Heterodoxy is not my doxy
Following up on a couple of recent posts on Crooked Timber, I thought it might be useful for me to explain why I donâ€™t think of myself as a â€˜heterodoxâ€™ economist or even find the concept particularly useful. Although Iâ€™m clearly to the left of most people in the economics profession (including a fair number who would call themselves heterodox) Iâ€™m happy to identify myself with the mainstream research program in economics.
The first reason for this is one of personal/political strategy. Starting from broadly social-democratic premises about the way the world works, Iâ€™m concerned to identify and advocate policies that will lead to better outcomes for society as a whole and particularly for the working class and the disadvantaged. Mainstream economics provides a set of tools (the theory of public goods, externality and market failure, taxation and income distribution) to do the analysis and a widely-understood language in which to express the results. No existing alternative body of thought in economics comes close to this.
Of course, a lot of economists, maybe a majority (though this isnâ€™t as clear as you might think) donâ€™t use mainstream economics this way. Rather they employ the simplest possible version of the neoclassical model, which leads to the conclusion that the optimal policy is one in which governments do nothing (except perhaps for some limited income redistribution). Sometimes this is because they donâ€™t know anything more than the simple model, and sometimes itâ€™s on the basis of more sophisticated counterarguments against the mainstream case for intervention, based on ideas such as public choice theory.
By attacking the logical foundations of this simple model, heterodox economists may undermine faith in the policy conclusions derived from it. But this doesnâ€™t get you very far. Even if you regard economic arguments for laissez-faire as worthless, this does not establish any positive case for alternative policies. As we discussed in our seminar on Sheri Berman a while back, orthodox Marxism, when faced with the challenge of depression and fascism, produced nothing but the counsel to wait for the revolution.
To give a more concrete illustration, Iâ€™ve spent a lot of time working on the implications of the equity premium, which, among other things, gives rise to a strong case for public ownership of certain kinds of infrastructure. If I understand the heterodox side of the famous Cambridge controversy correctly, the terms in which I express my case (relative rates of return to equity and bonds) are logically incoherent. But I have no idea how I would make my case if I were to use, say, the theoretical framework promoted by the late Piero Sraffa. It may be that, if the existing body of economic analysis were replaced by an entirely new theory developed on different premises, we could derive a better analysis. But I only have one life, and Iâ€™d rather devote it to promoting better policy outcomes than to relaying foundations.
More generally, I donâ€™t find the whole idea of orthodoxy and heterodoxy, or the related notion of schools of thought, particularly useful. It seems to me to imply a kind of intellectual ancestor-worship which is of no use to anybody. It goes with debates about what Keynes or Commons or Hayek really thought, which seem to me to be almost entirely pointless. In most cases, if their ideas were good ones, they will have been adopted by at least some people in the mainstream, and tracing their intellectual ancestry is of at most second-order interest.
This goes with a judgement that most of the concerns* that are commonly raised against simple-minded versions of economics can be addressed without throwing out the whole system and starting from scratch. If you donâ€™t believe in the perfectly rational economic man (sic), thereâ€™s a huge body of work on behavioral economics, bounded rationality, altruism and so on. If you donâ€™t like simplistic competitive models, the shelves are groaning with books on strategic behavior and game theory. To the extent that I have an international reputation, it derives largely from models of choice under uncertainty that go beyond simple expected-utility theory to take account of more realistic representations of risk attitudes, fundamental uncertainty and so on.
I could go on, but this post has already reached Holbonian extent, so Iâ€™ll stop and thorw it open for comments.
* I guess the big exception to this is if you want to discard methodological individualism altogether, but the theoretical enterprises that took this route (such as structuralism) donâ€™t seem to me to be prospering.