No reader of this blog needs reminding that positivism retains a powerful grip on development studies. Not because every theorist, researcher and department carries a card or flies a flag self-identifying as positivist, but because positivist concepts of what knowledge is and how it is assessed continue to dominate, in so far as these have captured the concept of 鈥榮cience鈥�. As Ingrid Kvangraven鈥檚 establishes, one need look no further than the dominance of random control trials (RCTs) for evidence of this. While there are many specific problems one might identify with RCTs, such as the capture of policy by what can be researched using RCTs rather than by what may be more significant as structural causes of poverty, perhaps the fundamental one is the model form, which stands behind RCTs. It is this that lends authority to RCTs, as it does to many other branches of economics.

Tony Lawson is probably the best known critic of mainstream mathematical modelling and in a he reprises his argument. Lawson is a 鈥榗ritical realist鈥� and 鈥樷�� and his, and other critical realists鈥� argument, is deceptively simple. All knowledge claims involve assumptions about the nature of the world, what and how it might appropriately be investigated. Whether this is acknowledged or not this presupposes a theory of reality or being (an ontology) and an orientation to knowledge (an epistemology). Philosophy thus has an important role in making these assumptions explicit and in exposing them to critical scrutiny to address their plausibility, consistency etc. Such philosophy does not replace the sciences or social sciences, but rather 鈥榰nder-labours鈥� for or supports their endeavours and is itself subject to critique in this context.

According to Lawson, much of modern economics is built around mathematical modelling. This modelling looks for patterns, but targets isolated sets of enduring relations as the significant aspect of socio-economic phenomena (though this can be more or less sophisticated as maths). As such, it presupposes human activity can be adequately captured by a method which assumes an 鈥榠ntrinsic鈥� and 鈥榚xtrinsic鈥� closure i.e. that the conditions that underpin the relation and which form the context of the relation are sufficiently unchanging for the relationship to endure (as a significant quantified outcome). However, these conditions rarely do endure since reflexive agents can alter their thinking, social structures are continually changing in smaller and larger ways and in any case, human activity is culturally variable as well as historically evolving.

The kind of mathematical modelling that dominates either cannot capture or distorts the nuance of socio-economic activity and encourages researchers to focus on quantified outcomes rather than the underlying complexity of shifting conditions that produce outcomes, which may or may not be regular for some period of time and in some place. For Lawson, this real world complexity of cumulative change does not contradict the idea that we live in capitalist societies which have 鈥榳ays of working鈥� because capitalism cannot and does not stand still and is not homogeneous in a way that the modelling can capture.

In the meantime, modelling leads to arrogated authority or power to influence policy, massive waste of resources, and dominance of skillsets which do not encourage appropriate engagement with socio-economic reality (and the problems therein). This is coupled with a curious lack of 鈥榚xplanatory success鈥�, which becomes most obvious when systems are radically changing or collapsing i.e. in crisis. Moreover, the discipline is never properly held accountable for explanatory failure precisely because of the hold mathematical modelling has over the idea of science 鈥� alternatives are dismissed as unscientific, lacking in rigour etc., rather than refuted.              

There are of course, many alternatives to positivism (and its legacy) in development studies, inspired by post-structuralism, social constructivism, new materialism etc. Lawson鈥檚 underlying point is not that anyone and everyone must be a critical realist, but rather that everyone鈥檚 work benefits from philosophical engagement, what he terms doing 鈥榮ocial ontology鈥�. This is quite different than what much of contemporary disciplinary philosophy has become 鈥� disengaged from the questions that matter to people and using technical methods that prevent general understanding (much like economics itself).

The general idea that methodology and philosophy are important components in a progressive approach to economics education is, however, well established and is promoted by and and many other pluralist initiatives and organizations. For example, it is intrinsic to the annual postgraduate workshop and to the many published works of Andrew Mearman, Danielle Guizzo and Sebastien Berger (see for example ). It can also inform work on , as the of Wendy Olsen illustrates. Olsen鈥檚 work, for example, pays particular attention to power, voice and participation in addressing development issues.

Nowhere is the explanatory failure of mainstream economics more evident than in its models of climate change. As various critics have , William Nordhaus was recipient of the Swedish Bank Memorial 鈥楴obel Prize鈥� in 2018, despite producing models that systematically underestimate the impacts of climate change and ecological breakdown (suggesting, for example, an optimal warming of 3-4⁰C 鈥� quite at odds with both the consensus among Earth system scientists as well as the subsequent Paris Agreement).  Mainstream economic textbooks and theory has been a major source of over the last 30 years and have thus contributed to our 鈥樷��.

While this is a 鈥� it is particularly acute for less wealthy countries. Not only are they liable to be less able to address climate change and ecological breakdown, but there is also a continual threat that post-Paris development policy will try to achieve necessary reductions in global resource and energy use by sacrificing the opportunities for future standards of living of the poor in order to maintain as much of the standards of the rich as is possible. While the Paris Agreement talks of 鈥榡ust transitions鈥� and actioning the Sustainable Development Goals (SDGs) in equitable ways, little of this seems rooted in reality.

The planet is going to force difficult decisions on us within a few short years and 鈥樷�� alternatives finesse a core dilemma that others in social and are at least recognising as central concerns. Without due attention to the of under and over development there seems little prospect of just transitions. As Hubert Buch-Hansen and Peter Nielsen鈥檚 recent critical realist inspired illustrates, economics can be on the right or wrong side of this existential challenge. Their textbook takes Lawson鈥檚 primary argument and develops it in the context of economics as a post-positivist evidence-based but not 鈥榲alue-neutral鈥� social science. Philosophy as if the world mattered.

Jamie Morgan is a Professor in the School of Economics, Analytics and International Business, Leeds Beckett University Business School, UK. j.a.morgan@leedsbeckett.ac.uk.

Photo: Tony Lawson, by .

The current pandemic is a human tragedy on an enormous scale, not only in terms of death and illness but also in loss of employment, disruption to education and increased anxiety. Perhaps of most concern to politicians, the various restrictions put in place to reduce the spread of COVID-19 have had large negative effects on national and regional economies.听

As a result, many leaders have opted to 鈥榬e-open鈥� their economies prematurely, partly since economic performance affects electoral cycles. In some cases there have been disastrous consequences to such loosening of social distancing restrictions, with spikes in infections in various countries or states. This has led to a discussion of a false dichotomy – between protecting human life and reviving the economy.听

This dichotomy is false for several reasons. At the most basic level, if large parts of the population get infected and either die or are unable to work, this would not bode well for the economy either. But more fundamentally, what we think of as 鈥榯he economy鈥� is really broader than just profits and asset values.听

One clear indication of this ontological mismatch is the fact that, while GDP is shrinking and unemployment is rising in many countries, stock markets are on a euphoric roll. Unlike their plunges in the face of previous shocks –听 such as the dot.com and subprime mortgage crises – stock markets rallied at an . Paul Krugman quipped that, rather than following economic fundamentals, the stock market is moved by a combination of .

But there is a deeper and older explanation for this spurious puzzle. Our current understanding of 鈥榯he economy鈥� is rooted in a relatively modern definition by Lionel Robbins in 1932: 鈥渢he allocation of scarce means that have alternative ends鈥�. This is a fundamental notion for neoclassical economics, which focuses on the market as intermediating the supply of (scarce) resources among demand from alternative buyers based on prices. This worldview sees consumers as seeking to maximize their 鈥榰tility鈥� (an unobserved quantity which roughly represents satisfaction), while firms who produce the goods are maximizing their profits.听

But how can firms maximize profits if consumer spending is tanking due to business and travel restrictions? Indeed, many small as well as large corporations have gone bankrupt during the pandemic. But the process of financialization in recent decades has broken the link between productive investment (making tangible things for profit) and generating revenues. More and more firms are making their profits from financial products and services, and increasing shares of countries鈥� economies and are coming from pure speculation in real-estate or financial markets.听

This disconnect between the 鈥榬eal鈥� and the financial parts of the economy came to the fore during the 2007-8 global financial crisis, as hyper-speculation in the financial sector caused enormous damage on the real side of many economies. So what is ultimately the relationship between finance and the economy?听

But how can firms maximize profits if consumer spending is tanking due to business and travel restrictions? Indeed, many small as well as large corporations have gone bankrupt during the pandemic. But the process of financialization in recent decades has broken the link between productive investment (making tangible things for profit) and generating revenues. More and more firms are making their profits from financial products and services, and increasing shares of countries鈥� economies and are coming from pure speculation in real-estate or financial markets.听

This disconnect between the 鈥榬eal鈥� and the financial parts of the economy came to the fore during the 2007-8 global financial crisis, as hyper-speculation in the financial sector caused enormous damage on the real side of many economies. So what is ultimately the relationship between finance and the economy?

Aristotle, in his book on Politics, distinguished between two kinds of activities. Chrematistike (蠂蟻畏渭伪蟿喂蟽蟿喂魏萎) – sheer money-making – was considered morally inferior to Oikonomia (慰峒拔何课轿课嘉�) –听 the concern for morally adequate individual and public household management. In fact Aristotle cautioned against separating financial activities from public (political) oversight, as this Chrematistic logic leads to . By contrast, the desirable Oikonomic processes promote overall well-being in social, ecological, financial and even inter-generational dimensions.听

While the recent stock-market rally is a pure example of Chrematistics, another trend is actually an example of how the holistic concept of Oikonomia is making a (partial) come-back due to the virus-related restriction on economic activity. Pandemic-related reductions in demand for fuel, air-transport, industrial production and car transport have all contributed to a greater-than-expected drop in CO2 emissions in the past few months. Historically, emissions move in tandem with GDP, but . This is due to the fact that reductions in emissions in the current crisis are concentrated in sectors which emit more CO2, proportionally, than others, leading to more reductions in emissions than those resulting from other shocks. This divergence of emission and growth opens up the possibility of policies to delink our economies from fossil fuels.

But CO2 emissions are not the only things that have dropped. People commute less, resulting in less traffic and car accidents. Families spend more time together, strengthening social bonds. Consumers spend more locally, invigorating small businesses and communities. And while many people have lost their jobs, some countries support citizen incomes to maintain both livelihoods and overall demand (thus indirectly helping businesses).听

Taken together, these positive side-effects of an otherwise tragic situation suggest that this crisis is teaching us a lesson. Instead of an unlimited pursuit of profit, our economy could (and according to Aristotle, should) be focused on meeting basic needs, cultivating social relationships, and even doing better by our planet. In fact, recent suggests that zoonotic diseases like COVID-19 are directly related to the encroachment of the global economy on ecosystems (which leads to loss of habitat and transmittal of viruses from animal to human in previously untouched areas).听

So in a way, the fact that (chrematistic) stock-markets rally in the face of human and economic (oikonomic) decline is not surprising. We have let our greed go wild at the expense of human, social, economic and ecological well-being. It is time to return to the original meaning of Oikonomia, enhancing the well-being of people and the planet alike.听

Dr.听Jacob Assa, The New School for Social Research. He Tweets at听.

听

Review of Lawson, T. (2019). . London and New York: Routledge.

Ontology is the study of being. Social ontology is the study of social being or, in other words, the study of the nature and basic structure of social reality. We all do ontology all of the time, economists included, whether we like it or not. For all practices carry ontological presuppositions. Economists only have a choice between doing ontology explicitly or implicitly. Tony Lawson鈥檚 contributions stand out and are of such profound significance precisely because he explicitly grounds his analysis in an account of social ontology. It is only by redressing the ontological neglect that has for some decades characterised the discipline that a productive transformation of economics is at all feasible.听

Lawson is perhaps best known amongst heterodox economists for his critique of the mainstream emphasis on mathematical modelling. Lawson shows that the implicit ontological presupposition of an insistence of mathematical modelling is a world of isolated atoms and argues that, as the social realm is not characterised by isolated atoms, the mainstream approach will produce largely irrelevant research. However, it would be wrong to consider this critique to be his major contribution. Rather, it is but one of an increasing number of powerful (sometimes startling) results derived from Lawson鈥檚 three-decade project of developing and defending, along with other participants of the Cambridge Social Ontology Group, an account of the nature of social reality.听

The Nature of Social Reality: Issues in Social Ontology provides the latest developments that Lawson has made in the field of social ontology. Here, he sets out an account of social ontology that has come to be regularly referred to as a theory of social positioning, demonstrating its explanatory power. An exciting feature of the book is that it sets out the theory of social positioning in its most advanced form to date and then puts it to work through analysing the nature of the corporation, money and emancipatory practice. Whilst Lawson is pursuing themes in social ontology at an advanced level, he takes great pains to ensure that the analysis is everywhere accessible. The detailed and provocative accounts of the corporation and of money provide ample illustrations of the enormous potential of the social positioning framework.听听

The theory of social positioning clarifies in particular the manner in which social phenomena are constituted through identifying the basic principles involved. To summarise, all social totalities are constituted through two steps:听

1. The opening of a position through the elaboration of sets of matching rights and obligations that will orient the element that is positioned towards serving a function of the totality.
2. The allocation of people, things and communities to those positions through:
   1. The practical placement of the positioned element as a component of a totality
   2. The harnessing of pre-existing capacities to serve the function of the position
   3. The allocation of a status to those elements that are so positioned.听

For example, Lawson argues that a corporation is a positioned community that qua an entity is allocated rights and obligations in the manner in which individual human beings are. Through the legal fiction of legal personhood, the positioned community itself鈥攁s though disembodied from its constitutive human beings鈥攃omes to bear rights and obligations. Lawson shows that by allocating rights and obligations in this way, corporations can in a particular sense become dangerously out of control.听

Lawson also deploys his general framework to develop a sophisticated and compelling positioning theory of the nature of money. Whilst currently, at least in the UK, money is a form of positioned bank debt, that is not to say that all debt (or credit) is so positioned, or that debt/credit in itself is money. Money is constituted when a phenomenon gets positioned and is everywhere accepted as a general means of payment.听 It functions successfully when community participants expect it to retain its value and be easy to pass to others. Lawson shows that there are historical instances where the phenomenon positioned has been a commodity and others when it has been debt. But key to an understanding of money, as with all other social phenomena, is positioning. A positioned X is always more than the X.听 In an important intervention to the history of monetary analysis, Lawson provides a sustained evaluation and critique of the credit theory of money, as interpreted by A M Innes, demonstrating the greater plausibility and explanatory power of his own positioning theory of money.听

Lawson concludes by considering the implications of his particular conception of social ontology for our understanding of emancipatory practice. He introduces an ethical framework, which he refers to as Critical Ethical Naturalism, of which perhaps the key tenet is that individuals are only able fully to flourish if all other individuals are flourishing鈥攁nd we all, to some extent, recognise this. Lawson posits that there is therefore a tendency towards human flourishing present in most of our most basic actions.听

Currently, numerous obstacles prevent a situation of generalised human flourishing, orienting our actions in different directions, where we often end up causing harm to others (and so ourselves as well). Lawson argues that, given such a situation, the aim of emancipatory practice must be to transform or remove such obstacles to human flourishing.听 These are typically manifest as sets of specific positional rights of obligations, including those that bear on the manner that the more facilitating ones are accessed.听 Lawson argues that currently, where obstacles to flourishing appear particularly pervasive, our best bet in seeking conditions of flourishing may often be by way of creating localised communities of care or resistance, these being relatively protected sub-communities in which, for the time being, relevant obstacles on flourishing are minimal or absent.

In short, over many years Lawson has influentially shown that the continuing problems of the discipline of economics stem from a neglect of social ontology. In The Nature of Social Reality: Issues in Social Ontology, Lawson indicates how, and the extent to which, an engagement with social ontology in an explicit systematic and sustained fashion can not only rectify matters but swiftly move everything forward. At the heart of it, and most importantly, he sets out a theory of social positioning that provides an explanatory powerful, highly general, framework for advancing the discipline, and our understanding more generally, very significantly.

Yannick Slade-Caffarel is a Lecturer in Social Science at King’s Business School. He tweets at .

By Ingrid Harvold Kvangraven and Carolina Alves

鈥淓conomics is unique among the social sciences in having a single monolithic mainstream, which is either unaware of or actively hostile to alternative approaches.鈥� (: 17)

What does heterodox economics mean? Is the label helpful or harmful? Being outside of the mainstream of the Economics discipline, the way we position ourselves may be particularly important. For this reason, many around us shun the use of the term 鈥渉eterodox鈥� and advise against using it. However, we believe the reluctance to use the term stems in part from misunderstandings of (and sometimes disagreement over) what the term means and perhaps disagreements over strategies for how to change the discipline.

In other words, this is an important debate about both identification and strategy. In this blog, we wish to raise the issue in heterodox and mainstream circles, by busting a few common myths about Heterodox Economics – mostly stemming from the orthodoxy. This is a small part of a larger project on defining heterodox economics.

Myth 1: Heterodox Economics is Anything that is Not 鈥淢ainstream鈥�
While it is true that many people do see the heterodox as defined in the negative – especially people observing from the mainstream and from outside the discipline – many scholars in the heterodox community also see the term as something positive and proactive, defined by a set of principles (see of definitions). The term dates back to the 1930s (e.g. ), but more recently definitions have been developed by Lee (), Vernengo (), Lawson (), and Dymski ().

Lee (: 8-9) – an important figure in building a heterodox economics community, particularly in the 2000s – saw heterodox economic theory as an 鈥渆mpirically grounded theoretical explanation of the historical process of social provisioning within the context of a capitalist economy鈥�. For Lawson (, ch. 3), heterodox economics is best characterized by pluralism at the level of method, coupled with a declared ontology of openness, relationality process, and totalities, in contrast to mainstream economics which is characterised in terms of its enduring reliance upon methods of mathematical modelling, expressed in the mathematical deductivism and its 鈥榣aws鈥� or 鈥榰niformities,鈥� interpreted as correlations or regularities.

Vernengo () argues that heterodox economics is centrally about understanding reproduction of society, that the production and distribution of the social surplus is central for their theories, and that effective demand is valid in the long run (which means that the limits to accumulation are mostly political). Going back to classical political economy, distribution is determined exogenously by social and institutional conditions (e.g. the wage is determined by the bargaining position of labor and the rate of profit is influenced by the interest rate, which is influenced by the central bank).

Lee always to do Economics in a pluralistic and integrative manner and to be responsible and open-minded economists. Openness to alternative methods also gives a much larger space for classes, gender, institutions, instability, uncertainty, exploitation, power asymmetries, distributional conflicts and ecological issues. In a similar manner, Mearman and Guizzo () see heterodox economics as a pluralist community with a diversity of origins, purposes, and standards for economic reasoning, ranging amongst others from history and philosophy of economics, to modelling, community organising, and policymaking.

We see heterodox economics as a study of production and distribution of economic surplus, including the role of power relations in determining economic relationships, a study of economic systems, and tendencies associated with it, and the employment of theories that have these issues at their core, such as Classical Political Economy, Marxian Economics, Feminist Economics, Institutional Economics, and Keynesian Economics. As reality is not static, we deem it as crucial to constantly think and rethink the nature and appropriateness of these theories and methods.

Now, you may think these definitions are too complex, that defining it in the negative is just easier, more practical? Well, it turns out that is not straightforward either, as defining the boundaries for 鈥榤ainstream鈥� Economics is not simple (see ).The defines the field as the study of scarcity, the study of how people use resources to respond to incentives, or the study of decision-making. Others yet define the mainstream by its method (see e.g. or Bandiera ), which can in turn be distinguished from the open systems approach of the heterodoxy.

Recognizing that heterodox economists may be united in their critique of orthodox economics does not mean they are defined by this common position (in fact, scholars in many other disciplines also reject orthodox economics, but this does not mean they are automatically heterodox economists).

So is Austrian Economics heterodox? This is obviously up for debate, and many Austrian economists will indeed identify as heterodox solely on the basis that many of them are excluded from the mainstream or have a different understanding of categories such as equilibrium and uncertainty. However, many heterodox communities would not include Austrians on either epistemological (Austrians tend to adhere to marginalism, see e.g. ) or sociological bases (they are not a part of our research communities, which includes academic institutions, journals, and conferences).

Table 1: Schools of Economic Thought

Source: Marc Lavoie鈥檚 .

Myth 2: It is 鈥渉ip鈥� to be Heterodox

The Economist once ran a story 鈥�鈥� (similar claims have been made elsewhere too, for example in ). Well, yes, it is true that the use of the term has been on the rise in the 1990s and the 2000s (as documented by , see figure below). There are lots of books popping up using 鈥渉eterodox鈥� in their book titles. (2014: 6) writes that 鈥渟ince the 1990s, but even more so since the mid-2000s, the term 鈥渉eterodox鈥� has become increasingly popular to designate the set of economists who view themselves as belonging to a community of economists distinct from the dominant paradigm鈥�.

Figure 1: Google Ngram for 鈥淗eterodox Economics,鈥� 1870-2008

But an increased use of the term does not mean that heterodox work has been accepted in the core of the Economics field. There has not been substantial change in the field since the global financial crisis (see , and ) let alone more inclusivity or openess (e.g. in top journals, hiring practices, prizes or teaching). While there has been some self-critique within the mainstream (e.g. critique of DSGE by and ), this does not mean that alternative theories, such as Post-Keynesian theory or Marxian theory, are now considered to be valid economic theories by top Economics institutions. As observes, the financial crisis had little impact on how the academic orthodoxy in Economics is constructed and reproduced.

Meanwhile, since the crisis, it seems that many concepts developed within a heterodox framework have been incorporated and appropriated by mainstream scholars, adapting them to mainstream frameworks, without any acknowledgment of those concepts鈥� heterodox origin (as highlighted by , among others).

Heterodox Economics is getting traction outside of Economics, though. We can publish in top journals of other fields (e.g. Politics, Geography, Sociology, Philosophy, Development), we can get media coverage in The Financial Times (e.g. prominent heterodox scholars such as , and ), and we can get jobs at top universities, such as University of Cambridge, LSE and Columbia University – but outside of Economics departments (you tend to find heterodox economists at institutes, centers, management schools, and non-Economics social science departments). In the US, many heterodox economists end up teaching at liberal arts colleges. (Note that in some non-Western countries, heterodox economists may get jobs in top Economics departments as they are not as marginalized – this is for example the case in Brazil, see ).

It is true that Heterodox Economics is popular among students (e.g. ), the public, and non-economists, but claiming that it is 鈥渉ip鈥� to be heterodox can be offensive to heterodox economists, as it suggests complete oblivion to the exclusion from our own field that we as heterodox economists historically have faced and continue to face. How many times has it not happened to us that someone within the dominant paradigm says: 鈥淲ell, you鈥檙e not really doing Economics 迟丑辞耻驳丑鈥︹赌�?

Myth 3: The Mainstream Is Already Heterodox

Some claim that the mainstream is already heterodox (e.g. Diane Coyle 2007, David Colander 2009, and Colander et al. 2010). These scholars argue that the inclusion of endogenous growth theory, behavioral and experimental economics, complexity economics and other theoretical innovations have reduced the dominance of neoclassical economics (for comprehensive responses to this claim, see , and ). While these developments may give a perception of diversity within the mainstream, as Stilwell () points out, the core still relies on neoclassical ideas such as methodological individualism and systemic stability produced through market forces. There may be a 鈥榗utting edge鈥� which breaks with some orthodox assumptions, as Vernengo () puts it, but it is this part of the mainstream that allows the mainstream to sound reasonable when talking about reality and is therefore plays an important role in maintaining its dominance.

It is evident that there is some extent of pluralism in mainstream Economics, especially with regards to models and different forms of minor deviations from neoclassical economics (e.g. New Keynesian Economics, New Classical Economics, New Institutional Economics, Behavioral Economics). Nevertheless, it must also be acknowledged that there continues to be monism in terms of theoretical starting points, methodological approach, and in attitude to methodological alternatives (see also ).

Critique of the field being met with the defense of the field鈥檚 already existing pluralism thus ignores the actual wide plethora of theories and methodologies that exist in Economics outside the mainstream. Furthermore, these theoretical innovations have not in any shape or form replaced neoclassical economics as the cornerstone of Economics curricula across the world, even if they may be taken as electives down the line in the course of an Economics degree. In short, the developments are neither radical nor transformative.

Myth 4: Heterodox economists are Just Lefties Upset with Neoliberalism

Often, the mainstream of the field is described as neutral, while the heterodoxy is described as ideological. Those believing in such a statement would be surprised to learn from Myrdal (1953) that the development of economic thought has always and everywhere been political, as politics and economics are closely intertwined. There鈥檚 a recognition within all heterodox schools of thought that Economics is inherently political. This does not mean all heterodox economists will agree on politics, but they will usually agree that market solutions do not lead to 鈥渘atural鈥� or 鈥渙ptimal鈥� outcomes.
Dismissing heterodox Economics as a political project is common, which completely covers up the politicalness of mainstream Economics, and it assumes motivations among heterodox economists that they cannot prove or validate.This assumption leads journalists to conclude that heterodox economics is more of a 鈥渢antrum鈥� than an actual rigorous intellectual alternative to the mainstream.

However, much of the heterodox critique of the strong bias towards market-based theory and policy runs deeper than a tantrum against neoliberalism or mainstream economic. It boils down to challenging the idea that the market can always lead to the best outcome. Why is the market solution to economic problems the only game in town and everything deviating from it about market failure? This question relates to the long-standing debate on whether or not economics is value free and how it is possible to best promote positive analysis over normative. While economists often attempt to disguise normative conclusions behind positive analysis, subjective factors are inevitably involved in the development of scientific ideas, and these are theory-laden because they are identified from the perspective of a paradigm. Furthermore, for many heterodox economist, this discussion is also about acknowledging pluralism. That is, there are different ways to investigate an economic phenomenon, and competing approaches, methods and theories lead to different policy implications.

Although mainstream economics and neoliberalism should not be seen as synonymous (see , 2019), the assumption that economic decisions reflect free choice and individual preference tends to support conservative economic policy, which – combined with a focus on markets, incentives and market failures – ends up promoting and supporting market fundamentalism. In this process, core aspects of heterodox economics, ranging from power and conflict between labour and capital, to inequality and the role of institutions have been systematically neglected. It is, therefore, not a surprise to see the heterodox critique of neoliberalism overlapping with critique of mainstream economics.

With the above considerations in mind, it becomes clear not only that choosing one theoretical framework and excluding others is political, but also that every theoretical framework is political, including neoclassical economics. Since class conflict is a core element of much of heterodox economic theory, you will find heterodox economists being more explicitly political, as they are more likely to challenge the ethics of distribution within the system of social provisioning. However, as pointed out by , most heterodox economists do not actually practice politics.

Myth 5: Heterodox Economists Will Take Over Once They Are Able to Construct Convincing Enough Models (aka 鈥業t Takes a Model to Beat a Model鈥�)

This is perhaps one of the most ridiculous myths about Heterodox Economics, as it completely shies away from the political nature of our discipline. Several big names in the mainstream perpetuate this idea that Heterodox Economics is kept outside of the mainstream of the discipline because it is simply not rigorous or scientific enough (e.g. in with the Financial Times Pontus Rendahl at University of Cambridge likens Heterodox Economics to creationists and alternative medicine). Angus Deaton has made a similar point, arguing that Economics must 鈥�,鈥� as if work done by Heterodox Economics is excluded based on its lack of rigor.

This myth is not only problematic because of its positivist and linear view of scientific progress, but we are also concerned with what 鈥榗onvincing modelling鈥� means. There is a vast range of models associated with heterodox economics. See for example, classical-Marxian models, such as , , , , ; Kaleckian models, such as, , ; Kaldorian, Harrodian and Post Keynesian models, such as , , , ; Thirlwall’s models, such as , , ; Stock-flow Consistent models, such as , , , , , and ; and Agent-Based Models, such as , 鈥� to mention a few!

Thus, putting aside the critique of modelling in economics, two questions come to our mind: first, which kind of rigour is claimed within [mainstream] economics? Second: why aren鈥檛 heterodox models accepted as sufficiently rigorous? The battle between the mainstream and heterodox is by no means straightforward. The rules of the games are contested and there is no impartial measure by which success is judged. Contesting the dominant measures of excellence are indeed among the core demands of many heterodox economists.

Following Myrdal鈥檚 (1953) insight that the development of Economics has always been political, it is clear that it is not simply a matter of constructing 鈥榖etter鈥� economic models. The political process is central. As observed in their review of the Cambridge Capital Controversy, for example, while Cambridge, Massachusetts lost the theoretical debate, they won the hegemony (this was even recognized by the Cambridge, Massachusetts side, see e.g. ). Consequently, scholars working in the tradition of Cambridge, England are now excluded from the field (e.g. Post-Keynesians, Kaleckians, Sraffians, Marxians).

Furthermore, the official university research evaluation processes (e.g. the Research Excellence Framework (REF) in the UK) marginalize non-mainstream approaches, thereby operating to compound many of the problems mentioned so far (Lee et al. , Stilwell ). As research evaluation programs favor mainstream Economics approaches over heterodox ones, teaching also suffers as lecturers hired by Economics departments seeking to maximize their REF score will likely hire only mainstream economists who are likely to publish in top journals (incidentally, have found that teaching has changed little with respect to pluralism since the financial crisis, despite some claims to the contrary). Furthermore, monism in the mainstream makes it less likely that heterodox theories may be picked up by students or policy-makers, thus further compounding the already unfortunate situation. Finally, there have been several studies of the Economics field that show that it is among the most hierarchical academic fields () and that to editors are also important in determining whether a study is published, thus suggesting that success even within the mainstream is not based solely on their internal measure of rigor.

Myth 6: Heterodox Economics Is Not Really Economics Though

If Heterodox Economics abandons neoclassical assumptions and formal modeling, why should it be called Economics at all? Couldn鈥檛 it be a part of sociology? This was the argument made by . This view of Economics is ahistorical as it does not recognize that what is heterodox economics today was considered a part of Economics in the past. When Smith, Ricardo, Marx and Keynes did their economic work, they were acknowledged as being a part of the profession. They criticized each others鈥� arguments, assumptions, and theories, but they did not dismiss each other for not being economists. But their ideas have been excluded through a political process.

Ironically, the narrowing of mainstream economics and squeezing of heterodox economists into other departments has come with a push for increased interdisciplinarity. This has led to the odd situation where economists look for collaborators in sociology or politics departments, while maintaining strict definitions of who can be considered an economist. More often than not, economists will collaborate with other social scientists that work within similar traditions (e.g. rational choice theorists in politics or sociology), leading to a narrow form of interdisciplinarity. Further, adding political context or history to mainstream economic analysis does not make it heterodox. Rather than adding interdisciplinarity to social phenomena, we believe it is the nature of social phenomena that bear on the disciplinary or interdisciplinary methods and approaches that are required for their analysis.

Myth #7: Heterodox is too Confrontational. Can鈥檛 we Strive for Pluralism Instead?

Pluralism and heterodox economics aren鈥檛 synonyms. Pluralism is a methodological position that implies that competing theories should be taught alongside each other, be it heterodox or mainstream. Pluralism is not in direct opposition with the mainstream, but rather it tries to broaden the field of Economics.

鈥楶luralism is an 鈥榠n principle鈥� position, based on ontological, epistemological and ethical propositions (as discussed by ), whereas heterodox economics is an alternative way of approaching economic questions that stands as alternatives to the mainstream. Heterodox economists may well be pluralists in principle, as creating space for heterodox economics might in practice result in pluralism. However, fighting for pluralism may not be strategic if our goal is a paradigmatic shift within Economics (a point made on a few months ago).

The Difficulty of a Definition

Defining a whole field, such as Heterodox Economics is not easy, especially not in the social realm (see also ). As with other fields in social science, there will be some disagreement of the precise way to define it, and what kind of scholarship should be included.

Defining heterodox economics needs to be both practically relevant and historically grounded. Practically, it is broadly about seeking to render economics a relevant and inclusive discipline. Here, we don鈥檛 deny the issues raised by related to the need and motives for classification, and its consequences. That is, definitions of heterodox economics usually leads to 鈥渦nwarranted dualism鈥� where scholars create unjustifiably strict and fixed distinctions between the categories. While this might be a useful path to take due to the complexity of the object we are trying to define, it leads us to underplay its complexity for the sake for a simple and clear definition (see also ).

Historically, the concept has been discussed, theorised and applied by a broad and diverse group, starting with Ayers (), and since then there have been contributions from economic methodologists, historians of economic thought, macroeconomists, microeconomists , and philosophers . This is important to understand, as while some might find the definition of the term 鈥榗onfusing,鈥� the source of the confusion might have less to do with the clarity and coherence of any single definition, and more to do with the multiple angles through which the term has been theorised.

With our definition mentioned above, we aim to identify the broader level of principles crossing the diverse discussions on what heterodox economics is. We believe it is important to have a positive definition of heterodox economics to distinguish the field from other social sciences, as well as from the mainstream of the field. Heterodox economists are not sociologists or political scientists, although we are outside of the mainstream of Economics and some heterodox economists may find themselves being employed by such departments. This leads us to our final point…

Why We Should Call Ourselves Heterodox

鈥楤ut we are all economists!鈥� some heterodox economists argue. Why signal that somehow we are different from them? However, we are not sure the 鈥榳e are a big family of economists鈥� strategy is helpful – especially given that the majority of 鈥渙ur family鈥� is excluding us from mainstream arenas. Such a claim indirectly assumes that there are not steep institutional barriers that negatively affect heterodox economists鈥� employment opportunities, funding chances, and their chances to impact the policy making process. The pejorative and dismissive tone towards heterodox scholarship exists, and the question that follows is what we are going to do about it. To avoid acknowledging both the fundamental differences and exclusion is to close door for the progress of the discipline and for young scholars, who are forced to reinvent themselves and find jobs in departments other than economics, contributing to the monolithic character of the discipline.

On a last year, many pros and cons of using the term heterodox came up. We do believe that so far, the pros outweigh the cons. As Stillwell (2016) puts it bluntly: 鈥楲abels matter […]. They construct imagery and signal strategic choices鈥�. To us the label signals a strategic choice: Do we try to blend in and pretend that all is fine or do we speak up about the marginalization that is taking place in our field? Self-identifying as heterodox signals to the world that alternative analyses of economic relationships exist – if anything it reinforces the idea that there are different ways to do economics, a point that rests at the core of the argument for pluralism (a big [happy] family after all!). And importantly, it also helps to raise awareness about the fact that these perspectives have been actively excluded from the mainstream over a period of four decades or more.

Does accepting the term heterodox economics mean we accept our marginal disciplinary status? No. On the contrary, we use the term in order to challenge this marginalization. If people find the heterodox label confusing, we should be able to clarify where we are coming from. This is key if we want to change the current state of our profession. If the label is problematic, perhaps it鈥檚 time to de-mystify, clarify and de-problematize it. We understand our colleagues that are scared for their career, or have other strategic reasons, to not speak up, as that is a consequence of the nature of our field. But yet, we encourage more allies to speak up and say we are heterodox – to show the strength and diversity of heterodox economics. The more scholars identity with the term, the more status and acknowledgement heterodox scholarship will get. If we stand together we can show the world what Economics is missing. Come join us outside of the heterodox closet

We are grateful to Cleo Chassonnery-Za茂gouche, Danielle Guizzo and Mat铆as Vernengo for helpful comments on an earlier draft.

Ingrid Harvold Kvangraven is a Lecturer in International Development at the University of York.

Carolina Alves is a Joan Robinson Research Fellow in Heterodox Economics at University of Cambridge, the U.K.

Read the article in Spanish .

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鈥淎bout these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.鈥�

An economist鈥檚 words but not meant to be a description of where things stand today in the aftermath of the Brexit referendum, though they might as well be. These are Keynes鈥檚 words from a following the publication of his magnum opus, The General Theory of Employment, Interest and Money in 1936.

Equilibrium or Uncertainty? Looking to Philosophy
Much like the crisis of 2007-08 discredited economists鈥� fantasies of equilibrium, Brexit has delivered a painful and brutal lesson 鈥� made no easier by the slow pace with which it has been delivered 鈥� in the importance of recognizing uncertainty of the sort described by Keynes as a central theoretical proposition about capitalist economies. But there is an important difference between the two cases. Equilibrium was and remains a central organizing principle and point of reference in economic theory 鈥� sometimes even in the sort of economic theory which rejects equilibrium as a feature of actually existing capitalist economies. Equilibrium is perhaps the concept with which economics has become synonymous. In comparison, uncertainty remains a relatively obscure issue, though not necessarily in the academic literature which is conscious of economic theory being rooted in, among other things, epistemology 鈥� the branch of philosophy dealing with what we know, how we know it and what is knowable.

How important could a philosophical point be for an economy? Very important, as it turns out. On such distinctions between uncertainty and calculable probability depend our views about how people behave, and about the importance of money and institutions in an economy. These things in turn matter for policy. The policy implications of the philosophical foundations of economics are not trivial, and economists either engaging in cod-philosophy or dismissing philosophy altogether will do so at their own peril, not to mention the cost to a public whose livelihoods hang in the balance of Brexit-like battles.

Choice under conditions of scarcity, or uncertainty?

Put simply, philosophy turns out to be more practical than one might think. Keynes鈥檚 awareness of this particular philosophical issue and the fact that it was of immense importance to him is summed up well by Robert : 鈥淐lassical economics was concerned with the logic of choice under conditions of scarcity; Keynes鈥檚 economics with the logic of choice under conditions of uncertainty.鈥� The two definitions point to two fundamentally different kinds of economics founded on two fundamentally different views of what an economy is and how it functions.

A few years before the crisis of 2007-08, Robert claimed that macroeconomics鈥� 鈥渃entral problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades.鈥� Alas, practical purposes caught up with Lucas soon enough. The practicalities of uncertainty have now caught up with no-deal Brexiteers and the hubris of their certitude. Uncertainty is always lurking beneath the surface of an economy, threatening to break through and overwhelm if it hasn鈥檛 surfaced already. So too does Keynes lurk around economics and economists, sometimes easily forgotten and neglected, but continuously present, relevant and with something to offer 鈥� if one is interested.

is a PhD student in Economics at The New School.

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Skidelsky, Robert. 2003. . New York: Penguin.

By Farwa Sial and Carolina Alves

In a recent听, the development economist Seema Jayachandran discusses three studies that used听Randomised Controlled Trials (or RCTs) to understand听the benefits of enhancing the self-worth of poor people. Despite wide differences in context, all the cases explore the viability of 鈥榤odest interventions鈥� to 鈥榠nstill hope鈥� in marginalised communities, concluding that 鈥榬emarkable improvements鈥� in the quest for poverty reduction are possible.

听from Uganda, for example, argues that 鈥渁 role model can have significant effects on students鈥� educational attainment,鈥� so the suggestion for policy-makers might be 鈥渢o place more emphasis on motivation and inspiration through example.鈥�听Another听听argues that 鈥減sychological barriers impede such disadvantaged groups from breaking the vicious circle and achieving better outcomes in life,鈥� so small but effective changes that address these psychological constraints can alleviate the effects of poverty and social exclusion.

The underlying theme of these studies is that individuals can surmount the structural challenges of poverty through their own efforts using tools like 鈥榚ffective role models,鈥� the generation of 鈥榤ore hope,鈥� and the 鈥榠mprovement of their mental health.鈥� Positive psychology of this kind and an emphasis on behavior change to meet the goals of individuals have been around at least since the 1950s, first in the popular literature of self-help books and now in academia, where they form part of an increasingly fashionable trend to 鈥榙o poverty reduction differently.鈥�

The push for听鈥櫶齠ollows the same logic. In the Kakuma Refugee Camp in Kenya, the UN Refugee Agency (UNHCR) and TEDx hosted an event to showcase the personal narratives of refugees. The resulting talk was designed to highlight the role of positive thinking in overcoming adversity, with the harsh realities of being a refugee and resorting to extreme survival skills portrayed through the lens of individual motivation. The implicit assumption was that positive attitudes could determine better opportunities in life.

This trend relies on RCTs as the key methodological tool to prove its case, a technique born out of an increasing focus in economics on the behaviour of individuals and the use of computing power to process enormous amounts of data in econometric analyses. RCTs are supposed to provide 鈥溾�� answers that form a scientific basis for policy-making. In reality however, they have some serious limitations.

An听RCT is an evaluation technique that draws from experimental design in order to measure the impact of a development project. As the name suggests, the process is based on a selection of a 鈥榬andom鈥� or unspecified distribution of people or communities who are subjected to a trial or an experiment. The proponents of this method suggest that it is possible to measure the impact of an intervention and attribute a causal relationship between the intervention and its outcomes when compared to a 鈥榗ontrol group鈥� who are not included鈥攁 worrying feature in and of itself because people in that group may be denied the essentials of a decent life if they are only provided to those who participate in the trials.

According to听, the top five journals in economics published 21 articles on development in 2000, none of which represented this methodology; by 2015 there were 32 such articles, of which 10 were RCTs.听Researchers听听go so far as to say that RCTs have become the new 鈥榞old standard鈥� in听 development economics, so it comes as no surprise that poverty has started to be studied in the context of this new听framework.

Poverty alleviation, however, is a hugely complex subject that touches on the strengthening of institutions, the health of governance,听the structure and dynamics of markets, the workings of social classes, macroeconomic policies, distribution, international integration and many other issues, none of which can be replicated from one context to another. That means that analyses of poverty have to be based on a critical examination of processes and actors that cannot be 鈥榗ontrolled鈥� against鈥攖hus violating the principle of RCTs.

Recent developments in economics have failed to account for these fundamental determinants of poverty.听Instead, the success of RCTs can be narrowed down to essentially听statistical arguments that seek to identify 鈥榳hat works鈥� and 鈥榳hich interventions鈥� should therefore be employed to improve听the lives of the poor. In such processes, the focus tends towards the individual or the household and (initially at least) to the design of small changes that are supposed to enable them to exit poverty, although eventually the 鈥榮caling up鈥� of interventions might also occur. Akin to the 鈥榥udge鈥� approach that has been popularised by听, the idea is that people鈥檚 choices can be shaped to allow them to escape from poverty and dispossession.

As a consequence, this approach听individualises the听鈥榩roblem鈥� of poverty whilst failing to acknowledge, contextualize, highlight or analyse the structures, institutions and actors that actually make and keep some people poor. For example, the idea that听role models can be effective in changing people鈥檚 behaviour, emotions and self-concepts isn鈥檛 new; what鈥檚 new is the belief that听these aspirations can lift people out of poverty without broader changes in politics, social structures and institutions. Returning to the brothels of Kolkata, advocating for the removal of psychological barriers may not be effective if the working conditions of sex workers and the structures on which their material deprivation stands continue to go unchallenged.

To be fair, The York Times piece introduces some important caveats to such strategies:

鈥淗ope isn鈥檛 a cure-all and in none of these examples can we be certain that it actually explains the gains in people鈥檚 income or education鈥nstilling hope without skills or financial resources is unlikely to be enough to lift people out of poverty.鈥�

Nevertheless, if the caveats are so strong as to question the validity of the experiments then they are not caveats at all, but fundamental inputs on which any successful methodology must be based. Economics distracts itself by reforming symptoms and ignoring the conditions which cause the malaise in the first place. As the development economist听听has written:

鈥淭he larger questions once asked within the discipline regarding the effect of alternative economic institutions and policies (such as those concerning property arrangements, trade, agricultural, industrial and fiscal policy, and the role of social protection mechanisms), for instance, and the impact of political dynamics and processes of social change, have been pushed to the background in favour of such questions as whether bed-nets dipped in insecticide should be distributed free of charge or not, or whether two schoolteachers in the classroom are much better than one.鈥�

Hence, in a听听letter published in the Guardian, fifteen leading economists argued that relying on RCTs to guide aid spending will lead to short-term, superficial and misplaced policies. Asking relevant questions is the first step towards understanding problems. And understanding why widespread hunger听and poverty persist in an era of unprecedented opulence, rapid technological transformation and democratic governance is the most important problem of the day.听Inequality is not born in a vacuum; it is a fundamental aspect of the distribution of income and wealth. Unless we understand how extreme wealth accumulation is connected to extreme inequality the question of poverty will go unaddressed.

More than听听people live in extreme poverty today. To say that they do not have sufficient hope, aspiration and tenacity to fight for their rights is to deny their agency. The structural odds against them inhibit their ability to leave the vicious cycles of poverty. Without additional resources and much more concerted action on the underlying causes, no amount of positive thinking will enable the great mass of individuals to climb out of poverty. We cannot afford to rely on methods that suggest that poor people are simply failing to make the 鈥榬ight choices.鈥�

This doesn鈥檛 mean that we should disregard RCTs or any other ways of empowering communities, but it does mean that we should build on an understanding of poverty alleviation which is concerned with attacking the malaise of unequal distribution as opposed to remediating its symptoms. That means confronting structures and actors that have not only failed to address poverty but may also have reinforced the nature of uneven development across the globe.

This post was originally published on .

Farwa Sial is a Senior Teaching Fellow in the Department of Economics at the School of Oriental and African Studies and Carolina Alves is a Joan Robinson Research Fellow in Heterodox Economics at the University of Cambridge.

鈥淭he 鈥榤arket鈥� is a bad master, but can be a good servant.鈥�
– (1993: 420)

In the world today, more and more interpersonal interactions are replaced by market transactions. The market system is both an economic and a cultural phenomenon, yet we seem to be hardly aware of the values that are bound up in it. This phenomenon is manifest at many levels: from the family, through the neighbourhood and the enterprise, to the nation and the globe. If there is such a thing as global ethics, I suggest, then they are 鈥� like it or not 鈥� the ethics of the market. My purpose here is to elaborate this claim, and to assess its implications. I shall distinguish between the market as a theoretical construct in economics, and the market as a social institution.

My main hypothesis can be briefly stated as follows: the most convincing ethical argument currently being made in favour of the market is its neutrality. Whether the market is in fact neutral may be disputed. But if one accepts this claim, it implies that the market is amoral, rather than immoral, and there remain, I suggest, two objections to allowing the market ethic to prevail. The first is that this is an abrogation of moral responsibility. It implies delegating decisions of major social and material significance to powers which are beyond our control, and whose outcome is uncertain. Second, the neutrality of the market comes at a cost in social and human terms; social relations between persons are replaced by contractual relations between economic agents.

All countries of the world are, today, part of the global market system. Even in the poorest countries more and more individuals are being drawn into the national market system, and hence the international also. Peasant subsistence is being replaced by the marketing of crops and the selling of labour. At the other end of the scale, in the richest countries, the same process continues, as I shall demonstrate below. There are undoubtedly many merits in the market system, and many valuable insights to be gained from the academic discipline of economics. I suggest, however, that it is important to retain the human dimension in our lives, and to recognise the alienating, desocialising effect of the market.

The Scope of the Market
The market as we know it today has developed over many centuries. A truly historical study should perhaps begin with Aristotle who, in the Nichomachean Ethics, sought to comprehend the phenomenon of exchange and money, and to examine how relations between persons were affected by (and indeed reflected in) what would today be called market transactions. His text has been the subject of various interpretations, but there can be little doubt that he was describing a society in which, to use the words of Evans-Pritchard in his introduction to Mauss鈥� The Gift: 鈥渆xchange of goods was not a mechanical but a moral transaction, bringing about and maintaining human, personal, relationships between individuals and groups鈥� (: ix). Over the centuries, there has been a very gradual shift 鈥� if one can trace the society which Aristotle described through to our own 鈥� from a society in which the emphasis was on persons and relations between persons, to one in which the emphasis is on things and relations between things (: 65).

Aristotle did not cast judgement 鈥� either positive or negative 鈥� on the market; rather he sought to comprehend a novel phenomenon in terms of the norms of his own society. But moving forward about two millennia to the eighteenth century, we find that the market was seen by writers such as Montesquieu and Tom Paine, as a very positive influence, as Hirschman has described in his article 鈥淩ival Views of Market Society鈥�. 鈥�(Commerce) is a pacific system, operating to cordialise mankind, by rendering Nations as well as individuals, useful to each other … The invention of commerce … is the greatest approach towards universal civilization that has yet been made by any means not immediately flowing from moral principles鈥� (Paine, quoted in : 108). By contrast, Marx, writing in nineteenth century Britain, was very critical of the capitalist system, both in material terms as pauperising, but also in social terms 鈥� as alienating. He was also critical of the role of economics in supporting this system. But, as Hirschman notes, the perception that 芦all social bonds were dissolved through money禄 did not originate with Marx.[i] This view was 芦voiced during the 1730s in England by the opponents of Walpole and Whig rule禄 (: 112). More recently, (1957) has been a powerful critic, using a variety of metaphors to describe the effects of the 鈥渏uggernaut market鈥� on ancient social norms, ranging from 鈥渢he outright 鈥榙issolving鈥� to 鈥榚rosion鈥�, 鈥榗orrosion鈥�, 鈥榗ontamination鈥�, 鈥榩enetration鈥�, and 鈥榠ntrusion鈥欌�� (quoted in : 113).

But the argument of some commentators that commerce may be positive – replacing non-existent or antagonistic relations – has been made in relation to international trade rather than inter-personal relations. It is on the latter that this article is concerned, and here the effect has generally been regarded as negative; yet the scope of the market has continually expanded.

In modern society, an increasing number of tasks which used to be undertaken by family members have now entered the market: care of the elderly, for example, or of children. And the duties of parents are even being seen as responsibilities enforceable by law, with children suing their parents for failing to carry them out properly. What is lost in this process are personal relations which may also be valued. Social and inter-personal relations are replaced by economic and legal relations.

Within a neighbourhood, social ties are generally weaker than in the family, but similar issues arise. In Norway, collaborative voluntary work (鈥渄ugnad鈥�) is carried out to, for example, organise a concert or raise money for new musical instruments for the school band. Why not 鈥� one might ask – buy a cake for the lottery instead of baking it oneself? Why not simply give money to the band instead of organising jumble sales? The answer is that something is thereby lost 鈥� a sense of community. The recent massive, and sometimes ill-directed, interest in the concept of 鈥渟ocial capital鈥� is, I suggest, explicable not solely by reference to new ideas and empirical evidence, but also a widespread sentiment that in modern society something important is being lost ().

Before considering what if anything might be done about this situation, I will discuss some of the theoretical literature concerning economics and the role of the market.

Economic Theory and the Market
In economic theory, the market is seen as fulfilling a central function 鈥� the allocation of resources; and the concept of a 鈥榩erfect market鈥� is important 鈥� that is, a market which satisfies certain prerequisites such as perfect information, many buyers and sellers, zero transaction costs. According to economic theory, if these prerequisites are fulfilled then the market 鈥榗lears鈥�, with all buyers and sellers 鈥榮atisfied鈥� 鈥� in the sense that they do not wish to buy or sell more at the market price. Economists do not, of course, believe that these prerequisites are actually satisfied in practice, and they therefore recognise that no perfect market actually exists. It is an ideal concept which is useful for theoretical purposes. Nor does the word 鈥榩erfect鈥� imply a moral judgment of the outcome. To the extent that the merits of the market are assessed in economic theory this is largely within the field of welfare economics, where the concept of a 鈥楶areto optimum鈥� plays an important role. But this is widely misunderstood by non-economists who make exaggerated claims about how economics can demonstrate the superiority of the market system. To quote Solow: 鈥淭he general educated and interested public thinks that economics has 鈥榩roved鈥� that the free market is efficient 鈥榩erhaps even the best of all possible worlds鈥�. Not one reader in a thousand of the Wall Street Journal has any grasp of the qualifications without which the theorem, as a theorem, is simply false.鈥� () My concern with economic theory concerning the market is not that it claims that the market system is morally superior. Rather, my concern is that 鈥榤ainstream鈥� economic theory is based on a representation of the economic agent (鈥榟omo economicus鈥�) as a person who is immoral 鈥� or at best amoral 鈥� according to widely held views of morality: self-interested and maximizing; and also autonomous, i.e. asocial, independent of personal relations with others. The economic system which is modelled on the basis of this representative economic agent is subject to the same criticism. And the theoretical assumption – of self-interest and autonomy – can, perversely, become self-fulfilling.

The relationship between the subject under study and the manner in which it is studied is a complex one (). An economic system is affected, indeed upheld, by the beliefs and values of those who adhere to it; and economists themselves play an important role here. They are not simply independent objective commentators; they are formed by the system, and they themselves influence the system. Thus there may well be a self-fulfilling, or at the least self-reinforcing, tendency in the manner in which economists portray markets. Economists generally seek to exclude discussion of values as far as possible from the discipline; it is common in economic textbooks to seek total separation between fact and value. But any discipline concerned with social phenomena will, either explicitly or implicitly, be concerned with normative issues. Ideology enters 鈥渁t the ground floor鈥�. To portray the market as 鈥榓 kind of natural or moral order鈥� (: 177) and to treat 鈥渢he market as free and institutions as constraints; the supreme medium for the expression of individual Choice鈥� (: 178) is in itself to adopt an (implicit) normative perspective.

Considering its importance as an institution forming our lives, it is remarkable how little the market has been studied in empirical terms. It apparently falls between the disciplinary stools of economics and sociology. Economists do not study institutions (that is what sociologists do); and sociologists do not study markets (that falls within the scope of economics). It is precisely the 鈥榗onventions, routines and rules鈥� of the market, and the mechanisms by which they bring about specific types of behaviour that are of interest in an understanding of the market as an institution.

Philosophical Critiques
Philosophers have not made much of a contribution to the study of the market. A rare but important exception is Elizabeth Anderson, author of , who notes, with reference to the market: 鈥淟iberal theory has not yet come to grips with the full implications for human freedom and flourishing of this most expansionary institution of the modern world鈥� (1993: 141) (my italics). According to Anderson the norms of the market display five features, which embody the economic ideal of freedom: 鈥渢hey are impersonal, egoistic, exclusive, want-regarding and oriented to 鈥榚xit鈥� rather than 鈥榲oice鈥欌�� (: 145). These five features listed by Anderson, of course, map closely onto the prerequisites of homo economicus in standard economic theory. Freedom is the freedom to disconnect; to treat others as objects. The cost of exercising such freedom is disconnectedness, and to be treated as an object.

Another of the few philosophers writing on the market is John O鈥橬eill who has made a strongly argued case against the position of a number of economists, but most especially Friedrich Hayek. O鈥橬eill distinguishes between two broad ways of arguing that markets promote the human good: the welfarist, and the perfectionist liberal (: 33). The former argument, which was described in the previous paragraph, has a weaker, more pragmatic, defence: merely that the market provides a better alternative than any other that has been attempted (typically meaning the State). The second argument is of greater relevance to my concerns in this article. Here, the market is portrayed as not simply compatible with, but required by, modern pluralism. As Hayek put it: 鈥楾he Great Society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims that they severally pursue鈥� (Hayek, quoted in : 19). This certainly seems a virtue of the system, but such radical autonomy may have its drawbacks. And one may certainly question in what sense it constitutes a moral system. As O鈥橬eill puts it, the market 鈥渁llows individuals with quite different ends and beliefs about the good to cooperate with each other. … Such cooperation occurs without rational dialogue or conversation about these ends. … An actor informs others not by voice but by exit鈥� (: 19). Neutrality, well-being, liberty, autonomy. These are the virtues which O鈥橬eill identifies. They accurately portray the characteristics of modern life; but they are not, I suggest, unambiguously virtuous. A strong a priori argument in favour of the market seems to be its claimed neutrality 鈥� distinguishing between individuals only insofar as they differ in respect of their purchasing power. This could at best be regarded as an amoral system. But it depends on, and indeed encourages, disconnection between persons as social beings.

The market is a social institution 鈥� indeed the dominant institution of modern-day life. As such it involves norms of behaviour. These may also be regarded as embodying a type of ethic, or morality: one which emphasises autonomy and choice, but also disconnectedness 鈥� in social and moral terms. . The market is not in all circumstances either good or bad. But the process of commodification, the spread of the market ethic, is an enormously powerful and important tendency of which we must always be aware, and where necessary take steps to control or resist.

Is There no Alternative?
In critically assessing the market we should ask: what does it replace or destroy? At the national level, does it replace strife between warring parties; or promote anarchy, leading to insecurity or environmental damage? And at the local level, does it strengthen or undermine family relationships, social bonds, trust, and a sense of community? It is both its strength and its danger that the market is a totalizing system. The international, national and local markets cannot easily be kept watertight, so that despite the merits of local solutions, these may be swept aside by global market pressures. In summary, my argument is that the spread of the market tends to be homogenising, negative and extremely powerful. This is an extreme position which I to some extent qualify. First, because 鈥榬eally existing markets鈥� actually differ significantly from each other and from the ideal. Second, I recognise that the market has undoubted positive features and merits that must be taken into account in a balanced assessment. But in relation to my third claim I see little cause for qualification. I believe that the expansion of the market has a considerable and negative effect on human, personal, relationships between individuals and groups; and there is scant evidence of any countervailing force.

At a global, macro level the continued expansion of the market is surely irresistible. But is there perhaps some hope that local initiatives can create alternative spaces 鈥� countering the apparently irresistible force of the market?

Some recent attempts that have shown great promise 鈥� such as couch-surfing and car-sharing – have been increasingly replaced by more market-based versions: Airbnb and Uber. But there are also other interesting examples of local initiatives to create what might be called alternative economic spaces. In Oslo, two very recent examples are the Oslo Food Cooperative and the Restart project. The former was founded in 2013 and acts as an intermediary, connecting local farmers鈥� produce to people in the city who want organic, local food. The core values are expressed in ten principles that incorporate dimensions of care for people and the environment into the processes of the organization and the goods the Cooperative provides. Important among these principles 鈥� and one of its attractions for members 鈥� is the emphasis on social relations, both between the consumer members of the cooperative who manage the operation, and between them and the local farmers who supply the produce. The cooperative was immediately extremely popular, with waiting lists of several hundred people. (Dumbauld, forthcoming). The latter example, Restarters Oslo, has sprung out of The Restart Project, an initiative which began in London with the organisation of so-called 鈥楻estart Parties鈥�, or community repair of electronic devices. These are three-hour pop-up events where participants arrive with broken electronics devices to get help repairing them together with skilled volunteers, called 鈥淩estarters鈥�. This form of community repair is positive in environmental terms – contributing to the transition to a circular economy. But it is also apparent () that a motivation for participating in the project is learning new skills and the social dimension 鈥� the inter-personal contact between individuals and groups.

Though these are, of course, modest 鈥� in comparison to the 鈥渏uggernaut鈥� of the market – they can perhaps achieve two things. At a minimum they can give satisfaction to those who participate in them; who can enjoy the inter-personal ties that are normally replaced by the market. More ambitiously, they can draw attention to the negative aspects of the market that have been pointed out here. The market is and will remain embedded in political, cultural and moral contexts; but we should be wary that it does not destroy these from within.

References:

• Ahnfelt, K (2016) MSc thesis, SUM, University of Oslo.
• Anderson, E., 1993, , Cambridge, MA: Harvard University Press.
• Chakravarty, S. 1993. 鈥淧olicy-making in a mixed economy: the Indian case鈥�. In . Oxford, UK: Oxford University Press.
• Dumbauld, E (forthcoming) Oslo Kooperativet: an alternative food network, its members’ perceptions and ‘orders of worth’ MSc thesis, SUM, University of Oslo.
• Hirschman, A., 1992, , Cambridge, MA: Viking Penguin.
• Hodgson, G., 1988, , Cambridge: Polity Press.
• Mauss, M., 1970, , London: Routledge & Kegan Paul.
• McNeill, D., 1988, , unpublished PhD Thesis, University of London.
• McNeill, D., 1990, 鈥樷��, Public Affairs Quarterly, Vol. 4, No. 1.
• McNeill, D., 1996, 鈥樷��, Forum for Development Studies, No. 2.
• O鈥橬eill, J., 1998, , London: Routledge.
• Polanyi, K., 1957, , Boston: Beacon Press.
• Schumpeter, J., 1954, . London: Allen and Unwin.
• Solow, R., 1989, in Colander, D. and A. Coats, eds., , Cambridge: Cambridge University Press.

[i] Marx鈥檚 analysis was based on the social relations of production. I have argued elsewhere () that in modern, wealthy countries we need to analyse the 鈥榮ocial relations of consumption鈥�; we need to better understand how people relate as consumers, and how this can be alienating in ways that are analogous to the alienation of workers under capitalism.

Desmond McNeill is head of research at Centre for Development and Environment.

Photo:

This article was first published in .

By Svenja Flechtner, Jakob Hafele & Theresa Neef

Much has been said about what鈥檚 going wrong in development economics 鈥� on this blog (for example by Adel Daoud, Ingrid H. Kvangraven, or Jacob Assa) and elsewhere (for example by , , and ), as well as . Much has been written, too, about alternative perspectives and approaches to economic development thinking (this gives an overview of many of them). But is it possible to build a coherent pluralist and critical framework out of these approaches? If so, what could a critical and pluralist research agenda for development economics look like?

On a weekend in early June this year, about 20 researchers 鈥� development economists in one way or another 鈥� from different backgrounds and perspectives gathered in Berlin to discuss these questions under the auspices of the and the (; are a few photos). For us, the organizers, this was quite an experiment: we were not sure which kind of debates we could expect to unfold having a with Marxist, structuralist, Post-Keynesian, Post-Colonial, complexity, behavioral and feminist perspectives. We knew, for sure, that the participants were open-minded and intellectually curious people, but would this suffice to find a common basis for fruitful discussions? In retrospect, we must say, there was so much to exchange and discuss that we should have taken a week rather than a weekend. Here are a few things that we have learned.

Questioning the dominant development mindsets

Before anything else: does it even make sense to have a field called 鈥榙evelopment鈥� economics that is concerned with the economic problems of the 鈥榙eveloping part鈥� of the world? There is no doubt that there are economically rich and poor countries on our planet. But, as the World Bank categorizes the world into low-, middle- and high-income countries according to arbitrarily set income thresholds, argued these categories may shape our view more than is helpful. For example, may seem to suggest that much has been achieved in terms of living standards and well-being, even though , and the actual achievements remain unclear. Moreover, categorizations often make us group countries or populations. But the , and just because two countries are equally poor (whatever ), they are not necessarily much alike and do not necessarily face the same problems.

For a symposium held by a European association, there is another good reason to question the distinction of 鈥榙evelopment鈥� economics: if we address economic issues in poor countries, a strong focus should be on the role that our European economies, governments and economic activities play in the whole story. For us, moving towards a pluralist agenda thus means to substitute separate analyses of 鈥榙eveloping鈥� countries and their economic issues by global encompassing perspectives.

Learning from History

A second ingredient for a pluralist paradigm is the willingness to learn from history. reminded us that development thinking has a long and rich tradition, while current lenses are rather narrow. Since the Washington Consensus, Reinert argued, economists have gotten lost focusing on getting prices/ governance/ institutions/ culture/ diseases/ education/ whatever other fad right. Such unilateral approaches are not only problematic because they lose sight of the fact that prices, institutions, culture or diseases exist at the same time and interact in complex ways. Typically, it is also forgotten that economists in earlier times have had interesting things to say about them. A pluralist paradigm reduces the risk of focusing on temporary fads and of forgetting the history of the discipline.

Global and structural perspectives: many trees, no forest?

A considerable part of the weekend was spent discussing the contributions of and relations between different structuralist, institutionalist, and Marxist perspectives. There are many common themes here, first and foremost because all see tendencies of polarization (of income, classes, gender relations, global political power, CO2 emissions, 鈥�). On these grounds, there was a common understanding that core-periphery relations and dynamics make it difficult for many countries to simply 鈥榙evelop鈥�. For example, and international trade regulations ( and give a flavor of this large debate) seal core-periphery positions in the world economy. It is no surprise that there is also a common understanding about the need to bring core-periphery perspectives to the forefront again. Fortunately, these have already enjoyed recent and fresh interest in development circles (see e.g. here). Of course, this is not to say that we should simply revive an old play. Substantial updates could come from new research methods: for example, discussed if and how on the economy could help to analyze and understand core-periphery dynamics empirically. A second direction for revisiting and enriching core-periphery perspectives is through pluralist analyses of the mechanisms at work. Carla Coburger and Patrick Kl枚sel analyzed the working of financial institutions and consequences for economic dynamics within West-Africa鈥檚 CFA-franc zone, bringing together core-periphery perspectives, institutional analysis and structuralist strands of post-colonial studies. Such an approach is far more encompassing than earlier core-periphery approaches that focused on macroeconomic dynamics and constraints.

Of course, thinking and bringing together these different perspectives does not only create harmony. The most fundamental line of conflict, for us, concerned the nature and objectives of 鈥榙evelopment鈥�. While a Postkeynesian perspective would emphasize how difficult it is for a country to achieve full employment and international competitiveness in the light of power imbalances and , some would want to abandon economic growth and global competitiveness altogether, arguing that they are detrimental for labor. Another example concerns the state. It is en vogue to and for development processes. But while it is quite common sense that many different forms of state power can generate economic growth, not all of them contribute to human well-being. For example, processes of economic growth in autocratic regimes like South Korea or Singapore have been criticized for being (see also ).

After all, why should we bother about similarities, differences, compatibilities and conflicts between these different approaches? Unilateral perspectives to specific problems and answers to specific questions in development economics are easy to obtain. But the interesting discussion starts when other perspectives complement them. Yes, export manufacturing could be a good strategy to overcome specialization in primary goods for some countries, but what are the implications for women (to name only one aspect)? The feminization of employment in export manufacturing, showed, can actually have detrimental effects on the well-being of women and their families. In this sense, thinking about a coherent, pluralist paradigm for development economics is like maximizing under A LOT of constraints. And to spoil this maximization analogy right away, it also stimulates debates about how to define 鈥榙evelopment鈥�. That鈥檚 what makes it so attractive to limit one鈥檚 research to one paradigm: it spares you a lot of questions and discussions. But in order to eliminate blind spots and to avoid policy prescriptions that create a whole bunch of new problems, the effort is worthwhile.

What future for behavioral development economics?

All these structural debates have little to do, at first sight, with the micro-focused field of development economics: the enormously rising strand of behavioral development economics and, notably, impact evaluation via randomized controlled trials (RCTs). But are these two worlds really disconnected? Providing a , Agn猫s Labrousse showed that many simple RCTs omit the potential heterogeneity of effects of micro-interventions. To understand better what works and how it works, we need mixed-methods approaches on the one hand and embedded interpretations on the other. Bringing us back full circle to structures and institutions, Svenja Flechtner argued that thinking about individual behavior from both sides is where behavioral approaches get interesting. Smita Srinivas emphasized the importance of connecting cognitive and structural views with institutional approaches to study processes of innovation at different scales ( about the symposium is here). Or take the example of : yes, we can address allegedly too low aspirations arguing that poverty, on average, depresses people鈥檚 ability to build forward-looking aspirations. But, we can obtain a better understanding of what鈥檚 going on if we ask how societal structures, belief systems, worldviews, racial or gender stereotypes and so on shape aspirations in specific circumstances – and also, how aspirations reproduce these social institutions or not. Rather than just designing behavioral interventions that correct behavioral anomalies or irrationalities, we may use psychology and socio-economics to understand observed behavior. As Robert Lepenies put it, behavioral analysis can be useful, but just because we draw on behavioral analysis, this does not mean we must use behavioral policies.

Towards a critical pluralist agenda: what way forward?

Finding common grounds between structuralists, institutionalists, behavioral economists, complexity scholars, critical political economists and post colonialists is not an easy task. But after a weekend of inter-paradigmatic discussions, we think that the search for a pluralist paradigm is a worthy endeavor. What is more, we think that it is actually possible. Of course, this is due, first and foremost, to the participants鈥� great openness: they regarded other perspectives as enriching rather than something that is fundamentally flawed in its modus operandi (as we know it from many discussions between neoclassical economists and Keynesians, for instance). This openness is necessary, but not sufficient for productive discussions: we need to find some common ground. At the same time, we are not saying that different approaches must necessarily agree with each other. To understand how this might work, framework of interested pluralism is helpful.

Source: Dobusch and Kapeller (2012), p. 1050

For example, consider the role of currency hierarchies for international economic dynamics. Different approaches could be identical in their take on the issue. They could also be convergent or compatible. Carla鈥檚 and Patrick鈥檚 analysis of the CFA-franc zone is a good example of compatible approaches that have been brought together fruitfully. The merit, again, is that our potential to learn is larger when we look at the phenomenon from several angles. Finally, we could find out that different approaches produce divergent or even contradictory interpretations of currency hierarchies. In this case, we must be able to engage in critical but constructive discourse. To dissent in a productive way, in turn, we need common meta-ground and some consensus about how scientific knowledge creation works. To figure this out, we need to meet again, for at least a week.

Svenja Flechtner is a Post-doc research assistant at the European University Flensburg.
Jakob Hafele is a Master student of International Development at Vienna University.
Theresa Neef is currently finishing her graduate studies in economics at Freie Universit盲t Berlin and works at DIW Berlin.

The symposium enjoyed financial support by the Fritz Thyssen foundation.

I have argued in my research that scarcity problems are, and will remain, an important sub-set of problems, but we need to include sufficiency and abundance problems as well (Daoud , , , , , ). Under scarcity, economics will give us insights about how people optimize their behavior to get as much as possible out of their limited resources. Neoclassical economics is mainly interested in what we can call allocation problems under a scarcity assumption. If actor A has a set of resources R, that is scarce in relation to fulfilling a set of wants W. Neoclassical economics tells us that a rational actor will optimize his or her resources in such a way that person can derive as much utility U as possible given the circumstances. These types of problems are central to many social science issues鈥攖hey face governments allocating a limited budget to a myriad of popular demands, they face the individual in deciding if he or she should go to university or take a job. As social scientist, we need to keep analyzing these situations.

What is problematic with the neoclassical view, however, can be summarized in three points. First, this assumption is often postulated to be empirically valid without further investigation. It is stipulated to be valid in most cases of which economics is applied to, and rarely confirmed (). A situation might be characterized by scarcity, but we know that even famines can arise when food is sufficient (; ). What is the real validity of a piece of research if its core assumptions do not hold when checked against reality?

Second, when we see the world from a scarcity perspective, we are led to ignore sufficiency and abundance problems (; ; . Many events or processes are not cases of scarcity. For example, unemployment is an abundance of labor power. Some would say, but is not unemployment rather a case of scarcity of jobs? No, not if we follow the original definition of scarcity, laid out by Menger, Robbins or Malthus for that matter (, ). Labour power is a factor of production. A job, which is essnetially a position is a specification to perform a particular task鈥攚hen the task if done by a worker, it satisfies fulfilling a want or need (:41). The social world is filled with other abundance or sufficiency examples: consumer society with its cornucopia of goods and services (); post-scarcity society and emancipator reasoning (); technological development (e.g. 3D-printers, automated machines, artificial intelligence) that leads to exponentially higher levels of productivity (.

Third, postulating leads us to ignore how scarcity problems became scarcity problems in the first place. What if scarcity is created? What if actor B has the instruments to manipulate actor A鈥檚 resources R to stay scarce? It would be more rational for actor A to engage in a power struggle with B, freeing one鈥檚 self from this artificial scarcity. In many settings, actors strive to achieve abundance or sufficiency in order to free themselves from the turmoil of scarcity (). Even Adam Smith writes that 鈥樷�he object of police [politics or governance] in general is the proper means of introducing plenty and abundance into the country, that is, the cheapness of goods of all sorts鈥� (:333). However, endowments or resources do not just appear as free gifts of nature or society. Capital owners control, for example, the supply of cars or housing. Even if demand exceeds supply, someone has to make the final call to produce more cars. Similarly, the supply of fish is not only controlled by the fishing industry but also by some natural seasonal cycles affecting the scarcity or abundance of fish. So even in functioning markets, individuals or groups may have vested interest in supplying more or less of some good or service. This is largely what political economy is about. (, ).

In summary, the approach I am advancing shows that the fundamental problem of neoclassical economics lies within the set of socio-economic problems (Daoud 2011a). Under scarcity, economics informs us that agents will instrumentally choose the strategy to maximize their utility, making (allocating) the most out of their resources. What I have argued in several papers is that this is only one useful strategy among several; agents might reduce scarcity, inflate it, or create it. As such, the research agenda of Scarcity, Abundance and Sufficiency subsumes the allocation problem within a super-set of problems. Recalibrating socio-economic inquiry to research the dynamics of scarcity, abundance, and sufficiency will cast not only new light on old problems, but lead us to discover new problems that traditionally have been reserved for neoclassical economists. I invite you to explore these problems with me.

References

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Daoud, Adel. 2007. 鈥溾�� Journal of Critical Realism 6(2):199鈥�225.

Daoud, Adel. 2010. 鈥�.鈥� American Journal of Economics and Sociology 69(4):1206鈥�29.

Daoud, Adel. 2011a. . Gothenburg: Gothenburg Studies in Sociology, Department of Sociology & Geson Hyltetryck.

Daoud, Adel. 2011b. 鈥�.鈥� Review of Social Economy 69(3):275鈥�305.

Daoud, Adel. 2015. 鈥�.鈥� in The Wiley Blackwell Encyclopedia of Consumption and Consumer Studies. John Wiley & Sons, Ltd.

Daoud, Adel. 2017. 鈥�.鈥� Cambridge Journal of Economics.

Dugger, William M. and James T. Peach. 2009. . Armonk, N.Y.: M.E. Sharpe.

Galbraith, John Kenneth. 1958. . London: Hamish Hamilton.

Hayek, Friedrich August von. 2004. 鈥淚ntroduction.鈥� in , edited by J. Dingwall, B. F. Hoselitz, and B. F. Hoselitz. Grove City, PA: Ludwig von Mises Institute and Libertarian Press.

Jevons, William Stanley. 1888. 3rd ed. London: Macmillan. Retrieved ( on 2008-10-08).

Keynes, John Maynard. 1972. 鈥�.鈥� Pp. 321鈥�32 in The collected writings of John Maynard Keynes. Vol. 9, Essays in persuasion. London, New York: Macmillan鈥�; Cambridge U.P. for the Royal economic society.

Menger, Carl. 1871. Principles of Economics. Grove City, PA: Libertarian Press; Ludwig von Mises Institute.

Offer, Avner. 2006. . Oxford: Oxford University Press.

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Robbins, Lionel Robbins. 1998. . Princeton, N.J.: Princeton University Press.

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S枚derberg, Johan and Adel Daoud. 2012. 鈥�.鈥� tripleC: Communication, Capitalism & Critique. Open Access Journal for a Global Sustainable Information Society 10(1):66鈥�76.

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Adel DaoudAdel Daoud is听Research Fellow in Political Economy, Centre for Business Research, Judge Business School, University of Cambridge, the U.K.

Photo: Johan S枚derberg & Adel Daoud

During the 1990s, although the market paradigm was dominant in economics and public policy, a new literature stressing the importance of the role of the state in industrialization rose to fame. We can mention (1989), (1990) or (1995). This literature dwelled on the East Asian miraculous industrialization and showed with empirical and historical evidence how the state apparatus was necessary to spark the economic take off. More recently, these academic attempts multiplied (for instance in the developmental state literature with , 2002) and gained new interest after the 2008 financial crisis. Yet, this literature is not novel and draws its inspiration from previous economists and social scientists, who for a long time warned us of the danger of disintegrating the state from the economic sphere. On the other hand, mainstream theorists tend to undermine, if not ignore, state intervention and consider it as an exogenous variable to economic growth (see for example , , and ). The post-1980s era had provoked academic debates around the role of the market versus the role of the state for developing countries: the claim made by mainstream economists and politicians was that countries which pursued a state-led industrial policy failed greatly and that the was an illustration of this (see for example the ). On the contrary, it was observed that the East Asian newly industrialized countries (the so-called 鈥榝our tigers鈥�) 鈥榤iraculously鈥� developed by pursuing market-oriented policies (see for example ). As heterodox economists, such as Amsden, Wade, and Evans, retaliated by stating the exact opposite, the extent to which the state could be an industrial actor or not become a new agora for both camps.

However, what if the terms of the debate were problematic at the conceptual level from the beginning? Is the dichotomy 鈥渟tate vs. market鈥� as evident as it appears to be in policy debates? A theoretical detour going back to Karl Polanyi might help us shed some light on this issue.

In his famous book (1944), Karl Polanyi proposed a theory of industrialization embedded in human institutions. Polanyi鈥檚 thesis was pretty radical, although a truism in itself: 鈥極ur thesis is that the idea of a self-adjusting market implied a stark utopia鈥�. And by market economy, Polanyi means: 鈥榓n economic system controlled, regulated and directed by market prices鈥� (p.71).

The 19^th century was the age of liberalism and the laissez-faire doctrine was the directing principle in economic policy (initiated by the British abolition of the corn laws in 1846). The sole path to industrialization was to trust market forces, at least in theory (see ). Indeed, three major elements are necessary to the industry: land, labor and capital. These were treated as commodities that needed a market mechanism to be distributed in the most efficient way. As a consequence, industrial policy excluded state intervention or planning in the three markets. Yet, the conceptual implications of this doctrine are very problematic: are these three commodities, real commodities that could be subjected to market mechanism? What is the anthropological tissue behind the industrial process? Polanyi was mainly concerned with this issue and tried to unearth the metaphysical grammar of the liberal doxa by enquiring on the nature of these commodities and on the nature of the market process. His argument goes as follows:

a) Capitalism and industrialization mechanisms rely on three commodities: labor, land and capital.
b) A commodity is an object that is produced to be sold in the market.
c) Labor is an aggregate term to signify human laborers, land is in fact nature itself and capital is a purchasing power through a banking and monetary system that is not produced.
d) Humans, nature and money are not a production for market sales and purchases.
e) Therefore labor, land and capital are fictitious commodities.

The conclusion (e) of the argument leads to Polanyi鈥檚 main critique: implementing a market economy for these three commodities means the total destruction of society. Since these commodities are fictitious and are in essence what constitutes a society, their fate cannot be rendered to the unique market prices. Rather, the state acts as a preserver and protector of society and industrial policy falls into this role. As Polanyi expresses it: 鈥楾he protection of society, in the first instance, falls to the rulers, who can directly enforce their will鈥� (p. 174). Namely, the state/bureaucracy leads policies to protect/develop society (indeed, the nature of the bureaucracy and political system makes implementing effective 鈥榩rotection鈥� problematic. We will deal with this issue later on). Here we can have an interpretation of Polanyi鈥檚 view of protection related to the normative definition of development as a process that broadens and expands individual social choices (perhaps the idea of protection here implies more a focus on negative freedoms- namely, freedom from 鈥搑ather than an attention on positive freedoms. The latter is what Sen refers to most of the time in his . Indeed a clear distinction between both freedoms is conceptually problematic as as a triadic relation shows. Yet, the idea of protection in Polanyi鈥檚 corpus of concepts also implies a social security system that empowers individuals鈥� capabilities).

As a matter of fact, society is not a homogenous ensemble and although it has a structure, it also has classes with different and opposite interests that render the implementation of industrial policy very problematic. Polanyi acknowledged this problem. Furthermore, an international monetary system embodied by institutions such as the IMF, the World Bank and the WTO, where bargaining power is a major issue, industrial policy, and government intervention in general, becomes contentious (see or , for example). Polanyi published his book in 1944 and could not forecast the upcoming neoliberal era in the 1980s.

Nonetheless, the reference to Polanyi鈥檚 work enlightens us in questioning the frontiers between the market and the state. As to planning being opposed to a market-oriented economy, Polanyi remarkably argued that: 鈥榳hile laissez-faire economy was the product of deliberate state action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not鈥� (p.147). In fact, the market itself requires a plan as well as planning, but the 19^th century liberals did not plan to implement a planning economy. Hence, although planning is ubiquitous in the economic sphere, its idiosyncratic meaning remains distinct from a market mechanism in the literature.

Mohamed Obaidy is an MS student in Economics at The New School