessarily a flaw.) And nowhere do I say that mainstream economists are politically neutral. That would be absolute nonsense. Mainstream economists are well-known for their ideological claims and positions.

    In a footnote at this point Lynne writes: ‘Throughout the essay Hodgson assiduously avoids any self-identification as an economist, heterodox or otherwise.’ To rectify this omission here and now, I regard myself as a heterodox economist and Lynne is at liberty to describe me as one if she so wishes.

    A fifth error that appears in the introduction is:

    Different methodologies will reflect different epistemologies which, in turn, reflect political philosophies and ontologies. This is a fundamental point which many heterodox scholars openly recognise, and Hodgson ignores.

    I do not ‘ignore’ this. In several places I have explored the (complex) link between mainstream assumptions and its adoption of ideology (e.g. Hodgson 1999). I continue to accept fully that particular ontological assumptions can enable or disable specific political positions.

    In a footnote on page 4 Lynne accuses me of a ‘seemingly personal attack on the late Fred Lee’. A critique confined to someone’s academic statements is not a personal attack. I have never attacked Fred personally. I knew Lee for over thirty years before his tragic death in 2014. Although we often differed on points of economics and politics, we retained respect for one another, and we never attacked one another personally. Similarly, Tony Lawson and I also have our differences, but we have remained mutually respectful friends for over thirty years.

    On page 7 Lynne writes:

    Hodgson criticises Lee for not including as heterodox the schools of Austrian, institutional, evolutionary or Sraffian economics.

    I admit an error here and I thank Lynne for her correction. But in our personal conversations, Fred Lee argued with me more than once that Austrian school economists were mainstream or neoclassical. At the time I contested this with him. I now accept that, sometime before 2009, Lee changed his position and admitted the Austrians into heterodoxy. This should have been recognised in my 2017 paper and I was in error. This error is already fully corrected in my forthcoming book.

    In addition, in the 2017 paper, I should have made it clearer that Lee excluded Sraffian economics in some, but not all, of his stated listings of what comprises heterodox economics. Again, this is already corrected in later drafts of my working paper and in my forthcoming book.

    The remainder of Lynne’s sentence is false. I do not accuse Lee of excluding ‘institutional’ or ‘evolutionary’ economics from his listings. Instead I note a possible exclusion of the new institutional economics and I wrote: ‘The “evolutionary economics” of Richard Nelson and Sidney Winter (1982) was also excluded from Lee’s (2008) list of ‘heterodox’ approaches.’ I stand by this claim. This is quite different from Lynne’s assertion of what I wrote. Her account is inaccurate.

    I now turn to the discussion of Tony Lawson’s arguments on page 9. Lynne writes:

    ‘Lawson has repeatedly refuted the notion that his definition suggests blanket opposition by heterodox economists to the use of mathematical formalism.’

    She supports this with quotes from Lawson and suggests that I fail to recognise this aspect of Lawson’s position. I do not. I stand by what I say on this in my 2017 paper, where I conclude:

    ‘Consequently, for Lawson, mathematics is appropriate for economics in highly limited circumstances only.’ (p. 9)

    I am fully aware that Lawson (2003, pp. xix, 27, 178–9; 2006, p. 49; 2009, p. 19) has repeatedly insisted that he was not ‘anti-mathematics’ in principle. Instead, he is against the ‘abuse’ of mathematics and against the dogmatic insistence by the mainstream that mathematics must always be used.

    But these statements have to be read alongside Lawson’s own explicit criteria for when it is appropriate to use mathematics. He argued that mathematics would appropriate for economics only in the extraordinary circumstances of approximation to what he called a ‘closed system’. To repeat what I quoted in my 2017 essay: Lawson (2003, pp. 21, 178) clearly regards the appropriate circumstances for the use of mathematics as ‘seemingly rare’ or ‘rather rare’.

    On page 10 Lynne writes:
    ‘The second view of pluralism expressed by Hodgson involves “engagement with the orthodoxy and other disciplines” by heterodox economists.’

    This is not my ‘view of pluralism’. Instead, as noted above, if pluralist conversation has virtues, then conversation with mainstream opponents should be considered. To say that this is a ‘view of pluralism’ is a distortion.

    On page 12 Lynne writes:
    ‘Hodgson (2017, p. 17) states that new departments will require funding and new positions although ‘few universities can afford the luxury of both [mainstream and heterodox departments]’. This assumes only one possible funding model’

    On the contrary, no one funding model is implied or assumed.

    There are several other errors, but I’ll leave it there. I hope the above remarks are useful.

    REFERENCES

    Hodgson, Geoffrey M. (1999) Evolution and Institutions: On Evolutionary Economics and the Evolution of Economics (Cheltenham: Edward Elgar).
    Hodgson, Geoffrey M. (2019) Is There a Future for Heterodox Economics? Institutions, Ideology and a Scientific Community (Cheltenham UK and Northampton MA: Edward Elgar), forthcoming.
    Lawson, Tony (2003) Reorienting Economics (London and New York: Routledge).
    Lawson, Tony (2006) ‘The Nature of Heterodox Economics’, Cambridge Journal of Economics,
    30(4), July, pp. 483-505.
    Lawson, Tony (2009) ‘On the Nature and Roles of Formalism in Economics’, in Fullbrook, Edward (ed.) (2009) Ontology and Economics: Tony Lawson and His Critics (London and New York: Routledge), pp. 189-231.

  • Jamie Morgan says:

    Every author has the right to impose meaning structures on the interpretation of their work; to state, “this is what I meant”. However, equally one can acknowledge that well-intentioned critique can arise based on work as a provocation. Moreover, the provocation can arise because there is a legitimate difference between imply and infer, though this is not the only matter by which difference or provocation can occur. Furthermore, if one then feels it necessary, as GH does, to clarify by emphasising quantifiers, modes and turn of phrase or reference to work not yet in the public domain then it does not necessarily follow it is appropriate to refer to someone as “in error” – in dispute, perhaps, but not in error; in some cases they may be differing over what is being conveyed by the structure, phrasing and claims.

    Perhaps the relevant questions to ask here in developing LC’s paper for final publication are:

    Does LC’s paper serve some legitimate purpose? Arguably yes, in so far as its final version makes clear that the essay is motivated and positioned to respond to the discursive influence of GH, in so far as his essay was placed in the public domain, and has been widely presented and discussed (in various forms).

    Is it reasonably articulated? Arguably yes, in so far as the final version of LC’s essay (if and where possible) makes clear that some claims follow from inferences regarding what is conveyed and the impression this seems to provide that positions heterodoxy (to a prominent heterodox economists such as Chester) in adverse ways (the issue is not necessarily whether this is intended, but whether this is reasonable as a reading that needs to be addressed – one can reasonably differ over this as GH and LC manifestly do; subject to some modal qualifications to respond to statements such as “all”).

    When I read GH’s paper I also thought that it conveyed an overly reductive and negative formulation of heterodoxy that seemed at odds with the intention to constructively advance “heterodox” (in so far as GH also positions himself along these lines) concerns. It would be ironic for GH’s project if he does little more than sow division whilst calling for constructive consensus. It is worth bearing in mind that at least 2 reasonably well-informed readers read the whole in a fashion that GH is at pains to stress misrepresents his work. As he suggests he has been prompted to reformulate and develop the project this may ultimately render LC’s critique moot, in terms of what is not yet available… but it is a response to what is and has been available and disseminated, so it is not thereby rendered irrelevant. This depends on how LC’s essay is modified to allow for GH’s response.

    I recognize this all seems a bit post-structuralist as a set of comments; but what is at issue here has become important because work does not have to be published in the traditional sense to be multiply in the public domain and for it to form part of discourse that has consequences – including dialogue for development and improvement of what we are all ultimately interested in; and which we should not be losing sight of: collectively improving the way economies are understood and influenced or shaped.

    “As you from crimes would pardon’d be,
    Let your indulgence set me free.”

  • Arturo Hermann says:

    It is an interesting debate between two well qualified scholars which can steer more reflection on this central issue. In the previous comments, I illustrated why I am fairly in agreement with Lynne Chester’s paper. I wish to stress here that her choice to chiefly address one significant contribution of Geoffrey Hodgson is fully legitimate.
    In fact, the goal of the LC’s paper is not to closely track the evolution of GH’s thoughts on the issue of heterodoxy but to discuss the perspective laid down in “The pathology of heterodox economics and the limits to pluralism”, which is one of his recent and more widely diffused paper on such theme.

Your comment

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please note that your email address will not be published.