From the issue dated
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:
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
and Letters. It is just, he says, that Notre Dame wants attention from the
mainstream and realizes that that requires satisfying the field's
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
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
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.
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
"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
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
'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
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
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.
"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.
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)
Section: Research & Publishing
Volume 49, Issue 20, Page A12
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