Heterodox vs. Orthodox: The Growing Schism in Economic Thought

Tae-Hee Jo considers himself a scientist, and it’s as a scientist that he flatly avers that mainstream economics is “not satisfactory in explaining the real world.” For that reason, Jo, an assistant professor of economics and finance, organized a public lecture and workshop about heterodox microeconomics. It will be held on Friday, March 2, in Bulger Communication Center.

Heterodox economists are the dissenters among economists. The field, according to Jo, is dominated by thinking that solidified in the nineteenth century and became orthodoxy. “Orthodox, or mainstream, economics has a set of assumptions, and it develops models based on those assumptions,” said Jo. “Heterodox economics is based on reality, and its models reflect that basis. The orthodox models are, however, distant from reality.”

In a way, it’s hard to compare the models, because the goals of the respective schools of thought are different. Mainstream economics, according to Jo, uses its models to predict the future. Heterodox economics is not about predictions per se, he said; it is about explaining the reality of the economic aspect of human behavior within the social context.

Given that definition, one can see why Jo prefaced his remarks by identifying himself as a scientist. The objective of heterodox economists is to understand the economic world much as a scientist might understand a phenomenon: by observation, testing, and replication of findings.

Mainstream and heterodox economists even define economics differently. In an effort to explain the difference, Jo cited the notion of “conspicuous consumption,” an idea first put forth by economist Thorstein Veblen (1857-1929). Veblen suggested that people choose to buy goods such as beautiful clothes and expensive cars to communicate their social status as well as to acquire goods. By acknowledging the role that social factors play in a purchasing decision, Veblen joins contemporary heterodox economists in throwing a wrench into a fundamental principle of mainstream economics. That principle is the belief that the law of supply and demand is not affected by complex social factors.

“However, heterodox economists are arguing, for example, that the recent increase in gas prices is due, at least in part, to speculations, and not just supply and demand,” Jo explained. This reflects the heterodox position that social context, market exchanges, and wealth transfers—not just supply and demand—influence the workings of the economy.

Frederic S. Lee, professor of economics at the University of Missouri–Kansas City, will speak on Friday, March 2, at 11:00 a.m. in Bulger Communication Center North. Lee, who has published extensively on heterodox economics, will present “Heterodox Microeconomics and Real World Problems.” The lecture is free and open to the public as well as to the campus community.

At 1:00 p.m., the first part of the workshop “Heterodox Theory of the Business Enterprise and Its Applications” will take place in Bulger N2C. At 3:30 p.m., the second part, “Conspicuous Consumption and Business Competition from the Heterodox Microeconomic Perspective” will take place. At 5:30 p.m., a roundtable featuring the presenters will discuss, “Heterodox Microeconomics: How to Move Forward?”

Jo has published a number of papers on heterodox microeconomics, including “Social Provisioning Process and Socio-Economic Modeling,” published in The American Journal of Economics and Sociology(November 2011). He is also co-editor of the Heterodox Economics Newsletter. “I am looking forward to the workshop,” Jo said. “I find this topic extremely interesting, and I think it may spark some interesting discussion.”

The event is sponsored by the Grant Allocation Committee of the Student Affairs Office, the School of Natural and Social Sciences Dean’s Office, and the Economics and Finance Department.