1.1 What is 'heterodox'?
Heterodox can mean simply 'non-orthodox' but that definition is problematic. Principally, it begs the further question of whether there is an identifiable orthodoxy. For some economists, the term orthodoxy has been misused or become redundant. It remains associated with the neo-classical economics of Marshall, Hicks and Samuelson. In that way, it ought to be distinguished from 'mainstream' economics, which is not neo-classical (see Colander, 2000) or is splitting up (Colander, Holt and Rosser, 2004). The mainstream includes many diverse strands, one of which is neo-classical economics; however many of the other strands may be inconsistent with each other and with the neo-classical economics that preceded them. Indeed, it could be argued that many of the new strands of the mainstream, such as complexity theory, evolutionary economics, behavioural economics and ecological economics, have non-neoclassical roots; others, such as experimental economics, are generating distinctly non-neoclassical results. In this chapter, therefore, 'mainstream' refers to the current body of work described above, i.e. is not limited to neo-classical economics.
However, many of these theoretical developments have not filtered into undergraduate teaching (Becker, 2004). As a result, 'orthodox' teaching still largely reflects neo-classical economics. Moreover, orthodox modules on, say, microeconomics retain more coherence than is found in mainstream microeconomics: often, the conflicts between the full information individualism of consumer theory, the limited information choice theory, and a game theory of strategic interactions are ignored. Of course, there are commonalities: maximisation of utility is common to the three bodies of theory just cited. In this chapter, the term orthodox refers to the essentially neo-classical material present in the vast majority of undergraduate economics curricula.
Clearly then, defining heterodox as 'non-orthodox' is problematic. Further, that definition of heterodox downplays the heritage of the heterodox theories, which are based in a tradition of alternative theoretical systems, such as those constructed by Marx, Keynes and Veblen. Heterodox theories are considerably more than reactions to orthodox theories. For the purpose of this chapter, heterodox means neither simply 'non-orthodox' nor 'non-neoclassical'. Nor is it defined merely in terms of new versus old, i.e. new economic research versus old textbook theory. Heterodox economics is not merely the process of catching up with scholarship discussed by Becker (2004) and Ormerod (2003) above.
A summary of the key characteristics found in the writings of heterodox economists is presented in Figure 2.
Figure 2: A non-exhaustive series of heterodox principles
- Methodology (rather than just method) is important to understanding economics.
- Human actors are social and less than perfectly rational, driven by habits, routines, culture and tradition.
- Economic systems are complex, evolving and unpredictable - and consequently equilibrium models should be viewed sceptically.
- While theories of the individual are useful, so are theories of aggregate or collective outcomes. Further, neither the individual nor the aggregate can be understood in isolation from the other.
- History and time are important (reflecting (3)).
- All economic theories are fallible and, reflecting (4), there is contemporary relevance of the history of thought to understanding economics.
- Pluralism, i.e. multiple perspectives, is advocated (following on from (3) and (6)).
- Formal mathematical and statistical methods should be removed from their perceived position as the supreme method - but not abandoned - and supplemented by other methods and data types.
- Facts and values are inseparable.
- Power is an important determinant of economic outcomes.
Figure 2 does not suggest that every example of heterodox economics exemplifies every one of these characteristics. Austrian economists, for example, would not recognise principle 10. Whilst some economists treat heterodox as a single body of theory (or try to create a single theory: Lavoie, 1992; Arestis, 1992), others treat it as a collection of theories (Garnett, 2005). Some argue for a coherence of heterodoxy at a methodological level or even in terms of the nature of reality as involving structures of deep causal mechanisms (Lawson, 1997, 2003) or complex adaptive systems (Potts, 2000). Figure 2 includes assumptions with epistemological and ontological standpoints that are widespread in heterodox literature (and therefore tending towards a potentially unifiable body of theory). Given the scale of these principles, students will only have very limited opportunities to understand the implications within the context of a single module. A more thoroughgoing approach would require a review of the experiences offered to students across a whole degree programme.
1.1.1 Method and history
Some of the points in Figure 2 merit further elaboration. Attention to methodology (1) and to the history of economic thought (5) are hallmarks of a heterodox approach. It is too bold a claim to state that all teaching of orthodox economics ignores methodology and history of thought. However, heterodox economists have argued that these two (arguably key) areas are neglected in standard treatments of economics. As discussed below, the question of what a model is, how it is to be used, how it is to be evaluated, etc. are crucial for anyone wanting to understand economics; and indeed, are useful questions for anyone required to think abstractly. Accordingly, abstraction is a central activity in economics: what does it mean? How are we to think of ceteris paribus? In contrast to many standard treatments, a heterodox module would spend longer discussing those methodological issues and would not set them aside. Rather, they would be revisited repeatedly.
Hodgson's (2001) claim that 'economics forgot history' may have a double meaning. First, economic models removed historical time from analysis. Second, the history of thought has been banished to an optional final level module. Heterodox approaches tend to take history more seriously. Partly this is self-serving, because it helps them justify their own existence by pointing to the fact that neo-classical economics was not always the only game in town and by examining critically how economics got to its current state. This approach should not lead to the conclusion that heterodox modules are merely history of thought modules. Rather, it rests on the belief that theories cannot be understood outside their wider socio-historical context. The rise of the General Theory is a good example: it reflected past intellectual currents but also the background of economic instability and high unemployment. The struggle between Monetarists and Keynesians is inexplicable outside of its economic context of what was actually happening to inflation. Heterodox economics precludes an a-historical approach to theorising and asserts that students should be introduced to this way of thinking.
1.1.2 Micro/macro distinction?
In addition to these two general principles, another is worthy of discussion. Principle 4 has implications for what sort of modules one would offer on a heterodox course. From several of the approaches called 'heterodox', the very concept of a micro/macro split along conventional lines is meaningless(footnote). Whereas orthodox treatments see the individual as the fundamental object of economic theory, Institutionalist economists, for example, see the institution as the basic unit of analysis, and as operating through and on individuals. In that sense, the notion of an aggregate economy is rather empty. Institutions operate at both the micro and macro levels. Similarly, Marxist analysis takes class as its basic unit and, as such, again the micro/macro split disappears. Further, where one might be able to identify a micro level and a macro level - for instance, of 'firms' and 'economy' - these levels are intimately connected: for example, the labour theory of value explains firm behaviour on the use of factors (or means) of production. In Keynesian analysis, a key argument is about the fallacy of composition and how it affects the behaviour of markets. Students could also benefit from it being pointed out that economists such as Smith, Marx and Marshall saw the whole economy but were able also to abstract from the whole to see its parts and crucially the relations between the parts. All of these arguments suggest that shoe-horning the heterodox approaches into micro or macro modules will rob them of some of the depth which they have to offer. In terms of curriculum design, abandoning the micro/macro split has minor implications at the introductory or survey level but, at higher levels, whole programmes would have to be redesigned away from the traditional format.
Footnote: Of course, in some ways, orthodox treatments also imply that a micro/macro split is inappropriate. Orthodox economics is methodologically individualist and tries to rest explanations of aggregate phenomena on microfoundations of individual behaviour. Arguably, a "macro"economics is irrelevant.