On Heterodox Economics and Reviews

Someone just sent me a never-read review of a series that I wrote for The Social Liberal Forum on economics and philosophy of science. Like Oscar Wilde said, the only thing worse than being talked about is not being talked about. In that sense I was glad that someone took the time to read what was a very long three-part blog post, but mildly disappointed that Mr Green didn’t engage with it in an appropriately generous spirit. A short defense:

i) It seems weird to say that one only likes George Cooper when it comes to heterodox economics when the rightly-lauded Mr Cooper spends much of “The Origins of Financial Crises” (a really great, readable book on 2008 and monetary policy) explaining the Financial Instability Thesis of Hyman Minsky! It’s somewhat like saying that you like Gary Becker but think Milton Friedman is rubbish!

ii) In terms of the family tree of heterodox economics, the parting of the ways with Samuelsonian Keynesianism is still the Cambridge Capital Controversy, but the mater familias is probably Joan Robinson and pater familias is Hyman Minsky. Kind of strange to talk of Heterodoxy without mentioning the thinking of either.

iii) If there were a part 4 of the series, perhaps I should have outlined more about institutional economics and the limits of mathematical economics of the more boring Krugman Keynesianism. But any engagement with Heterodoxy (beyond the short sketch in my own article) would quickly revel the differences. Certainly one should probably do that little homework if one is then going to dismiss whole swathes of economic thinking and paradigms.

iv) One of the other canonical heterodox economists was Wynne Godley (the man whose 1992 LRB essay on the single currency still explains the problem with the euro better than anything else!). Martin Wolf- somewhat wrongly identified as “orthodox”- has been touting Godley’s sectoral balances framework ever since the Financial crash. Adair Turner has adopted a lot of the Heterodox thinking about MMT, Sovereign money etc.

v) Keen and Wolf certainly share some ground but saying that the former is only saying the same thing as the latter is very odd. I don’t think either would agree with that. Certainly it deserves longer than a casual glance at one article on China.

vi) The role of savings and investment and how money is created and credit works is a HUGE difference between Keen and company and Krugman and Stiglitz. Any review which does its homework has to really dive into this.

vii) This whole “what do they want to replace it with” meme is really odd. It’s kind of like the Woody Allen joke about the two old ladies where one says “the food stinks!” and the other one agrees with “and such small portions!” Heterodox economics looks into the role of institutions, how it interacts with human psychology (Minsky builds on Keynes’ “animal spirits” here), how money works and modern monetary theory, the role of private debt etc. The fact that there isn’t a reductive mathematical economics to slide in is a feature, not a bug.

viii) The review of Naked Capitalism is quite odd. It engages pretty widely, has a range of different contributors, and has all kinds of tones from euphoric to caustic!

ix) It’s a little weird to say “I don’t really know much about it, but it doesn’t say anything!” One really needs to read some Wynne Godley, L Randall Way, Minsky, Keen, Varoufakis, the Real World Economics Review, Stephanie Kelton, Dean Baker, The Levy Institute at Bard etc before one can just dismiss people who had a much better track record in predicting the Great Recession and the demise of the euro and other major events that mark our lives.

x) Keynes didn’t use mathematical models which might compete with Krugman or Mankiw. He’s still the most insightful economist who has ever lived.

Although I didn’t exactly agree with his review, thank you to Mr Green for taking the time to read and engage with some of my ideas. Better a disappointing review than no one reading at all!

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