From: gerald_a_levy (gerald_a_levy@msn.com)
Date: Wed Jan 22 2003 - 08:51:39 EST
Another re-send./JL
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>From the issue dated January 24, 2003
Taking On 'Rational Man'
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'economie de Robinson Crusoe."
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 an American doctoral student at Cambridge.
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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