Economists weigh in on “hip heterodoxy”

A torrent of discussion in response to Hip Heterodoxy (blogged here) has come up at TPM cafe. The full discussion page, which includes posts by Paul Krugman, Mark Thoma, Max Sawicky and others, can be viewed here. For RPE, I will stick to the self-interest of the PEF, and include only James Galbraith, who is telegraphing, I’m sure, some remarks destined for the inauguration of the PEF’s John Kenneth Galbraith Prize in Economics, this Sunday in Halifax, at the Canadian Economics Association meetings. This kind of serendipity cannot be explained by any economic model.

“Hip Heterodoxy” and the History of Economics

By James K. Galbraith | bio

Perhaps the Brazil-savvy Ruccio or his anthropologist wife will correct me, but I remember reading somewhere that the indigenous tribes of the Amazon were not primitive isolates as many believed, but the remnants of mighty nations, which once ruled over vast empires.

So it is with heterodox economists. To the sharp contemporary eye, we seem a handful of misfits, who somehow stumbled past the comprehensive exams and the tenure reviews, laid like land-mines across our paths. But that is not quite how we see ourselves.

Did John Kenneth Galbraith spend “his whole life as an economic dissident”? Absolutely not. My father’s early Institutionalism was the mainstream at the time. The child of philosophical pragmatism and scientific Darwinism, Institutionalism linked Veblen, Commons at Wisconsin and Ayres in Texas; it gave us the New Deal and, in particular, Social Security. It was allied to a German-influenced historical economics, which controlled the American Economic Association. The AEA, now a free-trade sect, was formed in the 1890s largely to oppose the free-trade doctrines of 19th century British economics.

At that time, the main dissident force in economics was Marxism. Neoclassical economics barely existed; there are no significant Americans in those ranks before 1950. (John Bates Clark? Please. A minor post-Walrasian, whose son caught the drift and became an Institutionalist.)

In 1936 my father encountered Keynes and joined him, to become a leader in the ascendant Keynesian school. By 1942, as chief of wartime price control, he was for a year the most powerful economist in history. In the 1950s and 1960s, he became the most widely-read economist ever; The New Industrial State was on the Times bestseller list for over a year. And so it went into the 1970s: Milton Friedman’s Free to Choose was a reaction to The Age of Uncertainty, a 13-part BBC series and worldwide sensation; the book on that sold half a million copies in Japan.

Nor was he alone. The Harvard economics department was then full of giants who would today be thought heterodox: Leontief, Hirschman, Kuznets, Duesenberry, Landes, Dunlop. As a guide to what the profession would become, it was totally misleading. It did, however, succeed in fooling me.

I went from Harvard to Cambridge in 1974, to study under Nicholas Kaldor and others including Joan Robinson, Keynes’ close disciple. Returning eventually to Yale, I found another nest of highly heterodox figures, genially clustered around Jim Tobin: Nelson, Winter, Peck, Parker, Ruggles, Orcutt. All of these groups would be scattered within a few years.

But the point is: neoclassical economics was not always dominant. It rose to dominance in my professional lifetime. I expect to see it fall apart. Indeed as Hayes accurately reports, it is in fact crumbling, from within, right now. Again as Hayes reports, many neoclassicals realize this. The question is, what comes next?

Here the history of ideas matters, for the neoclassicals are determined to obliterate all traces of Marx, Veblen, Keynes, Kaldor, Robinson and Galbraith from the record and the curriculum. This will ensure that the successor doctrines–”behavioral economics” for instance–arise solely from within the neoclassical fold. And that is what heterodoxy exists to prevent. We represent intellectual biodiversity in economics; our mission is to preserve it, for better days.

The neoclassical trick is to insist that all “real economists”adhere to an arcane and limited set of techniques. The focus on conformity, on a bizarre hierarchy of journals, the dominance of the AEA at the annual meetings, all serve to define who is in the tribe, and their rank. Mainstream economics, as Hayes observes, doesn’t have fixed ideas; it is defined by who accepts the discipline of the cult. No real science operates this way– real science is highly varied with respect to mathematics, measurement and experiment, and deeply grounded in data and evidence, as vast parts of economics are not.

But ultimately the question becomes: who is really in the ghetto? At the AEA meetings, it seems the heterodox are. But what about everywhere else? Just a tiny handful of post-neoclassicals– Stiglitz and Krugman for instance– operate brilliantly in the public realm these days. Everyone else one encounters there is a business economist, a regional specialist, a statistician, a practical Keynesian, or some other heterodox type. Yes, there are thousands of academic neoclassicals, but what do they amount to? For the most part, so far as public issues are concerned, they have nothing to say.

So much the better. My hope is that the neoclassical ghetto will continue to build its walls, and that universities, who hold the power in these matters, will eventually just shrink those departments and let them wither away. Instead, we should expand schools of policy, of business, institutes of government, and whatever else it takes to find places where heterodox economists can find work. We will then build our own associations, develop our own journals, and create a better economics, engaged with the actual problems of the world: globalization and poverty, inequality and unemployment, peace and security, climate change.

This is called competition, by the way. It has a certain tradition in the field, though typically honored in the breach.