Academic Heterodoxy and Economics

Last week I participated in a workshop in Kiel, northern Germany. Before I comment on the workshop, I have to gush a little about how beautiful and homey the city of Kiel is. A large part of the city was destroyed by the war so it mostly has modern architecture, many open spaces and gardens, and wide streets. The place is generally quiet and laid back, with few people walking the streets, giving an impression of a sparsely populated city. Walking along the harbor (apart from the workshop itself) was the highlight of my stay there. It’s a major port for cruise ships operating the Baltic Sea (see photo above).

Now, the workshop: Researchers in Germany interested in applying computational models to problems in economics and finance converged here. Put some economists, mathematicians and physicists in the same room and give them some abstract models to play with… and you get the idea. This was a sub sub-field kind of workshop where everyone flowed on the same theoretical and methodological wavelength.

While sitting through the talks, I was struck by one thing about academia. Innovative scholars come up with new ways of understanding and explaining phenomena in the world. Sometimes these new ideas go against the grain, conflicting with theories that have long been established and accepted as rules of thumb in the discipline. Usually there is a lot of resistance from the ‘mainstream’ as people challenge the validity of these new ideas. Due to such resistance, scholars who adopt these new ideas may find it difficult to gain acceptance in the mainstream community of scholars. Their papers sometimes don’t get accepted into mainstream conferences, and don’t get published in mainstream journals. As a solution, these scholars come together to form a small community, almost like a support group, where they can freely share their idiosyncratic worldviews and develop their new philosophy. In some cases, they even create their own conferences and journals as their academic outlets. The hope is that over time, as they refine their theory and demonstrate its validity and robustness in explaining the world, they will gain some recognition and acceptance, and preferably, even trigger a paradigm shift as people grasp the supremacy of their theories over conventional wisdom.

Looking around the room, and listening to people speaking during the workshop, I identified these very characteristics of a budding unorthodox group of scholars. In fact, one of the questions debated was: how can we make our theory/approach/perspective relevant or acceptable in a world where contrasting theories dominate mainstream economics?

This brought me back to a fierce ongoing debate pitting ‘mainstream’ versus ‘heterodox’ economists, discussing the importance (or lack thereof) of introducing a new brand of economics into university curricular and policy making. This new(ish) brand largely castigates the ‘the holy trinity’ of neoclassical economics–equilibrium, rationality and greed. It advocates for analysis that considers markets as inherently inefficient, and always in a state of disequilibrium; actors who are heterogeneous, have limited cognitive abilities, and don’t have access to all relevant information in the market for decision making (also known as bounded rationality); and actors who are not purely self-interested and rational in the way they weigh costs against benefits. Proponents of this new brand of economics, dubbed the ‘heterodox’, feel that neoclassical economists need to budge a little more to accommodate a plurality of ideas in the discipline. So far it seems there some movement in this regard, but negligible in the larger scheme of scholarly work in economics. In the meantime, there are journals, conferences and workshops, professional bodies and graduate programmes dedicated to stimulating this brand of research. Like the one I attended.

I bet that every new academic trajectory starts this way, as a niche, and gains traction over time. Just like most successful innovations.

Very interesting discussions on this can be found here (growing list):

 

 

 

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