Can Heterodox Economics Make a Difference? gives us a wide range of economic views but the ‘key thinkers’ aren’t listening to each other, finds Orlando Hill

Phil Armstrong takes readers on a journey to find out whether heterodox economics can make a difference. With him, he takes the burning desire to know what his fellow economists think of the Modern Monetary Theory (MMT) and the Government as Employer of Last Resort (ELR) policy. Readers are invited to listen into conversations with some key thinkers, mostly Keynesians.

The title of the book is a question which raises many more questions. How do you define heterodox economics? In a nutshell, it is what is not accepted by the orthodoxy, the mainstream economics promoted by the establishment, i.e. the state with all its institutions, including academia.

So, what is orthodox economics? You cannot answer that question without looking at the historical context. In response to the crisis of 1929, some governments around the world responded by beginning to adopt policies which came to be known as Keynesianism. Where it was applied, there was an increase in public spending and government intervention. Particularly after World War II, strategic industries were brought into public ownership. Also the welfare state was created then, and trade unions were sometimes invited into the boardrooms of major companies. Demand-side policies were adopted with the aim of stimulating the lack of demand in the economy.

That all changed with the crisis of the late 1970s. Keynesianism was jettisoned and neo-classical economics became the new orthodoxy. State run industries were viewed as inefficient, opening the gates to privatisations. Markets, in contrast, were seen as efficient and capable of self-regulation. Trade unions were depicted as villains, whose ‘excessive’ demands had caused unemployment and inflation. They had to be weakened or even smashed, if economies were to recover. Supply-side policies, which favoured capital, were adopted to encourage businesses to invest.

However, as the financial crisis and the pandemic have shown us, governments are not fussed about casting away theories of market efficiency, intervening by pumping money into the economy, and bailing out banks or any other industry considered to be too big to fail. Nevertheless, there are still those that think that businesses should be left to fail, even if the consequence is unemployment.

Debating heterodoxy

The economists interviewed in this book cannot agree about who should be included in heterodox economics. Professor Victoria Chick would not include Marx among the heterodox, but would include the Austrian school, who are extreme defenders of the free market. In her view, what defines heterodoxy is primarily uncertainty. The Austrian school, even though it is politically close to mainstream economists, does not accept the idea that the economy is a well-greased model working like clockwork. For them, the future is uncertain. In her mind, Marxists are determinists who argue that the contradictions of capitalism will inevitably lead to its overthrow. In her view of Marxism, socialism would be the long-run equilibrium. That is an extremely simplistic way of reading Marx.

In contrast, Professor Steve Keen disagrees, arguing that Marx was the one person in the nineteenth century who ‘managed to do non-equilibrium thinking’ (p.365).

As someone who teaches Economics at ‘A’ level in a comprehensive school, I think students should be exposed to as many different views as possible. This is at least so that students realise that there is more to economics than the dominant and failed neo-classical school. The colleagues that I work with practice pluralism. Our students are exposed to key thinkers, Adam Smith, David Ricardo, Karl Marx, Rosa Luxembourg, Friedrich Hayek, Keynes and even Modern Monetary Theory. Students are encouraged to examine economic issues from different perspectives. Our understanding is that knowledge can only be achieved through dialogue.

However, reading the interviews, the reader will probably reach the conclusion that these ‘key thinkers’ are not willing to listen to each other. They quickly dismiss each other’s theories after confessing that they haven’t read much on the topic. And because the book covers such a wide range of topics and viewpoints it is not possible to have an in-depth discussion. One topic is skimmed over and then the discussion moves on to another. There is no real dialogue.

Professor Nick Potts asks whether heterodox economists practise what they preach, i.e. pluralism. Any academic who takes Marx’s value theory seriously, and seeks to redeem Marx and bring him back to the debate, will see their academic career weakened. They do not receive much support for their research, and are forced to teach mainstream economics to their students.

I know from experience that many of my ‘A’ level students are disappointed with the teaching of economics once they get into university, due to the lack of pluralism. In their opinion, economics is studied at universities as if the real world, with its problems of inequality, exploitation, war, and climate change, does not exist. Potts is right when he states that the purpose of mainstream economics is to ‘make people not understand what’s going on, and definitely not understand what is possible’ (p.427). Sadly, some of the heterodox economists seem to fulfil that role.

Economics for changing the world

The economists interviewed here are very successful academics at top universities. Ricardo Reis is an academic consultant at the Bank of England and the Federal Reserve System. This makes us wonder whether heterodox economics can actually be defined as something that is not accepted by mainstream.

As for Armstrong’s desire to discuss Modern Monetary Theory, ‘the most radical and controversial development in economic theory’ (p.4), with his fellow economists, I don’t think this book quite achieves its objective. A more accessible book for that is Modern Monetary Theory and its Critics edited by Jamie Morgan and Edward Fullbrook. It is a collection of essays which debates the merits of MMT. Armstrong is one of the participants in the collection with an essay entitled, ‘An MMT perspective on macroeconomic policy space’. For a Marxist perspective on MMT, Michael Roberts also offers some interesting thoughts.

Whether heterodoxy has the potential to ever replace neo-classical orthodoxy, I would agree with Potts, ‘the change will come from outside economics departments who will be the last to adjust’ (p.430). It was frustrated students who organised the Rethinking Economics movement and are putting pressure on departments to change the curriculum, and replace it with one that is ‘pluralist, realistic, diverse and decolonised’. It is people organising and demanding change that will force new ways of looking at economics. That is what will change the paradigm. The change will not come from Economics departments.

Whether heterodox economics can make a difference, it depends on what we mean by ‘make a difference’. Can capitalism be reformed and made to tackle the problems of climate emergency, rising inequality, big pharmaceutical companies’ control over our health, the greed of capitalist banking, the dominance of the tech and media monopolies? Or does capitalism have to be replaced by another economic system? Has capitalism outlived its historic role? Paraphrasing Marx, economists have only interpreted the world, in various ways. The point, however, is to change it.

Publisher’s note: The eBook version is priced from £22/$31 from Google Play,ebooks.com and other eBook vendors, while in print the book can be ordered from the Edward Elgar Publishing website.