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On the state of the worldly philosophy: reflections after a visit to the New School

 Dr. Vernengo I presume?

I am pessimist by nature (or nurture), I guess. So I never thought that the current crisis would lead to a collapse of mainstream economics. As I often point out to my students, in the US, it was the Great Depression, and the rise of the Neoclassical Synthesis that made Marginalism dominant. Up to that point the profession was dominated by an eclectic group that included many institutionalists, like Commons or Seligman, a non-Marxist defender of an economic interpretation of history, both of whom were presidents of the American Economic Association (AEA). Mitchell, another institutionalist that was president of the AEA, was the head of the National Bureau of Economic Analysis (NBER). And the administration was full of institutionalist economists during the New Deal. So a crisis might actually lead to the consolidation of a paradigm that was actually contradicted by the facts (yes, full employment of factors of production is hard to defend if you have 25% unemployment, but blame it on rigid wages and you're fine).

On the role of the New School in academia, the topic of our table with Rajiv Sethi and Ramaa Vasudevan, what I suggested, as my interpretation was rather broad, was it is the production of heterodox economists by means of heterodox economists (my definition of the heterodox camp here). In that, at least in the US, the New School is aided by three four other programs, namely Colorado State (CSU), UMass-Amherst, UMKC (Kansas), and Utah. Not sure what is the actual output of all these centers, but most newly minted PhDs end up finding jobs in academia, mostly public universities and liberal arts colleges, in government, in think tanks, and in organizations related to progressive activism from unions to environmental groups. In that respect, even though the profession is not likely to move closer to any heterodox perspective, there is space for heterodox economists to continue to do the kind of work that they were trained to do. In other words, if the crisis will not open new space for heterodox groups, at least not by default, it will also not close old doors.

There was a debate, to some extent represented in our table by the contrast of my and Rajiv's views, on whether to engage the mainstream or tear it down, as Ali Khan put it in another section. I have already written on that here (for a whole book in response to critics that suggest that heterodox authors do not engage the mainstream go here). Still not convinced that engagement is necessary, or that helps to advance the research agenda of heterodoxy. Sure enough that there are ideas here and there that might be useful, but that doesn't require engagement per se. Note that this also does not mean that the study of the mainstream can or should be abandoned. But as I noted, New School students, and heterodox economists in general, understand better the logic and meaning of the mainstream than neoclassical authors themselves (see my debate with Noah Smith here).

The idea that isolation (And from what really? From publishing in the more prestigious journals? From having Ivy League chairs? Or from reality? You choose, but I'll rather be part of the group that was not surprised by the crisis, like Baker, D'Arista, Epstein, Galbraith, Godley, Palley, Pollin, Taylor, Zezza, Wray, etc., and many more) does not allow for the development of reasonable ideas or to have influence is also questionable. In all fairness, by the 1830s, Ricardian economics, and the main propositions of the surplus approach were forgotten and modified in incoherent ways by the likes of Nassau Senior, Stuart-Mill and others. A German philosopher studying alone in the British Museum was able to reconstruct and advance the classical ideas. Yes his academic influence was small at best, but I would be surprised if someone suggested he had no influence (and I don't mean politically, but strictly as an economist). All the same, by the 1930s most of these ideas were again forgotten and misrepresented, and an Italian scholar, working in isolation, while editing Ricardo's works, also reconstructed and advanced on the classical ideas. And on top of that, the 1930s provided the idea of effective demand, and the possibility of upturning Say's Law in the long run. All of these achievements have NOT been lost, in part, because places like the New School continue to produce heterodox PhDs.

This time around there is no need to reconstruct everything from scratch. There is a wealth of accumulated knowledge, and the shoulders of giants to stand upon. Yes, one can be pessimistic about the profession as whole, and probably should be, as Foley seemed to be in the last section, arguing that the heterodox moment after the crisis was really brief. But that is the norm for heterodox authors. And this time around we have the New School!


  1. Hi Matias,

    It was wonderful day: a little history, ideas, thoughts, reflections, predictions... my reading list is out of hand.

    My thoughts: if Heterodox Economics were ever explained to the public, if they could understand its basic principles, and embrace it is as their own economics: that the economy belongs to no one, that the political economy, rather, is there for everyone to participate in (just like a Republic) that it could and should - without too much difficulty -- be structured in a transparent way which serves the interest of all; the public would push aside the false pessimism that rules now the way you'd fire any unproductive employee, who's stealing.

    1. Not sure the problem with heterodoxy is about marketing to a larger public. Vested interests play a role in making reasonable economics less prominent. The Koch brothers are now buying economic chairs in universities. By the way, something that is not new. And yes it was a very nice day, in particular the first table on the history of the dept at the NSSR.

    2. I truly think that Heterodox Econ has a charisma - an appeal - to broad human intuition which is entirely lacking in Marginalist/Neo Classical thought; which is why -- I think -- the latter has to rely on authoritarian suspend-your-critical-thinking models and coercive academic politics to prevail.

      I'm not that smart and I'm way behind in my life's reading list, so I've asked myself many times how I've managed to resist - had the confidence to say no - to the free-market neo-classical/neo-liberal bunk so many of my friends, family and co-workers have been inured to and grievously harmed by. The one simple answer I come up with (the model) is that that co-operation and team work and consideration of the needs of others yields better results for all, including me. This is very instinctive and broadly shared by the public. (Damn Margret Thatcher for ever saying "There is no 'Society'" Indeed, why else could she make such pernicious remark if she wasn't trying to undermine the very society she claimed didn't exist.)

      Keynes's effective aggregate demand among other ideas fits this vision. How did I come by this vision? I do have a better understanding of the role the Democratic Party (pre-1970) has played in 20th century American history than my peers and co-workers and such, but it is my peers and co-workers who I think could be won over by heterodox political economy. Let me offer another influence.

      Before I was 17 years old the one writer whose books I had read the most number of up until that point was John Steinbeck. Now, this is a subtle influence - and not necessarily one shared by that many people - but a very American one. And, if arrayed along with the many, many, other such cultural lights and reference points - which most Americans have been exposed - an artful ergodic-American graph could be made. which - I think - could deliver an American heterodox consensus. (Getting a little carried away) But seriously, I'm convinced American political culture - and American pedagogy - is more naturally sympathetic to heterodox economics than these other contrived orthodoxies -- it's just that no body seems to know that. It truly is one of those Emperor's New Clothes type of zeitgeists.

  2. this is interesting:


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