issue dated January 24, 2003
Taking On 'Rational Man'
economists fight for a niche in the discipline
How do you start a fire under a huge wet blanket? A faction of disgruntled
economists says that is their predicament.
Their efforts to open the field to diverse views are smothered, they say, by
an orthodoxy -- neoclassical economics and its derivatives -- that
is indulgently theoretical and mathematical in its aspiration to be more
"scientific" than any other social science.
Although it is inadequate to explain human behavior,
they say, that brand of economics dominates the discipline. Its practitioners
decide what work deserves notice by controlling what is published in the
field's prestigious journals. And with strongholds at leading research
universities and a Nobel awarded in the field, most mainstream economists are
too proud of their profession to even notice these puny insurgents.
Many say that the rebels are challenging a straw man -- that
neoclassical economics, which is based on such concepts as rational choice,
the market, and economies' tendency to move toward equilibrium, is much
roomier than portrayed. But others have a more belligerent response: Like us
or leave us for other departments and disciplines, such as political science,
history, or sociology.
This month, for example, the University of Notre Dame's economics department,
long renowned as unusually diverse, is likely to split in two.
A new department of economics, with a graduate program and several new hires,
would focus on orthodox approaches.
Dissident economists would be consigned to a department focusing on economic
thought, social justice, and public policy. But with no graduate program,
that would amount to exile and slow death, say the Marxist, labor, and development economists and historians of
economic thought who make up a large minority of the 21-member department.
The "tensions" that are forcing the split, says a report by a
committee of Notre Dame administrators and professors from other departments,
"are not the fault of the current faculty" members. They were hired
years ago, under "a clear mandate from the administration," to help
build an alternative to the neoclassical bastions: Berkeley, Chicago,
Columbia, Harvard, MIT, Princeton, Yale.
It is not that Notre Dame wants to abandon the subjects that its heterodox
researchers study, ones "appropriate to a Catholic institution,"
such as poverty and inequality, says Mark W. Roche, dean of the College of
Arts and Letters. It is just, he says, that Notre Dame wants attention from
the mainstream and realizes that that requires satisfying the field's
Moreover, says the committee's report, "We regard the differences
between the heterodox and orthodox economists to be so great that
reconciliation within a single cohesive department is wholly
Notre Dame, says David F. Ruccio, an associate
professor who specializes in Latin American economies and exploring
intersections of the humanities and economics, is "accepting and
imposing a certain definition of the discipline." The partition would be
a logical next step, he says. Heterodox practitioners have already been told
not to expect promotions, and that their books, even if placed with
prestigious publishers, will count no more toward advancement than articles
in minor journals, he adds.
Administrators are not quite so categorical. Richard Jensen, the department's
chairman, says "industry standards" dictate that publication in
leading journals is the key to promotion and tenure.
The split, says Mr. Ruccio, a prominent Marxist
economist, is a matter of raw power: "If the peasants won't deliver the
goods, collectivize them" in a low-profile department.
Pros and Cons
Despite the power of the orthodoxy, the naysayers
are numerous. While the American Economic Association has some 22,000
members, the 30-odd groups under the umbrella of the International
Confederation of Associations for Pluralism in Economics have American
memberships totaling more than 5,000.
The confederation's pained statement of purpose laments that most of its
members' interests, such as exploitation and inequitable income distribution,
have been "defined out" of economics. The field has gotten away
with that, observers say, because it is not as inescapably concerned as, say,
political science, sociology, and anthropology with concepts like power, influence,
deference, and social practice.
"It's hard to avoid Marx, and a whole bunch of other theorists, in those
discussions," says Michael A. Bernstein, an economist and historian at
the University of California at San Diego and the author of a recent history
of 20th-century American economics.
Not all the rebels are Marxists, although most do charge that neoclassical
economists refuse to admit that their approach is "sycophantic to
capitalism," as Steve Keen puts it. Mr. Keen, an economist at Australia's
University of Western Sydney, says he objects to neoclassical economics
because "it makes capitalism a worse system than it would otherwise be,
and makes it function less well as a generator of wealth and
Neoclassical theory holds that individuals, households, and companies
rationally serve their best interests and that competition sorts out prices,
wages, and the markets for goods and labor in
economies' movement toward equilibrium.
In other words, the market economy and those who take care of themselves take
care of one another.
That theory is rooted in the late-18th-century work of Adam Smith, although
he defined economics more broadly as the study of the nature and causes of
the wealth of nations.
His emphasis on self-interest, together with the theory of utilitarianism
that Jeremy Bentham developed at about the same
time, came to resound loudly in economics by the turn of the 20th century.
Influential thinkers then increasingly emphasized the allocation of scarce
resources among competing ends: Economics became a science of
In the United States, World War II solidified the trend, says Mr. Bernstein.
At the time, the government "embraced the work of these cutting-edge
economists, saying, This work can help us wage war." New ideas about the
application of mathematical models and modern statistics were used to meet
government goals, so economics, like the nuclear arm of physics, benefited
from enormous infusions of funds. Academic economics responded accordingly.
As a result, "every year, 1.4 million undergraduates in the U.S. take an
introductory economics course that teaches that only selfishness is
rational," objects Neva R. Goodwin, co-director of the Global
Development and Environment Institute at Tufts University, who is helping to
prepare a textbook with alternative views.
The orthodoxy also distorts economic reality, say its critics.
"Superficially, it seems like a coherent model of the world," says
Mr. Keen, the author of Debunking Economics: The Naked Emperor of the
Social Sciences. But don't be fooled, he says, by the mainstream's fancy
mathematics and claims that it is a predictive science, not just a
descriptive social science.
"I'd put its maturity at the same level as physics before Newton,"
he scoffs. "And possibly before Galileo."
Many approaches to economics fall under the heterodox umbrella. Besides
Marxist economics, they include so-called Austrian economics, which disputes
the neoclassical truism that economies tend toward equilibrium;
post-Keynesian economics, which highlights the role of uncertainty in
economies; complexity theory, which uses such concepts as chaos theory to
model economies; the intersections of economics and such realms as feminism,
environmentalism, and the law; and evolutionary theory, which views economies
as akin to evolving biological systems. The neglect of the last particularly appalls Mr. Bernstein, who calls one of its founders, Thorstein Veblen,
"probably the most truly original thinker that the U.S. has
The dissidents take heart from events in France. In 2000, an online
graduate-student petition proclaimed that neoclassical economics, or at least
its unbridled application in teaching and research, dwelt in unreality to the
point of being "autistic."
The students dubbed their movement "Post-Autistic Economics" and
quickly provoked a national debate of the French variety. Some leading
publications and high-profile economists hailed the protesters, who, in
petitions-cum-manifestoes, denounced economics as a morass of "imaginary
worlds" that was mired in "pathological," pseudoscientific
mathematics; that was aggressively excluding pluralism; and that was, even
so, barely able to explain "l'économie
de Robinson Crusoé."
The French minister of education appointed a senior establishment economist,
Jean-Paul Fitoussi, to lead a commission to study
the claims. Last September, the panel issued a call for some reform of
"Some mistakes have taken place" in formal modeling,
amid "very little concern for its empirical relevance," he
conceded. Teach the debates about neoclassicism, he declared.
The forces of post-autism wanted more. In a petition of their own, some 200
French economists charged that the orthodoxy's rationalist
"fiction" excluded the whimsy, variety, and "often
altruistic" behavior of Homo economicus, and was a front for cultural power
structures that other social sciences had deconstructed long before.
That sentiment rippled over to the Universities of Cambridge and Oxford,
where graduate students began well-subscribed petitions, and then, with help
from the Internet, on to several other countries. Most active has been the Post-Autistic
Economics Review (http://www.paecon.net),
edited by a visiting research fellow at the University of the West of
In the United States, some Ivy League graduate students started a petition
drive. Then, in June 2001, 75 reformers from 22 countries met in Kansas City,
Mo., and produced a Kansas City Proposal, which decried economics' neglect of
its own cultural, social, political, moral, and historical dimensions.
'A Con Game'
The reformers include prominent scholars who made their names as
top-notch neoclassical economists. One is the iconoclastic and polymathic Deirdre N. McCloskey, a distinguished
professor of the liberal arts and sciences at the University of Illinois at
Chicago who also has appointments there and at Erasmus University of
Rotterdam in art, cultural studies, economics, English, history, and
In 1983, she (then he, but that's another story) sparked an uproar with
"The Rhet-oric of Economics," an article
in the prestigious Journal of Economic Literature. In it, she
convinced many heterodox economists that the discipline's claims to truth,
while couched in terms of scientific proof, were shored up by many forms of
reasoning and persuasion.
Much of economics, she has reiterated with rhetorical flair, is "a con
game of a very odd sort," one marked by three primary "vices."
First, economists incessantly misuse tests of statistical significance. In a
1996 paper, "The Standard Errors of Regression," again in the Journal
of Economic Literature, she and Stephen T. Ziliak,
now an assistant professor of economics at the Georgia Institute of
Technology, argued that about 70 percent of papers in a leading journal
shirked accepted standards for determining statistical significance, while a
similar proportion mistook statistical significance for economic importance
-- by failing to use good, human judgment.
The second vice is "blackboard economics": "endless thinking
about imaginary economies that don't ever have anything to do with the
world." In her view, "that's not science; that's just chess
problems." A genuine science like physics, she says, would observe and
describe a phenomenon long before even venturing to model it.
The third vice: "the arrogance of social engineering."
Ms. McCloskey, a self-proclaimed free-market libertarian, expounds on those
"sins" in such publications as The Vices of Economists, the
Virtues of the Bourgeoisie. The latter, she argues, include not just
prudence but also courage, temperance, and love -- elements that Adam
Smith, too, wanted in economics' domain.
"Probably three-quarters of the scholarly activity in economics is
useless, will result in no understanding of the world," she sums up.
"Maybe higher. It's tragic."
Some more-mainstream American economists won't sign petitions but agree there
is fire under the smoke. One is Edward E. Leamer,
an econometrician at the University of California at Los Angeles. He says
that in the 1930s, economics "was done in verbal, written
language." But "the era of Samuelson," he says, referring to
the Nobel laureate Paul A. Samuelson, "was so successful in introducing
mathematics into the conversation that it's now required that you speak
Mr. Leamer calls that unfortunate "because
most of our Ph.D. students can never really master that language, and they
struggle so hard with the grammar and syntax that they end up not being able
to say anything."
He and many other professors report that newly minted Ph.D.'s often cannot
comprehend classic prose texts of the discipline, either. They have not read
Adam Smith, David Ricardo, and John Maynard Keynes, titans of the 18th, 19th,
and 20th centuries. As a result, those would-be academics learn the
"neo" without the "classical," and so have no way of
embracing the pioneers' varied legacies.
Do the Math
Most critics say mathematics is not the issue. "There are plenty of
anti-neoclassical economists who use math, and Marxist economists,"
notes Mr. Bernstein of San Diego.
In the online pages of the Post-Autistic Economics Review and other
publications, fellow reformers have pounded away at a central point. As a
University of Cambridge historian of economic thought, Geoff Harcourt, puts
it, always "pose the economics of an issue first, then see whether some
form of mathematics may be of use in solving the problems thrown up."
Mr. Leamer agrees. "The great economists got
involved in this discipline because they were interested in these social
problems, and they thought of economics as a tool for addressing and solving
them," he says. "But the discipline has become more and more
"A mathematician is uninterested in the problem," he adds.
"He's interested in the degree of difficulty of the proof, or the
surprise nature of the theorem. Those value systems are fine in mathematics,
but they're very destructive in economics."
The issue may not be how much mathematics to use, and when, but what kind.
Does neoclassical economics, with its emphasis on equilibrium, look for
"closed form," "all other things being equal" solutions
that simply don't suit the dynamic nature of economies? Yes, say critics like
Western Sydney's Mr. Keen, who would prefer the kind of modeling,
done in physics, biology, and other fields, that takes account of rates of
change over time. "The physicists are saying, You guys might be using sophisticated
mathematics from the 19th century, but you don't know crap about modeling today."
The Teflon Orthodoxy
Earlier attacks have left the American economics mainstream unscathed.
The American Economic Association's Committee on Graduate Education in
Economics, formed in 1988 and packed with big names, found similar faults
with the discipline. One finding, says Mr. Leamer,
a panelist: "Students could solve complex math
problems, but they couldn't solve simple economics problems that would have
been central in the 1960s." The committee's report appeared in 1991 in
the flagship American Economic Review "and was then
ignored," he recalls.
Similarly, in 1998, the group's Committee on Journals, headed by Thomas Schelling, a past president of the association, charged
in a report that leading publications had too much theory and math, and too
little empiricism, policy, and history.
Manuscripts in a "literary" mode, multidisciplinary manuscripts,
policy-oriented manuscripts? Apparently unwelcome, said the committee's
report, which by general agreement has languished. Reform-minded economists
have not had even the limited success of a similar "perestroika"
movement in political science, which has won a promise from leading journals
that they will be more hospitable to nonmathematical articles.
Neoclassical practitioners say that's because the reformers' complaints are
inaccurate. In the initial French debates, Robert M. Solow
of the Massachusetts Institute of Technology -- a Nobel laureate whose
growth model is a fixture of the undergraduate curriculum -- objected
that the protesters were not sufficiently allowing for neoclassical
economists' self-critiques and evolution, for example their work on
incomplete markets, imperfect competition, asymmetric information, and the
Kenneth J. Arrow, who shared the 1972 Nobel in economics, echoes that point.
Neoclassical economics is "a pretty baggy framework, and a lot that goes
on in it might not be quite what used to be thought of as neoclassical
economics," says the Stanford University scholar, who is regarded as an
architect of the mathematization of modern
economics. So, while concepts like rational choice, profit maximization, and
satisfaction may underlie most of the framework, what one means by them
"has become more and more subtle."
Similarly, orthodox economists have broadened how they study such notions as
rational choice. "The big thing there has been the development of game
theory, recognizing that if you're trying to outguess somebody else, they're
trying to outguess you," says Mr. Arrow. Game theory has been applied to
many areas of economics, and that marks a major change since, say, the 1950s.
"Behavioral economics" -- the study
of how people do not make rational choices -- also has recently
"caught fire," he says. It is being applied to such realms as
securities prices, consumer purchasing, contracts, and labor
bargaining. The psychologist Daniel Kahneman of
Princeton University shared the 2002 Nobel for work in the area that he had
done with the late Amos Tversky. "Any good
department has got to have a behavioral economist
on board, and that's one of the signs of the way things develop," says
"Now," he asks, "do you call that neoclassical or
post-neoclassical? It is a continuation of the neoclassical tradition, but
it's getting away from the traditional assumptions."
Mr. Keen is unimpressed. He says mainstream economists often tell reformers
that they are attacking a straw man. But economics curriculums
are still chockablock with the neoclassical.
"So I simply respond," he says, "'If what I demolish is a
straw man, why do you teach him?'"
Still, it's tough for an economics department to defy the dominant paradigm.
"Everyone is trying to be a little MIT or a little Harvard, and look
exactly the same because that's the way you get scientific prestige,"
says Bruce J. Caldwell, a historian of economic thought at the University of
North Carolina at Greensboro. That approach, he points out, ignores basic
economic theory about the benefits of diversification, specialization, and
Notre Dame, says Mr. Roche, the dean of arts and letters, is seeking a
niche. Actually, two: one in economic thought and policy and another in which
it can use mainstream tools. He is not surprised, however, that the plan
makes his faculty members "unsettled." Orthodoxy, they know, has
already begun to make inroads into some of the few other centers
of heterodox practice: New School University and the Universities of
Massachusetts at Amherst and California at Riverside.
In June, in Kansas City, Mo., the International Confederation of
Associations for Pluralism in Economics will hold a World Conference on the
Future of Heterodox Economics, offering thousands of marginalized economists
a rare opportunity to gather en masse. There, they will plan their battles
and commiserate about how long they must wait for change. And, says Georgia
Tech's Mr. Ziliak, they will share war stories
about how "the market wants you to pretend that you're an objective
economist, who is going to reveal something about the world through
neoclassical lenses, using standards of neoclassical theory, and some latest
fashion of econometrics."
But even though people are "still hiding their embrace of pluralism, or
of postmodern economics because they want that
job," he says, they are "still doing research, in their preferred
areas, although with little institutional support." That trend and the
June meeting, he says, make him optimistic: "The idea is to create solidarities
across different heterodox approaches -- libertarian, Afrocentric, feminist, etc. I know I feel energized by
Mr. Ziliak has another prediction. "Maybe we
heterodox economists will just say that we don't care about the pecking order
anymore, and we'll just produce parallel conversations in economics," he
says. "That may mean having less-prestigious job offers and lower
incomes, but I think you'll see more and more people doing that anyway
-- obviously for both supply and demand reasons."
"That's right," says the forthright Mr. Keen. "You've got to
agree to be marginalized, and then fight like hell."
HOW ECONOMICS BECAME WHAT IT IS
Several books on the history of the discipline of economics and the history
of economic thought have appeared in recent years. More are forthcoming.
The Crisis in Economics, edited by Edward Fullbrook
(Routledge, forthcoming in June)
Debunking Economics: The Naked Emperor of the Social Sciences, by
Steve Keen (Pluto Press/Zed Books, 2001)
Economics and Reality, by Tony Lawson (Routledge,
Economics as Religion: From Samuelson to Chicago and Beyond, by Robert
H. Nelson and Max L. Stackhouse (Penn State University Press, 2001)
How Economics Became a Mathematical Science, by E. Roy Weintraub (Duke University Press, 2002)
How Economics Forgot History, by Geoffrey Martin Hodgson (Routledge, 2001)
Intersubjectivity in Economics: Agents
and Structures, edited by Edward Fullbrook (Routledge, 2001)
Machine Dreams: Economics Becomes a Cyborg
Science, by Philip Mirowski (Cambridge
University Press, 2002)
Microeconomics in Context, by Neva R. Goodwin, Julie Nelson, Frank
Ackerman, and Thomas Weisskopf (Houghton Mifflin,
forthcoming in 2004)
A Perilous Progress: Economists and Public Purpose in Twentieth-Century
America, by Michael A. Bernstein (Princeton University Press, 2001)
Post-Modernism, Economics and Knowledge, edited by Stephen Cullenberg, Jack Amariglio, and
David F. Ruccio (Routledge,
The Rhetoric of Economics, by Deirdre N. McCloskey (University of
Wisconsin Press, second edition, 1998)
The Vices of Economists, the Virtues of the Bourgeoisie, by Deirdre N.
McCloskey (Amsterdam University Press, 1996)
Section: Research & Publishing
Volume 49, Issue 20, Page A12
Copyright © 2005 by The Chronicle of Higher Education