Economics in the Twenty-First Century: A Critical Perspective, by Robert Chernomas and Ian Hudson

Critical political economy is grounded in criticism of dominant economic thought. Robert Chernomas and Ian Hudson’s Economics in the Twenty-First Century is a worthwhile work in that tradition. It does an admirable job of presenting and critiquing writings from the winners of the John Bates Clark Medal (JBCM), which is awarded to an ‘American economist under the age of forty who is judged to have made the most significant contribution to economic thought and knowledge’. Many of us who harbour sceptical views of economics would be unwilling or unable to engage fruitfully with these works. However, understanding what constitutes the cutting edge of economic thought is important, since that thought informs consequential interventions by economists. Chernomas and Hudson should be thanked for taking on the task, and this book could serve as a conduit for bringing together critical political economy and economic sociology. Unfortunately, the book retains the problematic epistemological perspective of much critical political economy, maintaining a separation between economics and the economic. From this perspective, critical political economy shares in the ‘economic naturalism’ (Muniesa 2014) of mainstream economics, its intellectual enemy, and the battle becomes how well or how poorly economic theory and analysis represents economic processes.

Chernomas and Hudson’s critique has two components. The first situates the JBCM winners against the ‘four pillars’ of the ‘“old” mainstream’ of economic theory: rational self-maximization, methodological individualism, mathematical formalism, and econometrics (pp. 6–8). It is here that Chernomas and Hudson’s book is most valuable. Critical political economy offers a well-established critique of mainstream economic thought, and the pair provides a clear and succinct overview of that critique, primarily via the works of Robert Heilbroner and William Milberg (1995) and Sheila Dow (2002).

Two other features of the book make it a worthwhile read: its references, which point to many important works of critical political economy, and the historical touchstones it describes. Chernomas and Hudson are knowledgeable of both economic history and the history of economic thought, and the book is a solid primer. Critical political economy remains relatively marginalized in the academy, and discovering relevant thinkers can be difficult; this book is an up-to-date entry point for anyone interested in economics and its critics.

Throughout the book, the authors focus on the ways the JBCM winners continue to reinforce the pillars of economics, while also describing the ways they depart from mainstream economic thought. In this analysis, they are fair and insightful. For example, Chernomas and Hudson note that JBCM winner Matthew Rabin, in his writings on the economics of health, departs from the pillar assumption of rational maximization. However, as the authors explain, Rabin’s new assumption – that individuals have a preference for immediate gratification over long-term well-being – preserves the pillar of individualism. In Rabin’s analysis, societal-level health problems like obesity remain a matter of individual choice. Chernomas and Hudson argue that this ‘completely ignores the economic context in which these decisions occur’ (p. 103). They note that another winner, Amy Finkelstein, hints at supra-individual processes, with her acknowledgement that a person’s neighbourhood can reveal information about their health. However, they explain, she fails to follow through on this insight to recognize ‘the disparities in health among economic groups’ (p. 104). This failure clashes sharply with the multiple studies cited by the authors evidencing the systemic processes that unequally distribute ill health effects.

The second component of Chernomas and Hudson’s critique identifies how these leading-edge economic theorists fail to properly explain the economy. It is here the reader might hope for more innovative analysis from the duo. From their epistemological standpoint, the JBCM winners come in for critique primarily because of their inaccurate representations. This perspective fails to acknowledge the economic performativity thesis developed among economic sociologists such as Michel Callon, Marion Fourcade, Donald Mackenzie and Timothy Mitchell. Economists do not just do a better or worse job of objectively representing the economy. Rather, they have been vital in creating, maintaining, and transforming the entangled idea-object of ‘The Economy’.

In the sweep of their analysis, Chernomas and Hudson touch on some ways that economists might be implicated in making the economy. For instance, they suggest that economics creates ‘technicians’ (p. 15), but they never explore the transformative feedback between technical skills and economic processes. They treat as fixed the relationship among economic theory, technical application, and the economy. However, the changes among them are implicated in the departure from the ‘four pillars’ by the JBCM winners. Chernomas and Hudson also make the familiar point that economists have ‘profound influence’ on public policy (p. 147). Unfortunately, they take for granted the precise consequences of that influence. This connects to their treatment of corporate power as a totality, rather than precarious and differentiated. Owing to that precarity and differentiation, the entanglement of economics with its object is multivalent, as demonstrated in the work of economic sociologists. Critical political economy would benefit from engaging the performativity thesis, and the lack of acknowledgement of economic sociology expresses an unfortunate failure of cross-pollination between the two fields.

A prime opportunity for Chernomas and Hudson to have engaged economic sociology came early in the book when mentioning the economist Eugene Fama, a winner of the Nobel Memorial Prize in Economics for his efficient-market hypothesis. The authors suggest that awarding the prize to Fama ‘would be akin to astronomy awarding its highest prize to someone who “proved” that the sun revolved around the earth’ (p. 10). This quip exemplifies the authors’ economic naturalism. The relationship of astronomers with the sun is epistemologically and ontologically different from that between economists and economic processes. Although Fama’s theory is not an accurate portrayal of how markets function, its effects on markets are incredibly real. The problem with the theory is not how poorly it represents financial markets, but rather the role of the theory – and Fama himself – in the instauration of those markets (MacKenzie 2006).

Chernomas and Hudson are not oblivious to the fact that markets are made. They state that markets are ‘constructed in very deliberate ways’ (p. 11), and they criticize economists for failing to recognize this market making. Unfortunately, when it comes to overlooking the variable, concrete and consequential roles of economists in market making, Chernomas and Hudson are just as culpable as the mainstream economists they criticize.

Perhaps the defining feature of critical political economy is its emphasis on structural power. This is a central component of its criticism of mainstream economics, which is centred – theoretically and methodologically – on individual choice. Unfortunately, in their reiteration of structural power’s importance, Chernomas and Hudson miss another opportunity for innovative analysis. The pair fall into the familiar trap of the social sciences, where power becomes an amorphous entity that is both explanans and explanandum. Power, as described by the duo, is ‘held and wielded’, but it is also ‘deeply embedded’ (p. 17). This conception of power has been challenged by Bruno Latour, among many others, who argues that the importance of understanding social asymmetries, such as those skillfully identified by critical political economy, is the reason we do not seek explanatory recourse in power. Power is what must be explained.

In the conclusion of the book, Chernomas and Hudson criticize the JBCM winners for treating as natural the ‘institutions of modern capitalism’, such as private property ownership, and ignoring the ‘specific institutions that exist in current capitalism’, such as the International Monetary Fund (p. 154). However, in their evaluations of the winners’ works and shortcomings, with their emphasis on an amorphous, totalizing power, the duo fail to explain the variable historical roles of these institutions. Again, the role of these institutions, in both grounding and in shoring up power, is taken for granted. Missing from their account is how the practices of these enduring institutions are continually tinkered with, and how specific institutions necessarily favour certain powerful coalitions against others. Chernomas and Hudson grant powerful institutions more certainty, stability, and intentionality than they deserve.

Many of the arguments Chernomas and Hudson make about economic history would mix well with an analysis grounded in the performativity thesis. For example, in the authors’ critique of Esther Duflo, they note that her emphasis on small-scale solutions to development ‘ignores the historical example of nations that found broader, societal solutions to development problems’ (p. 35). The success of large-scale development endeavours of the past clashes sharply with what seems to be the routine failure of more contemporary efforts (Flyvbjerg et al. 2003). These failures become rhetorical fodder for those advocating individual-level assistance of the type analysed by Duflo. The performativity thesis raises the question of how economic thinking and analysis, indelibly imbued with individual self-interest as a theoretical and methodological starting point, instantiates and reinforces economic institutions and norms that lend themselves to such failure. Bringing together critical political economy and performativity analysis has great potential for explaining social asymmetries. Although this book did not perform such an entanglement, it could be useful for those who do.