http://chronicle.com/weekly/v49/i20/20a01201.htm

 

From the issue dated January 24, 2003

 

Taking On 'Rational Man'

   Dissident economists fight for a niche in the discipline

 

By PETER MONAGHAN

 

How do you start a fire under a huge wet blanket? A faction of disgruntled

economists says that is their predicament.

 

Their efforts to open the field to diverse views are smothered, they say,

by an orthodoxy -- neoclassical economics and its derivatives -- that is

indulgently theoretical and mathematical in its aspiration to be more

"scientific" than any other social science.

 

Although it is inadequate to explain human behavior, they say, that brand

of economics dominates the discipline. Its practitioners decide what work

deserves notice by controlling what is published in the field's

prestigious journals. And with strongholds at leading research

universities and a Nobel awarded in the field, most mainstream economists

are too proud of their profession to even notice these puny insurgents.

 

Many say that the rebels are challenging a straw man -- that neoclassical

economics, which is based on such concepts as rational choice, the market,

and economies' tendency to move toward equilibrium, is much roomier than

portrayed. But others have a more belligerent response: Like us or leave

us for other departments and disciplines, such as political science,

history, or sociology.

 

This month, for example, the University of Notre Dame's economics

department, long renowned as unusually diverse, is likely to split in two.

 

A new department of economics, with a graduate program and several new

hires, would focus on orthodox approaches.

 

Dissident economists would be consigned to a department focusing on

economic thought, social justice, and public policy. But with no graduate

program, that would amount to exile and slow death, say the Marxist,

labor, and development economists and historians of economic thought who

make up a large minority of the 21-member department.

 

The "tensions" that are forcing the split, says a report by a committee of

Notre Dame administrators and professors from other departments, "are not

the fault of the current faculty" members. They were hired years ago,

under "a clear mandate from the administration," to help build an

alternative to the neoclassical bastions: Berkeley, Chicago, Columbia,

Harvard, MIT, Princeton, Yale.

 

It is not that Notre Dame wants to abandon the subjects that its heterodox

researchers study, ones "appropriate to a Catholic institution," such as

poverty and inequality, says Mark W. Roche, dean of the College of Arts

and Letters. It is just, he says, that Notre Dame wants attention from the

mainstream and realizes that that requires satisfying the field's

"evaluative norms."

 

Moreover, says the committee's report, "We regard the differences between

the heterodox and orthodox economists to be so great that reconciliation

within a single cohesive department is wholly unrealistic."

 

Notre Dame, says David F. Ruccio, an associate professor who specializes

in Latin American economies and exploring intersections of the humanities

and economics, is "accepting and imposing a certain definition of the

discipline." The partition would be a logical next step, he says.

Heterodox practitioners have already been told not to expect promotions,

and that their books, even if placed with prestigious publishers, will

count no more toward advancement than articles in minor journals, he adds.

 

Administrators are not quite so categorical. Richard Jensen, the

department's chairman, says "industry standards" dictate that publication

in leading journals is the key to promotion and tenure.

 

The split, says Mr. Ruccio, a prominent Marxist economist, is a matter of

raw power: "If the peasants won't deliver the goods, collectivize them" in

a low-profile department.

 

Pros and Cons

 

Despite the power of the orthodoxy, the naysayers are numerous. While the

American Economic Association has some 22,000 members, the 30-odd groups

under the umbrella of the International Confederation of Associations for

Pluralism in Economics have American memberships totaling more than 5,000.

 

The confederation's pained statement of purpose laments that most of its

members' interests, such as exploitation and inequitable income

distribution, have been "defined out" of economics. The field has gotten

away with that, observers say, because it is not as inescapably concerned

as, say, political science, sociology, and anthropology with concepts like

power, influence, deference, and social practice.

 

"It's hard to avoid Marx, and a whole bunch of other theorists, in those

discussions," says Michael A. Bernstein, an economist and historian at the

University of California at San Diego and the author of a recent history

of 20th-century American economics.

 

Not all the rebels are Marxists, although most do charge that neoclassical

economists refuse to admit that their approach is "sycophantic to

capitalism," as Steve Keen puts it. Mr. Keen, an economist at Australia's

University of Western Sydney, says he objects to neoclassical economics

because "it makes capitalism a worse system than it would otherwise be,

and makes it function less well as a generator of wealth and innovation."

 

Neoclassical theory holds that individuals, households, and companies

rationally serve their best interests and that competition sorts out

prices, wages, and the markets for goods and labor in economies' movement

toward equilibrium.

 

In other words, the market economy and those who take care of themselves

take care of one another.

 

That theory is rooted in the late-18th-century work of Adam Smith,

although he defined economics more broadly as the study of the nature and

causes of the wealth of nations.

 

His emphasis on self-interest, together with the theory of utilitarianism

that Jeremy Bentham developed at about the same time, came to resound

loudly in economics by the turn of the 20th century. Influential thinkers

then increasingly emphasized the allocation of scarce resources among

competing ends: Economics became a science of "rationality."

 

In the United States, World War II solidified the trend, says Mr.

Bernstein. At the time, the government "embraced the work of these

cutting-edge economists, saying, This work can help us wage war." New

ideas about the application of mathematical models and modern statistics

were used to meet government goals, so economics, like the nuclear arm of

physics, benefited from enormous infusions of funds. Academic economics

responded accordingly.

 

As a result, "every year, 1.4 million undergraduates in the U.S. take an

introductory economics course that teaches that only selfishness is

rational," objects Neva R. Goodwin, co-director of the Global Development

and Environment Institute at Tufts University, who is helping to prepare a

textbook with alternative views.

 

The orthodoxy also distorts economic reality, say its critics.

"Superficially, it seems like a coherent model of the world," says Mr.

Keen, the author of Debunking Economics: The Naked Emperor of the Social

Sciences. But don't be fooled, he says, by the mainstream's fancy

mathematics and claims that it is a predictive science, not just a

descriptive social science.

 

"I'd put its maturity at the same level as physics before Newton," he

scoffs. "And possibly before Galileo."

 

Many approaches to economics fall under the heterodox umbrella. Besides

Marxist economics, they include so-called Austrian economics, which

disputes the neoclassical truism that economies tend toward equilibrium;

post-Keynesian economics, which highlights the role of uncertainty in

economies; complexity theory, which uses such concepts as chaos theory to

model economies; the intersections of economics and such realms as

feminism, environmentalism, and the law; and evolutionary theory, which

views economies as akin to evolving biological systems. The neglect of the

last particularly appalls Mr. Bernstein, who calls one of its founders,

Thorstein Veblen, "probably the most truly original thinker that the U.S.

has produced."

 

Global Ripple

 

The dissidents take heart from events in France. In 2000, an online

graduate-student petition proclaimed that neoclassical economics, or at

least its unbridled application in teaching and research, dwelt in

unreality to the point of being "autistic."

 

The students dubbed their movement "Post-Autistic Economics" and quickly

provoked a national debate of the French variety. Some leading

publications and high-profile economists hailed the protesters, who, in

petitions-cum-manifestoes, denounced economics as a morass of "imaginary

worlds" that was mired in "pathological," pseudoscientific mathematics;

that was aggressively excluding pluralism; and that was, even so, barely

able to explain "l'économie de Robinson Crusoé."

 

The French minister of education appointed a senior establishment

economist, Jean-Paul Fitoussi, to lead a commission to study the claims.

Last September, the panel issued a call for some reform of economics

education.

 

"Some mistakes have taken place" in formal modeling, amid "very little

concern for its empirical relevance," he conceded. Teach the debates about

neoclassicism, he declared.

 

The forces of post-autism wanted more. In a petition of their own, some

200 French economists charged that the orthodoxy's rationalist "fiction"

excluded the whimsy, variety, and "often altruistic" behavior of Homo

economicus, and was a front for cultural power structures that other

social sciences had deconstructed long before.

 

That sentiment rippled over to the Universities of Cambridge and Oxford,

where graduate students began well-subscribed petitions, and then, with

help from the Internet, on to several other countries. Most active has

been the Post-Autistic Economics Review

(<http://www.paecon.net/>http://www.paecon.net), edited by an American

doctoral student at Cambridge.

 

In the United States, some Ivy League graduate students started a petition

drive. Then, in June 2001, 75 reformers from 22 countries met in Kansas

City, Mo., and produced a Kansas City Proposal, which decried economics'

neglect of its own cultural, social, political, moral, and historical

dimensions.

 

'A Con Game'

 

The reformers include prominent scholars who made their names as top-notch

neoclassical economists. One is the iconoclastic and polymathic Deirdre N.

McCloskey, a distinguished professor of the liberal arts and sciences at

the University of Illinois at Chicago who also has appointments there and

at Erasmus University of Rotterdam in art, cultural studies, economics,

English, history, and philosophy.

 

In 1983, she (then he, but that's another story) sparked an uproar with

"The Rhet-oric of Economics," an article in the prestigious Journal of

Economic Literature. In it, she convinced many heterodox economists that

the discipline's claims to truth, while couched in terms of scientific

proof, were shored up by many forms of reasoning and persuasion.

 

Much of economics, she has reiterated with rhetorical flair, is "a con

game of a very odd sort," one marked by three primary "vices."

 

First, economists incessantly misuse tests of statistical significance. In

a 1996 paper, "The Standard Errors of Regression," again in the Journal of

Economic Literature, she and Stephen T. Ziliak, now an assistant professor

of economics at the Georgia Institute of Technology, argued that about 70

percent of papers in a leading journal shirked accepted standards for

determining statistical significance, while a similar proportion mistook

statistical significance for economic importance -- by failing to use

good, human judgment.

 

The second vice is "blackboard economics": "endless thinking about

imaginary economies that don't ever have anything to do with the world."

In her view, "that's not science; that's just chess problems." A genuine

science like physics, she says, would observe and describe a phenomenon

long before even venturing to model it.

 

The third vice: "the arrogance of social engineering."

 

Ms. McCloskey, a self-proclaimed free-market libertarian, expounds on

those "sins" in such publications as The Vices of Economists, the Virtues

of the Bourgeoisie. The latter, she argues, include not just prudence but

also courage, temperance, and love -- elements that Adam Smith, too,

wanted in economics' domain.

 

"Probably three-quarters of the scholarly activity in economics is

useless, will result in no understanding of the world," she sums up.

"Maybe higher. It's tragic."

 

Some more-mainstream American economists won't sign petitions but agree

there is fire under the smoke. One is Edward E. Leamer, an econometrician

at the University of California at Los Angeles. He says that in the 1930s,

economics "was done in verbal, written language." But "the era of

Samuelson," he says, referring to the Nobel laureate Paul A. Samuelson,

"was so successful in introducing mathematics into the conversation that

it's now required that you speak math."

 

Mr. Leamer calls that unfortunate "because most of our Ph.D. students can

never really master that language, and they struggle so hard with the

grammar and syntax that they end up not being able to say anything."

 

He and many other professors report that newly minted Ph.D.'s often cannot

comprehend classic prose texts of the discipline, either. They have not

read Adam Smith, David Ricardo, and John Maynard Keynes, titans of the

18th, 19th, and 20th centuries. As a result, those would-be academics

learn the "neo" without the "classical," and so have no way of embracing

the pioneers' varied legacies.

 

Do the Math

 

Most critics say mathematics is not the issue. "There are plenty of

anti-neoclassical economists who use math, and Marxist economists," notes

Mr. Bernstein of San Diego.

 

In the online pages of the Post-Autistic Economics Review and other

publications, fellow reformers have pounded away at a central point. As a

University of Cambridge historian of economic thought, Geoff Harcourt,

puts it, always "pose the economics of an issue first, then see whether

some form of mathematics may be of use in solving the problems thrown up."

 

Mr. Leamer agrees. "The great economists got involved in this discipline

because they were interested in these social problems, and they thought of

economics as a tool for addressing and solving them," he says. "But the

discipline has become more and more model-driven."

 

"A mathematician is uninterested in the problem," he adds. "He's

interested in the degree of difficulty of the proof, or the surprise

nature of the theorem. Those value systems are fine in mathematics, but

they're very destructive in economics."

 

The issue may not be how much mathematics to use, and when, but what kind.

Does neoclassical economics, with its emphasis on equilibrium, look for

"closed form," "all other things being equal" solutions that simply don't

suit the dynamic nature of economies? Yes, say critics like Western

Sydney's Mr. Keen, who would prefer the kind of modeling, done in physics,

biology, and other fields, that takes account of rates of change over

time. "The physicists are saying, You guys might be using sophisticated

mathematics from the 19th century, but you don't know crap about modeling

today."

 

The Teflon Orthodoxy

 

Earlier attacks have left the American economics mainstream unscathed. The

American Economic Association's Committee on Graduate Education in

Economics, formed in 1988 and packed with big names, found similar faults

with the discipline. One finding, says Mr. Leamer, a panelist: "Students

could solve complex math problems, but they couldn't solve simple

economics problems that would have been central in the 1960s." The

committee's report appeared in 1991 in the flagship American Economic

Review "and was then ignored," he recalls.

 

Similarly, in 1998, the group's Committee on Journals, headed by Thomas

Schelling, a past president of the association, charged in a report that

leading publications had too much theory and math, and too little

empiricism, policy, and history.

 

Manuscripts in a "literary" mode, multidisciplinary manuscripts,

policy-oriented manuscripts? Apparently unwelcome, said the committee's

report, which by general agreement has languished. Reform-minded

economists have not had even the limited success of a similar

"perestroika" movement in political science, which has won a promise from

leading journals that they will be more hospitable to nonmathematical

articles.

 

Neoclassical practitioners say that's because the reformers' complaints

are inaccurate. In the initial French debates, Robert M. Solow of the

Massachusetts Institute of Technology -- a Nobel laureate whose growth

model is a fixture of the undergraduate curriculum -- objected that the

protesters were not sufficiently allowing for neoclassical economists'

self-critiques and evolution, for example their work on incomplete

markets, imperfect competition, asymmetric information, and the like.

 

Kenneth J. Arrow, who shared the 1972 Nobel in economics, echoes that

point. Neoclassical economics is "a pretty baggy framework, and a lot that

goes on in it might not be quite what used to be thought of as

neoclassical economics," says the Stanford University scholar, who is

regarded as an architect of the mathematization of modern economics. So,

while concepts like rational choice, profit maximization, and satisfaction

may underlie most of the framework, what one means by them "has become

more and more subtle."

 

Similarly, orthodox economists have broadened how they study such notions

as rational choice. "The big thing there has been the development of game

theory, recognizing that if you're trying to outguess somebody else,

they're trying to outguess you," says Mr. Arrow. Game theory has been

applied to many areas of economics, and that marks a major change since,

say, the 1950s.

 

"Behavioral economics" -- the study of how people do not make rational

choices -- also has recently "caught fire," he says. It is being applied

to such realms as securities prices, consumer purchasing, contracts, and

labor bargaining. The psychologist Daniel Kahneman of Princeton University

shared the 2002 Nobel for work in the area that he had done with the late

Amos Tversky. "Any good department has got to have a behavioral economist

on board, and that's one of the signs of the way things develop," says Mr.

Arrow.

 

"Now," he asks, "do you call that neoclassical or post-neoclassical? It is

a continuation of the neoclassical tradition, but it's getting away from

the traditional assumptions."

 

Mr. Keen is unimpressed. He says mainstream economists often tell

reformers that they are attacking a straw man. But economics curriculums

are still chockablock with the neoclassical. "So I simply respond," he

says, "'If what I demolish is a straw man, why do you teach him?'"

 

Still, it's tough for an economics department to defy the dominant

paradigm. "Everyone is trying to be a little MIT or a little Harvard, and

look exactly the same because that's the way you get scientific prestige,"

says Bruce J. Caldwell, a historian of economic thought at the University

of North Carolina at Greensboro. That approach, he points out, ignores

basic economic theory about the benefits of diversification,

specialization, and niche marketing.

 

Notre Dame, says Mr. Roche, the dean of arts and letters, is seeking a

niche. Actually, two: one in economic thought and policy and another in

which it can use mainstream tools. He is not surprised, however, that the

plan makes his faculty members "unsettled." Orthodoxy, they know, has

already begun to make inroads into some of the few other centers of

heterodox practice: New School University and the Universities of

Massachusetts at Amherst and California at Riverside.

 

'Parallel Conversations'

 

In June, in Kansas City, Mo., the International Confederation of

Associations for Pluralism in Economics will hold a World Conference

on the Future of Heterodox Economics, offering thousands of

marginalized economists a rare opportunity to gather en masse. There,

they will plan their battles and commiserate about how long they must

wait for change. And, says Georgia Tech's Mr. Ziliak, they will share

war stories about how "the market wants you to pretend that you're an

objective economist, who is going to reveal something about the world

through neoclassical lenses, using standards of neoclassical theory,

and some latest fashion of econometrics."

 

But even though people are "still hiding their embrace of pluralism, or of

postmodern economics because they want that job," he says, they are "still

doing research, in their preferred areas, although with little

institutional support." That trend and the June meeting, he says, make him

optimistic: "The idea is to create solidarities across different heterodox

approaches -- libertarian, Afrocentric, feminist, etc. I know I feel

energized by it."

 

Mr. Ziliak has another prediction. "Maybe we heterodox economists will

just say that we don't care about the pecking order anymore, and we'll

just produce parallel conversations in economics," he says. "That may mean

having less-prestigious job offers and lower incomes, but I think you'll

see more and more people doing that anyway -- obviously for both supply

and demand reasons."

 

"That's right," says the forthright Mr. Keen. "You've got to agree to be

marginalized, and then fight like hell."

 

HOW ECONOMICS BECAME WHAT IT IS

 

Several books on the history of the discipline of economics and the

history of economic thought have appeared in recent years. More are

forthcoming. Among them:

 

The Crisis in Economics, edited by Edward Fullbrook (Routledge,

forthcoming in June)

 

Debunking Economics: The Naked Emperor of the Social Sciences, by Steve

Keen (Pluto Press/Zed Books, 2001)

 

Economics and Reality, by Tony Lawson (Routledge, 1997)

 

Economics as Religion: From Samuelson to Chicago and Beyond, by Robert H.

Nelson and Max L. Stackhouse (Penn State University Press, 2001)

 

How Economics Became a Mathematical Science, by E. Roy Weintraub (Duke

University Press, 2002)

 

How Economics Forgot History, by Geoffrey Martin Hodgson (Routledge, 2001)

 

Intersubjectivity in Economics: Agents and Structures, edited by Edward

Fullbrook (Routledge, 2001)

 

Machine Dreams: Economics Becomes a Cyborg Science, by Philip Mirowski

(Cambridge University Press, 2002)

 

Microeconomics in Context, by Neva R. Goodwin, Julie Nelson, Frank

Ackerman, and Thomas Weisskopf (Houghton Mifflin, forthcoming in 2004)

 

A Perilous Progress: Economists and Public Purpose in

Twentieth-Century America, by Michael A. Bernstein (Princeton

University Press, 2001)

 

Post-Modernism, Economics and Knowledge, edited by Stephen

Cullenberg, Jack Amariglio, and David F. Ruccio (Routledge, 2001)

 

The Rhetoric of Economics, by Deirdre N. McCloskey (University of

Wisconsin Press, second edition, 1998)

 

The Vices of Economists, the Virtues of the Bourgeoisie, by Deirdre

N. McCloskey (Amsterdam University Press, 1996)

 

http://chronicle.com

Section: Research & Publishing

Volume 49, Issue 20, Page A12

 

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