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Revisiting The
Crisis of Vision in Modern Economic Thought*
Robert
Heilbroner and William Milberg
(New
School University, New York)
© Copyright 2002 Robert Heilbroner and William Milberg
In the six years since our book, The Crisis of Vision in Modern
Economic Thought, was published in English, there are hints of some
important methodological developments within (and outside) the mainstream of
economic thought. While these
developments may temporarily obscure the role of vision in economics because
of a sense of consensus they may
create, over the longer run the issue of vision will likely come to the
forefront of economic debate. But before
we try to predict the future of economic ideas, let’s take a step back to
look at their recent history.
Over the past five to ten years we have observed a distinct empiricist turn
in economic research. Appeals to
empirical observation rather than theoretical (i.e. mathematical) knowledge
are a reaction against the “New Economics” that developed in the late
1970s--what we describe in The Crisis of Vision in Modern Economic Thought
(Chapter 5) as an “Inward Turn”. The
New Economics was itself a reaction to the era of general equilibrium, in
which economic knowledge was understood to progress through mathematical
proofs of the existence, stability and uniqueness of a general equilibrium
set of prices and quantities--with appeal to successively weaker sets of
assumptions. The New Economics was a
response to the widely-perceived irrelevance of the general equilibrium
approach. The New Economics reversed
the hypothesis generation process from a strict hypothetico-deductive
formula to a “creeping inductivism,” in which
casually observed phenomena were explained within models of individual
rational choice by the addition of such deviations from the competitive ideal
as imperfect competition, increasing returns to scale technology and
strategic behavior by firms and states. The “results” generated by the New
Economics models were (by intent) more relevant. But they were less robust. Robustness had been the main measure of the
progress of economic theory in the general equilibrium era. In the New Economics, robustness was
considerably less important—highly stylized, unrobust
results became acceptable as long as the results were deemed (usually a priori) interesting or relevant for
policy making.
But the lack of robustness was a problem for those interested in drawing
policy conclusions from the models.
Equally important was the growing sentiment that the models were ad hoc and could be used to model any pre-determined outcome. A cynicism
toward theory of any sort set in, and a quiet backlash has ensued.
The response to the weaknesses of the New Economics in the late 1990s was an
empirical turn, something that we did not predict as we wrote The Crisis
of Vision in Modern Economic Thought just six years ago. In this era, hypotheses are often rooted in
simple economic logic, intuition, or even in casual response to current
events, and emphasis is placed instead on the sophistication of the
measurement of variables and correlations among them. While the New Economics
was concerned with the ex post
construction of rational individual choice theoretical foundations, much of
the recent mainstream work makes no appeal to a formal mathematical model but
moves quickly into sophisticated measurement and statistical analysis.
The new empiricism has a double edge.
On one side, it constitutes a welcome appeal to relevance and could be
considered “pragmatist” in the longstanding American philosophical tradition
of Pierce and Dewey with its emphasis on inductive and contingent
knowledge. David Colander has lauded
the arrival of a more pragmatic economics, going so far as to describe it as
“the death of neo-classical economics.”
On the other side, the methodological development constitutes a rejection of
theory, along the same lines that Koopmans so
vehemently criticized Burns and Mitchell in his 1947 review article
“Measurement Without Theory.”
Curiously, the tendency to pragmatism in mainstream economics comes at a time
when a number of other schools of thought also claim pragmatism as their
philosophical foundation. Some groups,
including Friedmanian monetarists and American institutionalists have a long tradition and a
longstanding claim as representative of pragmatist thought applied to the
field of economics. Others, including
feminist economics and complexity theory, are relative newcomers on the scene. Given their common philosophical moorings,
there may be the making of a new consensus in economics. Such a consensus would no doubt be tenuous,
but if it could hold together, the possibilities for exciting new research
and debate and policy would be great. Economics would be more pluralist than
it has been in the past.
Does the recent methodological consensus imply the end to the crisis of vision in modern economics? Whatever methodological consensus may
arise, the retreat from theory ultimately leaves unresolved the crisis of
vision that we describe in The Crisis of Vision in Modern Economic Thought. If anything, as widely different tendencies
in economics vie for the mantle of pragmatism, it is likely that the question
of vision will rise to the surface instead of looming in the background of
economic discourse. This is an
optimistic prediction for the quality and depth of future debate among
economists. The history of the
crisis—revealed in our book—indicates that other, less rosy, outcomes are
also possible.
Authors’ Note
This short essay is being published in Japanese as the preface to the
forthcoming Japanese edition of our book The Crisis in Vision in Modern
Economic Thought, Cambridge University Press, 1996. We are grateful to the Japanese publisher
for granting permission to publish it in English in the Post-Autistic
Economics Review.
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SUGGESTED CITATION:
Robert Heilbroner and William Milberg, “Revisiting The
Crisis of Vision in Modern Economic Thought”, post-autistic economics
review, issue no. 16, September
16, 2002, article 5. http://www.paecon.net/PAEReview/issue16/HeilbronerMilberg16.htm
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