Wednesday, August 29, 2012

The evolution of progressive neoclassical economists (by Pedja dell'Arno)

Paul Krugman wrote an interesting post for his blog yesterday. As can be seen from the suggested blogs section of "Real Progress", this blog is an admirer of Krugman, and I do not share the usual criticisms of Krugman that one so frequently hears about him in some economics departments (that he is too partisan, that he should not waste time writing columns and blogs, etc.). However, I think that one weakness of Krugman has been his reluctance to participate in the debate on how to improve the scientific standards (and not only the relevance) of economics research. Yesterday's post is mainly against Austrian economists and their rejection of mathematical modelling in economics. But as a secondary message, it defends an open interpretation of mainstream neoclassical economics, and at the same time it accepts the usefulness of other approaches such as agent based computational modelling (or "complexity economics"). It is interesting because apparently the relationship of Krugman with "complexity" economics has been far from smooth.
This relationship is mentioned in the book by Beinhocker "The Origin of Wealth" (footnote 27 in chapter 1 and footnote 30 in Chapter 3). It seems that although Krugman in the mid 1990s expressed some sympathy for drawing ideas from evolutionary biology for economics, he rejected both the obsession with using metaphors from biology, and he also rejected the direct use of evolutionary theory for economics. 
"The Economist" had a review of Beinhocker's book in 2006 were it mentions the tense relationship between Krugman and the evolutionists.
Krugman had a bitter controversy with Brian Arthur  that triggered a final intervention by Arrow defending Arthur (also defended by Beinhocker in his book) which can also be interpreted as part of the crusade of the Krugman of those times to keep the gates of mainstream economics relatively closed. See also "An increasing returns Chronology" by Krugman in in the section on economic theory.
Beinhocker also mentions the intervention of current leaders of progressive economics coming from the neoclassical side (such as Stiglitz -see footnote 11 on chapter 14- who attacked one of the prophets of an economics that draws from modern physics and biology, Nicholas Georgescu-Roegen) who some time ago were reluctant to accept the criticism that economics was in contradiction with the laws of physics, in particular the second law of thermodynamics.
Things have changed, and today it seems that at least Paul Krugman has a much more open minded attitude towards these useful approaches. 

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