Heterodoxy is a term that may be used in contrast with orthodoxy in schools of economic thought or methodologies, that may be beyond neoclassical economics. Heterodoxy is an umbrella term that can cover various schools of thought or theories. These might for example include anarchist, socialist, Marxian, institutional, evolutionary, Georgist, Austrian, feminist, social, post-Keynesian (not to be confused with New Keynesian), and ecological economics among others. In the JEL classification codes developed by the Journal of Economic Literature, heterodox economics is in the second of the 19 primary categories at:
Economics may be called orthodox or conventional economics by its critics. Alternatively, mainstream economics deals with the "rationality–individualism–equilibrium nexus" and heterodox economics is more "radical" in dealing with the "institutions–history–social structure nexus". Many economists dismiss heterodox economics as "fringe" and "irrelevant", with little or no influence on the vast majority of academic mainstream economists in the English-speaking world.
A recent review documented several prominent groups of heterodox economists since at least the 1990s as working together with a resulting increase in coherence across different constituents. Along these lines, the International Confederation of Associations for Pluralism in Economics (ICAPE) does not define "heterodox economics" and has avoided defining its scope. ICAPE defines its mission as "promoting pluralism in economics."
In defining a common ground in the "critical commentary," one writer described fellow heterodox economists as trying to do three things: (1) identify shared ideas that generate a pattern of heterodox critique across topics and chapters of introductory macro texts; (2) give special attention to ideas that link methodological differences to policy differences; and (3) characterize the common ground in ways that permit distinct paradigms to develop common differences with textbook economics in different ways.
One study suggests four key factors as important to the study of economics by self-identified heterodox economists: history, natural systems, uncertainty, and power.
A number of heterodox schools of economic thought challenged the dominance of neoclassical economics after the neoclassical revolution of the 1870s. In addition to socialist critics of capitalism, heterodox schools in this period included advocates of various forms of mercantilism, such as the American School dissenters from neoclassical methodology such as the historical school, and advocates of unorthodox monetary theories such as Social credit. Other heterodox schools active before and during the Great Depression included Technocracy and Georgism.
Physical scientists and biologists were the first individuals to use energy flows to explain social and economic development. Joseph Henry, an American physicist and first secretary of the Smithsonian Institution, remarked that the "fundamental principle of political economy is that the physical labor of man can only be ameliorated by… the transformation of matter from a crude state to a artificial condition...by expending what is called power or energy."
The rise, and absorption into the mainstream of Keynesian economics, which appeared to provide a more coherent policy response to unemployment than unorthodox monetary or trade policies contributed to the decline of interest in these schools.
After 1945, the neoclassical synthesis of Keynesian and neoclassical economics resulted in a clearly defined mainstream position based on a division of the field into microeconomics (generally neoclassical but with a newly developed theory of market failure) and macroeconomics (divided between Keynesian and monetarist views on such issues as the role of monetary policy). Austrians and post-Keynesians who dissented from this synthesis emerged as clearly defined heterodox schools. In addition, the Marxist and institutionalist schools remained active.
Up to 1980 the most notable themes of heterodox economics in its various forms included:
From approximately 1980 mainstream economics has been significantly influenced by a number of new research programs, including behavioral economics, complexity economics, evolutionary economics, experimental economics, and neuroeconomics. As a consequence, some heterodox economists, such as John B. Davis, proposed that the definition of heterodox economics has to be adapted to this new, more complex reality:
There is no single "heterodox economic theory"; there are many different "heterodox theories" in existence. What they all share, however, is a rejection of the neoclassical orthodoxy as representing the appropriate tool for understanding the workings of economic and social life. The reasons for this rejection may vary. Some of the elements commonly found in heterodox critiques are listed below.
One of the most broadly accepted principles of neoclassical economics is the assumption of the "rationality of economic agents". Indeed, for a number of economists, the notion of rational maximizing behavior is taken to be synonymous with economic behavior (Becker 1976, Hirshleifer 1984). When some economists' studies do not embrace the rationality assumption, they are seen as placing the analyses outside the boundaries of the Neoclassical economics discipline (Landsberg 1989, 596). Neoclassical economics begins with the a priori assumptions that agents are rational and that they seek to maximize their individual utility (or profits) subject to environmental constraints. These assumptions provide the backbone for rational choice theory.
Neoclassical economic theory is grounded in a particular conception of human psychology, agency or decision-making. It is assumed that all human beings make economic decisions so as to maximize pleasure or utility. Some heterodox theories reject this basic assumption of neoclassical theory, arguing for alternative understandings of how economic decisions are made and/or how human psychology works. It is possible to accept the notion that humans are pleasure seeking machines, yet reject the idea that economic decisions are governed by such pleasure seeking. Human beings may, for example, be unable to make choices consistent with pleasure maximization due to social constraints and/or coercion. Humans may also be unable to correctly assess the choice points that are most likely to lead to maximum pleasure, even if they are unconstrained (except in budgetary terms) in making such choices. And it is also possible that the notion of pleasure seeking is itself a meaningless assumption because it is either impossible to test or too general to refute. Economic theories that reject the basic assumption of economic decisions as the outcome of pleasure maximization are heterodox.
Shiozawa emphasizes that economic agents act in a complex world and therefore impossible for them to attain maximal utility point. They instead behave as if there are a repertories of many ready made rules, one of which they chose according to relevant situation.
In microeconomic theory, cost-minimization by consumers and by firms implies the existence of supply and demand correspondences for which market clearing equilibrium prices exist, if there are large numbers of consumers and producers. Under convexity assumptions or under some marginal-cost pricing rules, each equilibrium will be Pareto efficient: In large economies, non-convexity also leads to quasi-equilibria that are nearly efficient.
However, the concept of market equilibrium has been criticized by Austrians, post-Keynesians and others, who object to applications of microeconomic theory to real-world markets, when such markets are not usefully approximated by microeconomic models. Heterodox economists assert that micro-economic models rarely capture reality.
Mainstream microeconomics may be defined in terms of optimization and equilibrium, following the approaches of Paul Samuelson and Hal Varian. On the other hand, heterodox economics may be labeled as falling into the nexus of institutions, history, and social structure.
Over the past two decades, the intellectual agendas of heterodox economists have taken a decidedly pluralist turn. Leading heterodox thinkers have moved beyond the established paradigms of Austrian, Feminist, Institutional-Evolutionary, Marxian, Post Keynesian, Radical, Social, and Sraffian economics—opening up new lines of analysis, criticism, and dialogue among dissenting schools of thought. This cross-fertilization of ideas is creating a new generation of scholarship in which novel combinations of heterodox ideas are being brought to bear on important contemporary and historical problems, such as socially grounded reconstructions of the individual in economic theory; the goals and tools of economic measurement and professional ethics; the complexities of policymaking in today's global political economy; and innovative connections among formerly separate theoretical traditions (Marxian, Austrian, feminist, ecological, Sraffian, institutionalist, and post-Keynesian) (for a review of post-Keynesian economics, see Lavoie (1992); Rochon (1999)).
David Colander, an advocate of complexity economics, argues that the ideas of heterodox economists are now being discussed in the mainstream without mention of the heterodox economists, because the tools to analyze institutions, uncertainty, and other factors have now been developed by the mainstream. He suggests that heterodox economists should embrace rigorous mathematics and attempt to work from within the mainstream, rather than treating it as an enemy.
Some schools of heterodox economic thought have also taken a transdisciplinary approach. Thermoeconomics is based on the claim that human economic processes are governed by the second law of thermodynamics. The posited relationship between economic theory, energy and entropy, has been extended further by systems scientists to explain the role of energy in biological evolution in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits of the various mechanisms for capturing and utilizing available energy to build biomass and do work.
Various student movements have emerged in response to the exclusion of heterodox economics in the curricula of most economics degrees. The International Student Initiative for Pluralist Economics was set up as an umbrella network for various smaller university groups such as Rethinking Economics to promote pluralism in economics, including more heterodox approaches.
# Listed in Journal of Economic Literature codes scrolled to at JEL: B5 – Current Heterodox Approaches.
(Solow 1988) George Stigler similarly noted the professional marginality of the "neo-Ricardian" economists (who follow Piero Sraffa):
Marx was an important and influential thinker, and Marxism has been a doctrine with intellectual and practical influence. The fact is, however, that most serious English-speaking economists regard Marxist economics as an irrelevant dead end.
"economists working in the Marxian-Sraffian tradition represent a small minority of modern economists, and ... their writings have virtually no impact upon the professional work of most economists in major English-language universities."(Stigler 1988, p. 1733)
Dynamic stochastic general equilibrium modeling (abbreviated as DSGE, or DGE, or sometimes SDGE) is a method in macroeconomics that attempts to explain economic phenomena, such as economic growth and business cycles, and the effects of economic policy, through econometric models based on applied general equilibrium theory and microeconomic principles.Frederic Sterling Lee
Frederic Sterling Lee (November 24, 1949 – October 23, 2014) was an American heterodox economist. His primary theoretical contribution to heterodox economics lies in the areas of pricing, price, production, costs, market competition, market governance, and the modeling the economy as a disaggregated, emergent whole. He was the founding editor of the Heterodox Economics Newsletter (2004–09), the editor of the American Journal of Economics and Sociology (2009–13), the president of the Association for Institutional Thought (2012), the president of the Association for Evolutionary Economics (2015), and the founder and honorary life president of the Association for Heterodox Economics. Lee authored and edited seventeen books, including Post Keynesian Price Theory (1998), A History of Heterodox Economics (2009), and Microeconomic Theory: A Heterodox Approach (2017). He published fifty-six articles and over a hundred book chapters, book entries, book reviews, and notes of one sort or another.Geoffrey Hodgson
Geoffrey Martin Hodgson (born 28 July 1946) is a Professor in Management at Loughborough University London, and also the editor-in-chief of the Journal of Institutional Economics.
Hodgson is recognised as one of the leading figures of modern critical institutionalism which carries forth the critical spirit and intellectual tradition of the founders of institutional economics, particularly that of Thorstein Veblen. His broad research interests span from evolutionary economics and history of economic thought to Marxism and theoretical biology. He first became known for his book Economics and Institutions: A Manifesto for a Modern Institutional Economics (1988), which criticises modern 'mainstream' economics and calls to revise economic theory on the new grounds of institutionalism. His reputation has become enhanced owing to the trilogy of more recent books – Economics and Utopia (1999), How Economics Forgot History (2001) and The Evolution of Institutional Economics (2004) all of which built Hodgson's arguments into a more rounded and powerful critique of mainstream economic theory.
In 1988, Hodgson was involved in setting up the European Association for Evolutionary Political Economy (EAEPE). He was its general secretary until 1998. In 2000 Hodgson co-founded The Other Canon, a center and network for heterodox economics research, with main founder and executive chairman Erik Reinert and others. In 2013, Hodgson co-founded the World Interdisciplinary Network for Institutional Research (WINIR). In his 2015 book "Conceptualizing Capitalism" and an article entitled "Legal Institutionalism", he sketched his own research program of a legal institutionalism.Hans Singer
Sir Hans Wolfgang Singer (29 November 1910 – 26 February 2006) was a development economist best known for the Singer–Prebisch thesis, which states that the terms of trade move against producers of primary products. He is one of the primary figures of heterodox economics.Heterodoxy
Heterodoxy in a religious sense means "any opinions or doctrines at variance with an official or orthodox position". Under this definition, heterodoxy is similar to unorthodoxy, while the adjective "heterodox" could be applied to a dissident.
Heterodoxy is also an ecclesiastical term of art, defined in various ways by different religions and churches. For example, in the Apostolic Churches (the Orthodox Church, the Roman Catholic Church, the Church of the East, the Anglican Communion, and the Non-Chalcedonian or Oriental Churches), heterodoxy may describe beliefs that differ from strictly orthodox views, but that fall short either of formal or of material heresy.Jan Kregel
Jan A. Kregel (born 19 April 1944) is an eminent Post-Keynesian economist.
Kregel has served since 2006 as Professor of Finance and Development at Tallinn University of Technology, Tallinn, Estonia. He is an adjunct professor at Johns Hopkins SAIS (SAIS), whose Bologna Center he co-directed in the late 1980s, and a visiting professor at the University of Missouri–Kansas City. He is also one of the Senior Scholars at the Levy Economics Institute of Bard College. Until 2007, he was Chief of the Policy Analysis and Development Branch of the Financing for Development Office of United Nations Department of Economic and Social Affairs. Until 2004, he was High Level Expert in International Finance and Macroeconomics in the New York Liaison Office of UNCTAD, being in essence its chief economist. For many years, he held the Chair for Political Economy at the University of Bologna.
Kregel studied mainly at the University of Cambridge (with Joan Robinson and Nicholas Kaldor) and Rutgers University (Ph.D. 1970 under supervision of Paul Davidson). He is a Life Fellow of the Royal Economic Society in London and in 2000 he co-founded The Other Canon, a center and network for heterodox economics research, with main founder and executive chairman Erik Reinert."In the 1970-75 period, Professor Kregel was concerned with synthesis, integration and delineation of a Post Keynesian methodology and paradigm. From the mid-1970s until the late 1980s, he worked on the analysis of decision making under uncertainty, on formation of asset prices and on Keynes analysis of Chapter 17 of the General Theory. In 1988, Professor Kregel showed that Keynes’ liquidity preference and own rate analysis were actually two sides of the theory of effective demand. His most recent works on price formation and market structure provide a powerful critique of neoclassical price theory and propose a Keynesian alternative in which expectations of the future go into the determination of current price determination and in which institutional arrangements undergird the process of price formation." (University of Missouri in Kansas City)
Professor Kregel is the Program Director for the Master of Science in Economic Theory and Policy of the Levy Economics Institute of Bard College. The Program was started in 2014.Mainstream economics
Mainstream economics may be used to describe the body of knowledge, theories, and models of economics, as taught across universities, that are generally accepted by economists as a basis for discussion. It can be contrasted to heterodox economics, which encompasses various schools or approaches that are accepted by their proponents. The economics profession has generally been associated with neoclassical economics and with the neoclassical synthesis, and over time the profession has included Keynesian approach to macroeconomics.Mises Institute
The Mises Institute, short name for Ludwig von Mises Institute for Austrian Economics, is a tax-exempt educative organization located in Auburn, Alabama, United States. It is named after Austrian School economist Ludwig von Mises (1881–1973).
The Mises Institute was founded in 1982 by Lew Rockwell, Burton Blumert, and Murray Rothbard, following a split between the Cato Institute and Rothbard, who had been one of the founders of the Cato Institute. Additional backing for the founding of the Institute came from Mises's wife, Margit von Mises, Henry Hazlitt, Lawrence Fertig, and Nobel Economics Laureate Friedrich Hayek. Through its publications, the Institute promotes libertarian, paleolibertarian and anarcho-capitalist political theories and a form of heterodox economics known as praxeology ("the logic of action").Peter B. Evans
Peter B. Evans (born 1944), Professor of Sociology and the Marjorie Meyer Eliaser Professor of International Studies at the University of California, Berkeley, received his BA magna cum laude from Harvard, an MA from Oxford University, and an MA and PhD from Harvard. He is a political sociologist whose work focuses on the comparative political economy of development and globalization. He has published widely on state-society relations, industrial economic development in Brazil and Latin America, civil society, and international development issues. His work is thus also relevant to the international political economy research literature.
Evans is active in the American Sociological Association's section on Labor and Labor Movements and has served as chair of that section. He is also a board member of the United Nations Research Institute for Social Development.
In the year 2000 Evans co-founded The Other Canon, a center and network for heterodox economics research, with - amongst others - Erik Reinert, executive chairman and main founder.Evans has taught at Oxford University, Brown University, the University of New Mexico, Universidade de Brasília, and Kivukoni College in Tanzania, In recent years, he has focused his attention on the study of alternative, and counterhegemonic globalization movements.Power theory of economics
Developed by Yasuma Takada in a series of lectures at Kyoto University, the power theory of economics is mostly based on a critique of both mainstream economics as well as heterodox economics theories of unemployment, most notably Keynsian economics and Marxian economics. The theory accommodates Thorstein Veblen, Vilfredo Pareto and Joseph Schumpeter.
Takada sometimes referred to the theory as a second order approximation, as introducing a theory of power relations into the materialism of economics was seen as one step closer to a true picture of socio-economic relationships.Quarterly Journal of Austrian Economics
The Quarterly Journal of Austrian Economics is a quarterly peer-reviewed academic journal covering heterodox economics published by the Ludwig von Mises Institute. It was established in 1998 after the Murray Rothbard-created publication, The Review of Austrian Economics, was transferred to other editors and then to George Mason University. The journal covers economics from an Austrian School perspective. The current editor-in-chief is Joseph Salerno.
A 2010 study identified 62 regularly published heterodox journals and used various empirical criteria to compare several aspects of their research quality. The Quarterly Journal's Bibliographic Ranking was ranked 33rd out of the 62 heterodox economics journals surveyed; its reputation among peers (both mainstream and heterodox) was ranked 57th.Real-World Economics Review
Real-World Economics Review is a peer-reviewed open access academic journal of heterodox economics published by the "Post-Autistic Economics Network" since 2000. Since 2011 it is associated with the World Economics Association. It was known formerly as the Post-Autistic Economics Review and the Post-Autistic Economics Newsletter. Previous issues are archived on its website. Two sister journals from the same publisher are Economic Thought and World Economics Review.The journal is part of the post-autistic economics movement, and, as such, heavily criticizes neoclassical economics. It accepts contributions from diverse schools of economic thought.Review of Radical Political Economics
The Review of Radical Political Economics is a quarterly peer-reviewed academic journal published by SAGE Publications on behalf of the Union for Radical Political Economics. It was established in 1968 and covers research on heterodox economics and political economy, broadly defined. The editor is Enid Arvidson (University of Texas at Arlington).Social cost
Social cost in neoclassical economics is the sum of the private costs resulting from a transaction and the costs imposed on the consumers as a consequence of being exposed to the transaction for which they are not compensated or charged. Private costs refer to direct costs to the producer for producing the good or service. Social cost includes these private costs and the additional costs (or external costs) associated with the production of the good for which are not accounted for by the free market. Mathematically, social marginal cost is the sum of private marginal cost and the external costs. For example, when selling a glass of lemonade at a lemonade stand, the private costs involved in this transaction are the costs of the lemons and the sugar and the water that are ingredients to the lemonade, the opportunity cost of the labor to combine them into lemonade, as well as any transaction costs, such as walking to the stand. An example of marginal damages associated with social costs of driving includes wear and tear, congestion, and the decreased quality of life due to drunks driving or impatience.a large number of people displaced from their homes and localities due to construction work
The alternative to the above neoclassical definition is provided by the heterodox economics theory of social costs by K. William Kapp. Social costs are here defined as the socialized portion of the total costs of production, i.e. the costs which businesses shift to society in their attempts to increase their profits.Socioeconomics
Socioeconomics (also known as social economics) is the social science that studies how economic activity affects and is shaped by social processes. In general it analyzes how societies progress, stagnate, or regress because of their local or regional economy, or the global economy. Societies are divided into 3 groups: social, cultural and economic.The Other Canon Foundation
The Other Canon Foundation is a center and network for research of heterodox economics founded by Erik Reinert. The name refers to the founders' message of there being another economic canon, alternative to the ruling neoclassical economics. Their suggestions, they claim, are valid for and can be applicated in the first, second and third world.Theodore Burczak
Theodore A. Burczak (born August 15, 1964) is an American economist and a professor of economics at Denison University in Granville, Ohio, where he teaches courses on macroeconomics, economic justice, monetary theory, and the history of economic thought. He is best known for his development of a socialist economic model designed to bypass the dispersed knowledge problems elaborated on by Friedrich Hayek as facets of the economic calculation problem, writing in his book Socialism After Hayek (Advances in Heterodox Economics), "my aim...is developing a 'libertarian Marxist' conception of socialism, a socialism committed to forms of procedural and distributive justice that are central to the Marxian tradition and a socialism keenly aware of the factual and ethical knowledge problems emphasized by Hayek."Thermoeconomics
Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of statistical mechanics to economic theory. Thermoeconomics can be thought of as the statistical physics of economic value and is a subfield of econophysics.Tony Lawson
Tony Lawson is a British philosopher and economist. He is professor of economics and philosophy in the Faculty of Economics at the University of Cambridge. He is a co-editor of the Cambridge Journal of Economics, a former director of the University of Cambridge Centre for Gender Studies, and co-founder of the Cambridge Realist Workshop and the Cambridge Social Ontology Group. Lawson is noted for his contributions to heterodox economics and to philosophical issues in social theorising, most especially to social ontology.