Monday, February 13, 2017

Heterodox, Trespasser, Malthusian and other economist labels

I discussed long ago what it means to be heterodox in economics. Bob Kuttner, who I once saw giving a talk at the New School (in the 1990s), a very sharp journalist that knows quite a bit about economics, sings the praises of Dani Rodrik as an heterodox economist. I discussed Rodrik before, in particular his notion that there is only one economics (neoclassical, of course as in the title of his book One Economics, Many Recipes). And he is not subtle about it either. As I noted back then, in his Has Globalization Gone Too Far, that in spite of Kuttner's review is not particularly critical and is indeed mildly for globalization, Rodrik says that: “when I mention ‘economists’ here, I am, of course, referring to mainstream economics, as represented by neoclassical economists (of which I count myself as one).”

Rodrik is, or was a few years ago at least, in what Colander, Holt and Rosser refer to as the cutting edge of the profession (my views on that here), which is to say he is heterodox in the same way that Joe Stiglitz or Paul Krugman are heterodox. They are willing to suggest that some imperfections make the laissez-faire dream of the most fundamentalist neoclassical authors somewhat overstated. But as much as Krugman and Stiglitz accept the conventional macro model, with the natural rate hypothesis, the same is true for Rodrik, which essentially accepts the basic Heckscher-Ohlin-Samuelson trade model (for a critique go here). He is a moderate neoclassical economist; a potty trained one if you will, but certainly not heterodox.

Don't get me wrong, in many policy issues Rodrik, like Krugman and Stiglitz, is on the right side, even if he gets there in ways that I would suggest are contradictory, and can be seen as an ally of heterodox economists on these policy issues. But I think it is a bit much to call him a critic of globalization, in particular because it underplays the role of true critics, that often paid a steep professional price, in terms of prestige and money, to defend their views. For example, his critique of the Washington Consensus was that the policies (essentially austerity cum deregulation, trade liberalization and privatization, or what you would call neoliberal policies) were incomplete and more institutional reforms were needed to make them work. So Rodrik was basically playing the Douglas North New Institutional imperfection card (now used very effectively by Acemoglu, Robinson and co-authors). Summarizing his work I said back then:
"Rodrik (1999b) suggested that five types of institutions, defined as behavioral rules that govern the interaction between economic agents, are relevant to explain successful development experiences: property rights, regulatory institutions, institutions for macroeconomic stabilization, institutions for social insurance, and institutions for conflict management."
The problem, as I noticed back then, was that the institutions he was pushing for (note that property rights are in the original Williamson consensus decalogue) were more harmful than good. They reduced the ability to promote state intervention in the economy and the scope for industrial policy, they were geared for macro stability narrowly focused on price stability (he probably wouldn't disagree with the idea of the natural rate in macro), and even when he was for social insurance policies, didn't seem to notice that his macro policies would make more social spending almost by definition impossible.

I should say that I find it very apropos that Kuttner compares him with Albert Hirschman, and calls the latter one of Rodrik's heroes, even if I think Rodrik is a different kind of trespasser, not interested in interdisciplinarity per se, but in using economics concepts for insights into other social sciences. More like a social science imperialist (for my take on Hirschman's interdisciplinarity go here). Hirschman was a development economists that was against planning, and that thought that there was something relevant about Hayek's Road to Serfdom (a book that says that any intervention by the state ends up in a slippery slope towards fascism*; the same argument Reagan made about Medicare in the 1960s). Hirschman had a serious debate with Currie on the issue of planning, regarding the latter's World Bank mission to Colombia, and was generally seen as friendly critic of the mainstream (see Roger Sandilands views, which are, correctly I would add, very critical of Hirschman). Like Rodrik, Hirschman got hired by Harvard, which is hardly known for hiring controversial lefties that go against the grain, which he only left to the Institute of Advanced Studies because he was a terrible teacher. Also, like with Hirschman's contributions, many heterodox and progressive intellectuals tend to overplay the critical aspects of Rodrik's work.

In my view, the problem with the friendly critic, that accepts all of the main tenets of mainstream marginalism, without taking seriously the heterodox critiques of the internal logic of neoclassical economics, is that they end up validating some of this illogical ideas, and the foundation for the neoliberal policies people like Rodrik supposedly abhor.

On a slightly different note, and I guess once we are in the topic of who should be considered heterodox and who is a follower of Hirschman, here is another question of labels. Dietrich Vollrath comes out of the closet as a MalthusianThat's a bit funny. I know neoclassical economists, in particular, after Clark's A Farewell to Alms, have come to embrace the epithet, but in all fairness, for a reasonably educated person Malthusian is sort of an insult (btw, on my views on some of the mistakes with the ideas of demographic transitions and Malthusian traps see this).

* On this, Jeremy Adelman tells us in his biography of Hirschman that: "when he found a copy of Friedrich von Hayek’s recently published (in London, in March 1944) The Road to Serfdom in a Rome bookstore, a nerve was struck. 'Reading this book is very useful for someone like me who grew up in a ‘collectivist’ climate—it makes you rethink many things and has shown me in how many important points I have moved away from the beliefs I had when I was 18 years old.'" Those would be his more progressive, Marxist, convictions. Hirschman had lived in Germany, not the Soviet Union, by the way.

4 comments:

  1. Two, for me, useful Rodrik outputs: trilemma, premature de--industrialization.

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    1. THe premature de-insdustrialization is in my view a huge mistake. Very much like that literature on Latin America by Palma. The US has not deindustrialized, and has not lost ground to China or any other country. Think of electric and self-driving cars, or almost anything. It's manufacturing employment that diminished, but the US is not deindustrializing in the sense of loosing it's industrial hegemony. As I noted years ago here http://nakedkeynesianism.blogspot.com/2011/05/manufacturing-jobs-have-declined.html

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    2. His political trilemma is a nice addition to the Impossible Trinity. Of course the original trinity has problems too, as I noted here http://nakedkeynesianism.blogspot.com/2016/08/the-impossible-trinity-revisited.html

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  2. He's totally an orthodox economist. Recently wrote:

    Meanwhile, economists rightly point out that trade is only weakly implicated in the major economic problems of the day — deindustrialization and income inequality. They are correct that the distributional consequences of trade are better addressed with safety net programs and nontrade remedies. But they have systematically downplayed these consequences — especially when the requisite compensatory programs have remained on paper. And they seem unable to grasp the valid core of the public’s concern about social dumping.

    http://foreignpolicy.com/2017/01/27/its-time-to-think-for-yourself-on-free-trade/

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