A Neoclassicalless Society?


The Chronicle of Higher Education weighs in with an interesting article about the fight to make room for economic thinking outside the neoclassical consensus. Reporter Peter Monaghan makes some typical mistakes of oversimplification, especially when he writes that the Austrian approach "disputes the neoclassical truism that economies tend toward equilibrium"–Ludwig Lachmann might agree, but not Israel Kirzner. In general, the Austrians don't deny the tendency toward equilibrium, though they would deny such equilibrium is ever reached, or that obsessive studying and modeling of that never-never-land should trump the analysis of human choices in the real world.

Reason contributing editor Deirdre McCloskey is prominently featured. Monaghan highlights three major critiques of mainstream neoclassical economics from McCloskey: misuse of statistical significance tests, imaginary modeling with no connection to the real world, and "the arrogance of social engineering."

Hayek scholar Bruce Caldwell in the article looks at the problem of stifling orthodoxy this way: "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 niche marketing.

It would be easy to respond to Caldwell that if there were a worthwhile market niche in defying the neoclassical orthodoxy, surely someone would be doing it. But that would be falling into the silliest types of intellectual blindness that a pop-neoclassical obsession with equilibrium and perfect information can cause, best exemplifed in the joke about the econ professor walking across the quad with a student, who declares, "Look, Professor, a $50 bill on the ground!"

"Nonsense, dear boy," he says, not looking down. "If there were, someone would have picked it up already."

The whole article is worth a look.

NEXT: Outside In

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  1. Monaghan may have a valid point about the rigidity of the economics departments at schools such as Notre Dame and others. The message of the Notre Dame econ department is “conform to our neo-classical school of economic thought, or be gone from our sight.” But a similar indictment could be made of a wide variety of departments – political science, women’s studies, history, philosophy, etc. – at a wide variety of universities. There, the message is usually “conform to our ultra-liberal school of thought, or be gone from our sight. Oppressor!”

  2. This kind of approach, leads to stagnation and death. You can argue that is already happening in many institutions, after all prestige is a measure of past glories, not of those to come. If I remember correctly this process was described by Kuhn. (now I am really reaching back)

  3. Someone’s very likely to pick up the $50 bill sooner or later, but sometimes it takes later than sooner. But at least when you know that, you’re closer to the truth than people who don’t understand economics at all, who, metaphorically speaking, are continuously looking at every inch of the ground figuring there’s no reason a $50 bill wouldn’t be lying around somewhere….

  4. The basic problem with these arguments against
    “neoclassical” economics, whether from the Austrians, the Marxists, post-Keynesians, feminist
    or other hyphenated economists is that the terms
    are never properly defined.

    What exactly does “neo-classical” mean?
    Here’s some usual “rough” meanings assigned
    to it:
    1. Any economics which says capitalism is good.
    Yes, some critics lump you Austrians in with us. (Lerner? Arrow?)
    2. NEW-classical economics/Chicago School
    (MIT? Harvard? Berkley?)
    3. Ugh, math.
    4. Rational utility maximization with perfect
    information. (Akerloff? Rubin? Tversky?)
    5. Models which can be tested econometrically.
    (Game Theory?)
    6. Models which are too ‘removed from reality’,
    i.e. which cannot be tested econometrically.
    (non-French economics?)

    The quotes by Ken Arrow in the article are
    probably the closest to the way it really is.
    That is, none of the definitions above really
    adequately describe the type of economics
    that are taught in a “mainstream” department,
    except perhaps as a “foundation” or a “baseline”
    Well, the “ugh math” part is probably true, but
    that’s just something that folks will have to
    get over.
    As Paul Krugman once said “us nerds took the
    economics away from the literati and we are not
    planning on giving it back”.

    Oh, and I most definetely consider McCloskey
    a neoclassical, even if she often criticizes the
    discipline (sometimes exaggerating the extent
    of the problem for um, rhetorical, effect).
    That’s part of what makes it a science.
    (“If You’re So Smart…” is one the most
    pleasurable economic books I’ve ever read.
    Especially for one without equations).

    The bottom line is that the critics ARE mostly
    attacking a straw man (which is not being taught).


  5. The Chronicles article is a ridiculous list of
    all the varied complaints about economics, almost
    all by people who have no idea what they are
    talking about. It includes real howlers such
    as the notion that economics teaches that it is
    only rational to be selfish. Whoever wrote the
    article should be ashamed of themselves, as most
    of the criticisms could be debunked simply by a
    little study of standard undergraduate textbooks.
    All the rest could be debunked by spending a bit
    of time in an economics department talking to
    people there or by reading the leading journals.

    A couple of other remarks on specific points:

    1) We already have lots of disciplines that do
    literary studies. Why not have one that does

    2) Economics is the only politcally balanced
    social science. Getting rid of the math
    requirement would destroy that (very valuable)

    3) Notre Dame relegated its lefties to a separate
    department not because they are lefties, but
    because they are lefties who don’t publish
    very much.

    4) Picking on French economists is good sport.
    Many are mathematicians or statisticians at
    heart, which is why their output can seem
    rather souless and detached from reality
    at times. Nonetheless, they are good at
    what they do, and the tools they develop are
    useful for Anglo-American types who actually
    have some economic intuition.

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