Heterodox and mainstream macroeconomics: a great divide

                In the blogs I write, I try  - when describing what most macroeconomists do and think - to add somewhere the qualification ‘mainstream’ or something similar. This is because I’m well aware of a strong and longstanding minority who are generally described as heterodox macroeconomists.

                One of the notable things I find about the mainstream/heterodox divide is how strong it is. I think it’s fair to say that most mainstream macroeconomists care little about what goes on in the heterodox world. That was clearly a big mistake when it came to Minsky and financial crises. However, my impression is that sometimes this feeling is mutual. When I have heard or read heterodox economists, what often strikes me is the wholesale rejection of the mainstream.

                Take, for example, a recent post from Lars P Syll which caught my attention for obvious reasons.[1] He writes: “People like Hyman Minsky, Michal Kalecki, Sidney Weintraub, Johan Åkerman, Gunnar Myrdal, Paul Davidson, Fred Lee, Axel Leijonhufvud, Steve Keen – and yours truly - do not share any theory or models with Real Business Cycle theorists or “New Keynesians”". Any theory? Is everything in what has been called the new neoclassical synthesis a waste of time?

                I think this is a bit of an exaggeration. To pick just one example I read recently, Steve Keen in his Minsky model forthcoming in JEBO uses a Phillips curve, which I would say was the defining relationship in New Keynesian theory. His and the New Keynes Phillips Curve are not identical, and of course Keen’s is not microfounded, and they do somewhat different jobs, but still there seems to be some overlap between mainstream and heterodox there. This is hardly surprising. The Phillips curve started life as an empirical discovery. It is neither the invention of New Classical or New Keynesian thought, nor the fruit of heterodox ideas, and so can quite happily be shared.

                What interests me is why the need for such wholesale rejection of the mainstream? I learnt one possible answer when young, which is the appeal of revolution rather than evolution. In Cambridge (UK) in the early 1970s, a significant group of the faculty called themselves Neo-Ricardians, and they too rejected neo-classical theory. Joan Robinson was an inspirational figure for this group, although the key influence was Piero Sraffa. They were strongly attracted to the ideas of the philosopher Thomas Kuhn, who talked about paradigm shifts in science. The mainstream was not going to evolve into something better: it was fundamentally flawed, and therefore had to be overthrown. Attractive stuff for undergraduates – too attractive in my case – but that particular paradigm shift never came.

                A rejectionist strategy is of course unlikely to win friends within the mainstream. Even those quite critical of aspects of mainstream thought and teaching can be exasperated by the rejectionist attitude.  My own view is very similar to that expressed by Diane Coyle in her review of Steve Keen’s ‘Debunking Economics: The Naked Emperor Dethroned’: “I have a lot of sympathy with the details of Professor Keen’s project, but not its ultimate ambition. For in the end I think the Naked Emperor needs to be reclothed rather than dethroned.”

                However, within macro the mainstream is hardly more accommodating. It may advertise that it is open to new ideas, but in practice, to get into good journals, these ideas need to be cast in a rather simplistic microeconomic framework that in all other respects is uncontroversial from a mainstream point of view. In effect this excludes those who have problems with much of that simple micro theory.

                Now many mainstream and heterodox macroeconomists may be quite comfortable with this state of affairs, but in practice it means any radical (but not wholesale) challenge to the mainstream is severely diminished. This is another reason why I would advocate that more macro analysis should start at the aggregate level, rather than be forced to always establish its microeconomic credentials in a formal way. (See here in particular.) The mainstream does need constant challenge, but not just on an ‘all or nothing’ basis.   

                               

                 

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[1] I don’t like having what I write described as “pure drivel” (who does), and for that reason I have never used that phrase about someone else’s writing. What seems to have upset Syll is a belief that I thought all macroeconomists signed up to neoclassical theory. It is true that I used the qualifier ‘mainstream’ only once in the post Syll attacks, but to imagine from it or my writing more generally that I believe all macroeconomists sign up to microfoundations (see here), that I am self-congratulatory about mainstream macro today (see here), or that the only debates are about policy (see here), requires a very selective reading. OK, rant over.