I also find exasperating how easily the notions of equilibrium are ridiculized by ideoligically oriented researchers which essentially ignore mainstream literature. Of course we evolutionists consider moving from situations of equilibrium to processes as a "must". But everything must qualified depending on the specific notion of mainstream equilibrium under attack: 1)Walrasian General Equilibrium in GET as a fixed point of the tattonement correspondence in the simplex of prices? 2) Equilibrium as a stationary state being stable in a dynamic system resulting from solving a problem of dynamic optimizacion? 3) Temporary Hicksian equilibrium?. 4) Lucas-Sargent rational expectations equilibria? 5) Which of the possible eq. States in Game theory can we target? In one-shot or in repeated games? In mixed strategies? In differential games? In evolutionary games? 6) Keynesian eqs. with rationing? And imagine that we focus on the fascinanting non-linear dynamic results around learning, multiple equilibria, structural instability, low dimensional chaos or bifurcations?. There are a lot of things to make accurate begore we ideologically attack what is an insatisfactory but fruitful, solid and that have bee built up during 100 years by some of the most brilliant minds in economics ( Hicks, Arrow, Debreu, Hahn, Cass, Koopmans, Benassy, Malinvaud, Allais, Von Neumann, Nash, Shubik, Lucas, Sargent, Larsen, Taylor, Dasgupta, Tirole). Formidable rivals. No simple heterodox quick attack is acceptable. Less ideology and more theory!

Three obscure mythos which block heterodox thinking:

1) "It is possible and even convenient to carry out empirical work without a fully-developed theretical frame behind" : FALSE. No matter whether the researcher is conscious or not, there is always a theory ( perhaps a bad fuzzy one ) underlying empirical search. The human brain cannot address the analysis of reality without reliance on a theoretical system. Theory are the glasses to look at reality. The more conscious we are regarding the theory underlying our empirical search, the higher the quality and the richer the bundle of ways to advance.

2) "Appreciative theory is often enough". FALSE. There is no such thing as appreciative theory. Theory means by definition representing the world through stylized and abstract forms and explanatory mechanisms in an operational manner. Thus, departing from sharp, non redundant, and consistent hypotheses which must be easily manipulable through mathematics, ordinary rigorous logical thinking or transparent computation, we proceed by obtaining coimplications of the hypotheses and we reach neat propositions to be tested against evidence. Appreciative theory is just proto-theory, vague and often inscrutable story-telling exercises or preliminary conceptualizations. Pre-theory to be done. It is not fully operstional yet. Fuzzy inscrutable narratives which often lead nowhere. This is not theory.

3) "We can only surpass neoclassical mainstream models by building up complex (often opaque) ABMs." FALSE. There is a rich body of instrumental material (from nonlinear dynamics, bifurcation theory, the theory of networks and stochastic processes) which are compatible with heterodox approaches and are more powerful and understandable, and reproducible and teachable than large scale ABMs. ABMs are just one of the possible alternatives.

Ooh! Hang on! I had a shot at this in my PhD! Both 1, 2 and 3!

https://espace.library.uq.edu.au/data/UQ_415865/s42061609_phd_thesis.pdf?Expires=1553039044&Signature=HONC5792yvvqEuMUyR31YNiuXuOoBZ5~6lybt~f~lDdNtVHqF3tvEYfE3xg3-VLVqURFFMk-bsBOb0PbddQbpLxiPrWFOqTh4So0prZNPKeZXjz35L3CDOt-RLQX8kyzFqOFqqcychwq1pDyNK05Enxwd3NGYv4l4m5-vdyp823I1CixZDXQuFqeSf6Gz~b6FrMkFOm~uYrm3aQt5FB8V2un1vQhim4q~HgsDIvk0S6nDyQfnFd-v57tPT5Ih~NSd4JZG3i53MqhcMLTY8av7g5ild30v5XrDS8FVpyZ0Z7mhlCoxiomaX3fIRBwsEfnyFyNoFs9V8fvXWigwe798A__&Key-Pair-Id=APKAJKNBJ4MJBJNC6NLQ

I heartily welcome this new discussion. I basically agree with Francisco's 3 theses.

I have read many posts in Real-World Economics Review Blog that argues that mainstream economics is fundamentally wrong (I agree) and how they are wrong (most of the cases, their criticisms are right). Lars Syll is one such typical blogger. He is very productive and posts his short article almost every week. I had advised him many times that only criticizing mainstream economics and without indication of a program of (or at least a direction to) a new economics, his interventions only produce among readers a skepticism on economics in general. His stance is based on Tony Lawson's critical realism. Many of his followers have a strong tendency to argue that use of mathematics itself is an indication of the lack of realism. I propose to discuss good and bad aspects of Lawson's critical realism and his followers discourses affected by his philosophy.

Another possible point of our discussion must be methodological arguments accumulated in Post Keynesian economics. See for example, Chapter 1 of Marc Lavoie's Post-Keynesian Economics / New Foundations. Many of their "methodologies" are an opposition to the mainstream basic methodologies and their tenets are right as such but Post Keynesians lack any concrete theories that can substitute or compete with the mainstream economics.

Economics as a profession is methodically strong in maximizing and managing private wealth, i.e. existent theories are a political reflection of economic group interests. However, recorded civilizational history (since Sumer) begun with private property. As a science, economics is still in an embyronic stage, concerning the methodical balancing of the private and public wealth gap, which is the main reason for social entropy. There are very many knowledge deficits, with respect to economic waves, cycles and spiral development, in historical and tech-know-logical terms. I do think the best future analogies for economics are from biology (life sciences) and medicine, based on sociophysical approaches.

Article Quantum Energetic Evolution

https://www.sociostudies.org/almanac/articles/quantum_energetic_evolution/

I agree with Francisco. However, I have a caveat: why should we consider ourselves heterodox? ... In my view the true opposition is between dogmatism and freedom to employ (and even design) the methods that fit better with the phenomena we are investigating.

Great point! Felix. I agree. And I would like to mention two additional mythos:

1) Mathematics is the domain of Neoclassical economics: FALSE. Apart from the amount of math-work in other schools, I support the idea that it was the systematization of Geometry (looking at the stars and observing triangles and shapes at night in the sky) what provided ancient Greeks with a system of thinking that spur knowledge creation for Centuries. Because of the influence of POSTMODERNISM we are loosing systematic thinking (non necesarily math) in our disciplines.

2)Neoclassical economics means "dangerous pro-capitalistic" thinking: FALSE.

3) Felix work emphasizes the need to keep thinking about how to enrich the characterization of individual behavior and interactions to advance in theory. I agree with that and with Brendan work in a similar spirit.

Words and denominations are of the utmost importance, as they frame the debate.

As long as the ongoing debate in economics is portrayed as being one between mainstream and heterodox economists, I am afraid nothing substantial will come out from this perspective.

In my opinion, neither mainstream economics nor heterodox economics are schools of economic thought. The current mainstream school of economic thought is the neoclassical school, although I would prefer to call it marginalist or anti-classical. All mainstream economists are neoclassical/marginalists. I would also include in this school the various Keynesian splitter groups, as I have found little evidence so far for the claim that Keynes founded a separate school of economic thought.

Heterodoxy is just a collective name for all the others. Under this umbrella, there are many economists who merely disagree with some propositions and concepts of the marginalist school, but do not formulate or adhere to a coherent alternative school of economic thought like, for example, classical political economy.

That is why I am skeptical that heterodox economics will succeed in evolving from its current state.

Dear Jorge, very interesting points.

(1) Marginalism is a key point. In any case, there are marginalists that do not buy neither the static (equilibrium-cum-compatibility of plans) approach of Neoclassical economics, nor its mathematical methodology, i.e. the Austrian School of Economics.

(2) I agree with you in that most of (not all) most of what we name Keynesian economics is to some extent very Marshallian, and in the case of Neo-Keynesians, they are even RBC with imperfections (DSGEs with Keynesian frictions). Except for the subjectivists Keynesians (Shackle, Lachman) they are almost Neoclassical.

(3) I disagree with the pessimistic view on heterodox economics. It is tru that there is no fully-fledged alternative currently on the market. But there clear "potential alternatives" that could eventually become substantially different paradigms: I mean (e.g.) Evolutionary Economics.

(4) What I am trying to highlight here is that (e.g.) Evolutionary Economics is not putting all the beef on the table regarding the theoretical development of the basis. And I feel that: a) their excessive reliance on empirical work per se (often without being conscious of the key role and limitis of the underlying theory); b) a misleading concept (in my opinion that of appreciative theorizing); and c) a reluctant pre-conception regarding formal work + a unidirectional preference (in some cases) for very complicated computational models, are weakening the analytical power and fruitfulness of the proto-paradigm, leading to an early (atifitial) closure of the field which may lead to a vanishing attempt.

On the other hand, it is misleading considering such fields as ecological economics, gender economics, postmodern-feminism or Marxian-environmental-atheistic economics, the economics of religion, as schools of heterodox economic thought. They may be thematic areas. But they do not provide us with new ontological and methodological perspectives from which we could analyze through the stating of new hypotheses and the obtention of neat fresh propositions ALTOGETHER: monetary economics, price theory, international trade, growth theory, sustainability issues, public finance, labor economics, industrial dynamics, business cycle theory, market dynamics, political economy...Most of the "schools of thought" that we find in the so-called heterodox economics are interesting thematic areas. But they are not alternative schools of economic thought.

I find in this discussion a number of interesting insights. However, I see that the various commentators are inclined to take for granted the definition of what neoclassical/marginalist/mainstream economics actually is. In this respect I would suggest to pay some attention to recent contributions (by authors such as David Colander, John Davis, Wade Hands, Mario Cedrini etc.) referring to an allegedly new “mainstream pluralism” (or pluralism within the mainstream).

Dear Andrea Salanti,

There is a clear definition of neoclassical/marginalist economics. What you seem to point out, quite correctly, is that some self-proclaimed mainstream economists do not agree with the theory of value and distribution of this school of economic thought. They don't realise that the theory of value is the core of every economic theory, because they take for granted the neoclassical separation of macro- and microeconomics. They view themselves as mainstream macroeconomists.

Dear friends,

In my opinion, a clear line of distinction between the mainstream and heterodox approaches can be drawn if reference is made to the explanation of the functional distribution of income (wages, profit and rents). In the mainstream approach the distributive variables (wage rate, interest rate and rent rate) are the prices for the use of factors of production (labour, capital and land) and therefore the distribution of income is a market phenomenon, based on supply and demand. In the heterodox approach, instead, the distribution of income is a social phenomenon, depending on the conflict between social classes (workers, capitalists and landowners).

In other areas of economic analysis, the distinction is less clear and there may even be overlaps.

I agree with Saverio. Another clear distinction is that while we find no (or non-chronic) inter-agent coordination problems in neoclassical and in mainstream neo-keynesian thought, we have an ongoing process of new potentials-cum-disruption + serious coordination problems in (e.g.) evolutionary economics.

Additionally, in mainstream theory almost all the action takes place in markets (everything has a price or "pseudo" shadow price); this is not the case in evolutionary or institutional economics where the market is just one among other realms of action, abd there are things that cannot be traded (e.g. tacit knowledge). But all this should be with time much more integrated, formalized and made systematic.

I am for pluralism in economics. While neoclassical economics is the most elaborated theory, it fails to work in many cases. The transition to market economies in 1990s was full disaster in many countries (especially for Russia), although it has been based on the theorem of free market efficiency from that theory.

I used to work in resource economics. Their finiteness, spatial factor, externalities set the limits for applicability of neoclassical theory. Another weak issue is the belief in full rationality. Now we have increasing complexity of decision making. I find it almost impossible to stay fully rational even for a person with PhD in economics. What about other consumers, without education?

The concept of rationality and its alternatived is a great issue. Thanks Yuri! To clarify: 1) rational agents as those with a complete, reflexive and transitive binary relation of preference defined on a convex and compact set of alternatives for choice. 2) rational in the sense of maximizing a function (or functional in dynamic opt) with nice properties defined on a convex and compact budget set. 3) Rational as being able of forming probabilistic expectations on the future which are unbiased, efficient and consistent with the try underlying stochastic process. 4)Rational as behaving according to a best-response correspondence in Game Theory. 5) Rational in the sense of behaving by using reason to remove obstacles and solving problems with an intentionality. 6) Being boundedly rational in the sense of following heuristics and routines guided by the provisional satisfaction principle. 7) rational in the sense of realizing that the world is not a white noise, and then trying to extract signals and oprational regularities on which we characterize reality as best as we can and then make and try to carry out provisional plans with an intentionality being open to learnin. We find at least all these solid notions of rationality in economics. Some are mainstream, others come from heterodox views. But we must work in comparing them without pre-ideology, trying to systematize and integrate firmally those that are still new...systematize heterodox notions in formal coherent frames to reach fresh prpositions.

I also find exasperating how easily the notions of equilibrium are ridiculized by ideoligically oriented researchers which essentially ignore mainstream literature. Of course we evolutionists consider moving from situations of equilibrium to processes as a "must". But everything must qualified depending on the specific notion of mainstream equilibrium under attack: 1)Walrasian General Equilibrium in GET as a fixed point of the tattonement correspondence in the simplex of prices? 2) Equilibrium as a stationary state being stable in a dynamic system resulting from solving a problem of dynamic optimizacion? 3) Temporary Hicksian equilibrium?. 4) Lucas-Sargent rational expectations equilibria? 5) Which of the possible eq. States in Game theory can we target? In one-shot or in repeated games? In mixed strategies? In differential games? In evolutionary games? 6) Keynesian eqs. with rationing? And imagine that we focus on the fascinanting non-linear dynamic results around learning, multiple equilibria, structural instability, low dimensional chaos or bifurcations?. There are a lot of things to make accurate begore we ideologically attack what is an insatisfactory but fruitful, solid and that have bee built up during 100 years by some of the most brilliant minds in economics ( Hicks, Arrow, Debreu, Hahn, Cass, Koopmans, Benassy, Malinvaud, Allais, Von Neumann, Nash, Shubik, Lucas, Sargent, Larsen, Taylor, Dasgupta, Tirole). Formidable rivals. No simple heterodox quick attack is acceptable. Less ideology and more theory!

As I am too busy now with other duty, I cannot intervene in this important discussion. But let me add two words on the point 2) that Isabel Almudi included in her list.

General Equilibrium Theory à la Arrow and Debreu does not prove that economic state or process is stationary. Stationarity of economic process is very important quality if we understand "stationarity" properly.

See my (old) paper: The Primacy of Stationarity: a case against General Equilibrium theory (1989).

Article The Primacy of Stationarity: A Case against General Equilibrium Theory

The question is written well. Breaking ‘domain-specific narratives’ might require a break from the traditional platforms of graduate education. Take Africa. It faces non-ergodic and strongly dynamical policy spaces. Yet, most PhDs return to the continent (or end up with the IFIs) ill-equipped to tackle the complexity. After a few years, they are bosses and confined to administration. What will trigger the revolution? The traditional Western schools are too consumed by the egos of disciplinary silos and the rigid narratives. Yet, African universities lack research energy. However, if I were to bet, it would be on the latter.

In my experience: 1)I agree with the diagnostic of Fred. But: 2) Be carefull with the revolutions. They always end up creating a new oligarchy. Revolutionary rethorics, in the cases I have lived, are bullshit to control people. 3) Totally agree with energizing fomestic institutions instead of importing talent. But 4) No radical change can be carried out without a formal and strict (probably new: complexity theory-formal evolutionary economics) theoretical system supporting the initiatives. Radical changes moved by will and feelings always end up in useless terrible disasters.

To support my reply to Fred: 1) and 3) I attach three studies regarding the more powerfull role of updated and newly created domestic institutions vs just importing talent.

Finally, in support of my replies 2) and 4) I attach two studies on the iron law of oligarchies (very large dominating groups) emerging from seemingly spontaneous process of public opinion formation.

From the point rised by Fred: He seems to point out to a complexity perspective as a theory supporting his transformative view. I fully agree. But, in the study I attach hereby, we discuss that guiding action from complex theories from which emergent properties follow, it is not such an easy task. We are going to discuss the way to manage policy action from a complex perspective (as it appears in the paper attached) at SPRU, University of Sussex, June 2019-EMAEE Conference, in a special session of "New Modeling Trajectories and ways ahead. Industrial dynamics". (Simone Vannucini, I. Almudi, F. Fatas-Villafranca, Gianluca Capone, Raffaello Seri, Franco Malerba, Andre Lorentz, Tomaso Ciarli, Jason Potts, and participants).

Africa is strongly non-ergodic. Cf. Article Public-Private Partnerships (PPP) on Moulding States: The No...

Preprint Public-Private Partnerships (PPP) in Africa: Harking the Holonomic

Let me comment on the question of Rationality that Yuri Yegorov and Francisco Fatas-Villafranca raised 10 or 11 days ago. Francisco in the post that starts with the sentence "The concept of rationality and its alternative is a great issue", he distinguished seven different concepts of rationality.

I do not deny that human being is a rational animal, but its capacity to perform a rational judgment is very restricted, mainly because of two reasons:

• (1) bounded rationality
• (2) myopic sight

(1) means that we cannot get a maximal (or optimal) solution by calculation by the lack of calculation capability, even if we know sufficient information. (2) means that, in a normal situation, we can collect only a small part of relevant information and almost always lack sufficient data for the relevant calculation.

We are behaving in a complex world with these severe conditions. Then, we must know how our behavior is organized (or structured) and why it is often effective. The solution I have got is similar to Fransico's 7th rationality, although I do not know the details of his idea.

(See my paper: Microfoundations of evolutionary economics.

https://www.researchgate.net/publication/301766363_Microfoundations_of_Evolutionary_Economics

This is to be Chapter 1 of a book with the same title which will be published soon from Springer.)

The most important point for economics is that our capability is extremely limited whereas the economy (be it national or world) is a really large system. It is necessary to elucidate how such a big economy works by actions of human agents who have only limited capabilities. This is the theme of Chapter 2 of the book above mentioned and the book as a whole. The title of Chapter 2 is

• A Large Economic System with Minimally Rational Agents.

In this book, we (M. Morioka and K. Taniguchi and I) have presented an adjustment mechanism that is totally different from Arrow and Debreu's General Equilibrium theory.

Let me return to Francisco Fatas-Villafranca 's original proposals. I agree with Francisco's main contention of his three-point theses:

1) Develop a solid general theory even if it seems too abstract. We need a theory to beat a theory.

2) Disconnect the heterodox discourse from specific ideological pre-conceptions. The alternative theory must be and can be built on a critical re-appraisal of the very foundations of neoclassical economics.

3) We now lack such a theory. Fragmentary, often ideological discourses in many realms of heterodox economics are helping the neoclassical economics to be considered as the unique possible basic economic theory.

(I have changed some expressions in such a way that seems to me more appropriate.)

For some small points, I feel uncomfortable. For example, Francisco referred to "critical ontology" in point 2). This reminds me Tony Lawson's philosophical background. I am not totally opposed to his arguments. Some of them are very good criticism of neoclassical economics. But, many people deduced from his books or papers ample reason to reject all kind of mathematical formulations (Lawson himself is more cautious and does not claim this kind of categorical refusal to mathematics). Another reason that I am rather reluctant to Lawson's arguments is his arguments seem to be too much based on his personal career that started from statistics. He may have been a good theoretician in economic statistics and statistical assessment of econometric models, but I doubt if he has ever worked in constructing a economic theory. Economic theories are not restricted to macroeconomic models. I have an impression that he is believing this is inevitable because economy makes a whole that cannot be divided into small relatively independent parts or aspects.

As for point 1), I wonder if Francisco and his colleagues have found a theory from which to re-start economics. They have made many agent-based simulations. I also think it is inevitable to recourse to simulation in order to see what happens in a system with non-linear interactions of a not too few number of elements. We should find a general theory (even for a small range of validity) that can elucidate the basic logic on how market economy works.

(As for significance of simulation, see my paper: A guided tour of the backside of agent-based simulation.

https://www.researchgate.net/publication/279177719_A_Guided_Tour_of_the_Backside_of_Agent-Based_Simulation

I estimate computer simulation is a third mode of scientific research after theory and experiment. )

Point 3) may be most difficult part of Francisco's proposals. We have a consensus on the fact that we lack a theory. There is no consensus which would be such a candidate. As I have claimed, I am now thinking that a theoretical basis has already found. The trouble is that many heterodox economists do not believe this and would not try to learn the new theory.

I fully agree with Professor Shiozawa comments. Let's move in Shiozawa direction: " have we found a new theory altogether as heterodox economists?" I would say: not yet, but we have very interesting but dispersed pillars that have emerged during the last 70 years. Taken seriously, not just rethorically: 1) radical uncertainty of heterogeneous agents, 2)strong limits to neclassical rationality but without giving up intentionality, 3) the importance of scattered gradual learning, 4)the crucial role of Structure and structural change in economic systems, 5)the need to explain and incorporate genuine innovations and their difussion but without giving up price theory, supply-demand trading interactions, the theory of dynamic value, 6) blocking and catalizing mechanisms interfering within co-evolutionary processes in which distinct domains mutually shape each other becoming dynamically co-determined, 7)aggregate paths as emergent properties taking seriouly the changing composition and the correct aggregation of different levels, sectors, etc. 8) methodologically: there are amazing advances in contemporary math to address this task ( still to be done..perhaps gradually for many decades to come).

Now: let me say that I am not a great fan of computer simulation. I use it because I am still experimenting and I have not found something better yet. In fact, there are important obstacles to be removed, and can be removed, but is difficult. Namely, A) The combination of formal logic ( see Aristotles' Analytics or contemporary math-logic) with dialectics a la Hegel/Marx/Schumpeter is not a trivial task. Although this integration is not only possible but mandatory to advance.

B)the ontology underlying the pillars 1) to 8) that have been emerging in heterodox economic theory is not that of reality being a continuous monomorphyc thing, but reality being a discontinuous polimorphyc "something" with different domains becoming self-referential to some extent, but also transversally linked in co-evolution but not all with all, nor none with none, but according to what Plato named a Symploke (a pretty complex topology I would say in contemporary terms).

C) the role and implementation of policy if reality has these properties is still to be defined.

Theory and vision

All right! We agree with the main points. This is important above all. All others are minor issues. Let us cooperate to build a new economics that can replace the neoclassical economics.

Although this is one of many minor issues, it seems there is some differences on the concept of "theory". Eight pillars you have cited seem to me a matter of vision concerning what kind of economics we hope to build, but it is not yet a theory. In my post of March 19, I mentioned this point. It seems many of Post Keynesian economists like Marc Lavoie are mistaking the vision and the theory.

Of course, a theory is guided by a vision, but it is something more concrete (even though it is purely logical and abstract) than a vision.

In a discussion page, I asked about the necessity of building theoretical foundations of Post Keynesian economics.

https://www.researchgate.net/post/Does_Post_Keynesian_Economics_need_no_theoretical_foundations

I asked this point one year ago. In my presentation of my question, I wrote this:

• Marc Lavoie's book Post-Keynesian Economics (2014) is a thick book of 650 pages and has a subtitle New Foundations. It is full of arguments on methodologies and policy orientations. I read full of criticisms against neoclassical economics (both micro and macro ones), but as far as I see in the book, few theoretical foundations are deployed. Does this mean that Post Keynesian Economics need no theoretical foundations? Or does this simply mean that Post Keynesians have not yet succeeded to build their own foundations?

A set of theses similar to Francisco Fatas-Villafranca's Eight Pillars is discussed as presuppositions of Heterodox economics and some of them as those of Post Keynesian economics. The term "presumptions" is not bad, because it shows that those propositions are still some thing we assume or something we hope to build in the theory. Theory proper is something that comes after those presumptions. Displaying presumptions is not a good way to fight against the neoclassical economics. We should fight with our theory/theories against their theory/theories.

I agree. Just as a concrete example: Isabel Almudi and myself are writing now a book entitled "Evolutionary Economic Theory" comisionned by Routledge. The book will appear in 2021. We draw on previous work in heterodox Ec. Theory to compare viz a viz concrete formal models (evolutionary vs neoclassical/neokeynesian) regarding: price theories consumer theory, production theory, trade theory, monetary and fiscal policies, innovation and growth, business cycle theories, labor market implications and political economy issues. It is a 300 pages volume in Routledge with detailed issue by issue modelling and comparison of implications through propositions. It includes a first chapter of math propedeutics. It runs from Nelson- Winter, Dosi et al, Metcalfe, Dopfer, Witt, Schumpeterians and then Shiozawa structuralists, Pasinetti, Gallegati, etc institutionalism, Hodgson, etc and postkeynesian features, and our previous works Fatas-Villafranca, Almudi since 2007-2019. A powerful synthesis emerges with neat propositions and implications in contrast with all the neoclassical counterparts. It will appear by 2021. And it must be updated every year as aggreed with Routledge. It is an attempt to delineate a clear arena for discussion addressable by both ortodox and heterodox thinkers as they see clearly in a common language their huge differences. Now finishing it..

By the way, in July 2020, as a sort of prolegomenon for the book mentioned by Francisco, Almudi and Fatas-Villafranca will publish the monograpgh "Co-evolution in Economic Systems", as issue 3 in the series Elements in Evolutionary Economics (ed. by Potts and Foster), Cambridge Unversity Press. We argue that the concept of co-evolution is the key organizing concept to develop the synthesis.

Splendid! The monogram "Co-evolution in Economic Systems" will come out soon. A big book "Evolutionary Economic Theory" will be published in 2021. I hope and expect that these two or three years around 2020 will be great years for economics.

Francisco Fatas-Villafranca Isabel Almudi

The new issue pf Economic Thought: History, Philosophy and Methodology (Vol.8, No.1) contains two articles on the Heterodox Economics strategies to take.

http://et.worldeconomicsassociation.org/files/2019/06/WEA-ET-8-1-Chester.pdf

http://et.worldeconomicsassociation.org/files/2019/06/WEA-ET-8-1-Hodgson.pdf

Lynne Chester develops her feeling that something is wrong with Hodgson's argumets that he developed since 2017. In the second paer, Hodgson anwers to Chester.

How do you think of their controversy? My impression is that Chester raises and deals with too many points and has not succeeded in presenting a positive perspective.

I agree with you. In any case, I practice and hold a view on the evolution of human thought that emphasizes the long long long term. The great achievements of geometry, algebra, astronomy, number theory, medicine, political thought, etc have taken centuries to become well-established and selected. History wins- out over our proposals and efforts as an inmensely strong but very slow stream which more or less selects and rules out. Thus, I am not a big fun of short term strategic efforts as those discussed in the paper. Just I think we as heterodox (in the present) should try to write down our ideas as clearly and neatly as possible as message for generations to come. Economics in 200 years from now will look very different from what it is today, and what it was 200 ago. Just a small fraction of what we have figured out and propose will remain. Just lets try to communicate as honestly and neatly as possible with the future generations. They will see. Neat and honest theoretical arguments written down. That is all we need ( and less ideology, impact factors, scientific marketing, scholarly celebrities, university rankings, scholarly cuasi religious rituals, nobel prizes....). Most of that is smoke. It will vanish.

Yes, by formal I not only mean mathematical (though I personally find a lot of explanatory power in non-mainstream mathematical approaches, in fact I would argue "for" mathematical methods in non-mainstream economics). Why? Because although I would mention e.g. Mises as a great FORMAL non-math theorists, I believe that most of us are not von Mises. Thus, it is much easier doing "very bad" non-math theorizing than it is working with models. Most of the post-modern sociologistics attemps to theorize are just rethorical sophistics (or even worse!!!!! Completely ideoligical and fully lost and misleading discourses). On the other hand, I would say that with exceptions of course, natural language leads easily to inconsistencies in assumptions, long and choppy (often wrong ) processes from assumptions to conclusions, much more difficult transmisibility and testability of theories. To sum up: Mises, Kirzner, Hayek, Shackle, ...gret theorists. But few people theorize neatly without math.

I agree with Francisco in the discipline that math impose on the discourse. Moreover, notice that most of the non-mainstream great minds that argue against math in the past, were critical against calculus, normal algebra of the time, clasical mechanics...But considering the huge advances in contemporary math ( measure theory, advanced convex analysis, differential topology, non-linear dynamics + stochastic processes, superior algebra, contemporary logics, computational methods, complex networks, population games theory, ....) just to name a few...this not just the Lagrange function, the implicit. Function theorem, trigonometry and linear systems of equations. There is a lot still to be said about the power of contemporary math in social sciences.

For instance: spontaneous orders, novelty in the form of endogenously changing "domains" of functions which, in turn, may involve bifurcations, non-linear complex systems with structural instability and a bit of noise may resemble many historical patterns, stochastic coevolutionary networks, ...I am not talking about empirism, I refer to a rich bundle of methologies which are amenable non-mainstream theoretical use and, as Isabel suggests, can nowdays generate a wide array of phenomena which were far from the mathematical potential just 60 years ago.

On the other hand modern math is not only about numbers or numerics systems or "quantifications". It is wider, it is a methodology to manage abstract representations with great accuracy and efficacy (the combinations of theorems allow us to extract intricate conclusions from our arguments which "live" within our theories but are almost invisible to natural literary logics (see discussions in Hilbert, Godel, Brrtrand Russel, analytic phil...). Still I agree with you in that formal is """theoretical management of forms in the most general sense, with realistic content, and no necessarily math""" but this is not per se EQUIVALENT to a verbal exposition in natural language (which is often a narrative, or a description, or intuitions, this never theory; or much worse: ideology, or story-telling with nice rethorics -as I have seen in pseudo-post-marxist-gender-ecological texts, or in ordoliberal promarket partisans.....I prefer Thomas Sargent or Edward Prescott, or Becker, at least it is clear how to beat them because they argue in a very precise and correct manner (although, in our opinion, they depart from fully insuficient hypotheses).

Building a better economics than the neo-classical paradigm may mean going back to rediscover concepts systematically excluded from the neo-classical theory as well as much of heterodox and progressive economics. Consider, for instance, the distinction between the responsible actions of persons (aka labor) and the non-responsible mechanical services provided by things (services of capital goods and land). Von Wieser was quite explicit about the distinction but it was entirely lost sight of in the 20th century. That in turn leads to the old labor theory of property (not the stupid labor theory of value). Moreover, the consideration that one's factual responsibility for something is actually inalienable leads back into the older notion of inalienable rights behind the abolition of, say, voluntary slavery or lifetime servitude contracts. These notions lead one well beyond the conceptions of heterodox economics that thinks it is a profound critique of marginal productivity theory to point out that markets are hardly competitive or that MP is hard to measure or the like. A sample of this sort of analysis is here: http://www.ellerman.org/the-case-against-the-employment-system-based-on-the-norms-of-ordinary-jurisprudence/ or the attachment.

I came across an interesting paper by that can be downloaded from the ssrn website:STRATEGIC PLURALISM AND MONISM IN HETERODOX ECONOMICS, by William A. Jackson. It refers to the strategies heterodox economists deploy in their struggle against the orthodox. « Pluralism is frequently supported by heterodox economists, but their rationale for it is not always transparent. It could be advocated for strategic reasons, as a response to the institutional power of orthodoxy, or for fundamental reasons, as a programme for how economics should best be done. This paper evaluates strategic pluralism, compares it with the alternative of strategic monism, and relates both strategies to long-term objectives. »

Actually, what defines an heterodox is being in minority. In my student’s time, neo-classic economists were considered as strange animals. In many countries in the world, they even may not be authorized to teach a State universities. The doxa, like many other things, is relative...

Thanks for such provocative and interesting comments. I must admit that I find many useful things in well-done (which is not aways the case) mainstream economics (great contributions by Arrow, Debreu, Game Theory, Monetarists, Lucas-Sargent, a few Neokeynesians and growth people such as Grossman-Helpman, Aghion-Howitt). INevertheless, even admitting merits, I am firmly against their ontology, thr representation of the world in terms of Full rationality & optimization & equilibrium & the prevalence of markets in social interactions. Just the specular inverse

Ontological view seems to me to be the right one. And we have nowdays the formal and math methodologies to build up a fully opposite economics to the current mainstream. It is not a matter of ideology or believes. It is the general feeling amongst heterodox economist that the world is radically uncertain, full of local apart from global interactions among heterogeneous agents at different levels (not only markets) who innovate and are boundedly rational, everything proceeding through complex and evolving topologies in circular (feedbacks, strong nonlinearities, structural instability) co-evolving systems.

Moreover, as we proceed through this co-evolutionary strategy, new propositions on how the works, new perspectives on old and new problems and fresh policy applications are appearing. The next recession/crisis will be a good empirical test for this new approach.

I am afraid the Arrow-Debreu model is a bit of a fraud in how they tried to show that in a perfectly idealized competitive world, there could still be a CE with positive pure profits. MacKenzie got it right (and belatedly Hahn) that a CE was only consistent with constant returns and zero profits. The problem is not in the idealization but in the indeterminacy of "who is the firm" which quickly gets one into deeper questions of property theory. See attached or the relevant chapter in my 1992 book, Property & Contract in Economics, which can be downloaded from ellerman.org .

Debreu "Theory of Value" 1959, and later on Arrow and Hahn GCE book are fully in line (although with different technical strategies) with Mac Kenzie results. Yes, I agree with you in the final results. An totally agree in the failed theory ofthe firm.

Francisco Fatas-Villafranca I am afraid I don't understand your statement that AD and AH are "fully in line" with MacKenzie. These are not technical questions like using one version of a convex set separation theorem or another. It goes to the more basic question of how is firmhood determined in an idealized competitive market. When all factors of production may be either bought or rented, hired, or leased, then it is no given apriori that the owner of one factor is a "supplier" of that factor versus a demander of all complementary factors to undertake production. AD tried to finesse the question by assuming that there were owners of production functions that were given, and that determined who is the firm. But there is no such ownership right in a free enterprise market economy. Ownership of corporations is just the indirect ownership of capital all of which can be rented out. Technical knowledge is routinely bought and sold.

Clearly any positive profit CE can be defeated by going to all the factor suppliers and offering them epsilon more to overtake that production project and still have some positive profit left over. That is called arbitrage across markets. If you think there is some privately owned unmarketable factor of production whose ownership determines firmhood, then please name it. Even if there were, then MacKenzie pointed out in his Presidential Address to the Econometric Society that such a hidden factor in firm 1 might be more efficiently combined with the hidden factor in firm 2 but that opportunity is not considered if it is unmarketed. Thus not only is the CE a fraud, but so is the efficiency theorem. That fraud of AD pretending to show that competitive market activity in perfectly idealized markets for all factors with decreasing returns to scale could give a CE with positive pure profits led to them getting the Nobel Prize and MacKenzie not. Nobels are important matters; people seem to hang themselves when they don't get it!

Why am I having to explain all this when it has been published for decades in papers I attach the explanations or you can download it? Attached is another more recent paper showing yet again that AD misrepresent the action of perfectly competitive markets. It is not a math question, but a question about competitive markets that AD got wrong since their supposed CEs can all be arbitraged.

Thanks for the papers and references. I will go through them because, definitely in this case, I was talking about the math techniques. It will take me some time going throughout the whole debate that you pose. It is a deep deep point. Thanks for pointing it out, I haven't learnt about it and I will do it now.

If I understand Ellerman's paper, the question may be summarized that in a competitive equilibrium in a zero transaction cost economy both capitalist and workers management firms can well function with the same plausibility but Arrow and Debreu are thinking that positive profit arises only in capitalist firms.

At this situation setting, Ellerman must be right. However, I wonder what happens in a positive transaction cost economy. Workers management firms may incur more transaction cost than capitalist firms, because it takes much more time for discussion and to gain a consent. Having learned from a long experience, capitalism has invented an institution of legal person and delegation system like shareholding, share holders general meeting and board of mangers. I do not know how workers management economy. It is true that ex-Yugoslavia tried a first step of workers management economy, but it had experienced many difficulties.

• It is an empirical commonplace that the Arrow-Debreu model of general equilibrium does not describe the real world, but it is equally commonplace to accept it as representing the pure logic of the competitive capitalist economy in an idealized world free of transactions costs. (Ellerman ""How Mathematics Obscures Conceptual Errors"" Abstract)

It seems that David Ellerman wants to emphasize conceptual errors of AD model, but I think descriptive ability or inability is also very important. However, in this latter case, denouncements of its "unreality" do not work very much for the reconstruction of better economics than neoclassical economics. The best way is to build a new theory that has more explanatory power than AD model. This is the point that Taniguchi emphasized in the Preface to our new book

Book Microfoundations of Evolutionary Economics

and in my chapter (§2.7.5).

The weakest point of various heterodox economics was that they have no descriptive theory on how market economy works. As my chapter hit it, our result is that we have got a theory that is more descriptive with more plausible assumptions than Arrow and Debreu model.

I must say that I am totally foreign to this discussion, for both personal limitations and lack of interest (I supposed I was once able to convincingly discuss AD and Morishima when a PhD student, but once the exams were passed, my interest was somewhere else).

I want just to mention that those interested in real markets and not in theoretical ones should refer to R. Coase to start with. It would help understanding why there is something else than K and L in the equation. In particular, it would shed some light on why the factor suppliers (e.g., workers, through cooperatives) cannot successfully overtake capitalist production projects.

More recently (1990 something), the business community came out with the "Smile Curve model", showing that most of the value-added per unit of product is created not at (K,L) production stage but at R&D, marketing, branding and after-sale services. As a consequence, if some of the Coca-Cola workers walked out of the firm and created their own soda, it would have difficulties selling to the mass market, even if it was of better quality/price ratio.

So, there is much more than K and L in a successful firm. The fate of capitalists (often ex-workers through their pension fund), line workers and management staff is (unfortunately or not, depending your own political orientation) closely linked and tied to another intangible: corporate culture.

Thanks for all the comments, I am really learning a lot from the discussion. It is an example of how heterodox economists can fruitfully and formally discuss with analitical neatness if they (we) stop divagating. Thanks also for the references.

Dear Hubert Escaith

I do not think that David Ellerman cited production function f(L , K) as a correct formulation. In original AD model, there is no production function but a set of possible production plans for a production unit. In the original model, there are no L nor L but finite number of distinct commodities (goods and services). I believe Ellerman wanted to avoid translation of AD model's terminology to a more familiar from which is more commonly used expressions.

Ellerman has a great paper that all participants to this discussion page must read:

Article Parallel Experimentation: A Basic Scheme for Dynamic Efficiency

He argues evolutionary or dynamic "efficiency" for many systems including sciences. Plurality and monism for economics must be considered in view of this evolutionary efficiency. His paper reveals that certain level of variety is necessary for economics. However, this does not imply that anything goes.

As Geoffrey Hodgson (Is there a future for heterodox economics?) argued in his new book, certain level of quality control is necessary even for the side of heterodox. Hodgson worries that too many heterodox economists are against neoclassical mainstream only because they do not like political tendency of the mainstream economics. This conception itself is flawed according to Hodgson. I agree with Hodgson that too many heterodox economists are more interested in politics (or ideology) and are not much interested in the economics itself.

I believe it is necessary to compete with the superiority between different economics.

Regarding AD model, now I will refer to Debreu (1959) Theory of Value: it shows with extreme clarity and neatness how limited (and why) the neoclassical frame is: 1)Absolutely no radical uncertainty nor innovation, everything is there for the agents to choose since the beginning. No time at all in the model. Fully complete markets for present and future goods and services. 2) Complete pre-orders and perfectly defined constraints just ready for the agents Max choice. 3) No action (apart from the auction correspondence operating with no trade), just to apply Kakutani's Theorem. That's it. I would say that it is great because it shows in its more neat manner the nakedness of Neoclassical economics. Other neoclassical approaches do "burlesque dances" around this scheme. But basically I would say that's it. This is very "scientific" because it clearly shows the foundations and limitations of the Neoclassical paradigm. The problem is the idolatric celebrity-type, impact-led, marketing-like type of sociology that is growing around the "business" (unfortunately business) of Science.

I also studied Debreu's Theory of Value (1959) as a representative theory of mainstream standard theory. As Francisco put it, it is a concise book (very good characteristics) and and clearly stated. Morishima was not satisfied with the Arrow and Debreu model (AD model). He did not admitted AD model as a general equilibrium model of capitalist economy. Morishima must have more sense of economists, but his system is a bit too complicated and difficult to catch the logical structure of his system.

Francisco Fatas-Villafranca had raised three points as defects of AD model. If we want, we can add many other defects of AD model. If I add only three of them (though very important as Francisco's three), they are

(1) It assumes decreasing or constant returns to scale. (convexity of production possibility set)

(2) No stability of economic sequences

(3) No mechanism that drives economy to equilibrium.

Let me add a few words on each of them.

(1) If we observe economy, most of industrial productions obeys constant returns to scale (as long as we consider inputs and outputs). If we take into account fixed capital, for example machinery and installations, or buildings and utilities, the production relations shows increasing returns to scale. AD model is a wrong generalization. Do not confuse decreasing returns to substitution. Arrow and Hahn talks about increasing returns to scale case but it is not clear if they have succeeded to formulate a theory in which firms operate in a normal state operating within the capacity of production. I tired to make a short survey on this points after Arrow and Hahn (1971), but I could not find any good models and definition of firms' equilibrium. See my paper

Chapter A Guided Tour of the Backside of Agent-Based Simulation

(2) AD model ensures existence of "equilibrium" state at a moment of time t. But, there is no logic that ensures the next market t' (e.g. t+1). In an extreme case, the economy tends to destruction when t increases. This defect is rarely pointed even among heterodox economists.

(3) This is usually named stability problem (also (2) is another type of stability problem). When the economy is out of equilibrium, by what mechanism does the economy tend to an equilibrium. In a general formulation, this is proved to be impossible because of Sonnenschein-Mantel-Debreu theorem.

As a conclusion, we can say that AD model and its variants are defective theory as an explanation of the working of capitalist or market economy. If we compare AD model and our results (Shiozawa, Morioka and Taniguchi 2019), I believe it is almost evident that our theory is much superior than AD model.

Agents assumed in our theory have only limited capabilities in sight (information gathering), rationality (calculation and logical inference) and execution (can change only a small part of the world). Our theory describes firms that operate withing the production capacity and adjust their production according as the sales volume changes from time to time. There is no notion of equilibrium prices but it is proved that price system out of the minimal price system converges to it.

(Theorem 4.10, Chapter 2 Book Microfoundations of Evolutionary Economics

What is lacking in our theory is the demand theory. We have not given any concrete formulation. We have only assumed that final demand (decomposed to millions of differentiated products) fluctuates everyday but the average moves moderately. We have assumed a set of production techniques and a set of product techniques but this does not mean we are excluding technical change. Both sets change dynamically and we cannot tell what will happen in the future. Even with this uncertainty, we can get a good theory how the technical change generates economic growth because we can assume the economy will take a price system near to the minimal price vector determined by the set of production techniques at a given time. In this sense, the new theory can be developed to a really dynamic theory which treats technical change.

Processes of ideas formation and difussion may become highly complex. As we can see in Hong Kong, Barcelona, Ecuador these days... streams of thought may be highly volatile. Representativity may clash with Governance. Democracy may not be always the "holly" grial that we all pursue. Two papers attached dealing with the dynamics of opinion formation from an evolutionary perspective.