Modern Heterodox Economics Thought

The Development of Modern Heterodox Economic Thought

Heterodox Economics, Heterodox Economic Definition

Dissension has always been a part of economics, and it remains so today. The neoclassical period ended, in part, because the flaws in neoclassical econom­ics had been pointed out by dissenting, or heterodox, economists. Neoclassical eco­nomics responded to those complaints in three ways: (1) it ignored the criticisms as unfounded; (2) it incorporated all or part of the criticism into the scope, content, and method of the dominant theory; and (3) it developed a way to get around the problematic issues. In the process, the mainstream practice in the pro­fession at major graduate schools and research centers, particularly in the United States, evolved from neoclassical economics to eclectic formal model building.

Because of these changes in the economics profession, it is more difficult to be heterodox today than it was when neoclassical economics dominated. The term "neoclassical economics" was coined by Thorstein Veblen to provide a target upon which to make his dissent. It allowed Veblen to lump Alfred Marshall in with classical economics and thereby thwart Marshall's attempt to find common ground between orthodoxy, with its highly abstract theoretical struc­ture, and heterodoxy, which stressed historical and institutional factors. Main­stream economists of Veblen's time did not call themselves neoclassical; heterodox economists called them this, and the term quickly became a negative caricature of the beliefs of the mainstream economists, rather than a charac­terization of what they actually believed. This continues today, with many heterodox economists criticizing "neoclassical economics." It gives them an easy target to shoot at. But as we argued in our discussion of modern microeconomics and macroeconomics, attacking neoclassical economics often misses the mark for modern economics.

The essence of modern economics is its eclectic formal modeling approach. It does not place severe restrictions on assumptions, nor does it have the ideological content that neoclassical economics had. Because modern formalistic model-building economics is so eclectic and so amorphous in its assumptions and core values, it is difficult to attack. At what part of this huge, amoebic body of theory can one accurately strike? Modern mainstream economists' response to most dissent is to refer to another part of modern economics as an example of how the mainstream is dealing with that issue, making it difficult to isolate and classify dissenting groups. Nonetheless, some heterodox groups remain suffi­ciently distinct to warrant a specific discussion, as long as the reader remembers our earlier proviso about the limitations of classifications—that they are made to clarify issues and gain insight, but inevitably do injustice to the groups being classified.

Modern heterodox thinkers fall roughly into five dissident groups: radicals, modern institutionalists, post-Keynesians, public choice advocates, and neo-Austrians.. In looking at the table, remember that our discussion of heterodox economists is intended to give evidence of the diversity of modern American heterodox thought and to provide a brief introduction to some interesting reading; it is in no way intended to be exhaustive.