What Is Mainstream Economics? And What Is Not…?

The exact nature of mainstream economics is occasionally difficult to discuss. An anonymous referee, saying the following, required me to provide a clear-cut definition of the main stream. It is worth quoting his/her suggestions at length:

The author uses the term ’mainstream economics’ (ME, henceforth) without defining it properly. He begins by writing that “mainstream economics should be regarded as an intended manifestation of pure logic”. However, later in the text he claims that one can have models that form the basis for the research program of mainstream economics. But, as contemporary philosophical studies on models show, models as such cannot be treated as “manifestations of pure logic” (models are not sentences). And here I wonder why the author did not refer to important papers in the history and methodology of economics that study the relation between such terms as ‘mainstream economics’ and ‘neoclassical economics’ (a must-read in this context is The Death of Neoclassical Economics by D. Colander). Nowadays the term ‘mainstream economics’ is usually used as an umbrella term for these approaches in economics that the audience agrees that they form the core of economics. However, then also institutional economics (pls. take into account N-prizes for North, Coase, or Williamson) should be treated as an important element of ME. The same holds for experimental economics (N-prize for V. Smith) or psychological economics (N-prize for Kahneman). Now, if one is to understand the author’s term of ME as comprising also, for instance, experimental economics, then many conclusions of this paper (e.g., the one dealing with the unrealisticness of ME assumptions) are simply false. For instance, take the following one “So, mainstream economics has disregarded the social character of economic behaviour even at the stage of describing the most fundamental economic laws”. However, pls. take into account, e.g., transaction cost economics. One cannot claim that O. Williamson, with his ideas of bounded rationality or opportunism, disregards “the social character of economic behaviour”.

Here is my response:

Now, turning to the detailed review of the review, I have to underline how astonished I was when reading some of his/her comments. For example, the Reviewer devoted almost an entire page to analyzing the possible meaning of my term “mainstream economics”. He/She seems to have made serious efforts to identify “my” interpretation, and doing so, he/she listed some possible meanings, among which there was some really strange suggestions. Here, and almost anywhere else, mainstream economics is referred to as the neoclassical orthodoxy, the American neoclassical synthesis, or the academic main stream, etc., that is, the neoclassical orthodoxy advocated by the leading American universities and the American-dominated scientific journals, founded by Paul A. Samuelson (and the most important predecessors and contributors of which were Walras, Jevons, Menger, Marshall, Koopmans, Haavelmo, Debreu or Lucas). To put it simply, it is the realm of mainstream formalism. On the contrary, any historical or institutional, behavioural approaches should be put under the “heterodox” label that can hardly be regarded as the parts of the well-known neoclassical orthodoxy. Once again, referring to institutional economics as a part of the mainstream camp makes no sense. Institutional economics per definitionem deals with the importance of the social institutions and the effects of their existence – the social institutions that are completely neglected by the neoclassical orthodoxy. The Reviewer called our attention to Oli Williamson – and here and now I would like to mention another name: Geoffrey Hodson, the leading figure of institutional economics. Prof. Hodson is completely supplanted from the mainstream camp, similarly to Oliver E. Williamson. Prof. Hodson is a faculty member at a small business school, while Oli Williamson is professor at Haas School of Business (Berkeley), but not at the department of economics! The suggestion according to which these scientific authorities should be regarded as the members of the mainstream camp seems to be absurd.

Once we have separate concepts for mainstream economics and institutionalism, then why should we mix them up…? Admittedly, I was confused.

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