Mutual Aid and the Making of Heterodox Economics in Postwar America: A Post Keynesian View

By Lee, Frederic S. | History of Economics Review, Winter 2002 | Go to article overview

Mutual Aid and the Making of Heterodox Economics in Postwar America: A Post Keynesian View


Lee, Frederic S., History of Economics Review


1 Introduction

The rise to dominance in post-1945 America of neoclassical economics has recently captured the attention of many economists interested in the history of economic thought--for example, see Morgan and Rutherford (1998). These economists offer a complex story of a profession reacting and accommodating to external pressures while at the same time developing and applying its core theoretical ideas. At the same time they slightly downgrade the argument that neoclassical theory became dominant because it was the better theory and dismiss altogether the argument that dominance was, in part, achieved by utilising institutional power to suppress heterodox economic theory. The story is appealing to most economists because it skirts the disturbing issues about power, ideology, and theory conflict, retains the 'better-theory-view', and portrays the economist as a hard-working, honest individual trying to do what he/she thinks is best in a changing and difficult environment. The outcome of their efforts, so the story goes, was the transformation of a more literary style of theorising into a more formal style which bought with it changes in language and tools, and, as a by-product, a reduction of theoretical pluralism. What the story also does is effectively to make heterodox economists invisible and write heterodox economics out of history. More specifically it renders invisible the emergence of heterodox economics from the post-1945 contested landscape of American economics.

To render visible what is currently hidden is the aim of this article. The end of the Second World War, combined with postwar anticommunist hysteria and the rise of pro-business ideology, constituted the first watershed with regard to heterodox economics in America. There were some Marxist economists in the academy before 1945, but by the middle 1950s they had all but disappeared. Similarly, there were institutional economists at many major as well as minor universities before 1945, but by the mid-1950s the number at major universities had so declined that mainstream economists began to view institutional economics as a mildly interesting but largely irrelevant theory whose end was in sight. However, beginning in 1958, heterodox economics and economists began to make a comeback; and the period circa 1970 constituted a watershed as it marked the theoretical and institutional emergence of three small and distinct heterodox communities--institutional economics, social economics, and radical economics--centered around the Association for Evolutionary Economics, Association for Social Economics, and Union of Radical Political Economics respectively. Each community had its own body of theoretical arguments that were supported by various social networks and institutions. Although they had a different orientation towards economic theory and policy, the three communities had more in common with each other than with neoclassical economics. In particular their critiques of neoclassical economic theory were to some extent similar and their topics for economic inquiry were overlapping. Moreover, while their particular methodologies, theories, and style were different, the differences did not preclude some degree of compatibility and complementarity. Finally, many economists in each community were relatively open to dialogue and social interaction with other heterodox economists.

While compatibility between the three communities and a slow process of convergence to a single heterodox community is acknowledged, (1) the story is incomplete, in part because the complex causal process underlying the convergence process remains to some extent unidentified. One component of the causal process, it is argued in this article, was the emergence of Post Keynesian economics, not because it did anything itself, but rather because the other three heterodox communities assisted it in its emergence and development. That is, each heterodox community acting on its own accord to aid the emergence of Post Keynesian economics, combined with the heterodox tendencies of Post Keynesian economists, resulted in an unforeseen convergence of all four heterodox communities to a single community of heterodox economists. …

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