Teaching Heterodox and Pluralist Economics – Some Useful Books

Abstract

This review highlights the strengths and weaknesses of three recently published useful resources for teaching economics from a pluralist and/or heterodox perspective. The introduction provides an overview of other helpful (text-)books for this purpose. Based on a historical approach, Geoffrey Schneider’s book describes and differentiates the characteristics of a broad range of economic ideas and systems. The core chapters on Smith, Marx, Veblen, and Keynes (+ Hayek) provide a brilliant concise, very well written and easily accessible overview of the plurality of major economic ideas in their historical evolution. Moreover, this explanation is shown as intricately entwined with the epochal eventful history of economic systems.

KEYWORDS:

• Teaching pluralist economics
• teaching heterodox economics
• history of economic thought
• introductory macroeconomics
• real world economic examples

Mitchell et al. (2019) is the ideal textbook for someone who works in a tolerant pluralist department and can teach introductory macroeconomics from a distinct Post Keynesian persuasion including a critical, while fair treatment of the mainstream. The standard material is provided, but the book also offers a wider range of theoretical perspectives than comparable standard mainstream texts, a wealth of illustrating case studies as well as discussions of contemporary pressing social and economic issues.

Komlos (2019) is an excellent companion if you want to add a critical running commentary to a course based on a conventional mainstream economics textbook. It is written in an engaging tone and easily accessible style. The strength of the book already published in its second edition is the rich real world oriented critique of mainstream economic theory which is based on a large variety of examples with many references to evidence and sources for further study in the endnotes of every chapter.

Bio: Stefan Kesting is a senior teaching fellow at the economics division of Leeds University Business School, UK. He received his PhD at the University of Bremen, Germany and previously worked there as well as at Auckland University of Technology, New Zealand as a researcher and lecturer for several years. He has taught ethics and economics, and various other fields of economics and has written on gender, social, ecological, and institutional economics.

Introduction: A Wide Variety of Books Have Been Published Recently in This Field

In recent years, a wide variety of books has been written and published to support academics teaching alternative perspectives on economics. Apart from the three books under review in this article (Komlos, 2019; Mitchell et al., 2019; Schneider, 2019) there are a wide range of other teaching resources on offer. I am aware of: Blau and Winkler (2018), Bowles et al. (2017), Goodwin et al. (2019b), Rochon and Rossi (2016), Sherman et al. (2018), The Core Team (2017) and Van Staveren (2015). I take these books as my benchmark for reviewing: Komlos (2019), Mitchell et al. (2019) and Schneider (2019).

To foster an alternative to the standard mainstream textbook typically, three strategies are employed and combined: 1) to propose, develop and promote one distinctly heterodox theoretical approach, or 2) to provide an overview of a plurality of alternative theories that differ from the mainstream and/or 3) to present a much richer, broader and more detailed and complex range of material about the real economy, than mainstream texts usually do. Most of the books listed above combine all three or at least two of these strategies. Blau and Winkler (2018) is firmly rooted in Feminist Economics which is convincingly presented as an alternative to mainstream labour economics – this is the 8^th edition of the book. However, to underpin their theoretical discussion, Blau & Winkler also work with a carefully chosen, wide-ranging and well-presented set of empirical data. Bowles et al. (2017) and Sherman et al. (2018) take a Marxist Political Economy perspective and underpin their arguments also with a rich array of real world case studies. Rochon and Rossi (2016, eds.) provide a platform for themselves and sixteen of their Post-Keynesian colleagues to provide an introduction to an array of mainly macroeconomic analyses, ranging from: the history of economic thought, to money and banking, to fiscal policy, to growth and development, to the international economy and to financialisation amongst other topics.

I include the mainstream textbook put together by The Core Team (2017) in this introductory portfolio because it tries to include at least some pluralist perspectives and also presents a very rich set of material on the real world economy and interpretation of data. Though quite conventional in its overall theoretical approach, the book is nonetheless a useful resource for pluralist economics teaching.

The small boom in publishing heterodox and pluralist ‘textbooks’ was in part inspired by the Global Financial Crisis cum Great Recession in 2008. This crisis motivates van Staveren to write her book. Moreover, she explicitly takes a pluralist approach. While working through typical micro- and macro-economic topics like: consumption, firms, labour and financial markets, money, economic growth, and international trade, supported by a rich variety of cases for each topic, van Staveren systematically and comparatively always presents the Social, Institutional, Post-Keynesian and Neoclassical theoretical view on the issues, at times supported by Marxist, Austrian, Feminist or Ecological economic perspectives. Her book sports a broad brush pluralist approach, while integrating the mainstream. Goodwin et al. (2019b) Macroeconomics in Context is comparable to van Staveren’s in its real-world orientation. However, its pluralist approach is less explicit. The book covers the typical range of standard Classical, Keynesian, Monetarist, New Keynesian Synthesis and New Classical approaches, but endeavours to engage students’ critical thinking by discussing the historical, institutional, political, ethical, ecological, distributional and social complexities of each topic. I merely took a quick look at Goodwin et al.’s macroeconomics book while preparing for this review article, but the collective of authors has also written a microeconomics version (Goodwin et al., 2018) taking a similar real-world oriented and critical approach and combined both in a shorter principles book (Goodwin et al., 2019a). So, let’s turn now to the more detailed review of the three relatively new additions to pluralist economics textbooks.

I endeavour to describe the nature of the three books under review (Komlos, 2019; Mitchell et al., 2019; Schneider, 2019) emphasise their strengths as well as point to some weaknesses and to make critical observations and suggestions for improvement in future editions.

A Long Awaited Post Keynesian Introduction to Macroeconomics from a Modern Money Theory Perspective

I know, a reviewer should take a critical and somewhat distant attitude. However, I find it hard to curb my enthusiasm for Mitchell et al. (2019) because this textbook is exactly the kind, I have been waiting for since I started teaching introductory macroeconomics courses more than a decade ago. The book fits exactly the style and content of the module I inherited from Malcolm Sawyer at Leeds. Following Susan Schroeder’s advice when I started teaching introduction to macroeconomics in New Zealand, I used the core theoretical chapters on the Classical and Keynesian Systems in Peterson and Estenson (1996) as required background reading for these lectures and continued this practice until last year. These chapters are wonderful and not outdated, but the book is out of print now for almost 25 years. So, it leaves the impression with students of being old-fashioned and not state of the art and it is hard for them to come by if they want to have a copy on their shelves for easy access. However, chapters 11 ‘The Classical System’ and 15 ‘The Aggregate Expenditure Model’ in Mitchell et al. (2019) fulfil exactly the same purpose because they are almost equivalent to Peterson and Estenson (1996). The treatment of the Classical System in chapter 11 could be a bit more detailed and I hope, Mitchell and his co-authors will consider some amendments for their next edition.

Overall, as Mitchell et al. state clearly in their introduction, the book is explicitly written from a Modern Money Theory cum Post Keynesian perspective while presenting macroeconomics as a contested and highly politically charged debate between two camps of economists: the orthodox neoclassical mainstream and the heterodox Keynesian/Institutionalist/Marxist approach. In my view, this the only honest way of teaching macroeconomics. This may be seen as biased and partisan or as undermining the scientific image of economics, but in my view this is not the case because students need to know where the lecturer stands to be able to critically evaluate the statements made by him or her in lectures, seminars and learning material and resources. To allow students to make up their own minds: Firstly, one’s own political leanings (Myrdal, 2017 [1931]) and pre-analytical vision (Heilbroner & Milberg, 1995) need to be made explicit. Secondly, economics needs to be taught as a politically and ideologically charged subject. Finally, the contending opposite views need to be presented fairly. Mitchell et al. introduce and compare the dissenting mainstream views mostly in part G: History of Macroeconomic Thought in four chapters on: The History of Economic Thought, The IS-LM Framework, Modern Schools of Economic Thought and The New Monetary Consensus in Macroeconomics.

However, the book starts in part A with chapters covering standard topics which are treated in a quite similar way to any mainstream textbook. There are chapters like: How to Think and Do Macroeconomics (2), The System of National Income and Product Accounts (4), Labour Markets Concepts and Measurement (5) as well as Methods, Tools and Techniques (7).

The remaining three chapters in part A go beyond the conventional content and provide useful alternative methodological approaches for economics students. Chapter 3 – A Brief Overview of Economic History and the Rise of Capitalism, is featuring a historical perspective and points to capitalism as the contemporary system we live in. This chapter catches in a nutshell the historical approach applied by Bowles et al. (2017) and Sherman et al. (2018) throughout their textbooks. Chapter 6 – Sectoral Accounting and the Flow of Funds provides an introduction to one of the key Post Keynesian methods which is hard to find anywhere else. This chapter is particularly important and useful. However, I wonder why the authors did not put the related mainstream argument about the Twin Deficit into it. Instead, this is covered much later with reference to chapter 6. Chapter 8 – The Use of Framing and Language in Macroeconomics provides another alternative methodological eye-opener for students and serves the purpose of debunking some false mainstream ideological beliefs about the nature of fiscal deficits or what German politicians like Wolfgang Schäuble call: ‘die schwarze Null’.

At the end of part A, chapter 8 and in part B, chapter 9, Mitchell et al. present the Modern Money Theory followed by chapter 10 which explains why the mainstream theory of the money multiplier is obsolete. It also provides a detailed introduction to the standard endogenous money theory of how commercial banks create money.

Part C is about theory and contains the two core chapters 11 and 15 mentioned earlier. Across six chapters, this part provides a detailed introduction and discussion of the great divide between the Classical and Keynesian analysis of the economy. Such a contrasting approach to teaching macroeconomics is the best to get students to understand why macroeconomists disagree about almost everything in their media comments and public debates and why their policy recommendations are so different. However contradictory and confusing this may appear on the outset – it can be better understood when the underlying theoretical concepts are grasped. Moreover, through this presentation of contesting views, it will also become clear that each perspective has good reasons to be convinced to have a solid theoretical foundation for their beliefs. This contrasting approach taken in this textbook fosters critical thinking amongst our students and a deeper understanding of economics.

The critical pluralist approach continues in part C by contrasting the quantity theory of money and the conflict theory of inflation (chapter 17), followed by a discussion of short and long run Phillips curves (chapter 18) and full employment policies (chapter 19).

This leads over to the policy oriented part E dealing with fiscal and monetary policy (chapters 20 to 23) in an open economy. Chapter 23 includes an explanation of recent unconventional monetary policies like Quantitative Easing and Negative Interest Rates. Part E ends with chapter 24 on Exchange Rates and the Balance of Payments.

The final section of the book part H: deals with contemporary policy debates like: pensions and intergenerational equity, currency crises, exchange rate systems, environmental sustainability and the origin of the Global Financial Crisis.

This is the ideal textbook for someone who works in a tolerant pluralist department and can teach introductory macroeconomics from a distinct Post Keynesian persuasion including a critical, while fair treatment of the mainstream. The standard material is provided, but the book also offers a wider range of theoretical perspectives than comparable standard mainstream texts, a wealth of illustrating case studies as well as discussions of contemporary pressing social and economic issues. In contrast to Goodwin et al. (2019b) who also provide a critical approach while taking a distinct theoretical and methodological stance, Mitchell et al. (2019) are clearer and more radical in distinguishing their heterodox approach from the orthodox mainstream. However, when compared to Van Staveren (2015) for instance, Mitchell et al. (2019) could do with more pretty pictures and more colour. This first edition looks like what Germans call a ‘Bleiwüste’ – that is, a text desert. For future editions, I wish the publisher will invest into an aesthetic makeover.

Finally, I have to point out that the book (Mitchell et al., 2019) is 573 pages long, compared to 306 pages of Komlos (2019) and the 206 pages of Schneider (2019). Van Staveren’s book comes closer (458 pages) but it is not restricted to macroeconomics. So, during the eleven weeks of my one-semester introduction to macroeconomics course, I can cover the material of eleven out of Mitchell et al.’s thirty-three chapters – a third of the book – while assigning another handful of chapters for background reading for my students.

A Systematic and Succinct Pluralist Introduction to Economic Ideas and Systems

Geoffrey Schneider’s book (2019) does exactly what the title ‘The Evolution of Economic Ideas and Systems – A Pluralistic Introduction’ suggests. Based on a historical approach, Schneider describes and differentiates the characteristics of a broad range of economic ideas and systems. The historical method allows Schneider to show how a specific set of ideas (e.g. Adam Smith’s explanation of the link between competition and specialisation) supported the evolution of a particular economic system (e.g. the advent of capitalism in England in the 18^th century) and how particular real world events and economic circumstances (e.g. the conditions of workers in English factories under capitalism in the 19^th century) led to the development of a specific set of ideas about this economic system (e.g. Karl Marx’s theory of how surplus value allows for the exploitation of labour and this in turn leads to class struggle). This is the kind of book I shall give to my niece or nephew when they show an interest in economics and are just about to go to university because it is a slim and nifty volume, written in a very accessible style and with some lovely illustrations.

In true pluralist fashion, the title of the first chapter asks: ‘What is economics?’ and responds: ‘The answer depends on who you ask’ (p. 3). This introductory chapter explains that economics matters because it has an enormous influence on policy which in turn shapes our lives and that economists need a variety of methods to develop an in-depth understanding of how the economy actually works. It also lays the foundation for the fourfold pluralist distinction of economics which is systematically applied in the rest of the book. These four competing perspectives of economics are:

1. Mainstream economists who think capitalism is a wonderful free market system and that government intervention should be limited.

2. Progressive political economists who believe capitalism can be reformed. This category includes a wide range of heterodox schools like: Institutional, Social, Feminist and Post-Keynesian economists.

3. Radical political economists (mainly Marxists) who think capitalism should be replaced by an alternative system because it is fatally flawed.

4. And a broad category of pluralist economists who try to synthesise the other three views. I can see that as an economist one’s political and evaluative position toward the capitalist system can change over time or adjust to different real world conditions observed, from 1) to 2) to 3) and back. But since the other three views seem to be mutually exclusive, I do not quite grasp why this fourth category is needed.

Though Schneider does not make this link explicitly, when we jump to the final chapter 8, entitled: Modern Economic Systems, we see the threefold theoretical positions reappear as manifest in three different ideal type economic systems represented in a range of particular real type economies. 1) The Market Dominated (liberal) Economies (MDEs) which are featured as coming close to their ideal by mainstream economists and in reality find representations in the Anglosphere (USA, UK, Canada, Ireland, Australia and New Zealand). 2) The Social (coordinated) Market Economies (SMEs) which are best represented in reality by the Nordic countries (Sweden, Norway, Denmark, Iceland and Finland) and are seen as ideal by progressive political economists. However, there is also a hybrid type of the first two that can be found in the real economic systems of Continental Europe and Japan. Country examples discussed by Schneider are: Germany, France and Japan. I asked myself: would pluralist economists see these three economies as the best examples for their synthesised theoretical perspectives?

The typical characteristics of the first two ideal type economic systems 1) and 2) are somewhat sketchy, but nonetheless very well explained by Schneider and the comparison of the types is underpinned with some data on GDP per capita, GDP growth, tax revenue, poverty rates, OECD Better Life Index and HDI rankings. The description of typical features of the economic systems of Germany, France and Japan is shorter and sounds a bit clichéd. The ideal economic system 3) State Dominated Economies (SDEs) which is probably welcomed by radical political economists is introduced based on a short description of the USSR and Cuba. The contemporary real world economy mostly resembling this system is China. In my opinion, this third model is not as well explained in its characteristics as an ideal type as the other two. In a second edition of the book, I would like to see more space devoted to explaining this in more detail and more space devoted to China as a real example of this ideal type. In my view the section on the USSR can go or be moved. It seems to fit better in the overview of history chapter 3 or in the chapter on Marx.

But I have run ahead of myself. The other two concise and very useful introductory chapters cover some key mainstream concepts like: scarcity, choice, opportunity costs, economic growth, the production possibility frontier and a pluralist economic critique thereof (chapter 2) while chapter 3 presents a broad-brush history of economic systems. I missed more references to eminent economic anthropologists (e.g. Marshall Sahlins?) and economic historians (e.g. Charles Kindleberger?) and their work in this section.

The core chapters on Smith, Marx, Veblen, and Keynes (+ Hayek) provide a brilliant concise, very well written and easily accessible overview of the plurality of major economic ideas in their historical evolution. Moreover, this explanation is shown as intricately entwined with the epochal eventful history of economic systems. This is very useful for students to attain an in-depth understanding of the evolution and diverse nature of economic theory. I am sure my teacher at the New School in New York City, the late professor Robert Heilbroner, a highly regarded doyen in this area, would have not only approved of, but even praised Schneider’s approach and execution in these chapters.

Unfortunately, the last chapter 8, devoted to modern economic systems does not provide an explicit theoretical foundation. For this purpose, I could imagine a mix of debates around the Varieties of Capitalism, the French Regulation School as well as Gøsta Esping Andersen’s and Douglass North’s work combined with Karl Polanyi’s theories thrown into the mix. Moreover, to introduce and tackle the problems presented by modern economic systems and not to discuss gender or the environment as well as contributions by ecological and feminist economics seems odd to me.

So, this very useful and systematically argued book disappoints a bit at the very end. Moreover, throughout the whole book, there are very few references accompanying the arguments and there is also no direction to lists of further reading which would be very useful for students who want to further explore certain topics and theories.

A Real World Oriented Companion Correcting the Mainstream Textbook View

Komlos (2019) is an excellent companion if you want to add a critical running commentary to a course based on a conventional mainstream economics textbook. It is written in an engaging tone and easily accessible style. The strength of the book already published in its the second edition is the rich real world oriented critique of mainstream economic theory which is based on a large variety of examples with many references to evidence and sources for further study in the endnotes of every chapter. So, ‘Foundations of Real-World Economics’ is an absolute appropriate title for this book and Komlos states his positions and aims very clearly at the start: ‘… this book is dedicated to a new kind of economics that promotes Capitalism with a Human face’ (p. 6). However, the book does not entirely live up to its subtitle ‘What Every Economics Student Needs to Know’. As a student, I would expect to find much more detailed introduction to and explanation of alternative theoretical concepts than Komlos provides. To be fair, some of these concepts are alluded to in the endnotes where for instance references are made to work by: Herbert Simon, W. Brian Arthur, Deirdre McCloskey, Joseph Stiglitz, Daniel Kahneman, Edmund Phelps, Robert H. Frank and also to: Ernst F. Schumacher (‘Small is beautiful’), Thorstein Veblen, Stephen A. Marglin (2010), George De Martino (2011), Jeffrey Madrick (2014) and not to forget: Lutz and Lux (1988). I have never met or spoken to the author – so, I may be mistaken, but these references and my reading of the book suggest to me that it is written by a left leaning critical humanist political economist with a knack for behavioural and Austrian economics. However, Komlos definitely takes a less distinct theoretical heterodox position than Mitchell et al. (2019), Bowles et al. (2017) or Sherman et al. (2018) and the underlying pluralism is not as clearly explained as in Schneider (2019) or van Staveren (2015).

I find the first two thirds of Komlos (2019) devoted to question mainstream introductory microeconomics and chapter 13 devoted to a detailed empirical critique of the free trade doctrine more convincing than the latter third dealing with macroeconomics. Komlos’s critique in the microeconomic section targets the familiar mainstream ideological tropes: 1) of markets as benign, fairly competitive, omniscient as well as omnipotent institutions and 2) the doctrine of the rational self-interested sovereign utility maximising consumer.

Apart from presenting of what I would call mainstream pluralist theories like: ‘Imperfect Information and Signaling’ (Nobel Prize 2001 winners: George Akerlof, Michael Spence and Joseph Stiglitz), chapter 5 ‘Taste Makers and Consumption’ deals descriptively and discursively with topics like: ‘Society, Culture, Fairness, Efficiency vs. Equity, Self-Interest vs. Altruism, Positive and Normative Economics’, but does not provide the alternative theory promised on the last page of the book, namely: ‘a paradigm switch toward humanistic economics in which people count, the quality of life counts, …’ (p. 272).

The strongest and clearest theoretical stance is taken in chapter 3 ‘The Nature of Demand’ which combines a convincing argument of Veblen’s Veblen (1899) conspicuous consumption with a humanistic and social psychological one based on Abraham Maslow (1943) and Erich Fromm (1956a, 1956b) as well as a wealth of other sources in a long list of endnotes to debunk consumer sovereignty and criticise consumerism. In two more chapters, Komlos presents his other conceptual base to critique the aforementioned orthodox textbook tropes namely a variety of mainstream pluralist theories: behavioural economics in chapter 4 and transaction cost economics in chapter 8. In chapter 9, he also uses alternative representations of typical blackboard economics diagrams ingeniously to refute mainstream anti-union and anti-minimum wage theories.

However in my view, chapter 7 ‘Returns to the Factors of Production’ is probably his strongest and definitely my favourite one because Komlos shows in it his indisputable and formidable ability to present and interpret empirical data from the USA to build a convincingly argued case of for instance: how labour productivity growth is not or no longer connected to real wages, how the percentage share of labour income in GDP shrunk since the 1950s and how the distribution of household income became more unequal over time.

While there could be more alternative theory in the microeconomic section, the lack of theory becomes more apparent in the macroeconomic one. Chapter 10 basically shows how mainstream economics has undermined and forgotten Keynes’s insights. Picking up schemes from chapter 7, chapter 11 continues the strong empirical arguments based on USA data in showing: much larger underemployment versus official unemployment figures, unequal ethnic distribution of unemployment and that ‘economic growth does not increase life satisfaction’ (p. 194). This is followed by a very short section – a couple of pages – on climate change and the environment. Chapter 12 is focussed on macroeconomic policy and shows how Keynesian fiscal stimulus works. However, there is no conceptual introduction to the accelerator or multiplier mechanisms and no discussion of the theory of sectoral flows. So the discussion of debt, inflation and deflation as potentially dangerous is much less sophisticated, insightful and balanced than the presentation of the same topics in Mitchell et al. (2019). However, the discussion of ‘taxes are good for us’ (p. 208) builds a very compelling argument because it is based on a detailed interpretation of empirical evidence – definitely the strength of Komlos’s book.

Chapter 14 on: ‘The Financial Crisis of 2008’ which presents a broadly observed list of thirty-one factual elements contributing to it, could do with a more in-depth introduction to Minsky’s theory of financial instability. The one provided is too short. Without a clear definition and detailed explanation of Minsky’s Hedge, Speculative and Ponzi stages the dynamic transformation process of the financial system cannot be fully understood. For a much better theory based discussion of financial instability and the Global Financial Crisis, I would refer the reader to Mitchell et al. (2019) who devote three chapters 25, 26 and 32 to this topic.

So, Komlos (2019) strength is the rich and terrifically insightful critical interpretation of empirical data. The book also presents some pluralist mainstream theories (behavioural, transaction cost economics, etc.) and humanist psychology very well. However, there is barely any discussion of gender and the environment and Komlos’s argument could be more systematic and at times could provide more alternative theory to make some of his critical claims and statements stronger. Nonetheless this is a very useful source for your course of heterodox critical economics if you fill in the gaps and reorganise the material a bit. You might link it with Robert Skidelsky’s (2020) latest book which is a brilliant introduction to a variety of heterodox theory and methodology, but presents very little empirical evidence. A combination of these two books should strike the perfect balance.