Heterodox Economics

Published Oct 25, 2023

Definition of Heterodox Economics

Heterodox economics refers to a perspective or school of thought in economics that differs from mainstream or neoclassical economics. It encompasses a wide range of theories, approaches, and methodologies that challenge or deviate from the dominant economic theories and assumptions.

Example

One example of a heterodox economic theory is Post-Keynesian economics. Post-Keynesians focus on the role of aggregate demand, income distribution, uncertainty, and financial markets in shaping the economy. They emphasize the importance of effective demand and argue that the actions of households and firms can lead to different outcomes than those predicted by neoclassical economics. Post-Keynesians also critique the assumption of rational expectations and argue for more government intervention in stabilizing the economy.

Another example is institutional economics, which emphasizes how economic institutions, such as property rights, social norms, and political systems, shape economic behavior and outcomes. Institutional economists argue that institutions are not just passive reflections of economic relations but actively influence economic behavior and development.

Why Heterodox Economics Matters

Heterodox economics offers alternative perspectives and approaches to understanding the economy and addressing economic issues. It provides critical insights and critiques of mainstream economic theories and policies, challenging the assumptions and limitations of neoclassical economics. Heterodox economics encourages pluralism and diversification within the field, promoting a broader consideration of social, historical, and political factors in economic analysis. By incorporating different viewpoints and theories, it fosters a more comprehensive understanding of economic phenomena and a more inclusive approach to policy-making.