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Three
Arguments for Pluralism in Economics1
J. E. King2 (La Trobe University, Australia)
© Copyright 2004 J. E.
King
Is there a single correct alternative to neoclassical economics? The
purpose of this short paper is to suggest that there is not, and to show that
this fact is increasingly recognized by eminent practitioners of several
varieties of heterodox economic theory.
For most mainstream economists, of course, there is only one way to do
economics. It requires the construction of a model, collection of relevant
data and subsequent testing. The model itself must be consistent with the fundamental
principle of methodological individualism: that is to say, it must be based
on the assumption of optimising behaviour by rational agents. The tests must
employ the most advanced econometric techniques rather than – or at least in
addition to – descriptive statistics. For the defenders of mainstream
economics these simple rules are what make it a science, which is envied and
increasingly imitated by the practitioners of less favoured disciplines in
the areas of management and social studies (Lazear,
2000).
This is a seductive story, and it is
widely believed, inside and outside economics (Fine, 2000). When applied to
the more disreputable branches of business ‘thought’ there is probably
something to be said for it. If, however, it is taken as mandating the
liquidation of sociology, political theory, social psychology and
anthropology as autonomous bodies of scholarly knowledge it is obvious
nonsense. As a methodological prescription for economics it is, to say the
least, very questionable. In what follows I examine three counter-arguments,
each making a different case for pluralism in economic thought. Two of the
authors I cite are followers of the Cambridge economist Piero
Sraffa, one is an institutionalist,
and two are Post Keynesians
Apart from Pierangelo Garegnani,
Heinz Kurz and Neri Salvadori are the two most prominent and tenacious
defenders of modern-day ‘classical’ economics, by which they mean the study
of the laws governing the pace of accumulation and the way in which output is
distributed between the social classes, by means of a rigorous long-period
analysis of a competitive capitalist economy. In a recent collection of
essays they turn, rather surprisingly, to the defence of pluralism. Economic
reality, they note, is widely believed to be very complicated. The questions
that economists ask are therefore inherently difficult, and it is unlikely
that they have simple answers. Since no theory can consider all relevant
factors in any particular economic context, there is a strong prima facie case for theoretical
pluralism. Different theories will often be complementary rather than
alternative, so that ‘to seek dominance for one theory over all the others
with the possible result that all the rival theories are extinguished amounts
to advocating scientific regress. To paraphrase Voltaire: in a subject as
difficult as economics a state of doubt may not be very comfortable, but a
state of certainty would be ridiculous (Kurz and Salvadori, 2000:237). Even classical theory has its
limits. Kurz, in particular, has long acknowledged
that it must be married to Keynesian macroeconomics if a comprehensive
understanding of capitalist society is to be attained (Kurz,
1990).
In his latest book the well-known institutionalist
Geoff Hodgson argues that the notion of a single, ‘general’ theory applicable
to human behaviour in all societies, at all points in time, is a dangerous
delusion that has led astray not only neoclassical economists but also many
heterodox theorists. Failure to appreciate the need for historical
specificity in economic theorising has not only blighted the work of several
generations of general equilibrium theorists, but also reduced the analytical
achievements of some of their most vocal opponents, including Clarence Ayres,
John Maynard Keynes and Joan Robinson. One does not have to agree with all
the names on Hodgson’s charge-sheet (see King, 2002) to accept the truth of
his contention that ‘there are several problems with general theorizing in
the social sciences. One is of analytical and computational intractability.
Facing such computational limits, general theorists typically simplify their
models, thus abandoning the generality of the theory. Another related problem
with a general theory is that we are confined to broad principles governing
all possible structures within the domain of analysis. In practice, a
manageable theory has to confine itself to a relatively tiny subset of all
possible structures. Furthermore, the cost of excessive generality is to miss
out on key features common to a subset of phenomena’ (Hodgson, 2001:16).
Hodgson’s own proposal for the reconstruction of economic theory, putting the
history back, is innately and profoundly pluralistic (ibid.:chapters 18-23).
The Post Keynesians Victoria Chick and Sheila Dow make an equally powerful,
if largely implicit, case for pluralism in their penetrating analysis of what
is implied by mathematical modelling in economics. Formalising an argument is
not, they suggest, an unambiguous improvement, as neoclassicals
believe. On the contrary, it is a matter of costs and benefits. Formalism
entails a particular view of the world, namely that it displays event
regularities strong enough for it to approximate to a closed system. It also
requires that the meaning of economic terms be fixed rather than
context-specific, and that these terms are separable rather than internally
related. If these assumptions are rejected, classical or formal logic is
inapplicable and Keynes’s ‘ordinary logic’ may be needed in its place.
Ordinary, common-sense or human logic ‘generates knowledge which is
imperfect, partial or vague’, and provides ‘reasoned grounds for belief which
are nevertheless not conclusively demonstrable’ (Chick and Dow, 2001:711,
714). Economic statements may therefore be true in some historical and
institutional circumstances, but false in others. Here Chick and Dow share
common ground with Hodgson, since their argument casts doubt on ‘the
possibility of finding immutable laws applicable to, say, feudalism and
capitalism alike, or even to capitalism in various stages of its development.
From this perspective, a theory can be “right” at one time and become “wrong”
(more accurately, outdated) at another. The notion of imbuing a closed
theoretical system with meaning is thus not an objective procedure; it
requires the exercise of judgement’ (ibid.:709). In this way their
critique of formalism leads them to pluralism, not just in substantive theory
but also in method, since Keynes’s ordinary logic ‘supports a methodology
which encompasses a range of methods in order to build up knowledge’ (ibid.:719;
cf. Dow, 1997).
Note that Chick and Dow do not completely deny the legitimacy of formalism in
economics, in all circumstances, for all purposes. On the contrary: some
problems lend themselves to closed-system thinking and cry out for precise,
formal solutions. They argue only that it is a serious mistake to suppose
that all economic problems are of this type. They would certainly disagree
with Kurz and Salvadori
on the size of the contribution that can be expected from formal reasoning.
The two Sraffians, Kurz
and Salvadori, follow Garegnani
in placing great emphasis on the so-called ‘core’ of classical economic
theory, which consists of propositions that can be established with certainty
about the relationships between inputs, outputs, prices and distributional
variables in a closed economic system where the same rate of profit is paid
in all industries (Kurz and Salvadori,
1995). The two Post Keynesians, Chick and Dow, see very little point in
exercises of this type, while Hodgson, the proponent of institutional
economics, seems to deny their validity altogether. Certainly he shows no
sympathy for those self-proclaimed institutionalists
who use prey-predator models, chaos theory and similar sophisticated
mathematical tools derived from the biological sciences.
If pluralism does not (quite) rule out formalism, what does it exclude?
Unqualified relativism, for one thing; logical incoherence, for another.
Hodgson is the most outspoken in denying that ‘anything goes’, and the most
sternly critical of postmodernist claims in this regard. ‘An acceptable
policy of pluralism’, he suggests, ‘concerns the policy of institutions
towards the funding and nurturing of science. Such a policy involves “pluralism
in the academy”. But it would not extend to the individual practices of
science itself. This confusion, between encouraging contradictory ideas in
the academy and encouraging them in our own heads, is widespread in
post-modernism….There is much to be said for tolerance of many and even
antagonistic scientific research programmes within an academic discipline or
university. But we should not tolerate the existence of inconsistent ideas
within our own heads. The policy towards science must be pluralistic and
tolerant, but science itself must be intolerant of what it regards as
falsehood…Any failure of social science to erect an adequate and coherent
general theory is not rectified by applauding incoherence’ (Hodgson,
2001:35). Horses for courses, as Geoff Harcourt has always put it (see Comim, 1999), but they must each have four legs and a
jockey and proceed anti-clockwise around the course.
Sheila Dow has also defended the principle of consistency against its
postmodernist and constructivist opponents. Thus she proposes that a clear
distinction be drawn between ‘pure’ and ‘modified’ pluralism. To be a pure
pluralist entails ‘a refusal to appraise methodologoies
and thus also [a refusal] to advocate one method rather than a plurality’.
This, she maintains, offers ‘no scope for scientific (or indeed any)
discourse’. According to modified pluralism, however, ‘no one system of
knowledge can claim to have captured reality; each is partial, reflecting one
vision of reality. Each school can support its approach to knowledge with
reason while recognizing the legitimacy of alternative approaches….World-view
and theory of knowledge cannot be eradicated; yet recognition of differences
at this level allows for more reasoned debate over appraisal criteria and
analysis of different methodologies’ (Dow 1996: 45-6).
Kurz and Salvadori also
insist on the need for logical consistency in economic theorising. For them
this criterion is enough to rule neoclassical analysis out of the race, since
its conception of capital is fundamentally flawed. If the ‘principle of
substitution’ is central to mainstream theory, they argue, it should be
applied in a logically consistent manner. In the long period, this means that
an increase in the price of one input induces a decrease in the quantity of
that input per unit of output. ‘All propositions of the theory can be traced
back to this basic idea. If it is not true in general, the theory appears to
be in trouble’ (Kurz and Salvadori,
2000:238). But it has been known since the mid-1960s that it is, in general,
false when applied to the collection of heterogeneous commodities known as
‘capital’. From a quite different perspective the Post Keynesian Paul
Davidson has criticised what he terms the ‘babel’
of New Keynesian economics, in which market imperfections that prevent
downward price and wage flexibility are denounced as the fundamental cause of
involuntary unemployment while in the same breath a falling price level
(‘deflation’) is decried as a serious macroeconomic evil (Davidson, 1999; compare
Solow, 1997 and Taylor, 1997 for graphic examples
of this incoherence). Horses for courses, once again, but all four legs must
be pointing in the same direction.
No single case for pluralism in economics emerges from this brief discussion,
and indeed it would be a cause for concern if one had. Similarly, there is no
single version of ‘unscientific’ heterodox economics to stand in opposition
to mainstream economic ‘science’. Sraffians, institutionalists and Post Keynesians do quite different
things, often in radically different ways – as do Marxists, social
economists, feminists, greenies and other schools of political economy. As Abbie
Hoffman is supposed to have said, in the course of the 1968 Chicago
conspiracy trial: ‘Conspire? We couldn’t agree on lunch’. But they did agree
to keep on talking, which in the last resort is what pluralism is all about.
Notes
1.This article previously appeared in the Journal of Australian
Political Economy, No 50, Dec 2002, a special issue on post-autistic
economics and the state of Political Economy.
See the JAPE website at www.JAPE.org
2. I am grateful to Sheila Dow, Heinz Kurz and
Frank Stilwell for comments on an earlier draft.
References
Chick, V. and Dow, S.C. (2001) ‘Formalism, logic and reality: a
Keynesian analysis’, Cambridge Journal
of Economics 25 (6), November, pp. 705-21.
Comim, F. (2000) ‘Forms of life and “horses for
courses”: introductory remarks’, Economic
Issues 4(1), March, pp. 21-37.
Davidson, P. (1999) ‘Keynes’ principle of effective demand versus the bedlam
of the New Keynesians’, Journal of Post
Keynesian Economics 21(4), Summer, pp. 571-88.
Dow, S.C. (1996) The Methodology of
Macroeconomic Thought: A Conceptual Analysis of Schools of Thought in
Economics. Cheltenham, U.K. and Northampton, MA: Elgar.
Dow, S.C. (1997) ‘Methodological pluralism and pluralism of method’. In A. Salanti and E. Screpanti (eds),
Pluralism in Economics: New Perspectives
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as history of economic thought’, History
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Hodgson, G. M. (2001) How Economics
Forgot History: The Problem of Historical Specificity in Social Science.
London and New York: Routledge.
King, J.E. (2002) Review of Hodgson (2001). Australian Economic History Review,
forthcoming.
Kurz, H. D. (1990) Capital, Distribution and Effective Demand: Studies in the
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Kurz, H.D. and Salvadori, N. (1995) Theory
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Press.
Kurz, H.D. and Salvadori, N. (2000) ‘On critics and protective belts’.
In Kurz and Salvadori (eds), Understanding
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York: Routledge, pp. 235-58.
Lazear, E. (2000) ‘Economic imperialism’, Quarterly Journal of Economics 115(1),
February, pp. 99-146.
Solow, R. M. (1997)‘Is there a core of usable
macroeconomics we should all believe in?’ American
Economic Review 87(2), Papers and proceedings, May, pp. 230-2.
Taylor, J.B. (1997) ‘A core of practical macroeconomics’.
American Economic Review 87(2),
Papers and Proceedings, May, pp. 233-5.
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SUGGESTED
CITATION:
J. E. King, “Three Arguments for Pluralism in
Economics”,
post-autistic economics review, issue no. 23, 5 January 2004,
article 2, http://www.btinternet.com/~pae_news/review/issue23.htm
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