Heterodox economy

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Heterodox economy (literally "deviating economy") describes approaches and schools of economic theories that lie outside the economic " mainstream " and cannot be called " orthodox " or "conventional economy". Heterodox economy is thus an umbrella term that encompasses various economic approaches, schools of thought and traditions . It encompasses institutional , post-Keynesian , socialist , Marxist , feminist , Austrian , ecological and other socio-economic approaches.

These views are usually contrary to the prevailing tenets of economics, namely the neoclassical theory as well as in macroeconomics the Keynesianism .

It is difficult to define a “heterodox economy”. The International Confederation of Associations for Pluralism in Economics (ICAPE) avoids the overly specific definition of the umbrella term and tries instead to describe the task as “promoting pluralism in economics”. One of the main challenges of "heterodoxy" is its own definition in areas that go beyond "neoclassical" economics. Because of the variety of approaches, heterodox economics is often associated with the term plural economics . In developing a common basis with the help of a critical opinion, some heterodox economists identified the following three things as essential:

  1. Identify common ideas which include structures of heterodox criticism between topics and chapters of introductory, overarching texts;
  2. Pay special attention to ideas that combine methodological and political differences between systems
  3. Characterize a common foundation that enables the development of clear paradigms to further develop common differences from traditional economic literature in different ways.

history

At the beginning of the neoclassical revolution after 1870, a number of heterodox schools questioned the dominance of neoclassical theory . Based on the socialist critique of capitalism, heterodox schools of this period included various representatives of mercantilism , such as the American school, which distinguished itself from the neoclassical methodology, and the historical school with the adherents of the unorthodox monetary theory of " social credit " . Other heterodox schools before and during the Great Depression included technocrats and Georgisten . In the case of the technocrats, the theory consisted of a non-market-related economic system based on the question of energy management. In the years that followed, more attention was paid to people like Frederick Soddy , who in the book "Wealth, Virtual Wealth and Debt" wrote about the importance of energy in economic systems. He criticized the focus on money flows in economics, arguing that real wealth can be derived from the use of energy to transform materials into physical goods and services. Soddy's economic writings were largely ignored during his time, but later incorporated into the development of biophysical economics, as well as ecological economics and bioeconomics during the 20th century.

Some physicists and biologists were the first to use energy to explain social and economic problems. Joseph Henry , an American physicist and secretary of the Smithsonian Institute, noted that the "fundamental principle of political economy is that human physical work can only be developed ... by transforming an unfinished state into an artificial state ... by expanding capacity and energy. "

The rise of heterodox approaches and the integration of knowledge in traditional areas of Keynesian theory, which gave the impression of providing a better political context with regard to unemployment than the heterodox monetary and trade strategies, led to a decline in interest in these areas in the following years the heterodox economy.

After 1945, the neoclassical synthesis of Keynesian and neoclassical economics ended in a clearly defined mainstream position based on the split into the field of microeconomics (largely neoclassical, but including the theory of market failure) and macroeconomics (differentiated between Keynesian and monetarist views on issues such as the role of monetary policy). Followers of the Austrian school and post-Keynesianism who rejected this synthesis developed into the clearly identifiable heterodox school. In view of this, the currents of Marxist and institutionalist economists also remained independent.

Until 1980, the most important issues in the heterodox economy were shaped in their various forms by:

  1. Rejection of the atomistic individual conception in favor of an overarching socio-economic approach;
  2. Highlighting time as an irreversible historical process;
  3. Identification of conclusions as a concept of mutually dependent influences (interdependent) between individuals and social structures.

Building on these findings, remarkable developments in the economy took place from 1980; a number of new research programs began to be perceived in different ways by the neoclassical mainstream. This includes behavioral economics , Complexity Economics , Evolutionary Economics , Experimental Economics , neuro-economics and others. As a consequence, economists such as John B. Davis demanded that the definition of heterodox economy be adapted to the requirements of the new complex reality.

In summary, the heterodox economy after 1990 can be described as a complex structure, consisting of a merger of two different types of heterodox research, each of which has differentiated areas with a multitude of research programs with different historical origins and orientations: the larger area of ​​the traditionally politically oriented heterodox economy and the "New Heterodox Economy" resulting from the integration of influences from other areas of science.

Critique of Neoclassical Theory

The core of heterodox economics is the rejection of an all-encompassing solution approach of economic theory, instead it advocates the principle of a multitude of equal theoretical areas and research directions. The commonality of their currents can be found in the rejection of neoclassical theory , with the view of an all-encompassing economic approach and the provision of methods and techniques for a joint analysis of real economic and social issues. Although many of the approaches are fundamentally different, they are not necessarily mutually exclusive as in traditional economics.

The main points of criticism of neoclassical economic theory can be summarized as follows:

Critique of the neoclassical model of behavior

One of the most widely accepted principles of traditional economic theory is the adoption of the "rationality of the economic agent". In fact, for a large number of economists, the concept of economic rationality of profit-maximizing and self-interested behavior is a synonym for an economic approach to behavior, summarized in the model of Homo oeconomicus . The economic theories outside of the aforementioned principle of rationality are viewed as approaches outside the boundaries of neoclassical theory. The neoclassical theory begins with a restrictive a-priori summary of the economic agent as a rational and profit-maximizing subject solely following his individual utility maximum in his environment. These assumptions describe the foundations of the rational decision theory .

Many different research areas criticize the standard model of Homo oeconomicus. Suchanek and Kerscher provide an exemplary statement:

First of all, it should be noted that this criticism can also be based on experimental results. So it was shown z. B. in the context of a scientific study among students that those who were familiar with the model of the rational, self-interested actor showed a lower rate of cooperation in interactions than others who were not familiar with the model. However, further investigations also showed that such a result cannot be reproduced in every case. In some cases, higher cooperation rates were found among economics students than among others. ... Homo oeconomicus is thus also an instrument for analyzing incentive-compatible investments. Seen in this way, it does not spoil morality but promotes the social competence of the individuals because it leads the (ultimately always normatively motivated) search for cooperation arrangements that are in the mutual interest. ... In particular, the "self-interest" of economics must not be confused with the egoism of moral philosophy and the model with the philosophical image of man.

Critique of the neoclassical model of the equilibrium market

Based on the given market rationality of the traditional behavioral model, many economists derive the well-known market equilibrium which, under special conditions, leads to a predetermined market-adjusting equilibrium and which, under certain conditions , is considered efficient as Pareto .

Heterodox economics rejects this fundamental summary on which neoclassical theory is based. The concept of market equilibrium has already been criticized by the Austrian school, post-Keynesianism and others. The idea of ​​an absolute market equilibrium is assumed to be unrealistic and therefore rather the exception in economic theory rather than the rule.

While the neoclassical economy can be described as a "rational-individualistic-equilibrium" context, the heterodox economy can be summarized as an "institutional-historical-social-structural" nexus . It should be noted that there is an economic difference in the distinction between neoclassical and heterodox economics in the above-mentioned approach, contrary to the comparison in the discussion of closed and open economic systems (Lawson, 1997); It is often assumed that the neoclassical theory can be considered relevant under certain conditions when it comes to markets of "perfect" or "near perfect" states. This justifies the neoclassical analysis of "imperfect competition", which questions the relevance of alternative approaches, although the deficits of classical economic theory are not eliminated.

Critique of the neoclassical model of the labor market

The problems of the limiting assumptions of the neoclassical model also apply in this context to the labor market and can be summarized under the criticism of the heterodox approaches with the following points:

  1. not perfect competition
  2. no homogeneous provider structure
  3. not perfect information
  4. Employment providers are not or only to a limited extent mobile
  5. There are frictions or price rigidities, wages are not absolutely flexible and adapt at any time
  6. The labor demanders (companies) are subject to the arbitrariness of the market and cannot sell their output at any time.

In particular, the problems of the subject areas of unemployment and their causes are questionable, although so far only voluntary unemployment could be described by neoclassical theory.

Voluntary unemployment is interpreted in neoclassical theory as an expression of bad investments in human capital and is thus self-inflicted.

In more recent approaches, reference is instead made to the concept of structural unemployment and the meaning of structural differences in connection with the conflict of the interdependence of industry and services within regional economic structures.

Research areas of the heterodox economy

Institutions

literature

Web links

Individual evidence

  1. Tony Lawson, bresserpereira.org.br: The nature of heterodox economics ( Memento of the original from September 26, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF file; 203 kB). Advanced access copy , Oxford University Press , on behalf of the Cambridge Political Economy Society , 2005. In: Cambridge Journal of Economics 2006 30 (4): 483-505 @1@ 2Template: Webachiv / IABot / www.bresserpereira.org.br
  2. C. Barry (1998): Political-economy: A comparative approach . Westport, CT: Praeger.
  3. K. Case, R. Fair (2008): The principles of economics . New Saddle River, NJ: Pearson.
  4. John T. Harvey, Robert F. Garnett Jr., (Eds.). (2008): Future Directions for Heterodox Economics . University of Michigan
  5. Soddy, Frederick. Encyclopedia of Earth .
  6. ^ Cutler J. Cleveland. "Biophysical economics" , Encyclopedia of Earth , Updated: September 14, 2006.
  7. ^ "Mr. Soddy's Ecological Economy," The New York Times , April 12, 2009.
  8. Davis, John B. The Nature of Heterodox Economics (PDF file; 116 kB) post-autistic economics review, issue no. 40, December 1, 2006, article 3, pp.23-30.
  9. Frederic Lee. (2009) A History of Heterodox Economics - Challenging the mainstream in the twentieth century . NY: Routledge
  10. Robert F. Garnett Jr. (2004) Rhetoric and postmodernism in economics in John B. Davis, Alain Marciano, Jochen Runde (Eds.): The Elgar Companion to Economics and Philosophy. Northampton MA: Elgar Publishing
  11. Kirchgässner, Gebhard (1991): Homo Oeconomicus , Tübingen
  12. ^ Andreas Suchanek, Klaus-Jürgen Kerschner. (2006) Does Homo Oecnomicus Spoil Morality? in Verena von Nell, Klaus Kufeld (eds.): Homo Oeconomicus - A new model in the globalized world? Münster: LA Verlag Berlin
  13. ^ Lawson, Tony. (2005) The nature of heterodox economics ( Memento of the original from September 26, 2007 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF file; 203 kB) in Oxford University Press from the Cambridge Political Economy Society, in: Cambridge Journal of Economics 30 (4): 483-505] @1@ 2Template: Webachiv / IABot / www.bresserpereira.org.br
  14. Werner Stuhlmeier, Gregor Blauermel. (1997) Labor Market Theories: An Overview . Heidelberg
  15. Kalmbach, Peter (2001). Deregulation and flexibilization of the labor market in times of globalization (report on behalf of the Enquete Commission "Globalization of the World Economy"). Berlin: German Bundestag (AU-Stud 14/20)
  16. Deutschlandfunk.de , Andruck - Das Magazin für Politische Literatur , May 9, 2016, Gaby Mayr: Reading the riot act in economics (May 11, 2016)