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 Malthusian. That'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.

Lauchlin Currie's review of Keynes' General Theory

Curried Keynesianism in action

 

The review with an intro can be read here (or here). Currie is often considered the first Keynesian in the Roosevelt administration (I suggested here that, while not a professional economist, that merit goes to Eccles), and was also the first to work in the White House, before the Employment Act and the creation of the Council of Economic Advisers (CEA). He was also later unjustly attacked as a Soviet spy, and Roger Sandilands has dealt with this here (subscription required). His biography of Currie is a must read.

Harry Dexter White, Lauchlin Currie and the Red Scare

In another post I pointed out one (and there are more) of the theoretical problems with Benn Steil's account of the Bretton Woods history. I would also emphasize that there are questionable historical assumptions too in his book. In particular, the book's description of both Harry Dexter White and Lauchlin Currie as Soviet spies is problematic. Steil basically accepts at face value Whitaker Chambers and Elizabeth Bentley's, two self-confesed Soviet agents, testimonies regarding White and Currie, and a certain interpretation about the revelations of the Venona Project after the fall of the Soviet Union (the original New York Times story here; subscription required).

I'm not going to get into the details, but on Currie, Roger Sandilands' paper (subscription required) is quite conclusive in my view suggesting that he did share information with Russians, but was in no way a spy. It is particularly important in this context what John Kenneth Galbraith expressed in a letter to Roger (in the paper cited, p. 99), namely:

"That he was a Soviet agent is, of course, untrue; what is true, is our failure to remember that the Russians in those days were our allies, and taking casualties beyond anything experienced by Americans. It was, in those days, official policy that we offer help, and the Russians could be certain, and rightly, of a warm reception as allies in Washington. As I say, this has now been forgotten; only those of us who were there remember our relief when they came into the War and the way they took casualties and suffering far beyond anything experienced ourselves."

On the White case the book to read is Bruce Craig's Treasonable Doubt that also suggests that the case against him is at best inconclusive, indicating that the information he shared with the Russian allies was not part of a espionage operation. This indicates that, while they passed information to Soviet agents, they did not intentionally betray the US national interests. As Julius Kobyakov, a Russian intelligence agent, suggested here: "Among the members of my profession there is a sacramental question: 'Does he know that he is our agent?' There is very strong indication that neither Currie nor White knew that."

On this very topic is worth noticing what Steil himself tells us about White regarding Bretton Woods negotiations. According to him: "White wanted to make the US dollar, and only the US dollar, synonymous with gold, which would give the US government a virtual free hand to set interest rates and other monetary conditions at will -- not just for the United States, but for the world." In other words, he put US interests above anything else in the Bretton Woods negotiations, something that would make the International Monetary Fund (IMF), an institution that owes more to White than Keynes, a tool of US interests and for creditor countries in general. If he was a Soviet spy then he had his priorities upside down, or was a terrible spy.

In more general terms, I would add, it seems that the line of attack on some New Dealers, like Currie and White, tainting them as Reds or fellow travelers, is not very different from the indictment of Keynes's ideas on the basis of his sexual orientation, recently brought to general attention in the Niall Ferguson case. One cannot trust the childless-gay-commie is the not so subtle message. If you cannot attack the ideas, go for the messengers' credibility, that's the right wing nut fringe strategy.

PS: Currie and White are only the tip of the iceberg. Svetlana Chervonnaya argues, convincingly, in a paper that Alger Hiss was not the Ales of the Venona documents, and that the case that he was a spy is also open. In the Rosenberg case, the Schneirs argue that while it is clear that Julius was a spy, a low level one that did not pass any relevant information on the bomb, it is also clear that she wasn't and that the US government knew it. If the US had given him the same treatment than other spies got, with similar offenses, he would have gotten a few years of jail time, and she should have not been accused at all. On the effects of this travesty of justice on the family it's worth watching the beautiful documentary by Ivy Meeropol Heir to an Execution.