Among other things, a) Hodgson correctly points out that lack of raison d’etre 4 hetecon may be responsible 4 its marginalization. I also agree that b) agreement on a “core” among hetecons would be desirable. He also notes c) general neglect of micro (I’ll return 2 this). 2/
Reviewing various attempts at self-definition of heterodoxy, Hodgson looks at the late Fred Lee’s “political” project of gathering anti-capitalist economists under the heterodox umbrella as prone to failure; & Tony Lawson’s dichotomy b/w “open” and “closed” systems... 3/
...that leads to defining heterodoxy as the refusal to self-confine into closed systems & consequently rejection of “ontologically inappropriate” formalism. This also has problems since Neo-institutionalists would fall into heterodoxy by this definition. 4/
Hodgson then: a) makes various plugs 4 #evolutionary economics à la Nelson-Winter as a good unifying candidate that however never rose 2 the occasion; b) proposes “rejection of Max U” as a unifying principle; c) outlines several possible strategies for hetecon to gain ground. 5/
Let me say upfront that I agree with many points raised in the book. A) admittedly 4 many old school folks like me the appeal of #hetecon was that it provided an alternative 2 usual thinking on, say, efficiency-equity trade offs, status-quo bias, “blaming the victims”... 6/
...& my interest in studying at @TheNewSchool was largely politically motivated. But I soon realized that B) lots of #mainstream econ is quite progressive, ie centered on mkt failures even w/o questioning “scarcity, rationality, equilibrium & methodological individualism”... 7/
... & C) this is similar 2 the Lange-Lerner project of demonstrating viability of socialism within the dominant paradigm. Incidentally, the argument about the dismissal by Cambridge UK of the socialist calculation debate is 1 of the most compelling in the book, esp. given...8/
...that studying Micro at @NSSRNews with Duncan Foley & Ali Khan (Hopkins) made me understand Arrow-Debreu GE as largely a response to Lange-Lerner. But I digress.
What follows = personal & partial reflection: I don’t claim 2 speak 4 all non-mainstream econs; 9/
To give just one example, #feminist Econ provides a deep critique of value theory, both micro (@NFolbre) & macro (@SSeguino6, @BraunsteinFE). Other schools have emphasized different problematic aspects of mainstream economics. #Ecological Econ, #horizontalists, come 2 mind 10/
Also, full disclosure, I have been saying repeatedly that I struggle with the label “heterodox” even though I appreciate its community-building purpose. So I am sure my thoughts will upset someone, and apologize in advance. 11/
My disagreement with G. Hodgson (GH) focuses on the relation b/w #micro & #macro, which 2 me is central 2 how contemporary econs understand #policy.
GH’s correct that to understand “heterodoxy” 1 must start in 1960s Cambridge UK. But Cambridge *wasn’t* only macro 12/
Case in point: Cambridge system of “prices of production” (PoP) provides a *micro* theory of value that is alternative (not complementary as argued by GH) 2 Walrasian GE: it takes 1 distributive variable as given -> doesn’t imply market clearing. Oh, and no aggregation issue. 13/
Here’s the first element of what I consider a reasonable description of “heterodox” (alternative, dissident, use ur favorite adjective, I still haven’t found mine): the rejection of the marginal theory of distribution. GH doesn’t pay much attention to this point, crucial 2 me 14/
However, the PoP system misses i) a theory of demand; ii) a theory of the determinants of the distributive variable; iii) an account of capital deepening as a dynamic process. In #Neoclassical Econ, i) Max U; ii) w=MPL; iii) f’’(k) <0 (ii & iii not required in Walrasian GE) 15/
Of course, Keynes provided i). The Post-Keynesians (PK) linked i) and ii). Yes, these are macro answers. An under appreciated point among hetecons is that micro-2-macro models w/ incomplete markets -> reduced forms that are isomorphic to PK with similar policy implications 16/
As for ii), a key point coming from Classical Political Economy (& the PoP system) is distributive conflict, under-emphasized in #Neoclassical Econ. I keep going back to Goodwin (1967) 4 a macro account. “Conflicting claims” models of inflation also address distribution. 17/
These macro accounts of distribution implicitly or explicitly refer to “bargaining.” Thus, I always found it odd that hetecon overlooked available bargaining theories (yes, mainstream). It is very easy to show that the Nash (1950) product can be used to obtain... 18/
... a “Classical conventional wage share” in the language of @GrowthDist to close the labor market w/o full employment. 1 can cook up rent-seeking games 2 the purpose. Digging deeper into, say, capital-labor bargaining Can be used to give precise meaning to “institutions.” 19/
As for iii), if 1 takes Cambridge seriously, there is then the famous “quantity of capital” problem. (Baqaee and Farhi have a JEEA forthcoming that revisits the aggregate production function issue and encompasses Garegnani 1970 as a special case.) How to explain K-deepening? 20/
With biased technical change. @tmichl69 (1999, 2002) has shown that labor-saving, capital-using tech change traces a path that looks like an aggregate prod. function but is really the “fossil” record of past technology. No Cambridge issue & yet again basically a micro theory. 21/
This, however, pertains to transitional dynamics and not balanced growth. For the latter, one can look at the implications of Kennedy (EJ1964) for “heterodox” growth models. See Foley, JEBO2003; Julius, MECA2005. Again, only scratching the surface here. 22/
The point is that there is considerable attention to micro issues and the way they translate into macro implications in current alternative approaches. None of these has necessarily ideological motivations: they take Cambridge seriously and cumulatively build on it. 23/
Importantly, & gearing up 2 conclusion, most people that GH overlooks (including scholars I cited above) do not fit either Lee’s or Lawson’s definition of heterodoxy. And yet are heterodox because critical of fundamental standard assumptions & relegated to lower-tier journals.24/
& so to me (& similar but not identical to @NakedKeynes) hetecon involves rejection of marginal distribution theory in favor of institutions, effective demand (or coordination failures), & conflict-driven capital deepening. Again partial definition, but hopefully constructive.N/N
PS. I think the debate on strategies is very important, & will return to it later.
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Joan Robinson was “probably the best economist alive” in Paul Samuelson’s own words.
@zachdcarter rightfully celebrated her work on monopolistic competition (without which there wouldn’t be new trade theory nor endogenous growth theory) & #monpsony.
Dismissing her work...
...on #capital theory is wrong-headed, because it has fundamental implications for the theory of #distribution.
She realized that there is no “quantity of capital” independent of prices in a world with heterogeneous capital goods.
The existence of...
...such quantity of capital is *crucial* for the #neoclassical theory of distribution, which rests fundamentally on the possibility that price movements will ensure that f’(k) = r.
This “closes” the Solow growth model: the real wage will be determined residually: w = y-f’(k)k..
*Bad take* alert here. Neoclassical growth theory rests fundamentally on the f'(k) = r profit-max condition. There is no real wage without this, since w = f(k)-f'(k)k because of constant returns to scale in production. If the former falls, theory of distribution is bust. 1/
Imo, the issue with Cambridge UK is not that they highlighted the issues with neoclassical growth & distribution (the muddle) but that they stopped there, w/o developing a coherent alternative on capital deepening, innovation, determinants of distribution, convergence, etc. 2/
There are contemporary, some of them old but still alive scholars who have been taking on these issues, training younger folks 2 press on. Lance Taylor, Krugman's first mentor, is one of them. Duncan Foley revived Charles Kennedy's theory of induced technical progress... 3/
John Maynard #Keynes was born on June 5, 1883, and died too early. Here's a few thoughts on why I keep circling back to him, & why his work forces 2 rethink the way we do & teach #economics, esp. #micro. I am sure this (partial) thread will upset someone: apologies in advance. 1/
#Keynes understood that #macroeconomics is about emergent properties: aggregate outcomes that don't make sense 2 the individuals populating the economy. The logic, e.g., of the #IncomeExpenditure model is that an economy can coordinate along any point on the 45-degree line.. 2/
and that, accordingly, we should expect economies to operate with slack. Then you have the #ParadoxofThrift and all that. He also talked about the #ParadoxofCosts when he discusses redistribution to lower income people who have higher propensity to consume... 3/