Issue 287 October 25, 2021 web pdf Heterodox Economics Directory
Last week I participated in an informal workshop on the nature of institutions and their role in economic analysis hosted by several researchers associated with the University of Graz. The basic idea of this workshop was to facilitate dialogue across mainstream and heterodox economists with a particular topical focus. For me, this was a welcome alternative to the usual routines of inter-paradigmatic exchange in economics, which are typically based on interested (heterodox) and disinterested skepticism (mainstream) towards each other.
In contrast, the spirit of the workshop was coined by the willingness to explore issues of theoretical convergence and to engage in mutual learning, which are probably the more fruitful routines in inter-paradigmatic engagement. Specifically, I found it nice to observe some convergence, for instance around the definition of institutions as man-made „systems of […] rules that structure social interactions“ as suggested by Geoffrey Hodgson’s by now classic take on the issue. Another point of common ground was seemingly found in criticizing those gross simplifications of the matter that are content to conceptualize the impact of institutions only with regard to their impact on market allocation, i.e., whether they distort (or support) market-clearing transactions. These simplifications – that are repeatedly found in the economics literature under labels like „good vs. bad institutions“ or „institutional quality“ – seemingly add little to both, our understanding of institutions as such as well as their economic impact. Of course, some differences remained, but still I think every participant could gain something from our exchange and went home a little wiser than before.
In contrast to these experiences, that indicate that the potential merit of a more widespread interaction between mainstream and heterodox researchers could be huge, stand those situations, in which the hard obscurantism practiced by some branches of the economic establishment leaves you speechless. As twitter is a prime source for pointed statements, it probably won’t surprise that my most recent experience of speechlessness draws on twitter. Over there I found a Stanford-economist arguing, that climate change and public debt are equivalent problems as it’s all about the „costs borne by future generations“.
Honestly spoken, this seems so off the wall to me, that it baffles me for days now. For one, the climate thing is something existential, while debt is primarily a distributional issue. For another, today’s investments might provide some long-term benefits (i.e. future payoffs, like better education or infrastructure and the like), while burning coal most probably won’t. Thirdly, it is overlooked that the embeddening, from which the respective constraints emerge, is different: climate change relates to a bio-physical constraints, while public debt is tied to institutional configurations that could be changed and adapted. And, finally, the argument loses total sight of the relative problem scales by neglecting to mention that these scales matter for assessing the importance and nature of the problem. And while debt is typically juxtaposed to current production (i.e. GDP), current emissions should be compared to remaining carbon budget – and doing so would enlighten us by indicating that these two problems are very different animals indeed.
As these stories indicate the heterogenous nature of 21th century mainstream economics, let me add that one thing on this: although I sincerely doubt that this argument could ever be satisfactorily rationalized in any way, I am not enough of a paradigm warrior to deny the merit of respectful conversation. This applies even more so for the current situation in economics, where occasions for such a respectful inter-paradigmatic interaction are highly scarce. So here is my final commitment in this spirit: If ever possible, I would truly welcome to share a beer with said colleague having him explain, why he, against all odds, sees any wisdom in his comment.
All the best,
Jakob
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