What is Heterodox Economics?
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Heterodox economics is the analysis and study of economic principles considered outside of mainstream or orthodox schools of economic thought. Schools of heterodox economics vary widely and have few common characteristics other than propounding theories, assumptions, or methodologies that fall outside of or contradict the mainstream Keynesian and neoclassical movements.Heterodox schools of thought include far-left theories such as socialism, Marxism, and post-Keynesian economics, as well as those associated with radical free-market economics such as the Austrian school. Heterodox economists often employ research methods and tools that originate in other disciplines, such as psychology or physics, to economic questions.
Definition
Heterodox economics refers to the analysis and study of economic principles that are considered outside the mainstream or orthodox schools of economic thought. It encompasses a wide range of schools with few common characteristics, except that their theories, assumptions, or methodologies contradict or lie outside mainstream Keynesian and neoclassical movements. Heterodox economists often use research methods and tools from other disciplines, such as psychology or physics, to study economic issues.
Origin
The origins of heterodox economics can be traced back to critiques and challenges to traditional economic theories. Over time, particularly in the 20th century, more economists began to question the assumptions and conclusions of mainstream economics, leading to the formation of various heterodox schools. These schools often emerged in response to specific historical events and social changes, such as the Industrial Revolution, the Great Depression, and the process of globalization.
Categories and Features
Heterodox economics includes various schools such as socialism, Marxism, post-Keynesian economics, and radical free-market economics associated with the Austrian school. Each school has its unique theoretical foundation and methodology. For example, Marxist economics focuses on the inherent contradictions of capitalism and class struggle, while post-Keynesianism emphasizes uncertainty and market failures. The Austrian school advocates for free markets and individualism.
Case Studies
A typical case is the oil crisis of the 1970s, which prompted many economists to reassess the assumptions of mainstream economics, particularly regarding the market's self-regulating capabilities. Post-Keynesian economists used this opportunity to highlight the importance of government intervention. Another case is the 2008 global financial crisis, where many heterodox economists pointed out that mainstream economics failed to predict and explain the crisis, emphasizing a renewed understanding of the complexity of financial markets.
Common Issues
Investors applying heterodox economics may encounter issues such as difficulty understanding the complexity and diversity of its theories. Additionally, since heterodox economics often challenges the existing economic order, investors might face criticism and skepticism from the mainstream economics community. A common misconception is that heterodox economics completely rejects market mechanisms, whereas they typically critique the limitations of market mechanisms.
