Heterodox Economics - Essay Example

s s of Heterodox economics deal with a set of methodologies inherently distinct from the traditional school of thought used to explain the economic school of thought. The heterodox approaches are considered distinct from the mainstream economics, while most economists distinctly contrast the heterodox economical approached with the neo-classical economics. Therefore, heterodox economics encompasses a wide variety of approached, traditions and schools of thought. These include socialism, Marxism, institutionalism, evolutionary, Austrian, post-Keynesian amongst many others (Rutherford 1999: 12). In contrast to these heterodox approaches, the mainstream economics are considered to be conventional or orthodox in nature, while they argue that the fundamental assumptions of these mainstream economics are flawed. To prove the point, Marxian approach towards economics would be taken as a test case to contrast it with the mainstream economics and predominantly, the neoclassical school of thought to analyze the central issues underlying the mainstream economical assumptions. On one hand where the Marxian approach under the umbrella of heterodox economics is quite radical in perspective, the mainstream economics assumes the rationality-equilibrium-individualism triangle to be the most potent force in defining the economical phenomenon. In other words, Marxian thought challenges the aforementioned nexus presumed by the mainstream economics and instead, propose the institutions-social structure-historical values nexus to counter the ill-effects propagated by the mainstream economists (Foldvary 1996: 13). On the other hand, the academia contemplating capitalism and the neoclassical thought evidently refutes the heterodox thought. Therefore, to assess the arguments, the underlying issues in mainstream economical thought deemed problematic by the heterodox approach (Marxian Approach) would be analyzed. Therefore, the basic assumptions will be assessed one by one to see how and why the heterodox academia rejects these arguments. Prior to pointing out the issues in the mainstream economic thought perceived by the heterodox approach, both the heterodox approach and the Marxian thought as one of the heterodox approaches need to be discussed. Back in the 1990`s, various groups of economists advocating for their respective approaches made an effort to enhance coherence amongst the heterodox school of thought to determine a model which suits almost all such approaches. In this context, the ICAPE (International Confederation of Associations for Pluralism in Economics) also aimed at reaching a common ground on the definition of heterodox school of thought (Lawson 2006: 12). Though the definition hasn’t been specified as yet, but few assumptions have been agreed upon; while most of these approaches are also definitive of the Marxist school of thought. In other words, the Marxist school of thought fits accurately under the heterodox economics model with mild variations in scope. For the most part, the heterodox school of thought is the brainchild of those economists who have offered outright critique on the macro texts of the neo-classical school of though. Similarly, Marxism as the economic model is also a result of a critique on the capitalistic school of thought where the relation of capital with labor has been pointed out as the central issue to the mainstream economics model. Therefore, the policy principles predicated by mainstream economics, such as individuality, minimal government interference and the concept of corporations are critiqued as being the root of all evils in economics. Therefore, the heterodox economics model offers a vibrant paradigm in which the Marxist school of thought fit accurately to point out the core issues with the mainstream economics models. The heterodox economical model is based upon four key values, while all subsidiary approached are based on these values. Heterodox economists base their assumptions on history, uncertainty, natural systems and power. Since the heterodox is now considered as an interchangeable concept for ‘non-orthodox’, the orthodox is associated with neo-classical approach (which like Marxism is one of the sub-approaches to mainstream economics). In this context, it must be pointed out that mainstream economist model constitutes theoretical paradigms like evolutionary economics, complexity theory, behavioral economics alongside the neo-classical school of thought. Therefore, the four key values inherent to the heterodox school of thought must be contrasted with those underlying these mainstream schools of thought to come up with a coherent yet holistic analysis. Historical values deem immense significance in Marxian school of thought where both the bourgeoisie classes as well as the proletariat class are driven by historical facts and aren’t merely individualistic subjects as assumed in the mainstream economic thought. Similarly, uncertainty principle is also central to heterodox economics while the certainty is wrongly assumed while carving out policies under the orthodox economic though. Also, heterodox economists tend to take into consideration, the natural systems, something which is often ignored by the academia still working under the mainstream economics model. Lastly, power dimensions are not only assessed rather critiqued under the revolutionary and the reactionary Marxian model of economics, a dimension which is the basic pillar of the mainstreams economics. These central critiques of the Marxian school of thought to the orthodox economic assumptions will further be assessed in detail to see their validity and reliability. The Marxian thought is based on the core underlying assumptions that the bourgeoisie class exploits the proletariat class; where the labor class works day and night where they get alienated with the fact that their hard work reaps profits for the capitalists. This core assumption, which is a simplified version of the Marxian anti-capitalist thought, inherently poses questions and raises issues central to the mainstream thought (Hawbsbawm 2011: 3). Firstly, the very concepts of ‘bourgeoisie’ and ‘proletariat’ instead of superficial concepts like ‘capitalist’ and ‘profits’ reveal how the Marxian economist tend to take into consideration, the social and cultural perspectives while posing an assumption. In other words, the Marxists never take the economic actors i.e. the humans as mere individuals with no emotive senses; instead they consider the culture, history, traditions and customs alive to give a true picture of the realistic scenario. In contrast, the mainstream economic model undertakes individuals as capital producing machines while ignoring all aspects of culture and history (Lee 2010: 19). This very perspective is inherently flawed since economics in a person`s life is connected with history and culture where even other disciplines of psychology and sociology have commented on how buying behavior and purchasing power is impacted by cultural variables, a very significant aspect which mainstream economists tend to ignore. Thus, it won`t be wrong to assume that the methodology undertaken by the orthodox economics and academicians is based on flawed logic since they factor out of the most significant variables out of the equation. Secondly, another core assumption which forms the crux of the entire orthodox school of thought relates to equilibrium. The state of equilibrium evidently affects the supply and demand complexes in the mainstream economics model where all other complex economic concepts tend to revolve around this basic state of equilibrium. However, in reality, a state or a society, even one single firm operational in the market can never be subject to equilibrium. A Marxian would never find rationality in a policy principle advocating for imposition of taxes based on the paradigm where a state of equilibrium is involved. Instead, Marxists tend to be realistic while they base their assumptions on the scenario where a society will undergo complex cycles and evolve, often will show unpredictable patterns (proletariat may overthrow the capitalists) which is generally a critique to the mainstream economics (Pearce & Frauly 2007: 41). Therefore, the equilibrium based models would obviously be perceived skeptically. Furthermore, these mainstream theories tend to base these equilibrium models while focusing on individuality and isolation from the dynamic market conditions. Marxian theory rejects the notion of individuality which commenting that the sense of community and solidarity, even alienation as an aggregate mass of people is the only scenario which makes sense (Lebowitz 2003: 21). Thus, the notion predicated by the mainstream economists that individual output and individual effort is the sole value around which economics revolves is inherently flawed and is thus, rejected by the heterodox economists in general and the Marxists in particular. Furthermore, economics as a social science is predominantly undermined by the classical and the orthodox school of though. That is, the mainstream economic models consider economics a discipline distinct from social sciences, and thus apply statistical models and mathematical equations to economics. Therefore, techniques like regression analysis and supply demand curves are the only tools utilized to reach testable and valid conclusions. However, Marxian school of thought proposes an alternate paradigm which points out to the issue in mainstream economics i.e. economics can`t be ruled out as merely a scientific field. In other words, economics is a social sciences discipline and is still academically considered as one due to the very reason that it involved social dynamics and power determinants (Goldstein & Hillard 2009:31). Therefore, Marxian school of thought evidently offers a solution to the alienation i.e. the emergence of classless society which is predicated as the only solution to alienation. Also, the contemporary Marxists point out to the fact that despite the attempt by the mainstream economists to turn economics into a scientific study, the results aren’t quite impressive (Kritikov 2011: 11). Instead, there are marked discrepancies between the perceived results and the actual results despite adding statistic values and mathematical formulas. Therefore, these mainstream economists must identify this underlying issue in their model and realize that adding a humanistic perspective to the model is a must. For this reason, the Marxists point out in their models that minimizing the internal chaos in human i.e. the alienation must be the focus of state economy; an aspect which can neither be measured nor conceptualized (Saad-Filho 2003: 12). Another underlying issue connected to the aforementioned theories lies in the sense of individuality which the mainstream economists religiously stress on. For the mainstream economists, the fundamental subject of analysis or the unit of analysis is the individual and the entire set of assumptions and interpretations revolve around an individual. In this context, the assumption designed for individual is homogenously applied on the entire system of economy. This very presumption poses a huge issue in context to the orthodox economics since the aggregate of individuals is comprised of heterogeneous beings. While the Marxian economists also base their assessments on the assumption that community is considerably homogenous, yet they incorporate units like institutions to incorporate the diversity of beings and their tastes and priorities while designing economic policies (Barker 2004: 31). The Marxian economy, in this context, can be applied to both macro as well as micro level; since institutions like religion tend to explicate their propositions on a macro level, while community and class as a unit of analysis can be applied to the sub-discipline at micro level. Therefore, the goal of the mainstream economists in this context is merely to maximize profits and the only aim of their entire activity and intellectual exhaustion is to control the dynamics of society and empower individualism. However, Marxism offers a holistic alternative where not only is a state of economic empowerment to the society is aimed at, but also emotional satisfaction of the individuals and the community as a whole is intended. Therefore, the issues with the mainstream theories are critiqued vehemently via Marxism which is one of the most aggressive sub-branches of the generic model of economics i.e. the heterodox economic model. Furthermore, heterodox economics models like Marxist ideas of economics also tend to critique the mainstream economic models on the propagation of ideas like division of labor and specialization, and even the technological innovations. Marxists also argue that the mainstream economists tend to dramatize concepts like division of labor and specialization to undermine value of human labor and exert significance of technology and machinery. Thus, the mainstream economists tend to argue sometime explicitly, otherwise implicitly that a capitalist must hire the specialized workforce and expand the modern machinery basis to enhance revenues (Hodgson 1999: 8). However, while advocating for these superficial values, they tend to ignore value of human thought and emotions. Therefore, capitalists are unwilling to invest on the humanistic sense due to which Marxian thought seems to be irritated by the mere notion of division of human race into classes. For this reason, the heterodox economists are often quoted as reactionaries since they tend to base their predictions and assumption on offering a critique on the orthodox school of thought like the neo-classical school of thought. Therefore, conclusively, heterodox economics deal with a set of methodologies inherently distinct from the traditional school of thought used to explain the economic school of thought. These heterodox economics tend to identify the underlying issues in the otherwise pre-dominant school of thought i.e. the orthodox or the mainstream school of thought. For this reason, Marxism school of thought (one of the heterodox disciplines) is taken as a test theory to identify key issues in the mainstream school of thought. As a result several issues have been identified. Firstly, the very perspective propagated by the orthodox school of thought is inherently flawed since economics in a person`s life is connected with history and culture where even other disciplines of psychology and sociology have commented on how buying behavior and purchasing power is impacted by cultural variables. Also, the mainstream economic models consider economics a discipline distinct from social sciences, and thus apply statistical models and mathematical equations to economics while evidently ignoring the humanistic perspectives of the subject matter. Another underlying issue connected to the aforementioned theories lies in the sense of individuality which the mainstream economists religiously stress on. Marxists also argue that the mainstream economists tend to dramatize concepts like division of labor and specialization to undermine value of human labor and exert significance of technology and machinery. Thus, the heterodox economic model may also be considered as a reactionary model since it offers critique to the mainstream school of economic thought. Bibliography: Barker, Drucilla K. (2004) Liberating economics: feminist perspectives on families, work and globalization. Ann Arbor: University of Michigan Press. FOLDVARY, F. E. (1996). Beyond neoclassical economics: heterodox approaches to economic theory. Cheltenham, UK, Edward Elgar. GOLDSTEIN, J. P., & HILLARD, M. G. (2009). Heterodox macroeconomics: Keynes, Marx and globalization. London, Routledge. HOBSBAWM, E. J. 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Rutherford, Malcolm (1999) Institutionalism as “Scientific” Economics. University of Victoria, Department of Economics, Departmental Discussion Paper 99-01 Saad-Filho, Alfredo (2003), Anti-capitalism: a Marxist introduction. London: Pluto Press Read More