Dani Rodrik a heterodox economist? You must be joking!

13 February, 2017 at 18:47 | Posted in Economics | 3 Comments

I discussed long ago what it means to be heterodox in economics. Bob Kuttner, who I once saw giving a talk at the New School (in the 1990s), a very sharp journalist that knows quite a bit about economics, sings the praises of Dani Rodrik as an heterodox economist …

hqdefaultRodrik is, or was a few years ago at least, in what Colander, Holt and Rosser refer to as the cutting edge of the profession … which is to say he is heterodox in the same way that Joe Stiglitz or Paul Krugman are heterodox. They are willing to suggest that some imperfections make the laissez-faire dream of the most fundamentalist neoclassical authors somewhat overstated. But as much as Krugman and Stiglitz accept the conventional macro model, with the natural rate hypothesis, the same is true for Rodrik, which essentially accepts the basic Heckscher-Ohlin-Samuelson trade model (for a critique go here). He is a moderate neoclassical economist; a potty trained one if you will, but certainly not heterodox.

Matias Vernengo

1390045613Economics students today are complaining more and more about the way economics is taught. The lack of fundamantal diversity — not just path-dependent elaborations of the mainstream canon — and narrowing of the curriculum, dissatisfy econ students all over the world. The frustrating lack of real world relevance has led many of them to demand the discipline to start develop a more open and pluralistic theoretical and methodological attitude.

Dani Rodrik has little understanding for these views, finding it hard to ‘understand these complaints in the light of the patent multiplicity of models within economics.’ Rodrik shares the view of his colleauges Paul Krugman, Greg Mankiw and Simon Wren-Lewis — all of whom he approvingly cites in his book Economics Rules — that there is nothing basically wrong with ‘standard theory’ and ‘economics textbooks.’ As long as policy makers and economists stick to ‘standard economic analysis’ everything is fine. Economics is just a method that makes us ‘think straight’ and ‘reach correct answers.’

Writes Rodrik in Economics Rules:

Pluralism with respect to conclusions is one thing; pluralism with respect to methods is something else … An aspiring economist has to formulate clear models … These models can incorporate a wide range of assumptions … but not all assumptions are equally acceptable. In economics, this means that the greater the departure from benchmark assumptions, the greater the burden of justifying and motivating why those departures are needed …

Some methods are better than others … For some these constraints represent a kind of methodological straitjacket that crowds out new thinking. But it is easy to exaggerate the rigidity of the rules within which the profession operates.

Young economics students that want to see a real change in economics and the way it’s taught, have to look beyond Rodrik, Mankiw, Krugman & Co. Those future economists who really want something other than the same old mainstream neoclassical catechism; those who really don’t want to be force-fed with mainstream neoclassical deductive-axiomatic analytical formalism, have to look elsewhere.

Just as Stiglitz and Krugman, Rodrik likes to present himself as a kind of pluralist anti-establishment economics iconoclast, but when it really counts, he shows what he is — a mainstream neoclassical economist fanatically defending the relevance of standard economic modeling strategies. In other words — no heterodoxy where it really would count.

Almost all the change and diversity that Rodrik applauds only takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics. All the flowers that do not live up to the precepts of the mainstream methodological canon are pruned. You’re free to take your analytical formalist models and apply it to whatever you want – as long as you do it using a modeling methodology acceptable to the mainstream. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered doing economics. “If it isn’t modeled, it isn’t economics.” This isn’t pluralism. It’s a methodological reductionist straightjacket.

In Rodrik’s world “newer generations of models do not render the older generations wrong or less relevant,” but “simply expand the range of the discipline’s insights.” I don’t want to sound derisory or patronizing, but although it’s easy to say what Rodrik says, we cannot have our cake and eat it. Analytical formalism doesn’t save us from either specifying the intended areas of application of the models, or having to accept them as rival models facing the risk of being put to the test and found falsified.

The insistence on using analytical formalism and mathematical methods comes at a high cost — it often makes the analysis irrelevant from an empirical-realist point of view.

No matter how many thousands of models mainstream economists come up with, as long as they are just axiomatic variations of the same old mathematical-deductive ilk, they are not heterodox in any substantial way, and they will not take us one single inch closer to giving us relevant and usable means to further our understanding and explanation of real economies.

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3 Comments »

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  1. Nice post.

    I wrote this recently:

    http://www.concertedaction.com/2017/01/28/dani-rodrik-on-free-trade/

  2. . . . there is nothing basically wrong with ‘standard theory’ and ‘economics textbooks.’ As long as policy makers and economists stick to ‘standard economic analysis’ everything is fine. Economics is just a method that makes us ‘think straight’ and ‘reach correct answers.’

    I think this is a fair paraphrase of mainstream complacency. And, they are wrong. Their methodology is corrupt and no longer accepts or makes use of critical reason. They do not think straight nor do they reach correct answers. They are propagating the mythology of a civic religion and in that context, talk of orthodoxy makes sense, but do we want a Protestant Reformation or a Scientific Revolution? The former is furthered by heterodoxy; the latter requires critical method.

  3. But is that important?

    Chang wrote about eight (or was it nine?) holes through which you can look on the economy, and through everyone of them you see something while other things are hidden. I think this is a good, non-dogmatic view. And at least Rodrik can see that globalization is not all rosy and may have gone to far.


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