Earlier this year, I wrote a series of Dorf on Law posts in which I commented on a testy exchange between "orthodox left" economists and "heterodox left" economists. (The last of my posts, which contains links to the previous posts in the series, can be found here.) The orthodox team's most prominent member is Paul Krugman, while the heterodox left is ably represented by James K. Galbraith and Tom Palley. Lately, there has been another go-round between Krugman and Palley, which sheds some further light on the orthodox/heterodox divide, and which provides additional evidence in support of my analysis back in May. Specifically, Krugman is showing once again that he prefers "the jerks to the right of him," as I once described it, and he continues to dismiss and marginalize his potential allies on the left.
To review the basics, both the orthodox left and the heterodox left are in broad agreement on what would constitute a good policy response to the ongoing economic crisis: significant increases in deficit spending, a more expansionary monetary policy, aggressive regulation of the financial sector. They further generally agree on issues concerning income and wealth inequality, favoring increases in the minimum wage, redistributive taxation, and so on. Indeed, Professor Hockett's Dorf on Law post from May 3 points out that, in some ways, it is difficult to figure out the differences, which is why his post is titled, "When is it Orthodox, and When is it Heterodox?" That post demonstrates, moreover, that the similarities extend to matters of theory, and not just to the bottom line of policy.
So, if the two sides agree on key theoretical points, and they agree on real-world policies, what is left to divide them? Plenty, as my series of posts explained. Perhaps the most important among their many differences is that the heterodox reject the idea that "capital and labor are paid as much as they deserve, based on their productivity," whereas the orthodox either accept that idea or only reject it in a haphazard or ad hoc fashion. This is an enormously important difference, because it means that the heterodox are actually equipped to explain important economic phenomena without finding themselves relying on the assumptions and methods favored by conservative economists, whereas Krugman et al. are left inventing and defending on-the-spot arguments to deviate from the conservative baseline. That those arguments are almost always better than the arguments from conservative economists is important, but it does not change the deeper fact that orthodox left economists clearly feel more comfortable playing on the conservatives' turf, and that the orthodox left displays a palpable antipathy to the heterodox left.
The latest dispute between Palley and Krugman is, on the surface, about theories of price inflation (the Phillips Curve, for those of you who remember your Econ 102 classes). What it is really about, however, is respect. Krugman has been writing recently about how his group of orthodox left economists have been using an important insight from 1971 by the late, great James Tobin to explain inflation. Palley has pointed out that heterodox lefties (and Palley in particular) have been all over this for decades, whereas the Krugman people are acting as if the heterodox literature does not exist, with the orthodox people once again supposedly proving that they are intellectually adept and willing to innovate.
The latest volleys from Palley and Krugman can be found here and here, respectively. (These are two very short blog posts from the two combatants, written in non-technical terms, so non-economist readers should feel comfortable reading both posts.) Palley explains in clear terms what he and his colleagues have written on this subject, and then chastises Krugman for ignoring their work. Krugman's response is remarkable, and not in a good way. He begins by saying "I plead innocent" to the charge of giving Palley et al. "short shrift," but then Krugman basically tries to explain why it is really OK that he is guilty.
Essentially, Krugman's defense boils down to something like this: "Well, it's impossible to read everything, so any sensible person ends up deciding who is worth reading, and who is not." This is obviously true, but it does not at all explain why the orthodox lefties spend so much time reading and listening to their conservative colleagues, who really have a horrible track record, yet find it so easy to act as if the heterodox do not even exist. Krugman admits that "modern academic economics is very much an interlocking set of old-boy networks," but he never even tries to explain why the heterodox (most of whom attended top Ph.D. programs, but who did not sign onto the orthodox bottom line) are non-networked.
To his credit, Krugman says that "one ought to lean against" this insider/outsider tendency. But the remarkable aspect of Krugman's post is that he essentially tells Palley and the other heterodox economists to be more polite, admonishing them and suggesting that "if you want the mainstream guys to listen to you, you probably shouldn’t accuse them of being denser and more rigid than they really are. So how about some more open-mindedness all around?"
I recall a time when I was in college, and there were some students protesting peacefully on campus about the college's investments in South Africa's apartheid regime. One of my classmates, who came from very old money, complained that "they're just so ill-mannered!" Similarly, European elites over the last few centuries would often explain their anti-Semitic views by complaining that Jews were unseemly in their focus on money -- as if the elites themselves had not passed laws restricting what kinds of trades Jewish citizens were permitted to enter. In both of these examples, you have comfortable elites not only enjoying the fruits of excluding outsiders, but in many cases actively excluding outsiders, and then saying that the real problem is that those outsiders are just so shrill.
As I noted in my series of posts two months ago, the heterodox have been marginalized to the extreme by orthodox economists. It is not that there are heterodox left, orthodox left, and various brands of conservative economists in each top department, with the orthodox left choosing to have lunch with the conservatives rather than the heterodox. The heterodox are missing from the top departments entirely, and very much because the orthodox left participated in that purge. If anyone other than Robert Solow among the orthodox left has done anything to try to fight that purge of heterodox economists, I am not aware of it.
Notably, Palley's current job is at the AFL-CIO, and Galbraith's is in a public policy school. No elite economics departments find their type of work -- even though it is as math-techie as anything in the mainstream, and even though Krugman himself admits that it is reaching conclusions on important questions at which he and his colleagues arrived much later -- worth supporting. When hiring decisions are made, the right unites with the orthodox left to say, "Well, that's outside the pale," and then they return to running the top journals, drawing the best salaries from the best universities, and fielding calls from presidents and prime ministers. That there are any remaining active heterodox economists at all is actually a bit of a miracle, attributable both to intellectual honesty and academic idealism.
For Krugman to say (after admitting, somewhat ironically, that it is important to "Listen to the Gentiles“) that the heterodox guys will get further by striking a less critical pose thus strikes me as completely tone deaf, at best. He acts as if the heterodox are a bunch of unwashed loud-mouths who are being impertinent, failing to understand that one simply does not do such things here. Readers can judge for themselves, but I find Palley's criticisms of Krugman to be quite within the range of polite society. But even if that were not true, it is a bit galling for Krugman to try to reprimand the outsiders for not acting like insiders.
Krugman has often argued, in response to those on the right who claim that he is shrill and nasty, that the stakes in policy debates are too high to worry about rules of civility. It is depressing indeed to see him show such a thin skin when it comes to people with whom he generally agrees, especially when those people have ample reason to be so much more hostile to him than they actually are.