From the issue dated January 24,
2003
http://chronicle.com/weekly/v49/i20/20a01201.htm
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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/), edited by a
visiting research fellow at the University of the West of England.
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)
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Volume 49, Issue 20, Page A12
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2003 by The Chronicle of Higher Education