What is heterodox economics?

Researching economic ideas outside conventional or orthodox schools of thought is known as heterodox economics. Heterodox economics schools possess unique ideas, assumptions, and procedures that differ from mainstream Keynesian and neoclassical movements.

Left-wing ideas like socialism, Marxism, post-Keynesian economics, and extreme free-market economics like the Austrian school are considered heterodox. Heterodox economists apply psychology and physics techniques to economic concerns.

Understanding

Heterodox economics encompasses numerous non-mainstream economic disciplines. These methods differ from orthodox economics and often conflict with one another in their assumptions, research programs, and findings.

Heterodox economics is also temporally relative since what was heterodox at one time may become mainstream. The Keynesian macroeconomic framework supplanted the classical notion that economies self-correct at the macroeconomic level, similar to microeconomic markets, in the 1930s.

Heterodox to Mainstream

In recent decades, mainstream economists and policymakers have accepted controversial ideas like behavioral economics. The Nobel Prize committee has recognized several heterodox economic works that have proved critical over time.

Sometimes, unorthodox ideas can disrupt the mainstream of economic theory, a process called a paradigm shift by philosopher of science Thomas Kuhn. 1 By definition, heterodox ideas are outside the scientific paradigm until they aren’t, then they may replace it. The 1870s Marginal Revolution established marginalism as the cornerstone of the present economic mainstream, exemplifying a paradigm shift.

Heterodox economics offers an alternative to orthodox economics. They can explain economic occurrences that traditional theories can’t explain or overlook until it’s too late or explicit.

Examples

The Austrian business cycle theory (ABCT) and Minsky’s financial instability hypothesis gained popularity during the Great Recession due to their adequate explanations and solutions for the U.S. housing bubble and global financial crisis, which mainstream theories couldn’t predict or address.

Feminist, post-Keynesian, and Marxist heterodox economic ideas are popular, but society continuously redefines them.

Heterodox Economics’ Impact

Heterodox economic ideas are often overlooked or dismissed as unimportant oddities. Their theories and assumptions don’t suit what most economists learn in academia and may directly contradict conventional theory and practice.

Scholars have been hostile to heterodox economics, but mainstream economics has changed toward a more integrated approach when specific heterodox ideas become mainstream.

Even if heterodox ideas fail to catch on, they can indirectly enhance and extend mainstream economics by pushing it. All economists must rethink their starting assumptions when confronting economic difficulties, using a variety of heterodox frameworks with possible answers. Dox economics pushes orthodoxy to prove it’s superior in practice, not merely tradition.

Others to Consider

Heterodox ideas have increased economic pluralism and multi-disciplinary analysis. Economics emphasizes market explanations. It may be the most excellent solution for most issues, yet most people think there’s more to life than market-based economics.

Heterodox methods focus on non-market components of economic phenomena such as social identity, cooperative collective action, power dynamics, and psychological biases to better explain them. Their explanations of the universe and its history typically match those of ordinary people better than orthodox ideas.

Conclusion

• Dox economics includes all other ideas and schools of thought outside the Keynesian and neoclassical mainstream.
• This economics includes several competing and contradictory schools of thought, some of which may become mainstream.
• Heterodox economists promote ideas, assumptions, or methodologies that deviate significantly from conventional economics.
• This economics fosters innovation and challenges economic schools.
• The Austrian business cycle theory (ABCT) and Minsky’s financial instability hypothesis gained popularity during the Great Recession because they offered convincing insights that conventional theories didn’t.