June 16, 2015

Heterodoxy at the crossroads

Comment on Rhonda Kovac on ‘The Context-Dependency of Human (Economic) Behaviour’


Science can be seen as either a means to an end or an end in itself. It is pretty obvious that the Classics had a political agenda and used economic theory for pushing it. Marx's main theme was the power struggle in all its historical forms and theoretical economics was only insofar of importance as it gave scientific support to what in the strict sense has been sociology/political science/history.

What the Classics and Marx had in common was the claim that they were doing science. This claim has been rebutted with rather convincing arguments. The same holds true for Walrasian and Keynesian economics.

So it is a bit misleading to speak of economics without qualification. There is political economics and theoretical economics. Political economics pushes an agenda, theoretical economics figures out how the actual economy works. Theoretical economics is judged according to the well-defined scientific code true/false and nothing else.

In the history of economic thought political economics has been dominant and more or less successful in hijacking theoretical economics. As a result we have a lot of small-scale practical know-how and many dubious generalizations but no scientific knowledge about how the actual economic system works. It is plain to economists and non-economists alike that General Equilibrium Theory does not explain the real-world economy in the sense that physics explains the universe. The same holds for Marx's surplus/profit theory and other approaches. True knowledge is lacking in economics. By consequence, expert advice of economists has no scientific foundation.

You say — let's call it the Kovac Doctrine — “... the purpose of economics is human well-being, which is psychological in nature.” I think there is no doubt that you treat economics as a means to an end. So you are a political economist in the tradition of Smith or Marx.

I have no qualms with this. My point is: political and theoretical economics are similar on the surface but ultimately incompatible pursuits. Both are legitimate but they follow different procedures and goals. It is important, therefore, to keep them properly apart.

At the moment Heterodoxy is in a mixed state: Orthodoxy is attacked for methodological or political reasons or both. This confusion cannot last. There must be a clear decision between political or theoretical economics.

If Heterodoxy decides for theoretical economics it commits itself to the standards of material and formal consistency and to the goal of a paradigm shift. Theoretical economics does not commit itself to any political goal.

Since science is essentially a journey into the unknown it is unknown at the outset whether a paradigm shift promotes human well-being. It is also entirely unknown at the outset how new scientific knowledge is put into practice. For this reason theoretical economics refrains from any better-world or save-humanity promises.

In sum I think that the Kovac Doctrine and all its implications is acceptable for Heterodoxy as a political movement but not for Heterodoxy as a scientific endeavor.

Egmont Kakarot-Handtke