Traditional economic thought sees new competition

A new challenge to the academic hegemony of the neoclassical school of economic thought has come from an unlikely medium. The growing influence of social networking and blogging networks in politics has become obvious in recent years with its role in the Arab Spring and London riots. Now economic academia is feeling the power of the blogosphere, as those outside the published and well known ‘mainstream’ are given a platform to express their opinions on the relevance of neoclassical theory to the present day.

With the shadow of recession still looming, government responses have become targets for the criticism of those outside mainstream thought, advocating revolutionary solutions. Neo-chartilism argues that governments can simply print more paper money, with it being a state created concept, and hence can spend their way out of the recession, free from bond markets. The Austrian school, however, argue that more, not less, responsibility is needed to break free from the downturn. Neither would advocate the tax and spend approach currently implemented by many governments.

Heterodox economics, encompassing all economic schools of thought outside the conventional school, is by no means a new concept. Since the late nineteenth century, alternative approaches have sought to challenge the status quo of the neoclassical school. Whilst a few schools gained some recognition, many failed to reach their required audiences and fell back into obscurity as Keynesianism was assimilated into the mainstream, appearing to offer an accurate and succinct theory of macroeconomics. Yet theory has been left open to criticism as some assert Keynes’ ideas are no longer applicable in the post-credit crunch world. The need for new ideas has become apparent.

United by their rejection of neoclassical theory as an accurate model, heterodox schools share little else. Many reject modern economics’ modelling of human beings as rational self interested actors, along with the idea of a pareto efficient market clearing equilibrium which rarely holds in real life. That is where the similarities end. Marxian, feminist and binary economic schools of thought fall under the heterodox label, with little in common. Some, like the Austrian School, are bordering on mainstream with some ideas shared with the mainstream, whilst some share little with any other approach.

The increasing popularity of blogging has allowed anyone’s opinion to reach a much wider audience. Economic journals and publications are renowned for their unwillingness to print anything too far from the status quo in terms of its use of micro and macroeconomic theory and econometric analysis. Writers are forced to make their articles mainstream in order to get them published and reach any audience. Blogs, however, have allowed heterodox ideas to be read by many, including by established academics, for whom blogging has also become an important medium. The nature of those reading such blogs also mean that such heterodox ideas are more readily received than by the seasoned academic. Students are able to debate with Harvard professors, with ideas from the fringes gathering more publicity as it is challenged by reputable economists.

Does blogging threaten traditional economics as a discipline? Not necessarily. As with any science, economics must evolve and change its principles over time, rejecting previously held beliefs as evidence is found to support new ones. Now other theories have a platform for their views, there may be scope for more credible heterodox ideas to strike work their way into mainstream theories. Challenges to the establishment can only be beneficial, highlighting weaknesses and proving the credibility of resilient theories. If the global financial crisis truly signals a new economic paradigm shift, perhaps the world should be looking to other theories. Current mainstream theory failed to predict, prevent and as yet find a credible solution to the crisis. It should not be seen as a threat to the discipline, merely as a tool to refine and progress.

If nothing else, economic blogging will reduce the monopoly of ideas held by the mainstream academics. Blogging is opening the debate to those outside the economic hubs of the elite US institutions, allowing those with heterodox views to have their voices heard. More debate and competition of ideas is inevitable. And as any neoclassical economist will tell you, more competition is a good thing.