Table 1.1 Theoretical orientations of each chapter
Tae-Hee Jo, Lynne Chester, and Carlo D’Ippoliti
The Routledge Handbook of Heterodox Economics is a collection of essays written by authors representing a wide range of theoretical traditions within heterodox economics. It is a project that encapsulates past and current developments in heterodox economics for the purpose of ‘analyzing, theorizing, and transforming capitalism.’
This has been an ambitious project. It is ambitious in terms of its multiple, challenging objectives that differentiate the present volume from other publications. The Handbook aims, first, to provide realistic and coherent theoretical frameworks—as an alternative to that provided by the mainstream (orthodox) perspective that dominates the teaching of economics and has informed many contemporary policies—to understand the capitalist economy in a constructive and forward-looking manner; second, to delineate the future directions, as well as the current state, of heterodox economics; third, to provide both ‘heat and light’ on persistent and controversial issues, drawing out the commonalities and differences between heterodox economic approaches; fourth, to envision transformative economic and social policies for the majority, not an elite group of the population; and, fifth, to explain why economics is, and should be treated as, a social science.
These objectives, and particularly the third, bears on the distinctive nature of this Handbook. All the chapters engage with more than one theoretical tradition in heterodox economics (see Table 1.1). This demonstrates the engagement of many heterodox economists with methodological pluralism compared to the monist methodology of mainstream economics. We, the three editors, consider that it is important to acknowledge and discuss the contributions that alternative theoretical frameworks can contribute to explaining the nature, dimensions, and dynamics of social reality. The Handbook is thus different from other handbooks and what may be considered companion volumes which explore a single heterodox school of economic thought. The Handbook’ s engagement across different heterodox theoretical perspectives does not mean the uncritical acceptance of any or all approaches. On the contrary, the contributions throughout this Handbook provide constructive critiques of heterodox approaches. This contributes, in our view, to the ongoing development of different heterodox traditions and their applications.
Table 1.1 Theoretical orientations of each chapter
It is contestable whether it is possible (or desirable) to synthesize different heterodox economic traditions. It is possible to discern similarities and compatibility between heterodox traditions; likewise, there are differences and incompatibilities. Some heterodox economists have argued that synthesis, in varying degrees, is both possible and desirable (perhaps most strongly by Lee 2009: 200–202). The activities of heterodox associations and networks—such as the International Confederation of Associations for Pluralism in Economics (ICAPE), the Association for Heterodox Economics (AHE), the Society of Heterodox Economists (SHE), and the Heterodox Economics Newsletter —tacitly, if not overtly, promote pluralism and, on occasion, have explicitly supported a synthesis of heterodox approaches.1 Others are more pessimistic about such prospects. For example, John King (2016: 10) notes that “[t]he difference within the various schools of heterodox economics—let alone between them—seem to me to be so substantial that any such intellectual Popular Front would prove to be a very unstable affair.” The difference between these two positions lies in the emphasis on the degree of similarity or difference between heterodox approaches—“a glass half-empty of coherence vs. a glass half-full of coherence” (Lee 2009: 202). We do not advocate one or the other position although we do hope that this project may contribute to the endeavors of heterodox scholars to develop more coherent and comprehensive narratives of capitalism than can be illuminated from a single perspective.
The Handbook also has the following distinctive features. First, contributions are from a mix of established and emerging heterodox economists with an emphasis on the latter. A reviewer of our Handbook proposal remarked that “the major weakness of the book is the lack of well-known authors.” We, however, think that this is a particular strength and unique feature of the Handbook. Fresh ideas and bold arguments are more often than not put forward by emerging scholars while established ones offer a somewhat more ‘predictable’ analysis given the period of time necessary to establish their careers and reputations. The evolution and development of the traditions within the heterodox economics community lie largely in, we believe, the work of emerging heterodox scholars. We hope that this Handbook provokes new directions for heterodox economics, which break from conventional understandings and practices of heterodoxy.
Another notable feature of the Handbook is that contributions are from scholars located in 16 different countries (see Table 1.2) and representing Marxian-radical political economics, Post Keynesian-Sraffian economics, institutionalist-evolutionary economics, feminist economics, social economics, Régulation theory, the Social Structure of Accumulation approach, ecological economics, and combinations of these traditions. This geographical and theoretical diversity portends well for the future of heterodoxy. Moreover, of the 44 contributors, nearly one-third are from women. This may not seem impressive and our aim was 50 percent of authors.2 This gender imbalance is very indicative of the economics discipline generally, mainstream or heterodox. It also establishes a yardstick upon which future editions of the Handbook may seek to improve.
While these are ambitious objectives and unique features, the Handbook does not strive to cover all aspects of heterodox economics. Rather than a definitive volume (we doubt that such a volume(s) is possible), the Handbook explores the theoretical and policy domains of heterodox economics. Methodology, research methods, and the philosophy of heterodox economics do not form the focus of this Handbook, although these aspects are touched upon in the following sections of this Introduction as well as in some chapters (especially Chapter 39), if relevant to the discussion of a particular issue. This is not because those areas are less important than theory and policy, but because there are already significant publications which focus almost exclusively on these areas.3 Moreover, many chapters in this volume attest explicitly or implicitly that heterodox economic theories and policies are firmly based on shared ontological foundations—for example, layered and structured reality, open systems of analysis, fundamental uncertainty, evolutionary-historical processes, and social relationships—that require multiple or mixed methods depending upon the research question at hand.
Table 1.2 The number of contributors by country
| Country | Number |
| Argentina | 2 |
| Australia | 4 |
| Austria | 1 |
| Canada | 3 |
| France | 2 |
| Germany | 4 |
| Greece | 1 |
| India | 1 |
| Italy | |
| Kenya | 1 |
| Mexico | 1 |
| Norway | |
| Portugal | 1 |
| Turkey | 1 |
| United Kingdom | 9 |
| United States | 8 |
| 16 countries | 44 contributors |
Note: Contributors are sorted into countries in which they are currently located.
With regard to theory and policy to which the Handbook explicitly speaks, there are some omissions. For example, while there is a chapter on the banking system in the context of developing countries, there is not a chapter discussing the banking system in developed countries. The latter could have discussed the roles played by banks in the context of instability, crisis, and accumulation. A chapter on the capitalist state may have been included as well. Shedding light on the roles of the state vis-à-vis other institutions and organizations is a sine qua non of most heterodox traditions. Rather than a separate chapter on the state, this issue is discussed within multiple chapters across three parts of the Handbook— ‘Society and its institutions,’ ‘Rethinking the role of the state,’ and ‘Social welfare and social control.’ Apart from these two examples, readers might also consider there are other omissions which could form a goal for future editions.
A last distinctive feature of the Handbook is that it is not a diatribe criticizing mainstream economics. There is no doubt that criticism is an essential part of developing alternative perspectives. Past heterodox critiques of mainstream methodology, theory, and policy have led to significant progress in many traditions of heterodox economics. For this project, however, we asked contributors to focus their effort and space on discussing the capacity of more than one heterodox perspective to elucidate a topic, while limiting the critique of mainstream economics. Contributions to this volume are, therefore, not framed within mainstream logic, concepts, and frameworks—for example, the law of supply and demand or individual-rational-optimizing behavior. It is our intent to demonstrate the strengths of heterodox analysis and that the development of heterodox economic traditions can be independent of mainstream economics. Heterodox economics is not about complementing the mainstream or only standing in opposition. Moreover, while we support pluralism, theoretical eclecticism between heterodoxy and orthodoxy is not promoted in this Handbook. That is the subject of an existing discourse about the possible integration of heterodox approaches into many approaches within the monist methodology of mainstream economics— such as, experimental economics, behavioral economics, and evolutionary game theory (see, for example, Lee & Lavoie 2012).
What is heterodox economics? The answer to this question has been the subject of a longstanding debate by heterodox economists although no consensus has been reached. An attempt to answer this important question is necessary to the extent that this Handbook is of and for heterodox economics. In this section, we delineate a multi-layered meaning of heterodox economics, which underlies the heterodox economics community in recent decades around the world.
Heterodox economics is not a single unified school of thought. It is an umbrella term referring to various schools of economic thought distinguished from mainstream economics in terms of theory, methodology, policy prescriptions, and community. This internal diversity at multiple levels is a major reason why a definition is difficult. If heterodox economics is to be defined, therefore, a broad (or minimalist) definition encapsulating core characteristics common to multiple heterodox schools of economic thought would only be suitable. As we set out in the previous section, this is the position adopted by the Handbook and requires some elaboration in order to understand the past development and current state of heterodox economics.
First of all, the label matters since naming is a social process of identifying and, thus, positioning a particular paradigm vis-à-vis other paradigms in economics. Different labels designating a dissident paradigm in economics have been deployed—for example, heterodox, non-mainstream, non-orthodox, unconventional, post-classical, progressive, and alternative. ‘Heterodox’ economics is most widely used in academia these days, although this is not necessarily the best term for various reasons. Notably, some scholars eschew this label because of its negative connotation. In fact, the etymology of ‘heterodox’ is twofold: ‘another opinion, holding opinions other than the right’ and ‘of another or different opinion.’ In the sense of the former, heterodox economics is conventionally perceived as being in opposition to the dominant position that is orthodox (in the intellectual sense) or mainstream economics (in the sociological sense). In other words, heterodox economics can be defined in terms of what it rejects, often implying erroneously that it does not have its own body of theory and policy. If this is what heterodox economics means, as Robert Prasch (2013: 20) points out, “[a]n unfortunate, if unintended consequence, is that it reaffirms the centrality of Neoclassical Economics.” Consequently, defining and practicing heterodox economics as in opposition can lead to a self-defeating outcome.4
Insofar as the development of heterodox economics is concerned, the oppositional definition is more harmful than fruitful (this is, of course, not to suggest that the opposition to or criticism of mainstream economics is unnecessary or unimportant). There is no doubt that heterodox economists have developed their own theories and policies that are inextricably connected to the evolution of the capitalist economic system. That is, heterodox economics has and continues to develop with the evolution of the economic system as part of society; and the complexity and uncertain nature of this socio-historical evolution necessitates more than one economic perspective. As early as the 1930s, for example, institutionalists recognized their research program as ‘heterodox’ economics, which refers to “the study of economic institutions as an alternative substitute for the study of rational choice” (Ayres 1936: 234). Consider too the following statements: social economics is “a discipline studying the reciprocal relationship between economic science on the one hand and social philosophy, ethics and human dignity on the other” (Lutz 2009: 516); and “[f]eminist political economy is a counter-disciplinary approach to understanding the way in which GENDER has been culturally constructed and intertwined with the processes of CLASS formation, race and other forms of social identity to support women’s disadvantaged social position” (Olson 1999: 327, original emphasis). In these respects, institutional, social, and feminist economics provide constructive research programs offering novel insights that are independent of—and not framed by—mainstream economics. P.A. O’Hara observes that the collective contribution of these insights provides a more comprehensive alternative to mainstream economics:
[t]he main thing that social economists bring to the study [of heterodox economics] is an emphasis on ethics, morals and justice situated in an institutional setting. Institutionalists bring a pragmatic approach with a series of concepts of change and normative theory of progress, along with a commitment to policy. Marxists bring a set of theories of class and the economic surplus. Feminists bring a holistic account of the ongoing relationships between gender, class, and ethnicity in a context of difference. . . . And post-Keynesians contribute through an analysis of institutions set in real time, with the emphasis on effective demand, uncertainty and a monetary theory of production linked closely with policy recommendations.
O’Hara 2002: 611
The existence of (and complementarity between) multiple heterodox traditions signals that heterodox economics exists independently of that to which it is opposed. Thus, a more positive definition of heterodox economics is (as the second etymology noted above indicates) that it is a body of economic theory and policy developed and practiced independently of mainstream economics.
Obviously, there are differences between the analytical concerns of different heterodox traditions. Such analytical differences, however, do not overshadow methodological commonalities; otherwise theoretical engagement and convergence are unlikely between different theoretical traditions. Lee (2012) observes theoretical engagement, during the first half of the twentieth century, between American institutionalists and Keynesians and Marxians, and subsequently between the latter and Post Keynesians. Engagement, integration, and synthesis across heterodox schools continued during the latter part of the twentieth century and into the new millennium. O’Hara (2007: 3) sets out in detail evidence of convergence between heterodox scholars vis-à-vis the principles of inquiry given the emphasis placed on “realism, holism, circular and/ or cumulative causation, institutions, and the role of values and social factors in economic life” by those who may be categorized as applying an institutional-evolutionary political economy approach. There is also historical evidence that the development of heterodox economics (and each tradition therein) has been fostered through professional organizations and social networks (see Lee 2009: 189–206). In other words, the development of heterodox economics is dependent to some extent upon the organization and continuation of the community of heterodox economists.
This combination of professional and theoretical engagement has two important implications for heterodox economics. The first is that the community is distinct from the community of mainstream economists; and the second is that it generates the central value that underpins the community of heterodox economists: that is the value of pluralism—the right of different theoretical approaches to exist without qualification—and its corollary that engagement with the different approaches is a positive social value.
Lee 2009: 202
Such an intellectual community (associations, journals, conferences, etc.), according to Lee (2011: 547), is built upon (and requires) the principle of ‘intellectual or scientific pluralism’—that is, “tolerance for different theories, professional practices, and the existence of contested scientific inquiry”—which promotes theoretical engagements among members within the community.5 From this community with pluralism view, we can derive a twofold sociological definition of heterodox economics: it is a community of heterodox economists that supports alternative theoretical frameworks and a movement aiming at developing theories and policies by means of developing an intellectual community or social network (Lee 2009: 1–20).
One essential aspect of heterodox economics is, however, not included in the above theoretical and sociological definitions—that is, philosophy and methodology. Lawson (2006: 485) contends that heterodox economics is “a rejection of a very specific form of methodological reductionism [that is, mathematical deductive modeling].”6 The significance of this argument lies in its potential for constructively re-orienting and redefining heterodox economics:
the various heterodox traditions can be identified as heterodox through a recognition of a fact that they advance claims or practices or orientations which are either concrete manifestations of, or presupposes for their legitimacy, a social ontology of the (seemingly coherent) sort set out above [that is, openness, process, and internal-relationship]. In short, the set of projects currently collected together and systematized as heterodox economics is, in the first instance, an orientation in ontology.
Lawson 2006: 498, original emphasis
Lawson’s ontological definition of heterodox economics is important because it illuminates the preconceptions and premises of economics to which mainstream economics pays no attention. However, a definition of heterodoxy could be extended to include the subject matter of heterodox perspective.
As noted earlier, it has been our objective for this Handbook to demonstrate actual and potential engagement among different traditions within heterodox economics. This engagement is possible, theoretically, methodologically, and through a general research agenda across heterodox traditions. As opposed to the mainstream’s preoccupation with the optimal allocation of scarce resources arising from the purported rational choices of individuals, the concerns of heterodox economics can be broadly identified as focusing on a wide range of economic and social activities in a socio-historical context, including both market and non-market, paid and unpaid activities, undertaken by human beings and going concerns to ensure their survival and reproduction. This broadly defined heterodox research agenda is akin to the term ‘social provisioning’— more commonly found in the lexicon of North American institutionalists than inherent to the wider heterodox community. Allan Gruchy (1987: 21) defines economics as the science of social provisioning, “the study of the ongoing economic process which provides the flow of goods and services required by society to meet the needs of those who participate in its activities” to which we may add Peterson’s (1995: 570) more structural definition of social provisioning as being “how societies organize themselves to secure the material goods and services necessary to maintain and reproduce themselves.” With this general subject matter, therefore, a definition of heterodox economics can also include the study of the social provisioning process which also reclaims the original meaning of ‘political economy’ or economics as a social science (Gruchy 1987: 21; Lee 2009: 8).
In sum, the contemporary meaning of heterodox economics can be delineated as multilayered and multi-faceted. It has evolved from an initial quite strong predilection to concentrate around critiquing mainstream economics to a stage of developing its own coherent and logical theories and policies. Contributions throughout this volume are demonstrable evidence of this shift within heterodox economics.
It is beyond the scope of this introductory chapter to detail the intellectual and historical origins of all schools and approaches that comprise contemporary heterodox economics.7 Instead, a brief overview of the origins and developments of heterodox economics is presented in order to situate this project.
Marxian economics, institutional-evolutionary economics, and other heterodox approaches rediscovering classical political economy took different paths in different contexts in the second half of the twentieth century. New approaches such as ecological and feminist economics emerged in the same period. While most heterodox schools implicitly or explicitly trace their intellectual lineage significantly earlier in time, to classical political economy (that is including, from a history of thought perspective, Marx among the classics),8 we limit ourselves here to the mid and late twentieth century, when most heterodox traditions developed as self-evident communities of scholars.
As already stated, it has been an explicit objective for the chapters of this Handbook to integrate more than one theoretical perspective. Arguably, an integrative and pluralist approach is a constitutive method and a defining feature of heterodox economics, even though some heterodox economists are not necessarily open to other heterodox methods and approaches and/or do not endorse, practice, and promote pluralism (Lee 2009). Allowing for a certain idiosyncrasy in the collection of contributors to the Handbook and personal preferences, certain regularities emerge. Thus, as shown in the Table 1.1, in Europe the Sraffian school was historically associated with Post Keynesianism, whereas in the US Post Keynesians have developed stronger links with institutionalists; feminist economics and social economics often inform each other; and radical political economics has stronger links with the Régulation and the Social Structure of Accumulation approaches than other schools.
These links descend partially from the personal work of the founding figures of the respective schools (see, for example, Roncaglia 2005). Thus, institutionalism was historically dominant in the late nineteenth and early twentieth century in the US, where it became intertwined with a strong interest in evolutionary theory after key contributions especially by Veblen. Similarly, Cambridge in the United Kingdom provided the location for intellectual and personal connections between Keynes, Sraffa, and the ‘Cambridge Circus,’ after which Post Keynesianism developed in parallel with the Sraffian school. The interests of the leading figures of the ‘Anglo-Italian school’ led their followers to specialize in pure theory and/or history of economic thought, whereas in France Michel Aglietta and Robert Boyer, in particular, inspired a more historically informed analysis, closer in theory to Marxian economics and in method to institutionalism.
From these (and other) founding figures to the current development of heterodox economics, the path has been complex. As is well known, the rise of the marginalist approach was immediately met with opposition from, for example, exponents of the German historical school, institutionalists in the US and elsewhere, and from several points of view even by dissenters within the marginalist approach, such as Carl Menger. However, in most Western countries the marginalist approach reached prominence, if not dominance, until well after the First World War.
The Great Depression was a primary motivator of the work of Keynes and his followers, even though we would not advocate the search for mechanistic links between economic history and economic theory. On the one hand, for example, Sraffa commenced his critique of the Marshallian theory of the firm (and of market forms) before the Great Depression, and Keynes himself had published his main ideas on the crucial relevance of uncertainty (as opposed to calculable risk) in 1919. On the other hand, right after its publication the General Theory was interpreted and translated in the language of marginalism by Hicks and Modigliani, and thus subsumed into the mainstream. Thus, though being dominant, marginalism was never the only analytical perspective, and at the same time ‘bastard Keynesianism’ originated more or less contemporaneously with Post Keynesianism.
In these two forms, Keynesianism may be seen to dominate the economic policy debate during the Second World War, for the unavoidable necessity to finance war expenditure. Relevant exceptions are the countries that did not significantly take part in the war (such as several countries in the global South), and those that adopted a communist regime, where an extension of classical political economy with a Marxian strand could be discussed.
After the war, national experiences diverged again, and the claim (ascribed to Samuelson) that economists were “all Keynesians now” was surely exaggerated. Indeed, Continental Europe, at least in Germany, Italy, and Austria (and partly France and other Nazi-occupied countries), shares the experience of reconstruction of a ‘democratic’ academia after the pervasive political control of the previous dictatorships. In these countries, ordoliberal and even neoliberal economists gained prominence during the 1950s and 1960s (Pasinetti & Roncaglia 2006; Heise et al. 2017) within the universities, but also in the highest institutions, for example, with the appointment of Luigi Einaudi as President of the Italian Republic and Ludwig Erhard as Chancellor of the Federal Republic of Germany. Consequently, active predominant government involvement in the economy was perceived as a relic of authoritarianism, and liberalism was synonymized with civil and political liberty.
Thus, in Continental Europe mainstream economics was strongest during implementation of the Marshall Plan, and possibly least (though still in a majority position) during the stagflation of the late 1970s and 1980s. Thereafter mainstream economics reached its peak, whereas heterodox economics declined in the 1990s and 2000s (more on this below). Therefore, it is incorrect to associate the rise of monetarism and the ‘new classical’ reaction to new Keynesianism with a conservative turn in academic economics during and after the Thatcher–Reagan era.9 Rather, the 1970s marked the beginning of a growing polarization in academic economics, at least in the US and Europe.
Both internal and external factors contributed to the growth of heterodox schools after the 1970s. Among the internal factors, there was the gradual return to their homeland (or the consolidation of their status in the host country) of several scholars who had fled autocratic regimes in Italy, Germany, Austria, and other countries. Often these scholars had studied in British and American universities where they met notable heterodox colleagues (often fellow compatriots who shared the same experience) such as Kalecki, Sraffa, Kaldor, Joan Robinson, and Richard Kahn, or eclectic and peculiar scholars such as John Hicks or Joseph Schumpeter. This migration flow before and during the Second World War facilitated further exchanges thereafter, on the basis of newly established funding grants and fellowships (Kregel 1988). Upon returning to their home country, the international networks and prestige of some of these scholars enabled them to communicate and compete with leading mainstream economists, mostly US trained, on a level playing field.10
With respect to the external factors contributing to the growth of heterodox economics in Europe in particular, mention should be made of the rapid growth of the higher education (university) system during the 1970s and 1980s, which created a steady demand for academic economists that in some national contexts opened new job opportunities for both less than outstanding mainstream economists and discriminated against heterodox economists (Heise et al. 2017).
These factors made significant growth possible, which allowed for the emergence and/or consolidation of new schools and paradigms of economics. Thus, in several countries, Marxism, which had mostly been expunged or almost never found its way into the ‘legitimate’ domain of mainstream economics, survived and developed in cognate disciplines such as history, geography, and sociology. Especially from the 1970s, interdisciplinary efforts brought about a reintroduction of Marxian political economy within academia. Around the same time, feminist studies increasingly found their applications within economics, often in the context of Marxian political economy. However, from the late 1980s a new consolidation of mainstream economics reduced this growth, or even compressed the space for heterodox economics. In response, heterodox economists established new associations and organizations during the 1980s and 1990s.
As Lee (2009: 59–65) recalls, initial debates were fierce even within heterodox associations, with tensions regarding, for instance, the membership of institutionalists within the Union for Radical Political Economics or Sraffians and Post Keynesians within the Conference of Socialist Economists. However, almost all heterodox economics associations now openly acknowledge economic pluralism as important to the teaching of economics and to the richness of the explanations provided by multiple perspectives. Indeed, the historical roots and developments briefly described here do not imply a predetermined future of heterodox economics. Rather, what is implied is that promising research programs are based largely on drawing from and connecting previously unrelated approaches or schools. This attitude and practice, arguably, develops in parallel to the growth of institutions and instruments that facilitate communication and exchange between communities and schools (and, as noted earlier, this has been an objective of this Handbook).
Economic pluralism offers the prospect of significantly improving our understanding of the economy and the possibilities to improve its functioning and outcomes. However, we do not envisage the future for heterodox economics through ‘rose-colored glasses.’ The pushback against heterodox economics that started in the 1980s has not slowed since the 2007–8 ‘great crisis’ or the ensuing stagnation/depression. Rather, across the world and perhaps most noticeably in Europe, several consecutive years of austerity policies have placed significant pressures on publicly funded universities, and heterodox economists appear to suffer disproportionately from the shrinking of funding, resources, and academic positions (see, for example, AFEP 2009; Corsi et al. 2011; Heise et al. 2017). In a growing number of countries, the reduction of public resources is concealed under the ‘banners’ of efficiency and merit, with journal and university rankings simulating a supposedly competitive research market, and various citation metrics providing the semblance of neutrality and objectivity to the hiring and promotion processes of academics and the financing of research centers (Lee 2007).
Heterodox economists are responding to these challenges in several ways which may be termed the ‘loyalty option,’ the ‘voice option,’ and the ‘exit option.’ Concerning the ‘loyalty’ option, an increasing number of pluralist and heterodox journals are being added to the databases on which rankings are based (mainly, Scopus® by Elsevier, and Web of Science™ by Clarivate Analytics), thereby increasing the number of citations that other heterodox journals receive. Some scholars have proposed ways to navigate the system by modifying individual or collective behavior, including changes to scientific practices concerning publication and citation habits (Dobusch & Kapeller 2012).
There are also attempts at shaping a ‘voice’ option. Objections to the systematic undervaluation of heterodox economics within national research evaluation systems have occurred in Australia, France, Italy, and the UK, while in other countries, such as the Netherlands, the existing system has been perceived as less biased. Alternative metrics or rankings have been proposed by Lee & Cronin (2010) and Corsi et al. (2011), and several heterodox associations continue to lobby for modifications and amendments to official national rankings.
Concerning the ‘exit’ option, in some countries there are attempts to lower the reliance on public financing of research and higher education by trying to attract private funds: either from local governments and student fees, as for example the newly funded Cusanus Hochschule in Germany, or from private foundations and social actors, such as the Greenwich Political Economy Research Centre in the UK.
Not all these activities are mutually exclusive; for example, some heterodox economists try to adapt in practice to new systems while also critiquing these systems; others increasingly seek private funding sources while also trying to maintain a good rating within the public system.11 However, there has been no coordination, let alone discussion, among heterodox economists about a collective strategy to cope with that environment that is evolving in new hostile ways. There are crucial political as well as ethical issues concerning possible strategies under the ‘loyalty’ option. Authors, reviewers, editors, and organizations can strategically change their behavior, and the widespread scientific malpractice aimed at tilting the bibliometric game is probably growing within the heterodox community too, without a debate of these issues yet.
Conversely, the success of various tactics under the ‘voice’ and ‘exit’ options depends on external support for criticisms and protests against the current system and its bias in favor of the mainstream.12 It falls on heterodox economists to both demonstrate their social usefulness and to help establish the conditions for it to be fully realized.
This Handbook is structured in six parts. Part I (Chapter 1) provides a general introductory overview of the definition of heterodox economics, its origins, history, philosophy, methodology, and current state. This introductory chapter also explains the aims and objectives of the Handbook.
Part II presents the core or fundamental theoretical frameworks that are shared by various traditions within heterodox economics—that is, Marxian-radical political economics, Post Keynesian-Sraffian economics, institutionalist-evolutionary economics, feminist economics, social economics, Régulation theory, the Social Structure of Accumulation approach, ecological economics, and combinations of these traditions. The chapters in Part II deal with ‘fundamental’ concepts in the sense that they are elements on which heterodox economic theories are based. The purpose of Part II is to distinguish the most distinctive, fundamental theoretical frameworks shared by heterodox economics traditions. Chapters in Part II not only encapsulate the historical development of theories (from classical political economy to present-day heterodox economic theories) but also demonstrate the relevance of these theories to advancing explanations of the workings and persistent problems of contemporary capitalism. Part II as a whole demonstrates that heterodox economics, through particular traditions or through integrated approaches, provides logically coherent alternatives to mainstream economics (including neoclassical economics); and the traditions of heterodox economics provide historically and socially grounded explanations of capitalism.
The opening chapter in Part II (Chapter 2) deals with the conceptualization of the social provisioning process. As discussed above, the study of the social provisioning process is one way to define (heterodox) economics. Tae-Hee Jo and Zdravka Todorova examine how the meaning of the economy and of economics changed from classical political economy to neoclassical economics; this comparison illustrates the latter’s asocial and ahistorical view of the economy and of economics. The authors demonstrate that a broader definition of heterodox economics permits different theoretical explanations of the ways in which the social provisioning process can take place in different types of economies in different historical contexts.
The emphasis on the historicity of economic theories—that is, the evolutionary nature of economics—is examined in the following two chapters. In Chapter 3, Nuno Ornelas Martins investigates the concept of the social surplus and the historical origins of the social surplus approach. He shows that in classical political economy the concept of a social surplus was inextricably linked to the study of a circular process of production and distribution. When this approach was resurrected with the emergence of the Cambridge Keynesian tradition and the revival of Marx’s original interpretation of classical political economy, the development of various heterodox traditions has tended to highlight differences between competing perspectives, rather than their common origins from the social surplus approach. However, according to Martins, consensus about the basic elements of a social surplus approach may constitute a promising route for the development of heterodox economics.
In the following chapter (Chapter 4), Agnès Labrousse and Sandrine Michel discuss the way in which the social surplus is distributed and, crucially, used—that is, accumulation regimes. Historical observation shows that accumulation—the process of adding productive capital to the previously invested amount of capital—undergoes long periods of stability, followed by periods of instability and crisis. Thus, especially Régulation theory and the Social Structure of Accumulation approach set out to study the dynamics of production, consumption and the distribution of income through institutional frameworks specific in time and location and which underpin macroeconomic regularities. In this way, Labrousse and Michel demonstrate that the evolutionary nature of the economy implies that economics should not assume a canonical accumulation regime but rather be concerned with a much broader variety of regimes.
The view of capitalism as a circular, surplus-oriented, sequence of interconnected monetary acts of production, distribution, and trade is further discussed in Chapter 5. Marco Veronese Passarella surveys the Post Keynesian, neochartalist, circuitist, and other heterodox monetary theories that focus on the process of creation, circulation, and destruction of monetary means in a world marked by class divide and social conflict.
In most heterodox traditions, monetary relations and the distributional conflict between social classes are intimately linked to the concept of effective demand, which is discussed in Chapter 6. In this chapter, Eckhard Hein surveys different strands of Post Keynesian economics (fundamentalists, Kaleckians, Sraffians, Kaldorians, institutionalists) and some strands of Neo-Marxian economics (the approaches focused on monopoly capitalism and under-consumption), showing how the principle of effective demand, and the claim of its validity for a monetary production economy, both in the short- and in the long-run, is at the core of heterodox macroeconomics. Thus, in the treatment of the basic pillars of heterodox economics, what the mainstream calls ‘macroeconomic’ concepts are often logically antecedent to ‘microeconomic’ ones. The rejection of the ‘microfoundations of macroeconomics’—typical of mainstream economics—is analyzed from a logical and methodological perspective by Claudius Gräbner and Jakob Kapeller in the final chapter of Part II, Chapter 10.
Part II contains three other interrelated chapters. Ajit Sinha’s Chapter 7 highlights the key differences between the classical and the marginalist (neoclassical and Austrian) approaches to the theory of value. Sinha stresses the distinction between the circular approach of classical political economy, built upon an objective approach to the theory of value, and the linear (subjective) approach of marginalism to value theory. Chapter 8, by Carlo D’Ippoliti, further investigates the different origins of these two approaches by tracing them back to the ‘pre-analytical vision’ of the functioning of the economy. While values and prices play completely different analytical roles in the two approaches (that is, an allocative and informative role versus a distributive one), theories of price formation hold analytical centrality in all economic paradigms, both heterodox and mainstream. For this reason, some economists refer to price theories as a demarcation line of what legitimately constitutes heterodox economics. Nevertheless, as D’Ippoliti suggests, there are still a number of contestable issues that should be analyzed.
Several heterodox traditions adopt pricing and income distribution models of simultaneous determination. However, as Scott Carter highlights in Chapter 9, this usually refers implicitly only to functional income distribution. Indeed, while personal income distribution is often studied by mainstream economists, heterodox economists more commonly focus on functional income distribution. However, as also argued by Corsi and Guarini in Chapter 21, it would be a mistake for heterodox economists to disregard the distribution of personal or household incomes. In sharing this view, Carter further surveys the main approaches that alternatively focus on wages or profits as ‘system closures’ and how these approaches have often collided within heterodox economics. Nevertheless, as exemplified by Sraffa, it is possible to develop formal models that encompass both possibilities, a fact that induces Carter’s optimism for the future.
The capitalist economy is a historically specific system of provisioning. Its specificity is characterized by the relationship between agents, structures, and institutions. One manifestation of such a relationship is the production and distribution of the surplus, denominated in value terms, on which the capitalist economy is based. Heterodox economists hold that a theoretical discourse should be put into the socio-historical context so that a theory is fully understood and is modified as the changes in the system transpire. With this rationale Part III scrutinizes the central constituents of the capitalist economy with a focus on the roles played by those constituents in a larger social context.
The opening chapter of Part III (Chapter 11) is John F. Henry’s ‘Society and its institutions.’ Following a brief statement as to why mainstream economics cannot undertake an examination of institutions as social constructs and accompanying ideology, this chapter explores the nature of institutions, highlights contributions to the analysis of institutions developed in several heterodox traditions, and critically evaluates weaknesses in these contributions, and proposes an approach that conjoins the various heterodox camps into a single effort that leads to a better understanding of such structures and the underlying ideology that supports these arrangements. The point of departure is Thorstein Veblen’s (1909: 626) definition of ‘institutions’ as “the settled habits of thought common to the generality of man.” It is at once noted that Veblen’s position entails an ideological component. But, for ideological appeals to have traction, they must speak to some underlying structure. Hence, a proper heterodox approach to institutions must examine both structure and the supporting ideological overlay as conjoined features of such organizations or arrangements. In this examination, several prominent institutional forms, such as the state, money, and the household, are used as examples to demonstrate how institutionalists, social economists, Marxians, feminists, and Post Keynesians address the main issues surrounding this theme. Incorporated into this examination is a critical evaluation of the term ‘society.’ Too often society is employed in a casual, non-critical fashion as if there were a homogeneous, holistic unit within which all members of a specific social order are organized in a unified fashion. Henry contests such a line of argument. Henry also argues that the most prominent social institutions are, rather, anti-social in their organization and ideological support. To better understand the nature of institutions, then, requires an understanding of the make-up of the social order itself. This further requires an examination of the fundamental social relationships that constitute the core or foundation of the social order, thus, in the final analysis determining (or conditioning) the institutional fabric of that order. As a conclusion of this chapter, Henry proposes that heterodox economists should develop an analysis of institutions that draws on the strengths of the various heterodox approaches and, concurrently, minimizing (or eliminating) the weaknesses inherent in each line of attack.
If institutions are social arrangements and organizations, there must exist socially active agents who make and manage such institutions. In Chapter 12, ‘Heterodox economics and theories of interactive agency,’ Mary V. Wrenn examines agency, which is defined as the power to act, choose, imagine, understand, engage, and manipulate the biological and social environment. Obviously, this notion of agency is completely absent in mainstream economics; in place of interactive agency are asocial optimizing individuals disembedded from the society. Wrenn thus argues that interactive agency distinguishes heterodox economics—in particular, institutional, Marxian, and Post Keynesian economics—from the mainstream. While agency appears in different forms and often with varying degrees in different heterodox traditions, what is common to them is the interaction between agents and structures that shape the evolutionary path of the provisioning system. After carefully examining the concept and role of agency underpinning various heterodox approaches, Wrenn arrives at a conclusion that theories of interactive agency provide not only a powerful critique of mainstream economics but also a more socially relevant economic analysis.
The household is one indispensable and distinctive agent in the account of the system of provisioning and its evolution. However, the household is often subsumed in the heterodox discussion of the production of commodities and the reproduction of the economic system as a whole. In Chapter 13, Zdravka Todorova provides the theoretical grounds for developing a heterodox theory of the household that goes beyond the contributions (and limitations) of a single heterodox approach. With this goal in place, she examines various heterodox economic perspectives, such as feminist, Post Keynesian, Marxian, and social economics. This examination leads to the analytical categories of the household—that is, the household as a going concern, an institution, and an actor-participant (or socialized agent)—that shed light on the specificity and variations of household agency depending on the household’s socio-economic position within the society; the inseparable connections to other agents and to surrounding institutions; and the production of non-commodities and non-market oriented activities such as care and recreation, which are often ignored by heterodox approaches. Consequently, Todorova concludes that the analysis of the household should be central in developing heterodox economics since the life process is maintained through the organization of household going concerns.
The following three chapters deal with the business enterprise, the dominant agent and organization that, in Thorstein Veblen’s words, animate the “material framework of modern civilization in the industrial system” (Veblen 1904: 1). Drawing upon institutionalist, Marxian, and Post Keynesian economics, Tae-Hee Jo in Chapter 14 strives to build a heterodox theory of the business enterprise. The rationale behind this bold task is that while each heterodox economics tradition offers its own distinctive insights into the business enterprise that are alternative to the neoclassical-Marshallian theory of the firm, an integrative approach will offer a more comprehensive understanding of the business enterprise than each heterodox approach could do separately. The theory put forward in the chapter is institutional in that the business enterprise is conceptualized as a going concern whose primary goal is survival and reproduction by making strategic (as opposed to optimal) decisions; it is Marxian in that an array of business enterprise activities is formulated following Marx’s circuit of capital schema; and it is Post Keynesian in that specific ‘monetary’ activities such as production, pricing, investment, financing, and competition are put in historical time (and fundamental uncertainty). Readers will find rich and radical implications as to how the business enterprise operates in corporate capitalism vis-à-vis the structure and dynamics of the provisioning process.
In Chapter 15, Tuna Baskoy argues that heterodox approaches in general conceptualize market competition as a dynamic-evolutionary process in which the power (or agency) of the business enterprise to control its environment in its own interests shapes market outcomes, rather than the structure of the market determines the enterprise decisions and market outcomes. The concept of power, as is found in Austrian, Marxian, and Post Keynesian economics, thus becomes important to the account of both competitive and cooperative enterprise activities in the market through market governance organizations (for example cartels and trade associations) and institutions (for example rules and regulations). An important implication of Baskoy’s argument is the view that the market is a social creation and, hence, it is controlled, managed, and reproduced on a continual basis.
In Chapter 16, ‘A Marxian understanding of the nature and form of dominant capitalist legal institutions,’ Lorraine Talbot demonstrates how legal institutions reflect and enable particular stages of capitalist development. Utilizing Marx’s analysis of credit and falling profit rates, and focusing on historic developments in the UK, Talbot discusses why the company form emerged as the dominant legal institution of capitalism from the late nineteenth century onwards. This chapter thus provides an explanation for the behavior of modern corporations and shows why they are increasingly driven to destructive short-termism rather than productive development and innovation. The chapter also examines moments in the current crisis, dubbed the ‘Long Depression,’ that are explicable through the Marxian lens. This chapter concludes by arguing that meaningful reform of the company from a socially progressive perspective begins with the removal of shareholder control rights.
As discussed in several chapters in Parts II and III, central to the theory of monetary production (à la Marxian, institutionalist, and Post Keynesian), along with the surplus approach and the theory of effective demand, is money as a social institution and a driver of real economic activities such as production, expenditure, and employment. Thus money and related systems of managing monetary resources are essential for us to understand key issues in heterodox economics. The following three chapters examine, respectively, the origins and nature of money, the banking system in developing countries, and the shadow banking system.
In Chapter 17 Pavlina R. Tcherneva defines money, following the chartalist-modern money approach, as a power relationship of a specific kind and a stratified social debt relationship measured in a unit of account determined by some authority. Thus, money emerges as a social mechanism of redistribution, usually by some authority of power (be it an ancient religious authority, a king, a colonial power, or a modern nation state). In other words, money is a ‘creature of the state’—as opposed to a ‘creature of the market’ as in mainstream economics—which has played a key role in the transfer of real resources between parties and the redistribution of economic surplus. A notable implication of this chapter is that a historical understanding of the origins and evolving nature of money illuminates the economic possibilities under different institutional monetary arrangements in the modern world—that is, ‘sovereign’ and ‘non-sovereign’ monetary regimes (including freely floating currencies, currency pegs, currency boards, dollarized nations, and monetary unions).
In Chapter 18, Radha Upadhyaya critically examines contending approaches to the role of banking in the financial system of developing countries with a particular focus on sub-Saharan African countries and their development process. The conventional mainstream argument posits a positive long-term correlation between finance and economic growth, which requires the liberalization of the domestic financial system. Such an argument is based upon the assumption that growth is resource-constrained. However, most developing countries that went through financial liberalization in the 1980s and 1990s have not achieved the goal anticipated by the mainstream theory and policy. Upadhyaya argues that the focus on the relationship between finance and growth obscures more fundamental issues, such as the country-specific structural and institutional arrangement of the financial systems in sub-Saharan African countries. In the face of both the failure of the mainstream analysis and the lack of heterodox analysis, she suggests that the role of knowledge creation as a means to reduce uncertainty and the banking system as part of the larger social-institutional structure be taken into account in the analysis of financialization and its effects on growth.
The shadow banking system, which is located outside the regular banking system, has brought about scholarly and public debates after the financial crisis of 2007–8. Chapter 19 by Benjamin Wilhelm provides a heterodox and interdisciplinary understanding of the shadow banking system. Wilhelm proceeds his discussion as follows. First, he examines the institutional qualities of shadow banking. Second, he provides a legal perspective on the workings of shadow banking. And then he discusses the impact of regulation on the shadow banking system with regard to institutions, practices, and instability. In a nutshell, Wilhelm argues that the shadow banking system calls for a comprehensive analysis that touches upon the economic, social, legal, and political dimensions surrounding the system.
As many contributors of the Handbook point out, heterodox economists hold a broader view of the economy—that is, the process of social provisioning, including both market and non-market activities, paid and unpaid activities, and commodities and non-commodities. This heterodox view also implies that the so-called ‘informal economy’ should not be left out as it pertains to the accumulation of capital as well as the well-being of people. In Chapter 20, ‘The informal economy in theory and policy: prospects for well-being,’ Elizabeth Hill provides a thorough examination of the informal economy. Hill begins with the debate about the informal economy within the discourse of development economics and shows how theoretical and empirical understandings of economic informality have evolved and are now used to understand development, well-being, and insecurity/precarity around the world. As the informal sector grows, it has become ‘normal’ rather than aberrant. Hill finds that the shift in the theoretical understanding of informality has significant implications for how we conceptualize models of capital accumulation; how emerging economies build systems of social protection; and the patterns of growth and inequality. Other important issues analyzed in the chapter are the informal sector’s role in providing employment and livelihood, limits on productivity, the prevailing policy regime, worker agency, the structure of the labor market, and impact of socio-economic organizations and institutions on livelihoods, well-being, and freedom. Apparently, the informal economy is a highly contested area of public policy. Hill’s chapter will be a good starting point for further research on the informal economy from a heterodox perspective.
Chapter 21, the last chapter in Part III is an analysis of inequality and poverty, two pressing issues inherent to the capitalist economic system. Marcella Corsi and Giulio Guarini start the chapter with the discussion of income inequality, drawing upon a classical approach to distribution, and then explore the link between human development, social exclusion, and poverty. In the latter analysis, Corsi and Guarini find Sen’s capability approach useful to the extent that poverty means the inability to live a minimally decent life, which is due largely to various forms of social exclusion, such as unemployment, financial exclusion, exclusion from the school system, that we observe in most capitalist economies. Thus the chapter pays particular attention to the process of social exclusion as it affects the most vulnerable individuals in the society by creating treacherous social traps. Corsi and Guarini’s chapter thus makes a case that inability, poverty, and inequality are socially generated. If so, it is imperative to break this vicious spiral by establishing social institutions that provide vulnerable people with opportunities to get back into the social provisioning process, or to transform the way the system is organized.
Understanding the components of agency, structure, and socio-economic institutions is necessary to understanding the dynamics of capitalism, which is the focus of Part IV. Many heterodox schools criticize the mainstream (and particularly, neoclassical economics) for its static method. Thus, with their focus on the dynamics of capitalism, the chapters in Part IV provide an overview of the scientifically fruitful alternatives to mainstream economics.
Ramaa Vasudevan opens Part IV of the Handbook (Chapter 22) with an analysis of capital accumulation—many heterodox schools recognize this as the engine of capitalist growth. Vasudevan compares classical-Marxian and Post Keynesian approaches to accumulation and growth with institutionalist, Social Structure of Accumulation, and Régulation approaches to discuss the institutional and structural changes integral to the process of capitalist accumulation particularly since the post-Second World War period.
Given the centrality of globalization in shaping growth and development patterns, the following two chapters deal with open-economy issues. In Chapter 23, Yan Liang examines the evolution of the terms of trade and the position of developing nations to provide a heterodox analysis of the causes of persistent unbalanced trade and its impacts on macroeconomic performance and long-run growth. Following Myrdal, Liang proposes the adoption of a ‘double standard’ by which beggar-thy-neighbor policies are still condemned but developing countries are permitted to protect their industries in pursuing a comprehensive development strategy.
In Chapter 24, Victor Ramiro Fernández and Gabriel Brondino discuss the global value chains (GVC) approach to explain the main determinants of the industrial organization of international commodity production chains. They highlight how several works applying the GVC approach underestimate or ignore the role of power, the nation state, financialization, and geopolitics. Nonetheless, these concepts and players can be incorporated to provide a more realistic interpretation of the current features of global capital accumulation. This use of the GVC approach, according to the authors, is much more meaningful in shedding light on uneven development in ‘peripheral’ regions.
In Chapter 25, Siobhan Austen shifts the focus to theorizing labor situations, and identifies a number of similarities between Elinor Ostrom’s Institutional Analysis and Design (IAD) theoretical framework and the approach adopted by the institutional economist, Bruce Kaufman. These similarities include a focus on actors, interactions, and, especially, the rules affecting particular labor situations. Austen concludes that these similarities create important opportunities for new heterodox analyses of labor and employment.
In Chapter 26, Matias Vernengo highlights that for heterodox theories the business cycle is endogenous, which means that shocks and propagation mechanisms are not central. Vernengo discusses the inherent instability of the capitalist system from Marxian and Post Keynesian perspectives. The former focuses on the rate of profit as the main variable through which to understand fluctuations; the latter emphasizes that not only the economic system is prone to crises, but also that it could settle at a stable and sub-optimal position in the long-run. Thus, growth is inherently cyclical and economic policy must be geared towards reducing the negative effects of the downward phase of the cycle and to stimulate a boom.
Özgür Orhangazi, in Chapter 27, focuses on Marxian (and Social Structure of Accumulation) and Post Keynesian approaches to economic growth, with a specific attention to growth in developing countries. Five main factors are identified that most heterodox schools recognize as critical to explaining economic growth: aggregate demand, distribution, instability, competition and technical change, and institutions.
However, heterodox theories generally are of the view that economic systems are prone to crises of reproduction and growth. Thus, in Chapter 28, Petra Dünhaupt surveys various strands of heterodox discourse on the financial and real explanations of crises, with a focus on financialization. While the topic has given rise to a burgeoning literature, Dünhaupt shows that heterodox traditions are not in agreement, with some heterodox traditions regarding financialization as a cause of crises and others treating it as a consequence of crises.
The final two chapters of Part IV deal respectively with economic development and the ecological crisis. In Chapter 29, John Marangos surveys alternative theories of international development based on Post Keynesian and Marxian perspectives of social provisioning. The similarities and differences of the different policy approaches to fiscal discipline, public expenditure priorities, tax reform, financial liberalization, exchange rates, trade liberalization, foreign direct investment, privatization, deregulation, property rights, and institution building are extracted.
In Chapter 30, for Anders Ekeland and Bent Arne Sæther ecological issues are the special interest of a minority of scholars. However, as humanity faces potentially devastating global warming, a rapid extinction of biodiversity and other serious environmental problems, theories and policies for full employment and a more equal distribution of resources can no longer be formulated without taking into consideration the ecological consequences. Focusing on ecological, Marxian, and Post Keynesian economics, Ekeland and Sæther show that while finding a solution is easier for mainstream economics—as it is based on the pervasive notion that the price mechanism can take care of all intended actions—drafting policy recommendations from a heterodox perspective requires an understanding of how the economy works, and how policies and strategies should be shaped.
The chapters in Part V extend the previous theoretical discussions into the policy arena—in particular, chapters in this part envision a more sustainable, egalitarian, equitable economic system that is consistent with and supported by heterodox economic theories. The six chapters of Part V focus on capitalism’s ecological crisis, its financial systems, the role of the state, the relationship of the governance of large firms to prosperity and inequality, full employment, social welfare, and social control. All six chapters explain their respective ontological and methodological foundations, as well as the critical conceptualizations, which shape their proposed policy prescriptions.
The ecological crisis is the subject of Chapter 31 in which Lynne Chester contends that an effective exit strategy from the ecological crisis does not lie within the current options presented by the broad dichotomy of alternative policy prescriptions: those advocating the reform of capitalism using the same mechanisms which have embedded the ecological crisis (for example, ecological economics, steady-state economics); and, those proposing a new albeit highly unlikely socio-economic system (for example, ecological Marxism, socialist ecology). Chester argues that there must be a significant shift in our thinking to design a strategy that directly addresses the interdependencies between the spheres that constitute the social and economic organization of capitalism. This chapter contributes to this complex policy task with its analysis of the dialectical relationship between the ecological, energy, and economic spheres and proposes a new regime of capitalist accumulation in which the imperative of ecological preservation is compatible with capitalism’s mode of production.
Chapter 32 moves the policy focus to the sphere of finance. Wesley C. Marshall argues that the 2007 global financial crisis not only occurred within the world’s most powerful economic institutions in the geographical center of economic power, but the enormous sums of money involved also forced many to rethink the nature of money. Both the meteoric rise of the shadow banking system and its collapse and bailout point, according to Marshall, to the irrefutable observation that money is not scarce despite the global policy of propping up financial asset prices while restricting productive investment, employment, and production being neither economically nor politically sustainable. However, the alternative of abundant funding for full employment and production is also problematic, as simply producing more smoke and steel cannot be a way forward. This chapter proposes that a set of basic structures and principles can transform today’s financialized global morass once the non-scarcity of money is openly recognized and understood because the many experiments and lessons learned in global finance mean that designing global, regional, national, and local financial structures is the easy part.
A vision of the state’s role in a progressive transformation of the market economy is the focus for Chapter 33 authored by Anna Klimina. Policies to redistribute economic power receive particular attention. Large-scale companies, given the nature of technology and market uncertainties, are envisaged as remaining a key component of a market economy although these companies will require comprehensive restructuring to avoid fragmentation. State capitalism is viewed as a promising form of modern capitalism that can be re-imagined to acknowledge its inherent democratic promise. Through the lens of an institutionalist vision for democratic state control in market-based societies, the chapter discusses how, in state capitalist economies, the state as chief owner of society’s productive property and principal controller of the social surplus can nurture institutions that promote effective economic democracy, thus becoming the agent of its own social control.
In Chapter 34, Jordan Brennan argues that the rise of the modern corporate form in early twentieth century helped spawn new schools of economic thought—institutionalism, Neo-Marxism, and Post Keynesianism being three examples—that began to use power (in its many incarnations) as an explanatory variable. Corporate power, according to Brennan, is the key to analyzing and explaining corporate governance. The chapter empirically substantiates this assertion by demonstrating that corporate concentration is strongly and inversely related to GDP growth and income equality, and that the concentration of assets and income among the 100 largest American-listed firms, in conjunction with resource redirection within these firms, has simultaneously depressed growth and exacerbated inequality. Consequently, it is argued, effective policies to alleviate secular stagnation and income inequality must address the corporate governance of large firms.
John Marsh, Timothy Sharpe, and Bruce Philp explore in Chapter 35 the concept of full employment in heterodox perspectives. The problem of unemployment is examined in historical context, alluding to the Great Depression, the ‘Golden Age’ of capitalism, stagflation, and supply-side policies (especially Thatcherism and Reaganomics). The concept of ‘full employment’ as a policy objective is explored in the context of Beveridge (1945), as well as post-war policy. These goals are set against theories in the heterodox tradition, which explain unemployment and offer policy prescriptions with regard to achieving full employment. Two heterodox approaches are considered: Marxian economics (in the context of the notion of the ‘reserve army of the unemployed’) and Post Keynesian aggregate demand management. The job guarantee is then presented as a full employment policy, with particular reference to how the program accommodates the issues raised by these heterodox schools of thought.
Part V concludes with Chapter 36, ‘Social welfare and social control’ authored by Andrew Cumbers and Robert McMaster. In this chapter, Cumbers and McMaster show how mainstream economics is founded on a utilitarian understanding of welfare, which has developed theoretically into revealed preferences, and so forth, and despite theoretical innovations the standard outlook is consequentialist, which renders all actions instrumental: the value of anything rests solely on its outcomes. Of course, according to the authors, this is also reflected by the mainstream predilection for exchange-value and commodification which means that social welfare is reduced to a series of calculations of a range of feasible (and expected) outcomes. Social control, on this understanding, is achieved through the market: the market represents freedom and dissipates power. Drawing from the extensive critique of both the consequentialist underpinnings of the mainstream and its adulation and conceptualization of the market, Cumbers and McMaster present an analysis that draws from the capabilities approach associated with the works of Amartya Sen and Martha Nussbaum, and apply this to argue about the need for economic democracy. The capabilities approach is based on the Aristotelian notion of human flourishing, and as such is resonant with aspects of Marx’s analysis. It offers an alternative framework of the evaluation of well-being, impoverishment, and justice. An appealing aspect of the capabilities approach is that it invokes ontological realism in endeavoring to provide a framework of equality evaluation, despite the limitations of Sen’s fairly modest framework in the context of neoliberalism. Cumbers and McMaster contend that capabilities are sensitive to institutional configurations, and that capabilities are more likely to be enhanced by deepening the processes of economic democracy. In doing so, they consider various models of economic democracy and their impact on ownership forms and production relations.
Chapter 37, by Jamie Morgan and John Embery, concludes the Handbook project in an effective manner by highlighting the prominent contributions within and reinforcing the objectives set out in this introductory chapter. Importantly, Morgan and Embery make their own case that heterodox economics is a pluralistic movement and a ‘critical community’ that restores the original meaning of economics as a social science, and hence that the success (in the sense of continuation and reproduction) of heterodox economics is independent of the innovation within mainstream economics; rather, it depends on the positive development of heterodox economic theory and policy, which are fostered by critical engagements among different heterodox traditions through the intellectual community of heterodox economists.
1 In the introductory chapter of Future Directions for Heterodox Economics (2008), a collection of essays presented at the 2003 ICAPE conference held at the University of Missouri-Kansas City, Robert Garnett (2008: 2, emphasis added) states that the book strives for “innovative new connections among formerly separate theoretical traditions (Marxian, Austrian, feminist, ecological, Sraffian, institutionalist, post-Keynesian).” (This aim reflects one of four goals of ICAPE, that is, “to promote a new spirit of pluralism in economics, involving critical conversation and tolerant communication among different approaches, within and across the barriers between the disciplines” (see ICAPE website, http://icape.org)). In the same volume, Sheila Dow (2008: 9) observes that “I have been increasingly aware that much of the interesting work among young scholars is synthetic in nature, exploring the middle ground between schools of thought and developing new ideas as a result of cross-fertilization. Indeed, arguably, the greatest developments in economics have been the result of new connections being made between formerly separate sets of ideas.”
2 In The Elgar Companion to Social Economics (2015) 27 percent of contributors are women (14 out of 52) and in the Oxford Handbook of Post-Keynesian Economics (2013) 9 percent are women (5 of 56 contributors).
3 For research methods, we would refer readers to the Handbook of Research Methods and Applications in Heterodox Economics, edited by Frederic Lee and Bruce Cronin (Edward Elgar, 2016); and for methodology and philosophy, to the works of Tony Lawson such as Reorienting Economics (Routledge, 2003) and
Economics and Reality (Routledge, 1997), and Applied Economics and the Critical Realist Critique, edited by Paul Downward (Routledge, 2003). We would also recommend readers to see the list of readings on heterodox economics compiled by the Heterodox Economics Newsletter, http://heterodoxnews.com/hed/#entry-50.
4 Others do not favor the label ‘heterodox’ because the dualistic distinction between heterodoxy and orthodoxy-mainstream is considered to de-emphasize the variety and complexity within each, although it may be useful for the purpose of heuristic and analytical convenience (Dow 1990; Mearman 2012).
5 Whether this pluralism should be open to mainstream economics is another question (see Garnett 2011; Mearman 2011; Courvisanos 2016). Journal citation data show that heterodox economists tend to cite mainstream economists, but not vice versa (Kapeller 2010), although heterodox economists practice (or tolerate) pluralism to a greater or lesser degree than mainstream economists.
6 Most mainstream economists hold that their economics is the only legitimate paradigm. Regardless of the relevance or empirical validity, any theory that is not ‘modeled’ in mainstream language is not economics. Economics from the mainstream viewpoint is thus defined not “by its subject matter but by its way of thinking” (Coyle 2007: 232). Viewing economics in terms of methods is common to virtually all variants of mainstream-neoclassical economics, such as neoclassical-feminist economics, neoclassical-social economics (for example, Gary Becker), (evolutionary) game theory, and experimental economics. Some Harvard economics students, for instance, thought that their long-time professor, John Kenneth Galbraith, was not an economist, because “he wasn’t a modeler” (Coyle 2007: 231). By the same token, most heterodox economists are not economists in the view of mainstream economists. Heterodox economists are not just the critics of mainstream economics but the ‘enemies of economics’ (Coleman 2002). Such a bizarre definition of economics is at odds with the nature of social science whose development is characterized by intellectual-scientific pluralism.
7 For the UK and the US, see Lee (2009); for France, see Facarello & Béraud (2000); for Italy, Garofalo & Graziani (2004); for Germany, Heise et al. (2017); for Austria, Klausinger (2016); for Spain, see Guerrero (2004).
8 This heritage, though, does not usually extend to topics of money and finance or ecology and natural resources. Perhaps for this reason, today Post Keynesians and ecological economists draw comparatively less from classical political economy. 9 Although of course in this period the teaching and practice of neoliberal economics was even violently enforced in some countries, such as Chile (see Valdés 1995).
10 Some of them obtained notable positions in academia. For example, Josef Steindl was conferred an honorary professorship at the University of Vienna, in spite of an initial cold reception (Guger & Wal-terskirchen 2012).
11 See, for example, the articles published in the 2010 special issue (Vol. 69, No. 5) of the American Journal of Economics and Sociology.
12 This includes financial as well as political support. In some countries, such as Germany, sources of support have so far been limited to trade unions and progressive parties’ foundations, whereas in the US it is mostly non-partisan bodies that express a demand for non-mainstream economics. In other countries, such as France and Italy, there seems to be little, if any, social awareness of (and interest in) economic pluralism and the existence of heterodox economics.
Association Française d’Economie Politique (AFEP). 2009. Evolution of economics professors’ recruitment since 2000 in France. Available from http://assoeconomiepolitique.org/wp-content/uploads/FAPE-State-of-pluralism-in-France-Final-Version.pdf [Accessed January 20, 2017]
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