Saturday, September 22, 2018

Two Kinds Of Economists

Or, rather, I classify economists into two kinds on each of three dimensions (Table 1).

Table 1: Classifications For Economists
Emphasis on social reproductionEmphasis on allocating scarce resources
Money non-neutralMoney as a veil
Economic issues arise under competitive model, with all agents in possession of all information actually existingEconomic issues to be explained as a result of deviation from an ideal, competitive model

I have written about the first dimension before. Classical political economy, and economists in related traditions, focus on what needs to hold such that society is reproduced. Neoclassical economics is defined, by many, as being about the allocation of scarce resources.

Post Keynesians and others describe money as having real effects. Many mainstream economists, on the other hand, model capitalist economies as, basically, barter economies. They hold money to be neutral, at least in the long run. It is not clear that such models can be extended to contain money.

My third dimension, above, relates to attitudes to two types of models. In one, an economy is described, at a high level of abstraction, as characterized by free competition, with no agent being able to influence market prices, and all agents having complete information about what can be known. In the other model, one introduces rigidities and stickiness in prices; oligopolies, monopolies, and monopsonies; information asymmetries; and so on. One group of economists thinks the former model can describe an economy that need not tend to an equilibrium with desirable properties. Many mainstream economists, however, think actually existing economies are to be described by deviations from perfect competition and that it is the goal of policy to try to make actual economies function like the ideal. (I was inspired to try to define this dimension by Palermo (2016).)

Theoretically, the above taxonomy yields eight kinds of economists. I do not know that one can find important economists at every node of the cube so defined. But, to see how this works out, consider Joseph Schumpeter. He emphasized scarcity, thought money and finance impact real variables, and saw issues with a perfectly competitive economies. For the latter, consider his argument - later taken up by John Kenneth Galbraith - that large corporations were needed for the research and development needed for growth in a mature economy.

John Maynard Keynes is another economist that emphasized the real effects of money and argued issues can arise in the ideal economy. He argued, in the General Theory, that a perfectly competitive economy would be violently unstable. Rigidities in wages are desirable, for they provide stability. I am not sure where I would put him on the first dimension, but followers at Cambridge, such as Kaldor and Robinson, developed models of warranted growth in the 1950s that lie in the upper left box in the figure.

Obviously, this post should go on to explore more nodes in the cube I have outlined.

  • John H. Finch and Robert McMaster (2018). History Matters: On the mystifying appeal of Bowles and Gintis. Cambridge Journal of Economics.
  • Giulio Palermo (2016). Post-Walrasian Economics: A Marxist Critique. Science & Society 80(3): 346-378.

1 comment:

Anonymous said...

I like this kind of thing. I have daydreamed about a tree of economic questions. Nodes near the root would be fundamental assumptions. The leaves would represent the theories of individual economists or schools. If you could scientifically determine the answers to questions near the root of the tree you could definitively debunk whole swathes of economics in one go.
It wouldn't change any fossilised minds of course (Friedman 'proved' assumptions don't matter), but students would benefit from it.