Sunday, July 29, 2012

"Heterodox" and mainstream, honey and vinegar

One more thought on the Nick Rowe post on heterodoxy and mainstream.

As you all know, I consider myself a mainstream economist - but I also find a lot of the self-styled heterodox people interesting. Part of this is that I find intellectual history interesting, but I also think there are genuinely neat ideas out there. I don't think I'm unusual on that point.

So the question is, if you happen to think those neat ideas are the most important ideas (I don't know if I'd personally go that far), how do you - as a self-styled heterodox economist - promote them?

You probably shouldn't do it by insulting mainstream economists and claiming they don't understand things or that they're ideologues.

You're probably better off saying "Hey look - I know you don't usually think of the time structure of production in your models, and that's fine because you're talking about other stuff. But we all know that in actuality some production processes take longer than others, right? Well if you think about it, lower interest rates should encourage longer production processes, all else equal. On top of that - if you have most producers operating with a particular length production process, when the interest rate is reduced a disproportionate share of new loans are going to go to new investors (obviously), and because of what we noted earlier those new investors are going to have longer production processes than the existing population of producers. That's kind of a neat little dynamic, isn't it?"

Say that to a mainstream economist. Or better yet - write it up formally.

That whole paragraph would be quite amenable to any mainstream economist. I've personally thought it was a "neat little dynamic" ever since I first heard about it, and I always enjoy reading new research on it (particularly empirical research).

Unfortunately this is usually not what we get. What we get is Austrians haranguing mainstream economists for (1.) not understanding that capital is heterogeneous, or (2.) not understanding that the interest rate coordinates intertemporal decisions. There are two problems here. First, neither is true. Second, both claims make mainstream economists think that the Austrian has a very weak grasp of economics. In a lot of cases that may well be true.

That's not to say one can't do critiques. Just know that if you're critiquing mainstream science you are by definition taking issue with the consensus of a lot of very smart people.

That makes me nervous. I can't personally think of any element of economic science where I think every mainstream consensus (because it's true - sometimes there are a couple mainstream answers) is wrong. I think it should make most people nervous.

But trying to dismantle the mainstream is a very different proposition from suggesting a neat idea to the mainstream that maybe doesn't get as much consideration as it deserves. There's a lot out there to think about. Lots of interesting things have been missed.

So why not present it that way? Why not use honey instead of vinegar?


  1. Dr. Michael Emmett Brady himself would be an example of a scholar who has a good idea of both orthodox and non-orthodox perspectives in economics. (According to personal information I received from him, he studied at the University of Southern California and at Claremont Graduate Institute before transferring to the University of California at Riverside to do his doctoral dissertation.) But out of curiosity folks, would you classify Dr. Brady's work as "mainstream" or "heterodox"?

    Also, though this is not always the case, one could make the argument that economists of both heterodox and orthodox stripes aren't really good mathematicians.

    Another interesting thing of note would be that many mathematicians today don't seem to be all that interested in economics, despite the fact they have the training to do good models and improve on the models of economists themselves! See the following link for more.

    1. Is there a reason - other than Brady's own claims - that you say economists aren't good at math.

      This is not my experience at all.

      Do you consider your own professors lacking in this area? I am concerned that Brady has particular bones to pick and so is saying things that you are accepting too uncritically.

    2. Actually, I've talked to other people besides Dr. Brady on this matter to see if this was true or not. When it comes to proofs, mathematicians have criticised economists either for not being able to work through proofs, or for being ridiculous with their logical foundations. (Look at the theorem/lemma ones.) I do not believe everything Dr. Brady says, Daniel Kuehn. I do check to see if he is correct or not. I have checked his claims that he may be the only one alive to have read the entire Treatise on Probability, for example.

      This is not true. There are people who have read the book properly and understand it, but they belong to a small minority of specialists. It's just that it seems that Brady is the only one who has taken the time and the effort to point this out extensively and more vocally than others. (In fact, ANY professional mathematician who has read Boole and Keynes AND understood both - would be horrified by the misinformation and lack of understanding of Keynes's Treatise on Probability that has accumulated in the academic economics literature.)

      Not all of the professors I have encountered are lacking in this area. There are ones quite capable in mathematics. Really Daniel, it's more of a fact that economists simply aren't really good mathematicians in comparison to certain other professions, like engineers or physicists or mathematicians themselves.

    3. re: "Really Daniel, it's more of a fact that economists simply aren't really good mathematicians in comparison to certain other professions, like engineers or physicists or mathematicians themselves."

      That is probably true - I'd agree with that. But that's a very different proposition from saying that they aren't good at math!!! I wonder about engineers. You're probably right, but I wonder if - like economists - they're good at certain kinds of math.

      I would not trust a mathematician to evaluate the foundations of economic models except for simply whether the math is correct (and I'm guessing it usually is so that's a moot point).

    4. So are you saying that Fischer Black or Benoit Mandelbrot had nothing to constructive to say with regard to finance or econometrics? :-P

    5. Really Daniel, it's more of a fact that economists simply aren't really good mathematicians

      I was taught graduate micro & mathematical economics by mathematicians. They seemed pretty competent. But anyway, do they become bad mathematicians as soon as they start working on economics, I wonder, or do they start working on economics because they're bad mathematicians? Perhaps Dr. Michael Emmett Brady has some thoughts...

    6. Really? Were they professional mathematicians? Also, where did you go to graduate school Vimothy? You seem to be like Daniel Kuehn, more of a mainstream economist.

      Also, what do you think of the work of Dr. Michael Emmett Brady? Do you think Dr. Brady is "mainstream", or "heterodox"? I personally think he's neither. But clearly the fact Dr. Brady has had a fairly extensive mathematical training does influence his views of the economics profession...

    7. They both studied mathematics at undergrad level. One had a PhD in maths and the other in theoretical physics. Both currently have chairs in the econ department.

      I don't know anything about Brady. Presumably he is a maths or physics prof and is unimpressed at the efforts of economists in this direction?

      Either way, my impression is that there are a lot of mathematically competent people working in economics. And of course, some people who are not. But this is probably true of many fields.

    8. I never meant to say that all economists were poor mathematicians, just that they often aren't as good as professional mathematicians themselves.

      Dr. Brady isn't a physics professor or a mathematics professor, but he's had graduate-level training in mathematics, so I can see how it would influence his view. His doctorate is in Economics.

    9. "just that they often aren't as good as professional mathematicians themselves."

      And I bet most professional mathematicians are not as good at economics as most professional economists. And you know what else? Most professional biologists are not as good at basketball as most NBA players.

    10. Is Blue Aurora actually Dr. Brady?

  2. (new reader here)
    "That whole paragraph would be quite amenable to any mainstream economist."
    Out of curiosity, are you aware of any existing work that tries to model this (or ABCT in general) formally? I'm pretty critical of ABCT (probably because I've participated in quite a few discussion with libertarians who reduce the topic to ABCT = holy truth = Fed is evil), but I agree that such formal model could be interesting.

    Regarding the discussion about math, the claim that economists are bad mathematicans is just silly, Blue Aurora. It's not their purpose to be mathematicians! Mathematics is just a tool, and there is large variance in level of mathematical sophistication between economists, just as there is large variance among physicists or engineers. Some economists use linear regressions, others use differential topology or stochastic differential equations or whatever, and there's nothing wrong with that, as long as their tool is appropriate for their job.

  3. I'm in the process of trying to incorporate ideas from Austrian economics and mainstream macroeconomics. It's not easy. Things become quite complicated fast. I think it's worthwhile in the end though. What's needed is a sort of overall model that describes what is possible under loose assumptions, then some empirical work to find out which assumptions can be tightened up to make something simpler.

  4. I did a Graduate Diploma in Economics. But I am not sure I ever read a textbook cover to cover. I have read a lot of economics though. (I even had a go at reading Human Action, but that was years ago and I did not get all the way through.)

    But I guess my Grad Dip Ec probably means I pass Nick's test by a process of acceptable substitution. :)


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