Heterodox Economics

[PokrLikeItsProse]

There's been some activity in the lefty blogosphere discussing "Hip Heterodoxy", an article in The Nation by Christopher Hayes, describing academic economists whose research runs contrary to mainstream economic thought. The article paints a picture of heterodox economists whose work is based more on empirical data vs orthodox neoclassical economists whose work is more theoretical in nature. The comparison may or may not be valid, but it reminds me of some poker players arguing that their exploitative style of play is the best and that poker theoreticians don't really know what they are talking about.

One place where this article has been discussed is the TPMCafe Book Club, which lists "James Galbraith, Tyler Cowen, Max Sawicky, Nathan Newman, David Warsh, Diane Coyle, Thomas Palley, David Ruccio, Mark Thoma, and Paul Krugman" as noted individuals reacting to the article.

Does anybody have a reaction? Did anyone read this or hear of it before I linked to it here? If you are plugged in to the conservative/libertarian end of the blogosphere, has this article been discussed at all there?

[Propertarian]

Sadly, there is a strong tendency amongst human beings to visit websites and read articles that reinforce their own beliefs/study issues from their point of view, and the lack of replies this post has received is just a small piece of the evidence that this is true.

[Propertarian]

Personally, I think lumping all non-neoclassicists into a group known as "heterodox" obscures more than it reveals, and far from all of those who have been called heterodox are more empirical and less theoretical.

[Propertarian]

Finally, I don't think using the premise of human beings as self-interested utility maximizers to come to conclusions is necessarily right wing or dooms one to right wing conclusions; anybody who thinks it does hasn't been unfortunately have missed a lot of the more interesting work being done in economics departments recently.

[clowntable]

The article didn't really say much. Just some whining about a marketing problem.
The one thing I would agree with though is that those Fridmanian economists are a pretty arogant bunch at times (warning: overgeneralization and low sample size)

[ianlippert]

[ QUOTE ]
Card, a highly esteemed economist at the University of California, Berkeley, caught flak for his heresy not on trade but on the minimum wage. In 1994 he conducted a study to see whether an increase in the minimum wage in New Jersey had the negative effect on employment that basic neoclassical theory would predict. He found it didn't.

[/ QUOTE ]

Hasnt this study been shown several times to be poorly done? Didnt they just phone up some companies and ask them how the minimum wage was going to affect the businesses highering practices? When the pro minimum wage camp constantly points to this one single study to prove their point, I get very skeptical of their position.

[ianlippert]

[ QUOTE ]
The empirical work that Gowdy and other heterodox economists tend to cite most is that of behavioral economists, those who study how humans actually reason about economic decisions, calculate risk and respond to incentives. What they routinely find is that the rational utility maximizer of the neoclassical model is a convenient fiction.

[/ QUOTE ]

I really dont understand where people get this charazterization that classical economists believe that humans are fully rational. The idea is that people act rationally but may have irrational beliefs, which leads to a perception of irrational action. So someone may have the irrational belief that they hate walmart but shopping at a local shop where prices are twice as high isnt irrational if you understand their belief.

I think these Heterodox economists (whatever that means, might as well say socialist it seems) simply dont understand what utility means. Utility is not neccessarily a monetary measurement. To say that people dont maximize their utility is to basically claim that people are inherantly schizophrenic. I hate icecream but im going to spend all my money on it. Outside of extremely rare cases, I dont think this ever happens. The vast majority of human action is people maximizing their utility.

I also lold at the idea of right and leftist economists all in the same room trying to justify their particular government programs. Must have been very entertaining.

[PokrLikeItsProse]

[ QUOTE ]
The vast majority of human action is people maximizing their utility.


[/ QUOTE ]

This is where I disagree. I think that the vast majority of human action take a satisficing approach to increasing their utility while at the same time acting to decrease the gap between themselves and people with higher utility and increase the gap between themselves and people with lower utility. That is, once a basic threshold is reached, people care less about absolute utility and care more about relative utilty.

For example, I think that Americans are not attracted to policies that maximize GDP, but to policies that maximize GDP subject to constraints on the Gini coefficient, even if they fall well short of maximum GDP on an absolute scale without those constraints. Not that most Americans can put their thoughts into those terms, but that is what they want.

[tomdemaine]

[ QUOTE ]
acting to decrease the gap between themselves and people with higher utility and increase the gap between themselves and people with lower utility.

[/ QUOTE ]

Surely this is best achieved through maximizing their utility? Also any study or theory with interpersonal utility comparisons is bogus. You can't measure utility across people though any means other than self reporting with is obviously fraudulent and bogus.

[clowntable]

lol, cardinal scales.