Telling It Like It Is: Reflections of a Maverick Economist

Abstract

Following the advice of institutionalist Wendell Gordon, the author aims to “tell it like it is” by reflecting on his own path to institutionalism, the economic contributions of post-Keynesian institutionalism, and some of the major issues that deserve institutionalists’ further attention. Several heterodox economists are identified as influences contributing to the making of this economic maverick, but so too are Barbara Jordan and Michael Harrington. Then attention is given to the institutionally focused pre-analytic vision of post-Keynesian institutionalism, the inescapable reality of business cycles in market-oriented economies, and the institutionalized myopia of money-manager capitalism. Some key issues warranting our further attention include the expansion of economic insecurity, the threat of authoritarianism, and the climate crisis.

Keywords:

• institutional economics
• Veblen-Commons
• post-Keynesian institutionalism
• money-manager capitalism
• economic insecurity

JEL Classification Codes:

• A11
• B52

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1 Over the past several decades, the term “maverick economist” has described a variety of analysts and policy advocates outside the economic mainstream. The subtitle of this paper—delivered in San Antonio by a Texas-trained institutionalist—derives from Economic Mavericks: The Texas Institutionalists, a research volume edited by Ronnie J. Phillips (1995) which opens with a discussion of the Texas roots of the term “maverick.” For even more on the term, its namesake, and San Antonio origins, see Strong (2021).

2 For a history of industrial relations in the United States, see Kaufman (1993). At Cornell University, the academic unit devoted to all aspects of work and the employment relationship opened in 1945 as the New York State School of Industrial and Labor Relations. Most of the school’s early faculty members were institutionalist in their orientation, but as institutionalism lost ground in economics departments during the postwar era, the cluster of economists associated with the school gradually became more neoclassical.

3 Of the other economists with whom I studied while at Cornell, Ken Mayhew—a professor on leave from Oxford University—was most influential. Mayhew taught a seminar called “Problems in Labor Economics,” which examined labor market segmentation and its policy implications as well as the theory and practice of using incomes policies to combat inflation. As presented by Mayhew—who highlighted the crucial links between assumptions, theories, and policy implications—economics was nothing like the dry and mechanical “choice theory” I’d learned in earlier courses. Instead, it was a vibrant discipline of competing theories and meaningful debates over what constitutes the proper underlying assumptions for a particular situation.

4 Veblen (1919) contains several excellent essays that critically assess the preconceptions of conventional economics and point toward an evolutionary alternative.

5 For a discussion of Commons’s focus on practical problems, see Witte (1954). Regarding Commons’s goal of serving as a scholar and teacher on the side of workers (sometimes referred to as “the common man”), see, for example, Parsons (1985, 757) and Chasse (2017, 1–2).

6 For example, neoclassical theory traces economic conditions blocking individual achievement to policies and practices that stray from the idealized notion of a competitive market equilibrium. It’s a doctrine inconsistent with my personal observations as well as my understanding of economic history.

7 Admiration for Jordan was a factor in my decision to pursue graduate work at The University of Texas. When I made that decision, Jordan was on the faculty of the university’s LBJ School of Public Affairs, and her presence was one reason I chose to study in Austin. I considered it an indication of the quality of the Texas faculty.

8 According to Harrington (1980, 14), the institutional changes of the 1980s weren’t likely to eliminate capitalism, but they would transform it (in a direction that was not yet fully determined), resulting in a system that survives “in a radically altered form.”

9 Harrington’s approach was not merely compatible with Brigg’s institutionalist focus on the structural nature of much unemployment; it also dovetailed with the analytical perspective underlying the industrial-relations research spawned by institutionalists, a perspective that centered on studying employment systems by examining their evolving institutional structures, strategies, and practices.

10 Although Harrington was influenced by Karl Marx, I found in Harrington’s writings a stimulating alternative to a rigid and narrow Marxist economics that centered on an inescapable clash of two classes and the need to abolish private property. And I found his deep commitment to democracy and gradualist approach to socialism (similar in many respects to that of the British Fabians; see Harrington 1989) far more promising than revolutionary approaches.

11 Keynes’s adoption of a methodological foundation grounded in institutional and historical contingency dovetailed with the viewpoint of Commons (which Keynes acknowledged) and foreshadowed the emergence of PKI; see, for example, Crotty (1990).

12 Pivotal contributions that inspired the emergence and development of PKI include Wallace Peterson (1977), which highlighted common ground shared by institutionalists and post-Keynesians, and Charles Wilber and Kenneth Jameson (1983), which constructed a post-Keynesian institutionalist foundation (including an emphasis on the bimodal industrial structure of advanced capitalism) and applied it to examine the problem of stagflation. For a recent effort (by a team of international scholars) to advance PKI and its frontiers, which also includes a short history of the tradition, see Whalen (2022a).

13 For more on the vision (methodological foundations) of PKI, see Whalen (2022a, 7–11, 16–18).

14 For a contemporary critique of the optimization assumption in economics, see Wunder (2022, 232–239). For a post-Keynesian institutionalist look at relevant research in psychology, sociology, and neuroscience, see Brazelton (2011).

15 On the frequently asked question of how “modern monetary theory” (MMT) relates to PKI, my view is that MMT is an offshoot of PKI that became a distinctive camp by building on the state theory of money of the Chartalists. Still, PKI and MMT continue to have much in common on matters of both economic analysis and public policy, and some heterodox economists see themselves as part of both traditions.

16 The National Bureau of Economic Research (2023)—directed for many of its early years by institutionalist Wesley Mitchell—traces periods of U.S. business expansion and contraction from the mid-nineteenth century.

17 Economist Franklin Allen argues that most economists were caught flat-footed by the financial crisis because to them it was unimaginable. “It’s not just that they missed it; they positively denied it would happen,” says Allen, who places much of the blame on the finance world’s fascination with the efficient market hypothesis (Knowledge@Wharton 2009).

18 The business cycle perspective of PKI is, of course, strikingly different from the viewpoint underlying the “real business cycle theory” of new classical macroeconomics, which sees cycles as a response to exogenous shocks and has no room for involuntary unemployment.

19 For PKI analyses in response to the global financial crisis of 2007–2009, see, for example: Nesvetailova (2010); Prasch (2010); Whalen (2007 and 2010); Wray (2010); and Zalewski (2011 and 2012).

20 For a clear early warning about derivatives (but still a decade after Minsky 1986), see McClintock (1996); and for other contributions to the financial instability literature in the two decades prior to the global financial crisis, see, for example: Carter (1989); Chick (1997); Cypher (1996); Dymski (1997); Kregel (1992; 1997; 1998); Niggle (2006); Poirot (2001); Rima (2002); Phillips (1997); Wolfson (2002); and Wray (2002).

21 In addition to the works cited in footnote 19, examples of contributions to the instability and stabilization literature following the onset of the global financial crisis include: Bahtiyar (2020); Brown (2008); Diop (2021); Galbraith (2012); Girón (2018); Girón and Correa (2021); Harvey (2012); Kaboub, Todorova, and Fernandez (2010); Scott and Pressman (2019); Tcherneva (2011); Tokucu (2014); Ülgen (2015); Weller and Sabatini (2008); and Whalen (2011). These references illustrate the variety of innovative research directions—and the international scope—of work produced at the intersection of institutionalism and post-Keynesianism.

22 An appreciation of the endogenous nature of business cycles has motivated much of my research on U.S. fiscal policy, including a critical appraisal of a proposed constitutional amendment to balance the federal budget (Whalen 1995), an analysis of the erosion of automatic stabilizers (Whalen and Wenger 2002), and explorations of the long history of progressive arguments favoring public jobs for the unemployed (see, for example, Whalen 2019).

23 In developing his approach to capitalist development, Minsky drew inspiration from Schumpeter (his dissertation adviser at Harvard), but much of the theory that Minsky produced is compatible with Commons’s own analysis of industrial evolution in the United States (Atkinson and Whalen 2011, 58–65).

24 After identifying several similarities between the contemporary era of investor-led capitalism and the finance capitalism of the late nineteenth century, Prasch (2014, 565) observes that “today’s money-manager capitalism is sui generis with regard to myopia.”

25 For work on money-manager capitalism composed prior to the global financial crisis, see, for example, Van Lear (2001 and 2002); Whalen (2001; 2002; 2008); and Zalewski (2002 and 2004).

26 The following are examples of the variety of research topics related to money-manager capitalism: economic change in Latin America (Correa 2014), economic exclusion (Zalewski 2019), evolution of the U.S. economic system (Atkinson, Hake, and Paschall 2021; Tymoigne and Wray 2014), financial innovation (Nesvetailova 2014), household agency (Cardwell and Todorova 2016), inadequate industrial capacity in the United States during the COVID-19 crisis (Whalen and Liang 2022), income inequality (Zalewski and Whalen 2010), legal foundations (Atkinson 2010), money-manager capitalism in primary commodity-dependent developing countries (Ventimiglia and Tavasci 2010), organizational structures and corporate behavior (Dean 2018), social provisioning and the Veblenian research tradition (Jo and Henry 2015), and stages of economic development (Diop 2016; Toporowski 2020). As with the literature cited in footnote 21, these references illustrate the variety of innovative research directions and the international scope of work at the intersection of institutionalism and post-Keynesianism.

27 In particular, we need the following in the realm of PKI:

• To buttress our pre-analytic foundation, we need to stay informed of work in other disciplines that can deepen our understanding of human behavior (for a useful starting point, from a Veblenian and pragmatic perspective, see Stanfield 2023);

• To better contribute to preventing financial crises and containing business cycles, we need to continue to look for new insight from the worlds of both theory (including the neglected contributions of Wesley Mitchell; see Kappes and Milan 2023) and practice; and we need do all we can to ensure that college students learn macroeconomics from a business-cycle perspective; and

• To advance our understanding of money-manager capitalism and shed light on humanity’s socioeconomic possibilities for the future, we need to stay on top of changes in finance and business practices (in individual nations and internationally) and their consequences for workers, consumers, and the overall economy. For examples of important recent developments, see Ivory, Protess, and Bennett (2016), Morgensen and Saliba (2020), Coates (2023), Phillips-Fein (2023), and Goldstein (2024). In addition, since money-manager capitalism has evolved significantly over time, we need historical accounts of that evolution in addition to analyses of recent developments. We also need to think creatively about the institutions and policies that would help foster and sustain more broadly shared prosperity.

28 The three issues addressed here (rising economic insecurity, the threat of authoritarianism, and the climate crisis) are not presented in order of importance. And they are certainly not the only issues that deserve our attention. For example, mass poverty remains inexcusable and demands more serious international attention; androcentrism, racism, and intersectional discrimination demand attention in the United States as well as across the globe (it is my hope that many aspects of discrimination can be addressed in the context of a broad approach to addressing widespread economic insecurity); and the ever-present threat of nuclear annihilation cannot be ignored. In addition, inflation—one of the first economic problems addressed by PKI years ago—has recently returned as a significant issue in many nations.

29 On the erosion of U.S. employment security and its devastating social consequences, see, for example, Case and Deaton (2020).

30 For examples of the literature on financialization and employment precarity, see Appelbaum and Batt (2014); Kalleberg (2012); Lazonick (2023); Mader, Mertens, and Van Der Zwan (2020); and Van Der Zwan (2014).

31 For evidence of the opportunity for greater collaboration among institutionalists, see the common interest in precarity among feminist institutionalists and post-Keynesian institutionalists (J. Peterson 2022, 144–146; Whalen 2022b, 110–115; Weller and Karakilic 2022); for a look at other heterodox economic research on financializaton and its consequences, see Epstein (2005); and for a sociological perspective, see Krippner (2005).

32 Wallace Peterson (1994, 92) was among the first to identify rising economic insecurity as “the raw material for a bitter, divisive conflict in America.”

33 Insecurity has become such a part of our culture that it is now reflected in our literature. For example, this past summer I turned on the radio just in time to hear the review of a pair of novels on NPR’s “Fresh Air,” which concluded as follows: “[t]hese two novels share a charged undercurrent of fear, about how easy it is to slip out of one’s foothold in America, and how very hard it can be to find that foothold in the first place” (Corrigan 2023).

34 Although I focus above on the United States, we currently see democracy and the rule of law under threat worldwide. See Democracy Report Team (2023).

35 Authoritarian leaders also pose a growing threat to international peace and stability.

36 For a few ideas on how to reform the Supreme Court, see Olinsky and Oyenubi (2022) and Commons (1923).

37 Institutionalists have also demonstrated that authoritarianism and fascism are at odds not only with instrumental valuation, but also with reason. See, for example, Waller (2013), which argues that reasoning is unnecessary when an autocrat has the unchecked power to exercise discretion.

38 For a valuable examination of initiatives seeking progressive institutional change, see Figart (2017).

39 For a modest recent effort at applying PKI to the climate crisis, see Whalen (2023).

40 Most economists would maintain that research into social values and beliefs falls outside the purview of their discipline, but institutionalists take a broader view. In fact, upon receipt of the Veblen-Commons award, Gordon (1985, 309) argued that “the central work of economists ought to be to develop understanding of the process by which society generates values and tries to implement them.” At the heart of action—or inaction—on climate change are values, just as there are values at the heart of debates over the future of capitalism and democracy. (In fact, at the annual meeting of the Association of American Law Schools in 2012, I recall an attendee chide panelists for failing to recognize that many citizens have no interest in participatory democracy: “Many people don’t care at all about democracy. They want a strongman to fix things.”)

41 For a related interview with Marsalis (on the intersection of jazz and democracy), see Spinelle (2020).

42 For an important recent discussion of optimism and hope, see Wrenn (2023).

43 “And that’s the way it is” served as the signature sign-off for CBS Evening News anchor Walter Cronkite from 1962 through 1981. Cronkite and his family moved from Kansas City to Houston when he was 10 years old; he attended The University of Texas at Austin.

Additional information

Notes on contributors

Charles J. Whalen

Charles J. Whalen is a research fellow at The Baldy Center for Law and Social Policy, University at Buffalo. An abbreviated version of these remarks was delivered upon receipt of the Veblen-Commons Award at the annual meeting of the Association for Evolutionary Economics, January 5, 2024. The author thanks Linda Whalen for feedback on this paper—and on countless others composed in the past several decades. He also thanks Glen Atkinson, Jim Peach, Anna Zachorowska-Mazurkiewicz, and Dave Zalewski for comments and suggestions. He dedicates his remarks to the memory of Vernon Briggs, who passed away in October 2023.