What is Heterodox Economics?

Matthew Coutts
June 2010
University of Auckland

Introduction
Ever since the inception of the political economy there has been a divergence of thought
accompanying its development. Throughout the centuries, and particularly in the latter part
of the twentieth, conventional thought within the discipline has been dividing, creating
doctrines or ideologies outside the mainstream. Today there is an increasing trend to refer
to these as heterodox economics. However, the nature of this division as well as the very
nature of heterodox thought remains, in many peoples minds, unclear.
Heterodox economics is a complex structure being composed of many different kinds of
work, each internally differentiated with different historical origins and orientations. In the
past there has been relatively little cross-communication between schools, but now as we
enter a pluralist age the very notion of an orthodoxy is beginning to be questioned.
In attempting to define the characteristics and demarcate the constantly shifting
boundaries of orthodox and heterodox economics one must first look at the idea of
heterodoxy in the history of economic thought.

Historical Context
No science has been criticized by its own servants as openly and constantly as
economics (Georgescu-Roegen, 1971: p1)

Dissatisfaction with an orthodox or mainstream can be traced back to the eighteenth

century where late mercantilist theory, in the context of a political economy dominated by
the rich and powerful, was defeated in the political upheavals of 1775-1825 bringing forth
the laissez-faire economic liberalism of the classical economists such as Adam Smith and
David Ricardo. The 1750s orthodoxy of protectionism and regulation became the
heterodoxy of 1825. This is but one example among many of how orthodoxy often
becomes heterodoxy and vice versa as political economies and the social context behind
them changes.
Marxist economics could be classified as being heterodox since its inception. Karl Marx
created, using the ideas of fellow socialists, an economic ideology at odds with the then
accepted bourgeois system. Socialist political movements provided the foundations for
Marxists to differentiate their work from what they perceived as being an orthodoxy.
However, it could also be argued that heterodoxy was absent at this time as different
schools of thought could easily coexist (Backhouse, 2000). The nineteenth century was a
time dominated by the academic schools, exemplified by those of Schmoller in Germany
and Marshall in England. While many differences did exist between the schools these
could easily be described as local phenomena.
It was throughout the interwar period that heterodoxy became an even less appropriate
way of classifying branches of economics. There were a great number of different
approaches to economics at this time (see Mitchell 1969) but there simply didnt exist an
orthodoxy from which to rebel. Both American micro and macro economics were pluralist
(Morgan and Rutherford 1998), notwithstanding Keyness (1936) claims to the contrary,
and even though institutionalism did come to be identified as a distinctive movement
(Laidler, 1999) it shouldnt be regarded as a heterodox tradition in this period.

The Keynesian Revolution can be seen to mark the emergence of an orthodoxy as a

result of the mathematical structure advanced by the General Theory (Backhouse, 2000).
As time progressed this orthodoxy gradually became less Keynesian and more
neoclassical. John Hicks, Joan Robinson, and Paul Samuelson paved the way for the
emergence of a microeconomic orthodoxy in the same way Keynes did for
macroeconomics. Beginning in the 1930s economic theory became simpler and more
formal (Backhouse, 1985) moving away from the ideologies of Chamberlin, Hawtrey,
Marshall, and Mitchell to those of Arrow, Debreu, and Patinkin (Blaug, 1999). By the 1970s
when economists trained before 1950 ceased to dominate the discipline a neoclassical
orthodoxy was firmly established.
The 1970s saw the proliferation of heterodox thought with Kregel, Eichner, and others
promoting a post-Keynesian alternative to neoclassical thinking. At the same time Austrian
economics was established as being heterodox (Vaughn, 1994). The countervailing
schools of thought presented by these groups, although not the first time proposed, now
became institutionalized as heterodoxies. Various explanations have been put forward in
an attempt to explain this change in thought, for example the changing economic
environment, the challenge of the Vietnam war, the intellectual landscape of the time, the
growth of higher education in the developing world, and even changes in the technology
and economics of publishing (Backhouse, 2000).
While the concept of economic heterodoxy has always been with us, the term made its first
published appearance in Allan Gruchys Modern Economic Thought in 1947 (1967 reprint:
621). The term was used sporadically throughout the rest of the century though it is only in
the last three decades that we have witnessed a rapid growth in the terms use. The notion
of heterodox economics has expanded hugely over this time through the creation of
associations, roundtables, and conference sessions.
Since 1980 new traditional heterodox research programs have emerged (for instance, the
re-thinking Marxist school, SABE, feminism, new evolutionary currents, and others)
backing Lawsons remark that the vitality of heterodox economics is alive and
flourishing (Lawson, 2006, p.483).
Thus as it now exists in the academic world, heterodox economics, can be seen as a
collection of specific styles of economics that has been excluded from the neoclassical
mainstream. These separate projects or traditions include institutionalism, Marxian,
Austrian, post-Keynesianism, and feminist economics, among others. In defining what
heterodox economics is one must then determine the commonalities and virtues, if any,
these traditions hold in common.

Searching for Commonalities

The many schools that comprise heterodox economics have their own journals,
organizations, networks and academic institutions in which they dominate. It is often
perceived that in economics, at least, beyond [the] rejection of the orthodoxy there is no
single unifying element that we can discern that characterizes heterodox
economics (Colander, et al, 2004 p. 492). There is even a great deal of debate as to
whether these various schools constitute coherent projects (Hamouda and Harcourt, 1988)
or even constructivist programs at all (Peukart, 2001). While it is very difficult to discern
any unifying elements between different schools or even academics practicing heterodox

economics beyond this initial observation, there are those that assert the existence of
certain commonalities.
Lawson (2001) suggests three prominent commonalities observed in each school (1) a set
of recurring abstract themes or emphases, (2) much school-specific theory, analysis and
methodology, and (3) a difficulty in generating wide agreement on specific alternative
theories within each school. Davis (2006) suggests another three commonalities that are
useful when drawing the dividing line between neoclassical and heterodox economics
circa 1980 (1) the rejection of the atomistic individual conception in favor of a socially
embedded individual conception, (2) emphasis on time as an irreversible historical
process, and (3) reasoning in terms of mutual influences between individuals and social
structures.
While these two contrasting suggestions can be useful on the one hand for describing a
point-in-time contrast of heterodox commitments and on the other for describing shared
commonalities, neither treat heterodox economics as a selection of dynamic or changing
ideologies.
A more complex structural analysis that emphasizes the changing nature of this division in
a historical context is needed. By exploring different research approaches it is possible to
analyze the origins of both heterodox and orthodox traditions and characterize them by
types of dynamic process. It should also be added that the history of economic teaching is
of great importance, for a program to become orthodox it typically requires a school to
move from an entirely research based program to an established teaching program. Thus
according to Davis and Sent (2006) heterodoxy arises because of (1) the failure to
become orthodox following a period of pluralism1 (e.g institutionalism), (2) the loss of the
status of orthodox when a new orthodoxy emerges (e.g. post-Keynesianism), (3) the
failure to redirect orthodoxy from outside orthodoxy (e.g. Marxism and radical economics),
and (4) the failure to redirect orthodoxy from inside orthodoxy (e.g. feminism and social
economics). In moving away from a point-in-time comparison of different approaches, this
dynamic perspective on the history of economic thought shows us that there are different
origins to different research approaches, making the idea of heterodox economics
considerably more heterogeneous.
Lavoie (1992, 1992b, 2006) supposes that the distinctiveness in heterodox economics can
be formulated from five pairs of presuppositions: organicism versus methodological
individualism, realism versus instrumentalism, free markets versus regulation, procedural
rationality versus substantive rationality, and production versus exchange. Providing these
demarcations are not interpreted rigidly such methods of categorization can be useful. It is
also the case that a number of heterodox thinkers adhere to these presuppositions (for
example, Setterfield, 2003 and Pasinetti, 2005).
Further than simply suggesting commonalities between different schools of thought, an
economist could be said to heterodox if they claim to be working in a manner or offering an
alternative that does not fit or is incompatible with the mainstream. This would make being
heterodox a matter of deliberate choice requiring more than dissent from orthodox beliefs.
While parallels could be drawn from religious heterodoxies this such definition is not
ahistorical and could often fail as those working in heterodox schools often face more

There is certainly an argument that neoclassicism's assent to orthodoxy was a result of the interwar period
of pluralism (see Morgan and Rutherford, 1998).

challenges than their orthodox counterparts, such as lower wages, a smaller job market,
difficulty publishing and obtaining research grants.
Heterodox economists have a tendency to be skeptical of most ideas put before them,
especially those from different schools (Andreff 1996). While this can make unity between
schools seem difficult to imagine a counter tendency has begun to emerge. Perhaps as a
result of the peril found in being a minority, researchers from different schools have been
working to advocate for increased interaction and the bringing together of schools. Such is
true particularly amongst American Radicals (Marxists) and post-Keynesians in monetary
and macro economics. Recent years have in fact witnessed the creation of various groups,
programs and institutions to help bring the different heterodox schools together. For
example the International Confederation of Associations for Pluralism in Economics
(ICAPE) seeks to group all heterodoxies and their literature. Steve Fleetwood based at the
University of Lancaster has also launched a program to help generate more intellectual
exchange between heterodox economists from different schools.

The Mainstream
it could be argued that orthodox economics has embraced a pluralism that has been
advocated by heterodox economists themselves (Dow, 2000, p. 160)
Given that there are several schools of thought classified as heterodox as well as
numerous economists working in an unconventional or unorthodox sense, a dividing line
could also be created by taking the literal interpretation of heterodox and saying that
anything in economics not defined as orthodox has to be heterodox. However, there is a
spectrum of possible interpretations regarding the nature and definition of orthodox
economics. In the past it would have been acceptable to see equilibrium and general
equilibrium as unifying, organizing concepts for orthodoxy (see Weintraub, 1985;
Hausman, 1992). However, there have been fragmentations in the content of orthodox
economics making general equilibrium one concept among many (see Coats, 2000;
Hodgson, 1999). For instance game theory, with its evolutionary potential, is an area
widely accepted by the mainstream not contributing directly to the general equilibrium
project. The fundamental problem is that game theory is based on the direct
interdependence of agents that is not compatible with the ideas of optimality, equilibrium,
and stability (Davis, 2006). Likewise experimental economics, in questioning the
specification of rational behavior, does the same (Dow, 2000).
Mathematical formalization is a common thread that can be seen to remain as a
methodological ground stay for all forms of orthodox economics. It has been argued that
such formalism is needed for the progression of economics (Krugman, 1998; Blackhouse
1998), as it constrains the application of subject matter to those factors that can be
mathematically expressed (see Chick, 1998). Arguments that are not backed by
mathematical expression, for many orthodox economists, are either seen to be poorly
expressed or not economically grounded at all. This position helps orthodox economists
legitimize the tendency to ignore elements of heterodox economics not mathematically
expressed.
Such formalization also constrains the direction of future developments in orthodox
economics. Recent pluralist trajectories in this sense can only be regarded as transitional
states, until parts are unified within a single uniform whole (Blanchard & Fisher, 1989, p.
505). It is therefore only possible to see the current state of orthodox economics as

progress in a qualified manner. Without a methodological rethinking it is not clear how

orthodoxy can sustain pluralism, nor how useful it is to draw a distinction between
orthodox and heterodox economics.

From Competing Paradigms to Pluralism

In a subject as difficult as economics, a state of doubt may not be very comfortable, but a state of
certainty would be ridiculous Voltaire

Analytically, culturally, philosophically and organizationally, recent trajectories in heterodox

economics have revealed a marked shift away from the school of thought individualism to
pluralism where there is no possibility that any school could possess final or total
solutions (Fullbrook, 2003, p. 8-9). Many of todays heterodox economists see pluralism
as a central normative commitment, valuing the diversity of views and narrative heterodoxy
provides (Hargreaves-Heap, 2001). Dominance for one theory over all the others with the
possible result that all the rival theories are extinguished amounts to advocating scientific
regress (Kurz & Salvadori, 2000, p. 237).
Open-system realists2 have provided the most rigorous justifications for heterodox
pluralism (Lawson, 1997, 2003; Dow, 1997, 2000, 2004a, 2004b; Fullbrook, 2001;
Herrmann-Pillath, 2001). Such thinkers see the role of economic enquiry as an open
ended network of institutions and processes so complex that no single idiom can
adequately represent it (Garnett, 2006, p. 528), and that they [reject] the ideas of
theoretical monism and theoretical universalism (Herrmann-Pillath, 2001, p. 91).
This said many leading heterodox economists remain committed to their individual
paradigm, seeing their main role as a search for the demarcation criteria that would render
a distinctiveness and superiority of heterodox economics over that of the orthodox
mainstream. The ascendance of pluralism has generated numerous criticisms. Davidson
(2002, 2003) argues that heterodox economists will only be able to improve their standing
if they develop a superior paradigm and unite behind a single general theory. Davidson
regards the optimism in the Fullbrook/ Dow assertion, that pluralism could help the
introduction of heterodox economics into mainstream teaching, as dangerously misguided,
in that it would likely reinforce the marginal status of non-mainstream ideas within
economics. Sent (2003) doubts that heterodox economists are serious about pluralism in
that they are unable to treat mainstream economics in a pluralistic manner.
While teaching is the most fundamental and important role of professional economists,
today many educators and curricula at graduate and undergraduate level are still criticized
for their degree of uniformity, mathematization and formalization (Goodwin, 2000; Garnett,
2006). Even the mainstream is beginning to call for a more plural approach to teaching as
the narrowness and homogeneity of current practice are seen to be creating a pedagogical
crisis (Coats, 2000; Rutherford, 2000). The heterodox tradition should work to provide the
increasing demand for critical thinking and real-world-complexity in economic education,
particularly at the graduate level, to provide better learning outcomes for future
generations of economic thinkers.(Earl, 2002; Feiner, 2002; Fullbrook, 2003).

Those who provide an ontology deduced from the fact of intentional human action.

Conclusion
pluralism and intellectual progress are complements and that each [heterodox] school of thought
(Austrian, feminist, old and new institutionalist, Marxian, neoclassical, post-Keynesian, Sraffian,
etc) adds something unique and valuable to economic scholarship (Harvey et al. 2008: xi)

The nature of economic thought is expanding away from an orthodox or accepted core;
the past two decades have seen an increasing variance of acceptable views. Important
aspects of todays mainstream economists thinking, including those such as George
Akerlof, William Baumol, Truman Bewley, Paul Krugman, and Thomas Schelling, are being
conducted outside the generally accepted orthodoxy of the profession. However, the ideas
they generate are accepted and debated within the mainstream, expanding the variance of
acceptable views within economics.
At the same time the intellectual agendas of leading heterodox economists are beginning
to move beyond the established paradigms of post-Keynesian, Marxian, institutionalevolutionary, Austrian radical, feminist, social and Sraffian economics to expand new lines
of dialogue, criticism and analysis throughout dissenting schools of thought. A new
generation of scholarship is being created by the cross-fertilization of these ideas allowing
novel combinations of heterodox thinking to be applied to important historical and
contemporary problems.
Modern economics is becoming an ever more fuzzy set, containing such elements as
evolutionary game theory, new growth theory, new institutionalism, information economics,
and public choice. Many of these approaches are being increasingly adopted by other
disciplines, often without much examination. The falling regard for disciplinary boundaries,
especially in heterodox schools, is corroding the need for the categorization and even
definition of economic thought as being heterodox.
The bewildering diversity of different views and intellectual niches in economics ensures
that there will always be intellectual minorities and majorities and how we classify them
matters little as long as they continue to flourish exploring new fruitful aspects of economic
and social life.

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