The Changing Face of Mainstream Economics
by
David Colander
Ric Holt
Barkley Rosser
November 2003
MIDDLEBURY COLLEGE ECONOMICS DISCUSSION PAPER NO. 03-27
DEPARTMENT OF ECONOMICS
MIDDLEBURY COLLEGE
MIDDLEBURY, VERMONT 05753
http://www.middlebury.edu/~econ
The Changing Face of Mainstream Economics
David Colander, Ric Holt and Barkley Rosser
1. Introduction
If one reads the heterodox literature in economics these days, one gets the impression that
modern mainstream economics is much like the economics of 50 years ago; it is called
neoclassical economics and is criticized in much the same way that earlier heterodox economists
criticized the mainstream economics of the 1950s or 1960s. In this paper we argue that much of
this criticism today is off the mark because mainstream economic thinking has changed. We
argue that economics is moving away from a strict adherence to the holy trinity—rationality,
selfishness, and equilibrium—to a more eclectic position of purposeful behavior, enlightened
self-interest and sustainability. The paper develops our ideas by considering the nature of that
change and the process and sociological dynamics by which the profession changes.
2. The Profession as a Complex System
To understand our argument it is helpful to think of the profession as a complex system.
Complex systems cannot be understood from assumed first principles; they can only be
understood through the process of change that underlies them. In the same way, the economics
profession can best be understood by the process of change that characterizes it. Most
considerations of the economics profession have tended to take a static view of the profession,
which makes it seem as if it is an unchanging entity. That’s the approach that most heterodox
criticisms of the profession have taken. That's not the way we see the economics profession; we
see it as a dynamic entity, which generates a self-reproducing, evolving, complex system of
interacting ideas.
Getting a handle on such a dynamic entity and conveying its essence to others often
requires giving it static classifications and organizing it into distinct periods. Historians of
economic thought must do this to provide structure for their consideration of past economists.
But these classifications are crutches, not characterizations of reality. They are imposed by the
observer and are not necessarily part of the essence of the profession at any point in time. Any
static classification hides the dynamic change occurring underneath it. For this reason the
classifications used by historians of thought, such as Classical or Neoclassical, while useful and
perhaps even necessary, are nevertheless confining and miss important dimensions of the
profession.
3. The Edge of Economics
The changes in the profession are brought about by what we call work at the edge of
economics.
1
It is innovative and successful work at the edge of the profession that signals
1
The term, edge of economics, refers to work challenging the previously considered “orthodox” ideas.
Initially, we described it as cutting edge work, but some of our colleagues have pointed out that cutting
The Changing Face of Mainstream Economics
the future direction of change in economics and how the profession eventually comes to be
viewed and understood by its elite. The very concept of an edge of the profession is
designed to suggest a profession in which there are multiple views held within the
profession, and goes against the standard classifications of economics. Those standard
classifications convey a sense of the profession as a single set of ideas. In our view, that is
wrong; it is much more useful to characterize the economics profession as a diverse
evolving set of ideas, loosely held together by its modeling approach to economic
problems.
2
Standard classifications tend to miss the diversity that exists within the profession, and
the many new ideas that are being tried out. They miss the important insight that one can be part
of the mainstream and yet not necessarily hold “orthodox” ideas. Standard classifications also
emphasize a fairly narrow orthodox core of the profession and convey a picture of all
conventional economists accepting this core. The reality is more complicated; conventional
economists often hold a variety of views simultaneously. If the variance of views increases,
while the core remains relatively unchanged, the static characterization of the profession will not
change, but its dynamic characterization will.
A large variance in acceptable views, such as has emerged in the profession over recent
decades, signals that changes are likely in the future. In our view the interesting story in
economics over the past decades is the increasing variance of acceptable views, even though the
center of economics has not changed much. For example, mainstream economists today such as
William Baumol, George Akerlof, Thomas Schelling, Truman Bewley, and Paul Krugman, in
important aspects of their thinking, are working outside of what is generally considered the
orthodoxy of the profession. Yet, their ideas are widely accepted and discussed within the
mainstream of economics. It is such work that has increased the variance of acceptable views in
the profession.
To capture that variance of acceptable views, static classifications must be seen for what
they are—useful fictions that are meant for students and non-specialists. These classifications are
backward looking, and, to be meaningful, they must be supplemented with a discussion of the
variance of ideas acceptable to the mainstream. The reality is that at any point in time a
successful discipline will have hundreds of new ideas being tried out, as new methods, new
technology and new information become available. That is what happens at the edge of
economics.
This edge of economics has both intellectual and social elements. The intellectual aspect
of economics at the edge fundamentally involves originality. This does not mean that all ideas at
the edge are totally new. Ideas have origins, and grow better in some environments than in
others. The history of economics is full of instances in which old ideas are rehabilitated or
revived and found to be useful and advantageous within the new context that is emerging.
edge work can only be defined historically as work at the edge that has panned out. Comments by Larry
Moss, and Ken Koford were very helpful in redirecting us in our terminology.
2
Robert Solow (1996) writes “Today if you ask a mainstream economist a question about almost any
aspect of economic life, the response will be: suppose we model that situation and see what
happens…modern mainsteam economics consists of little else but examples of this process.”
2
The Changing Face of Mainstream Economics
In the work at the edge ideas, which previously have been considered central to
economics are being modified and broadened, and the process is changing the very nature of
economics. What is making it possible for these ideas to take root now, but not in the past, are
advances in analytic technology, such as non-linear dynamics, which has made it possible to
study much more complex models than before, developments in computing capabilities, which
have made studies with simulations and agent-based models much more useful, allowing
economists to study problems that do not have analytic solutions. Combined with advances in
other disciplines relevant to economics, which makes the integration among disciplines easier,
the combination of these advances has opened up completely new ways of integrating those ideas
into the core beliefs of the field, and has changed the core beliefs in important ways. For
example developments in nonlinear dynamics are now allowing alternative models of processes
that include sudden shifts from one equilibrium to another, and the development of agent-based
modeling is allowing researchers to explore models with heterogeneous agents and to move
away from a focus on unique equilibria.
4. Change within the Profession
Sociological issues impinge upon and constrain what is possible intellectually. The reproduction
of ideas involves the social, political, and economic structures of the academic and policymaking
establishments in which ideas are developed and transmitted. Ideas, however original and
possibly wonderful, that do not become accepted by some of the elite of the profession, and
which do not eventually get funded, will not be accepted and transmitted within the profession.
To internally move the discipline to a new position some of the profession's elite must accept
these ideas.
In our view what is occurring in economics today is a modification of the standard view
of paradigm shifts proposed by Thomas Kuhn (1970), at least as it relates to the economics
profession. Kuhn argued that the driving forces of change are those ideas that challenge the very
system of thought in a way that puts them outside the mainstream, and ultimately are only
introduced, "funeral by funeral" by a paradigm shift. This makes it easy to recognize that a
paradigm shift has occurred.
We see this view as not quite fitting the economics profession. From our dynamic
perspective an alternative channel exists that allows for significant changes to occur within the
mainstream of the profession. These changes do not lead to sudden paradigm shifts, but instead
lead to cumulative evolutionary changes that ultimately will be recognized as a revolutionary
change. The changes that lead to this ex-post revolution were initially accepted within the
profession gradually, more along the lines suggested by Imre Lakatos (1978). This alternative
channel is the following: When certain members of the existing elite become open to new ideas,
that openness allows new ideas to expand, develop, and integrate into the profession. In that case
change within the profession can be accepted gradually, being introduced "data set by data set"
and "new technique by new technique" as well as "funeral by funeral". In some cases these new
ideas will originate from outside the mainstream, from those who consider themselves heterodox,
even if the acceptance of such ideas leads to their “normalization” and removal from being
identified as heterodox.
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The Changing Face of Mainstream Economics
These alternative channels allow the mainstream to expand and evolve to include a wider
range of approaches and understandings. Eventually, sufficient change is made so that future
historians of thought will consider the orthodoxy of the period changed. This, we believe, is
already occurring in economics. Mark Blaug, one of the most distinguished current historian of
economic thought, has pointed out that beginning as early as the 1950s the classification
"neoclassical economics" was no longer appropriate to characterize modern economics (1998,
p.2), an argument further developed by Colander (2000a).
The difference between Kuhn’s view and ours is in how changes generally come about in
a profession. We suggest that changes, even ones that will eventually be considered
revolutionary, often come from within and will not be noticed for years. Kuhn's view suggests
that they can only come from outside and are quite apparent when they occur. The dynamic
approach of change within the profession that we are introducing here involves stealth changes,
in which advocates of new ideas may gain acceptance among the elite of the profession and even
achieve positions of power and prominence within at least some leading academic institutions of
economics. The change, however, is so gradual that the profession often does not notice that the
change has occurred.
The reason for the difference is the multiple dimensionalities that we see in the
mainstream profession. It is a complex system of evolving ideas. Individuals in the profession
see minute changes upon minute change but do not have a perception of the aggregate of the
changes. Only when historians of thought look back, after sufficient time has passed to gain
some historical perspective, does the larger change become apparent.
5. The Process of Change
Both the social and intellectual aspects of change must be taken into account in order to
understand the evolution of ideas. The work at the edge is generally begun by younger
researchers and in some cases those who are doing heterodox work. But their ability to do that
work, and to have their work affect the profession, is dependent on the existence of crucial
persons in the leading academic establishments, representing the mainstream of economics, who
are open to seriously considering new ideas. These crucial people may be the ones who have
developed what was considered the old orthodoxy, but their having developed it doesn't mean
that they aren't open to change and new ideas. There is nothing inconsistent with being one of the
originators of a theory and simultaneously being a critic of that theory. Good economists
simultaneously recognize the strengths and limitations of a theory, and are open to new
approaches and ideas. A good example of a person that fits this category is Kenneth Arrow.
Although he is associated with what is considered modern neoclassical orthodoxy, he was
instrumental in the introduction of the complexity approach into economics.
3
The consideration and ultimate acceptance of a new idea by a certain portion of the elite
becomes a key to the process of how the conventional foundation of the discipline evolves. It is
not crucial that those developing the ideas initially be at leading establishments. But they must be
able to attract the attention of influential individuals at those institutions in order for their ideas
3
Mirowski (2002, pp. 432-436) argues that an important influence on Arrow in his change of view was a
former student, Alain Lewis (1985), whose work continues to be little known by most of the profession.
4