Dissident and Complementary Currents in Modern Economics

Economic theories and doctrines have gained a great variety since the last quarter of the 19th century.

Criticisms of neoclassical economics brought about the birth of heterodox economics.

Heterodox economics includes many approaches. Including classical political economy, Marx and the Marxist tradition of political economy, Keynes, Keynesian economists, institutionalist and evolutionary economists are seen within heterodox economics.

New mainstream economic theories developed particularly in terms of technical analysis after the 1970s, which resulted in the cutting off of economics from other social science disciplines.

Because of the social and economic effects of the 2008 crisis, critical approaches in economics have gained new importance.

The major shift from classical political economy to neoclassical economics was that class relations were no longer the analytical unit in economic theorizing.

Neoclassical economics has set the agenda for economics since the last quarter of the 19th century when the marginalist turn took place

homo economicus who rationally acts in accordance with his self-interest under all conditions.

Behavioral economics that stresses the irrational aspects of economic acts which, however, can be corrected through market-oriented interventions and regulations towards rationally acts.

Although diverse currents in neoclassical and neoliberal economics have developed over time, they have common in certain theoretical abstractions and political conceptions of the market economy. 

The so-called abstractions such as (i) the market economy as a self-regulating and self-balanced mechanism, (ii) the rising importance of competition as the central and powerful explanatory tool of the economy to exclusion of all other operating relays, (iii) the conception of self-interest as the driving force of the economic actions that also determines non-economic behaviors, (iv) subjectivism, and (v) the ideal type of the economic man as homo economicus who is naturally disposed to exchange have certain deficient general theoretical implications.

(i) the place of history has lost its importance, (ii) the dynamic nature of the economic process has been ignored, (iii) relatedly, the idea of change has fallen from grace, (iv) structures and institutions have no longer been a  part of explanation, (v) deductive, reductive and mathematical tools and methods have displaced the socially, culturally and politically relevant elements of the economy, (vi) the nature and behaviors of economic agents have been taken granted without reference of their non-economic features

Marx was one of the first political economists who criticized new economics labeling it “vulgar economics”.

For Marx, classical political economy was wrong in explaining the true structure of capital and its relation with labor through which profit arises but the epistemic structure of classical economy based on class relations was the one that economics should never leave.

Alongside Marx, the German Historical School set the controversial research agenda in economics against liberal and marginalist economists

The Historical School was also crucial for having a direct and strong impact on the development of American institutional economics in the late 19th century whose crucial members studied their doctorate in economics in Germany.

Marx’s political economy, the Historical School, and American institutional economics were the first critiques of both the liberal classical political economy and neoclassical economics.

In the wake of the marginalist revolution, there supervened several national schools in economics such as American, Swedish, Lausanne, British, Austrian, and Italian neoclassical economics. The late version of neoclassical economics then paved the way for the new critical lines of economics such as Schumpeterian, Keynesian, neoclassical Keynesian synthesis with social democratic tendencies, and post-Keynesian economics.

There is another line of economics, particularly critical of the Keynesian version of economics led by the German ordoliberals, Friedrich Hayek, Ludwig von Mises, public choice school, the Chicago school, and the third way economics. This group is generally called ‘neoliberal’ economists who paid specific attention to the subjectivist methodological and theoretical aspect of early neoclassical economics.

the neoliberal group of economics represents both the harsh critique of the old political economy school with certain structural and historical methodic orientation and the internal criticism of neoclassical economics in a way to develop it towards a more sophisticated mainstream version of economics including new classical real business cycles, new consensus in macroeconomics, new Keynesians, new political economics, behavioral economics, game theory, experimental economics, and so on.