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Debating the Future of Heterodox Economics
Geoffrey M. Hodgson
To cite this article: Geoffrey M. Hodgson (2021) Debating�the�Future�of�Heterodox�Economics,
Journal of Economic Issues, 55:3, 603-614, DOI: 10.1080/00213624.2021.1945874
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603
Debating the Future of Heterodox Economics
Georey M. Hodgson
Abstract: This article is a reply to five reviews (by Lynne Chester, David Dequech, John
Henry, Marc Lavoie, and Jason Potts) of Is there a Future for Heterodox Economics? (by
Geoffrey Hodgson). It welcomes the debate that has emerged on the nature and future
of heterodox economics. The article revisits the problem of defining heterodox (and
orthodox) economics. The relationships between orthodox and heterodox economics
and political ideology are discussed, especially in relation to different normative views on
markets. The essay also points to the need for understanding how scientific disciplines are
organized, particularly to inform discussions of strategy by heterodox economists.
Keywords: heterodox economics, ideology, markets, organization of scientific disciplines
JEL Classication Codes: B40, B25, D83, L52, O12, O33
JOURNAL OF ECONOMIC ISSUES
Volume LV No. 3 September 2021
DOI 10.1080/00213624.2021.1945874
I wish to thank the reviewers for taking the time to read my book on heterodox economics
(Hodgson 2019c) and for providing thoughtful comments and criticisms. As well as the four
reviews published in this issue of the Journal of Economic Issues, I would also like to address
an assessment elsewhere by Marc Lavoie (2020) in another journal. I am pleased that my
book has helped to stimulate a debate concerning the meaning and future of heterodox
economics.
Marc Lavoie (2020 9, 16) wrote that “the book has to be taken seriously ...because
the future of the various schools of thought that compose heterodox economics is something
that concerns and worries us all.” Overall, he “found the book tantalizing.”1 John F. Henry
(2021, 595–602) urged that the book be “read by every institutionalist—and, more broadly,
heterodox—economist: the issues [Hodgson] raises require significant debate and critical
responses.” It is “most definitely” a “worthwhile read.” Henry continued: “He puts forward
his recommendations, those may be contested or accepted. But, regardless of one’s position,
they are the stuff of debate. So, let the debate begin.”2 Jason Potts (2021, 591) remarked that
“Hodgson does a splendid job in telling the fascinating story of how we got into this mess.”
David Dequech (2021, 583) concluded that “Hodgson is right that heterodox economics
must change. The strategies that he prefers are worth trying. ...At the very least, his last
chapter is excellent ‘to start a wider conversation about possibilities.’”
Geoffrey M. Hodgson is at Loughborough University London.
1I thank Lavoie (2020, 10) for correcting two minor errors in my book concerning the origins of the terms
post-Keynesian and Post Keynesian, and my omission of an earlier reply to Hahn (1982).
2I was very saddened to learn of John Henry’s death in September 2020. He was a fine and stimulating
scholar.
604 Geoffrey M. Hodgson
But you can’t win them all. Lynne Chester (2021, 588–589) wrote “I do not find these
strategies, nor the notion of experimentation, to be very persuasive.” She was “disappointed”
with the book, claiming (wrongly) that it was my primary intention to admonish others,
rather than to generate debate or help move things forward. But she added, more positively,
that if “debates are generated by this book’s ideas, then it will contribute to advancing
heterodox economics.”3
I have been involved with heterodox economics for over fifty years. I have learned a
great deal from my experiences in various heterodox groups. But my concerns about the
future of heterodox economics have gradually intensified. 2008 was a watershed. As many
observers have noted, mainstream economics changed little in response to the 2008 Crash.
Even Queen Elizabeth II of the UK was shocked by its failures. Mainstream economics carried
on much as before, as if nothing had happened, and as if its theory and policy required at
most relatively minor adjustment (Besley and Hennessy 2009; Dow et al. 2009; Earl 2010).
The core assumptions of economics and its predilection for mathematical technique over
substance (Blaug 1997) received no urgent scrutiny by mainstream economists. These
outcomes impelled me to look more closely and analytically at heterodox economics and its
strategic options. I am very pleased that the issues are now being debated among heterodox
economists, and with more determination than before.
A foremost and persistent worry is that heterodox economists cannot agree what
heterodox economics means. In the light of the comments of the five reviewers, I touch
on this again in the following section. Another section addresses the issue of ideology, in
relation to both heterodox and orthodox economics, again in response to the reviews. This
is followed by a section that considers if neoclassical economics is intrinsically pro-market.
The penultimate section concerns the analysis of heterodoxy and orthodoxy (in economics)
as academic communities and institutionalized systems of power, which is an issue that is
under-stressed by some of the reviewers.
What is Heterodox Economics?
In my book I criticize the two leading attempts, by Tony Lawson and Frederic Lee, to define
heterodox economics.
Briefly, Lawson’s definition is based on ontology, using his (oddly defined) distinction
between “open” and “closed” systems (Hodgson 2019c, 57–58, 63–71).4 Lawson (2006) noted
that economic reality is generally open (in his sense) and argued extensively that the closed
systems of mathematics are generally inappropriate to analyze open economic phenomena.
Lawson (2003, 21, 178) clarified in several places that he was not against mathematics in
3 Referring to unpublished working papers rather than the later (Hodgson 2019c) book, Chester (2019)
mischaracterized my position in several ways, as well as pointing to some minor errors (which I corrected in my
book). She did not take the opportunity in her current review to withdraw her false statements that I identified in
my earlier reply to her paper (Hodgson 2019b).
4 Lawson (1997, 19) followed Bhaskar’s (1975, 70) odd characterization of a closed system “as one in which a
constant conjunction of events obtains.” This event-level definition is at variance with an emphasis on ontological
fundamentals and with the prevailing definitions in systems theory, where a “system is closed if no material enters
or leaves it; it is open if there is import and export and, therefore, change of the components” (Bertalanffy 1950,
23). It is also peculiar that Lawson (1997, 16–17) defined deductivism similarly in terms of presuming “event
regularities” or “constant conjunctions of events or states of affairs,” with regularities of the form “whenever event
x then event y.” As several authors have noted, philosophically this is an atypical definition of deductivism, because
it refers to empirical regularities concerning events, rather than to logical deductions with propositions. Matthew
Wilson (2005) argued that neoclassical economics does not fit Lawson’s characterization of deductivism (Hodgson
2019c, 57–58).
605
Debating the Future of Heterodox Economics
principle, but he claimed that the ontological conditions for its appropriate use are “seemingly
rare” or “rather rare.” Lawson (2006) argued that different heterodox economists accept the
ontological openness of economic systems in various ways, and consequently they should
confine their use of mathematics to these “rare” circumstances only. By contrast, mainstream
economists generally ignore ontological openness and they make mathematics compulsory.
Notwithstanding the “not against mathematics in principle” qualification, Lawson and
his supporters ended up endorsing the use of mathematics in “rare” circumstances only.
Lavoie (2019, 13) concurred with me on this. He wrote: “Hodgson’s interpretation [of
Lawson] appears to be the correct one.” He added: “Thus while Hodgson and myself are in
agreement that most neoclassical economists are obsessed with mathematical technicity, we
also both agree, in contrast to Lawson, that this does not preclude the use of modeling by
heterodox economists.” This is an accurate statement of a position that I share with Lavoie.
Some critical realists embrace mathematics much more fully than Lawson (Hodgson
2019c, 70–71). Although Lee (2008 and 2009) made the adoption of “critical realism” a
necessary condition of being heterodox, he did not restrict mathematics in the same way as
Lawson. Instead, he defined heterodoxy by adding different criteria, including the rejection
of the scarcity concept and of methodological individualism. I criticized Lee’s criteria as
flawed and imprecise (Hodgson 2019c, 53–56).
Furthermore, while Lee listed some important strands of heterodoxy, he omitted
Herbert Simon’s behavioral economics, the evolutionary economics of Richard Nelson and
Sidney Winter, Amartya Sen’s capabilities approach and other ostensibly heterodox streams.
I suggest a possible explanation of these omissions may lie in Lee’s depiction of heterodoxy
as incipiently an anti-capitalist movement. As far as I am aware, Simon, Nelson, Winter and
Sen have not explicitly opposed capitalism (Hodgson 2019c, 53–63). But we cannot be sure
of the explanation for Lee’s exclusions.
Playing down the differences, Chester (2021, 586n1) saw the contrast between Lawson
and Lee on the definition of heterodox economics as “more semantics than anything else.”
I disagree. I pointed out in my book that Lawson’s and Lee’s definitions of heterodoxy
would exclude and include very different people and schools of thought. Strong caution
about the use of mathematics would make Alfred Marshall plus Nobel Laureates Ronald
Coase, Douglass North, Elinor Ostrom, Oliver Williamson and (possibly) Milton Friedman
all “heterodox” by Lawson’s criteria (Hodgson 2019c, 59). I doubt that Lee would have
agreed with these inclusions. In addition, Lawson’s approach denies that Sraffian and post-
Keynesian modelling are heterodox, while Lee explicitly included them. The claim that these
differences are merely “semantics” jars with Chester’s own statement (with others) that “no
consensus” has been established on the definition of heterodox economics (Jo, Chester, and
D’Ippoliti 2017, 8). If the differences were mere “semantics,” then surely a consensus would
have been reached by now?
Furthermore, Chester (2021, 586) claimed that I “take issue” with a definition of
heterodoxy “advocated” by Andrew Mearman. This claim is incorrect. Chester does not seem
to have read the relevant texts carefully. Indeed, it was the recognition of an enduring lack of
consensus on the definition of heterodoxy that led Mearman to try a different tack. Mearman
(2012, 407) argued that a “fixed definition” of heterodoxy is undesirable, and its meaning
should be left “purposefully vague.” Because the problems of defining heterodox economics
have persisted without resolution, Mearman suggested that the effort be abandoned.
606 Geoffrey M. Hodgson
In my book I argued that Mearman misunderstood the nature and purpose of a
taxonomic definition, and I suggested that some implicit or explicit definition is unavoidable.
In general, the complex or changing nature of a phenomenon does not rule out the need
for a workable definition. Despite the complex and evolving subject matter, taxonomic
definitions play a crucial role in biology and elsewhere (Hodgson 2019a). They are crucial to
establish epistemic communities of investigation. Without a definition, how can we establish
lists of “heterodox” journals, or “heterodox” departments, or whatever?5
Mearman and others have noted a possible “sociological” definition, where “heterodox
economics” refers to the de facto community who describe themselves as heterodox
economists. That works as a crude demarcation criterion. But it leads to the question of what
holds such a diverse group of scholars together? Marxian, Kaleckian, Keynesian, Sraffian,
institutionalist and other approaches are very different in some respects. Incompatible
assumptions have led to unresolved arguments within heterodoxy, for around fifty years,
including over the use of mathematics. So, what holds heterodox economists together?
I address my answer to that question in the next section. Before that, I shall briefly note
my own definition of heterodox economics. I characterize orthodox economics in terms
of the prevailing assumptions of utility maximization (Max U) and equilibrium. Hence,
I suggest that heterodox economics could be defined primarily in terms of opposition to
Max U. I think that this is a sensible definition. But why has it not been proposed more
prominently before? The answer to this question also relates to what I suggest instead holds
heterodox economists together. Although I think that my proposed definition is sensible, I
do not believe that it will be accepted by the heterodox community. I discuss why in my book,
and in brief below.
Ideology, Heterodoxy, and Orthodoxy
In my book I noted that heterodox economists in Cambridge sometimes use expressions like
“left-wing economics.” I argued the following: “With the failure to establish a clear theoretical
identity for heterodoxy, it is all too tempting to used leftist ideology as the alternative glue
to bind people together...heterodoxy has been united more by (leftist) ideology than by
analysis” (Hodgson 2019c, 160, 174).
Notice that this is a relative statement—heterodoxy is united more by ideology than
anything else. This does not mean that heterodoxy is fully united by ideology. Contrary
to Chester (2021, 585) I do not say in the book that heterodox economists have a “shared
ideological affiliation.” In fact, the phrase “shared ideological affiliation” does not appear in
my volume. Also, contrary to Chester, I do not say that “leftist ideology is synonymous with
heterodox economics.” I do not believe it is true.
Instead, leftist ideology is prominent among self-described heterodox economists. It is not
universal, and there are important exceptions. Among these are Austrian economists, who in
my experience are much more favorable to market solutions than most heterodox economists.
5 Lavoie (2020, 9) noted my editorship “of the Journal of Institutional Economics, a publication which he
refuses to label as a heterodox journal but which publishes both orthodox and heterodox contributions.” This is
not quite right. I wrote instead that “those that run” the Journal of Institutional Economics “do not wish [it] to be
promoted as heterodox, although [it publishes] material that might be described as such.” (Hodgson 2019c, 77n.).
Because the journal is open to both orthodox and heterodox contributions, it would be misleading to promote
it as simply “heterodox.” There is also the problem that there is no consensus on what heterodox means. This
should lead anyone to hesitate before using the heterodox description. Personally, I would not mind if it appeared
on “heterodox” listings, alongside several other journals that include both orthodox and heterodox contributions.
607
Debating the Future of Heterodox Economics
Both Lawson and Lee saw the Austrian school as heterodox. But this classification is rejected
by some prominent heterodox economists, including Lavoie (2020, 11–12). There is little
on Austrian economics in The Routledge Handbook of Heterodox Economics (Jo, Chester, and
D’Ippoliti 2017). Furthermore, Austrian school economists are not prominent in heterodox
gatherings. Heterodox economists still do not agree on whether Austrian economists are
heterodox or not. I suggest that much of the resistance to their inclusion is related to ideology.
Other exceptions are John Maynard Keynes and some post-Keynesians. Lavoie (2020,
12) wrote: “post-Keynesians of all strands only wish to tame capitalism, just as Keynes himself
aimed to do.” Hence, they do not share the full-blooded socialism of Marxists and some
other heterodox economists.6 Lavoie is right here about Keynes. But I think that Lavoie is
wrong to suggest that all post-Keynesians “only wish to tame capitalism.” James Crotty (2019)
has recently published a book that claims that Keynes was a socialist and “against capitalism.”
In my view it would be more accurate to describe Keynes as a social democratic liberal.7
Crotty’s claim is wrong about Keynes, but it shows that some post-Keynesians are socialists
who want to end capitalism, in line with the prominent leftist ideology within heterodoxy.
Why have heterodox economists avoided defining themselves in terms of opposition
to Max U? In my book I point out that the rejection of Max U would not necessarily lead to
left outcomes. An alternative motivational emphasis on virtue or duty, for example, might
lead to conservative positions. Furthermore, many left economists—from Oskar Lange to
John Roemer, Samuel Bowles, and Herbert Gintis—have embraced Max U (Hodgson 2019c,
8, 30–31, 52, 60, 79, 85). Being for or against Max U does not indicate whether you are left
or right politically.
This observation, combined with the prominence of left ideology among heterodox
economists, may help to explain why they do not adopt the Max U criterion of orthodoxy.
Critics of Max U are ideologically varied. Among them are Deirdre McCloskey and Nobel
Laureate Vernon Smith. Both are members of the Mont Pelerin Society, which formerly
had Friedrich Hayek and Milton Friedman as leading members. If heterodoxy were to
organize around opposition to Max U, then it would have to ally with leading critics such
as McCloskey and Smith, alongside others with different ideological views. Would the
heterodox community be happy with that? If not, then that would help explain why heterodox
economists do not define themselves principally as opponents of Max U. Personally, I would
welcome such an alliance and it is one of the strategies that I favor in my book. But I think
that many heterodox economists would reject it.
My view is not against ideology in economics. Instead I argued that “an ideology-free
economics is neither desirable nor possible” (Hodgson 2019c, vii). Contrary to Henry (2019,
595) I do not believe that Nelson-Winter evolutionary economics is “politically neutral.” I
note that it is less ideological in tenor and less politicized. But that does not make it ideology
free. A broad stream of thought, it harbors varied ideological views. But its general stress on
dynamic transformation and change makes political neutrality impossible.
6 The Concise Oxford English Dictionary defines socialism as the proposal that the “community as a whole
should own and control the means of production, distribution, and exchange.”
7 Keynes (1972a, 294, 297) wrote that “I think that capitalism, wisely managed, can probably be made more
efficient for attaining economic ends than any alternative system yet in sight,” he declared that “the Class war will
find me on the side of the educated bourgeoisie” and he concluded “the Liberal Party is still the best instrument
of future progress.” Keynes wrote to Hayek congratulating him for the critique of socialism in The Road to Serfdom
(Hayek 1944). Keynes (1980, 385) saw it as “a grand book.. ..Both morally and philosophically I find myself in
agreement with virtually the whole of it.”
608 Geoffrey M. Hodgson
Within orthodoxy as well as heterodoxy, I would argue strongly for greater ideological
pluralism, alongside good measures of theoretical and methodological pluralism. Lavoie (2020,
11) wrote: “Hodgson believes that it is a grave error to associate heterodox economics with
left-wing economic policies.” But I say no such thing. To disagree here with Henry (2021,
601), I do not want “to move heterodoxy in a more conservative direction.” Neither do I
insist that heterodox economists “abandon” left ideology, as Henry (2021, 599) put it. I
favor ideological pluralism. By contrast, the views in quotes that Lavoie and Henry wrongly
attributed to me would not necessarily increase ideological diversity.
Henry (2021, 595) claimed that I fault 1960–1990 Cambridge economics, because
of its “‘leftist ideology,’ coupled with an anti-capitalism perspective.”8 But much of that
Cambridge economics is logically independent of the kind of leftist ideology that was found
in Cambridge. You can fault the ideology without ditching all the theory. If I had been a
member of the economics department in Cambridge in the 1960s and 1970s, then I would
have argued against the support expressed by Joan Robinson and others for Soviet Russia,
Mao’s China and North Korea, but I would have supported some Cambridge theories,
including the critique of the neoclassical aggregate production function. I fault several
1960–1990 Cambridge economists partly because of their ideological intolerance, as well as
some of their theoretical limitations.
The community of heterodox economists has a choice. One option would be to define
their field primarily in ideological terms, as “left wing economics” or “socialist economics.”
This would be a reasonable and consistent approach. We would all make our personal
choices whether we were sufficiently left or socialist to join such a grouping. This option would
unite many, but not all, heterodox economists. But socialist mainstream economists such as
Kenneth Arrow (1978), Oskar Lange, and Abba Lerner would also have to be included in the
leftist heterodox camp. Heterodox economists would organize primarily in terms of ideology,
and not primarily in terms of theory.
An intermediate option would be to define heterodox economics in terms of both
leftist ideology and some theoretical assumptions. This approach may successfully exclude
socialist mainstream economists such as Arrow, but there is still the difficulty of identifying
the theoretical core that defines heterodox economics.
Another option is for heterodox economists to avoid defining themselves in terms
of ideology. They would then try to define themselves using other criteria, about which
so far there is “no consensus.” Whatever that future (non-ideological) consensus outcome,
there would be no warrant to exclude others with different ideological views, if they were
heterodox by the agreed criteria. It would not be appropriate to make heterodox economics
exclusively leftist. Instead there would be a need to tolerate and promote ideological diversity.
8 It is not obvious who Henry (2021, 600) was criticizing when he questioned: “how is it that micro is
‘theory-oriented’ while macro is (merely) ‘policy oriented’?” Of course, both microeconomics and macroeconomics
have policy implications. Both are built on theories. I observed that “the heterodox neglect of micro topics such as
Max U reflects an uppermost concern for macro-economic policy. This would suggest that heterodox economics
is as much policy-driven as theory-driven.” (Hodgson 2019c, 81). This implies neither that micro is merely theory
orientated, nor that macro is merely policy oriented. It should be considered why there is often a preference for
macroeconomic policy over microeconomic policy. In part this may reflect the enduring influence of pre-1990
Cambridge economics on its heterodox successors. As I show in my book, several observers of Cambridge heterodox
economics in its heyday noted its biases towards macroeconomics and leftist ideology. Cambridge thinks of itself
as an elite university. Many of its economists, including John Maynard Keynes and Nicholas Kaldor, have been
government advisors. Its economists absorb a notion that their potential role is to advise governments, primarily
on macroeconomic issues.
609
Debating the Future of Heterodox Economics
Henry raised some very important questions concerning the ideological nature of
mainstream economics. He accurately cited my view that neoclassical economics is adaptable
in policy terms, and it can be twisted to serve several different ideological positions, from
socialism through social democracy to free-market capitalism. The evolution of neoclassical
economics since the 1870s is testimony to this adaptability.
But this does not mean that neoclassical economics is infinitely adaptable. It is not
neutral either. There are some specific standpoints that Max U promotes and some it cannot
represent. Basing itself on utilitarianism, neoclassical economics takes a consequentialist
ethical stance, thus downplaying issues of duty, virtue, and moral motivation (Hodgson
2013, 2021). Keynes (1972b, 445) saw economic Benthamism as “the worm that is gnawing
away at the insides of our civilization.” I agree with Keynes on this. As Joseph Schumpeter
(1950, 448) also noted, society would not cohere if it were based on Max U. In an excellent
recent volume, Jonathan Aldred (2019) argued that neoclassical economics provides a License
to be Bad. The Max U viewpoint corrupts policy and ethics. Hence it should be replaced by
something better.
Neoclassical Economics and Markets
Today, many neoclassical economists hold pro-market views. They reflect the ideological
climate of our times. But before 1970, many neoclassical economists held socialist or
social democratic views. Some still do today. We must distinguish between the essential
characteristics of neoclassical economics, including the features raised in the previous
paragraph, and the ideological decorations and biases that are brought in by particular
neoclassical economists.
Is neoclassical economics intrinsically pro-market, as Henry and others suggest? Henry
(2021, 600) complained “it’s not clear how neoclassicism does not necessarily lead to pro-
market policies.” I shall try to be clear. My answer is partly illustrated using neoclassical
general equilibrium theory by socialist economists in the debate in the 1930s and 1940s on
the feasibility of socialism.
Consider the socialist planning mechanisms proposed by Oskar Lange and Frederick
Taylor (1938). Contrary to a widespread depiction, they did not propose an authentic “market
socialism,” because it included no genuine market. Instead, Lange and Taylor used Walrasian
general equilibrium theory to devise arrangements where supposedly prices could be formed,
and price signals could operate, between divisions of a centrally planned economy.
They considered an economy consisting of a central planning office plus many publicly
owned producer plants (factories, farms, etc.). They proposed that the central planning
office would call out a series of output prices for every item to be produced. Based on an
appraisal of marginal costs, every producer plant would respond with an offer of how much
they could supply at that price. But crucially, these offers would be indicative rather than
contractual. The central planning office would then adjust each price, up or down, in the
light of estimated overall surpluses or shortages. The process would then continue until
there were no surpluses or shortages. Then the central planners would instruct the plants to
carry out production, using the prices last offered for accounting purposes. It would operate
by central instruction rather than devolved contracts. Is this scheme workable? Mark Blaug
(1993, 1571) wrote with appropriate derision:
The Lange idea of managers following marginal cost-pricing rules because
they are instructed to do so, while the central planning board continually
610 Geoffrey M. Hodgson
alters the prices of both producer and consumer goods so as to reduce
their excess demands to zero, is so administratively naive as to be positively
laughable. Only those drunk on perfectly competitive, static equilibrium
theory could have swallowed such nonsense. .. .in all the...calls for
reform of Soviet bloc economies, no one has ever suggested that Lange
was of any relevance whatsoever. And still more ironically, Lange’s ‘market
socialism’ is, on its own grounds, socialism without anything that can be
called market transactions.
Even if this scheme were workable, it would not be a market. The producer plants
would not own their outputs and they would not buy their inputs. Instead, everything would
be owned and distributed by the state. In general, neoclassical economics is blind to the
institutions that are required to sustain private property and contracts. Hence there is much
loose neoclassical talk about “marriage markets,” “markets for ideas,” “political markets,”
“markets for laws,” and much else (Hodgson 2020). These phrases show a rhetorical bias
towards markets, but not an understanding of them. A major problem with neoclassical
economics is that it does not have key concepts to identify what is, and what is not, a market.
By contrast, the original institutional economists—particularly John R. Commons
(1924)—can point to the legal and other institutions that are necessary for true property
and markets (Deakin et al. 2017). Original institutional economists can properly identify
property, contracts, and markets, while neoclassical economics has inadequate conceptual
tools to do so. The Lange-Taylor example shows that neoclassical economics is not necessarily
pro-market. It was used to support planning. Léon Walras, the founder of the general
equilibrium theory used by Lange, called himself a “scientific socialist” and advocated price
regulation, worker cooperatives and the public ownership of natural monopolies, including
of land.
When neoclassical economists support markets (as they often do) they use a theory that
is inadequate to understand the nature of markets and their operation. Consequently, Henry
(2021, 600) was on the right track when he wrote,
Without a sufficient depiction of 'the market,' how would one recognize
a pro- or anti-market policy? Coupled with Hodgson’s critical remarks on
general equilibrium theory and Lange’s use of this approach in defending
socialist planning, it would appear that the whole of neoclassical theory
is useless in recommending any defensible policy—whether of a pro- or
anti-market nature.
But “the whole of neoclassical theory is useless” is too strong. I would say instead that
neoclassical partial equilibrium theory is of some use in policy terms, but, by contrast,
neoclassical general equilibrium theory is of very limited use for designing policy.
Nevertheless, Henry’s statement points in the right direction.
Lawson (2006, 486–487) also took the view that mainstream economics should not be
regarded as necessarily pro-market. He wrote that such ideas were “ultimately unsustainable.”
Mainstream economics should not be seen “as a project concerned primarily with defending
the workings of the current economic system.” Some mainstream economists act in this way.
“But most do not. And I do worry that portraying the mainstream economics as driven by
the goal of achieving results in these terms is overly conspiratorial.” I agree with Lawson on
these points.
611
Debating the Future of Heterodox Economics
Henry (2021, 600) asked me “to define the capitalist market.” I can define markets and
I can define capitalism, and I have done so elsewhere (Hodgson 2015). Markets have existed
for thousands of years before capitalism. Capitalism depends on markets, but it involves
some additional features, notably (1) a developed financial system with banking institutions,
the widespread use of credit with property as collateral, markets for debt, and (2) widespread
wage labor and employment contracts. I list some other definitional features in Hodgson
(2015) but these need not concern us here.
“Capitalist markets”—or markets within capitalism—are profoundly affected by features
(1) and (2). Markets that are “embedded within a monetary production economy,” as Henry
put it, operate in the glare of financial institutions, and are profoundly affected by the
dynamics of employment and profit seeking.
Pluralism and Consensus in Academic Disciplines
Lavoie (2020, 16) wrote: “Hodgson who is an Institutionalist economist, should have
emphasized more strongly the importance of creating institutions for the development of
schools of thought.” I am worried that he got that impression. My emphasis on how schools
of thought and scientific disciplines are organized and institutionalized is a major theme of
the book. Perhaps I need to stress this again. In the book I wrote:
[W]e must examine economics not merely as a set of doctrines, but as a
system of organized authority, requiring strategies of power to transform
it....To function effectively and to create a community of mutual trust
and esteem, science must be organized. (Hodgson 2019c, 133, 137)
There are several other statements underlining the importance and role of scientific
institutions. In the case of heterodox economics, this led me to the following conclusion:
It is no longer viable for heterodox economists to work on as they have
been doing, simply in the faith that someday, somewhere and somehow,
more and more people will be persuaded of their veracity. This faith rests
on a remarkably individualistic and de-institutionalized view of science.
(Hodgson 2019c, 174)
Heterodoxy cannot rely on mere persuasion. It has created its own networks, but these need
to engage more with powerful academic institutions. This led me to identify weaknesses
that prevent it organizing more effectively and gaining more power, including the lack of
consensus on what heterodox economics means, and the lack of a shared raison d’être.
For these and other reasons I regard chapter five on “Heterodox economics as a scientific
community” as the most important in the book. My argument in that chapter leans heavily
on the work of Michael Polanyi (1962) and Philip Kitcher (1993). Their broader work on
social epistemology and epistemic communities helped me more than anything else to
understand why heterodox economics was failing to gain further influence within academia.
Chapter five was touched on by all five reviewers, but not to a great extent. No reviewer
mentioned Kitcher. Three mentioned Polanyi. It is true, as Henry (2021, 598) noted, that
Polanyi was a member of the Mont Pelerin Society in its early years. But it is important to add
that at that time the Society was a much broader liberal forum than it turned out to be in the
1970s, when Chicago became its nexus. Furthermore, Polanyi was a Keynesian. Also, he saw
612 Geoffrey M. Hodgson
economic inequality as a major problem. He extensively criticized the stronger pro-market
views of Friedman and Hayek (Polanyi 1945; Burgin 2012; Hodgson 2021).
In their work on science, Polanyi and Kitcher developed a social epistemology, where
knowledge is gained and developed not simply by individuals reflecting on ideas and the
real world, but also interacting with other scientists. Scientists create a division of labor
and expertise, where to a large degree they rely on one another and trust the results derived
from specialisms that are some distance from their own. Crucially, such a social system of
science depends on organizations, with screening, rewards, and incentives. Without such
institutions it cannot work.
Both Polanyi and Kitcher argued that scientific organization must combine a system
of authority and consensus, alongside some encouragement to criticize current orthodoxy
and to innovate with new ideas. A viable and healthy science requires both consensus and
pluralism. Polanyi and Kitcher emphasized that without consensus and authority, science
would fail to cohere and move forward. Instead it would argue endlessly about everything.
But also, without sufficient pluralism of ideas and approaches, innovation would be stifled.
A balance had to be found between the two.
After reading Polanyi and Kitcher, it struck me that mainstream economics was
unbalanced: there was too much consensus and authority and too little pluralism. But
on the other hand, while heterodox economists had rightly emphasized pluralism (at least
in terms of theories, but often less so in terms of ideologies), they had generally failed to
see the importance of consensus. Some consensus was necessary to build cumulatively
on past achievements, to screen out contributions of inferior quality, to provide rewards
and incentives, and to regain power and influence within academic institutions. The
establishment of some degree of heterodox consensus requires organization and power
within the academy. Both pluralism and consensus are essential.
Concluding Remarks
So far, I have not said much about the reviews by Dequech and Potts. That is because I
agree with almost everything they write. Dequech’s reflections are not only intrinsically
important, but they are also valuable because, as he points out, his home country of Brazil
is one of the few major countries where heterodox economics is relatively strong. He is aware
of some of the difficulties involved in moving heterodoxy forward, even in relatively favorable
academic circumstances in the past. Brazilian heterodox economists in 2021 are under some
ideological pressure from the government of Jair Bolsonaro. Hence a careful treatment of the
relationship between ideology and economic theory is particularly important.
Potts makes some very interesting points about a possible new paradigm for economics.
Further work in this direction would be very helpful. But I doubt if much headway can be
made with this new and exciting line of thinking within current university departments
of economics. The issue of strategy, including possible organization locations in academia,
must be addressed.
My primary aim in writing the book under review was to open up debate on ways
forward for heterodox economics. I am very pleased that the debate has intensified, with
some excellent and stimulating contributions. The editor of the Journal of Economic Issues
has helped a great deal by providing a critical forum for this important discussion. Let the
debate continue.
613
Debating the Future of Heterodox Economics
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