extend the core insights and thus form a new paradigm in that science. Initially, they enjoy a glorious period of the dance between observation and theory, where observations confirm and extend the paradigm. But finally, some prediction the theory makes is contradicted by observation. After a period of denial and dismay, the science settles into an unhappy peace: the paradigm is taught, but with less enthusiasm, the anomaly is noted, and the various within-paradigm attempts to resolve it are discussed. Then, out of somewhere, whether from a Professor (Planck) or a patents clerk (Einstein), a resolution comes. Rinse and repeat.
Those punctuations never occur in economics, and because the punctuations don’t occur, neither does the kind of revolutionary change in the discipline that Kuhn vividly describes for physics and astronomy. Economics is, therefore, not a science. As Kuhn explains brilliantly, a real science goes through a process of paradigm change via a shift from what he calls ‘normal science’, to a scientific revolution triggered by a fundamental anomaly and resolved by a new paradigm, after which normal science resumes once more with the new paradigm. Economics has experienced many theoretical and empirical crises since the Neoclassical school became dominant in the 1870s, but none have resulted in a revolution to a new paradigm akin to the shift from Ptolemaic to Copernican astronomy.
An economic crisis, when it strikes, does disturb the mainstream. Their textbook advice – if the crisis is empirical rather than theoretical – is thrown out of the window by policymakers while the crisis lasts. Mainstream economists react defensively – which is not significantly different from what happens in a science. They can justify the extraordinary policy measures undertaken by the unexpected nature of the crisis, but then treat the contradiction the crisis poses for their theory as an aberration, which can be handled by admitting some modifications to peripheral aspects of the core theory. One example is the concept of ‘bounded rationality’ promoted by Joe Stiglitz (Stiglitz 2011, 2018). This can be invoked to say that, if everyone were strictly rational, then the problem would not have arisen, but because of ‘bounded rationality’, the general principle didn’t apply and, in this instance, a deviation from policies recommended by the pure theoretical canon is warranted.
Minor modifications are made to the Neoclassical paradigm, but fundamental aspects of it remain sacrosanct. Again, this is comparable to the reactions to an anomaly by adherents to an existing paradigm in a science.
Over time, the crisis passes – whether that passing was aided or hindered by the advice of economists. A handful of economists break with the majority because of the anomaly, which is how heterodox economists are born. But the majority of students become as entranced as their teachers were by the fundamentally utopian Neoclassical vision of capitalism as a system without power, in which everyone receives their just rewards, and in which regulation and punishment are unnecessary, because The Market does it all. These new students replace their masters, and they continue to propagate the Neoclassical paradigm.
This is the first hurdle at which economics fails to be a science. The process Planck describes, of the death of adherents of the old (Neoclassical) paradigm resulting in them being replaced by a ‘new generation’ that is familiar with the ‘new scientific truth’, does not occur in economics.
The second hurdle is the political role of economic theory. The last genuine scientific revolution in economics occurred in the 1870s, when the Neoclassical took over from the Classical school of thought – the approach developed by Adam Smith (Smith 1776), extended by David Ricardo (Ricardo 1817) and commandeered by Marx (Marx 1867). Neoclassical economists imagine that their theories originated with Smith (Samuelson and Nordhaus 2010a, p. 5), but in fact Smith, Ricardo and Marx used an ‘objective’ theory of value that is completely at odds with Neoclassical theory. Ricardo explicitly rejected the utility-oriented, scarcity-based proto-Neoclassical economics of his contemporary Jean-Baptiste Say, declaring emphatically that:
There are some commodities, the value of which is determined by their scarcity alone … These commodities, however, form a very small part of the mass of commodities daily exchanged in the market … says Adam Smith, ‘… It is natural that what is usually the produce of two days’, or two hours’ labour, should be worth double of what is usually the produce of one day’s, or one hour’s labour.’ …
That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy; for from no source do so many errors, and so much difference of opinion in that science proceed, as from the vague ideas which are attached to the word value. (Ricardo 1817, Chapter 1, emphasis added)
The Classical school of thought had logical problems of its own (Keen 1993a, 1993b; Steedman 1977), but a key factor in its demise, and the rise of the Neoclassical school, was that Marx turned the Classical approach into a critique of capitalism itself (De Vroey 1975). Since then, the fact that Neoclassical economics supports wealthy interests, via its merit-based theory of income distribution, has played a major role in cementing the dominant position of Neoclassical economics. Well-funded ‘thinktanks’ promote its analysis of capitalism, so that its analysis of the economy dominates popular and political discourse on economics. This ideological role of Neoclassical economics means that it is defended vigorously, even when reality proves it to be wildly wrong about the nature of capitalism itself.
These same factors isolate those economists who refuse to ignore the empirical and theoretical failings of Neoclassical economics, and who form rival paradigms like Post Keynesian, Marxian, Austrian and Biophysical Economics. These academics survive as marginalized iconoclasts within the economics departments of leading universities (like Ha Joon Chang and Tony Lawson at Cambridge University), as leading academics in Departments of Business or Management rather than Economics (like Mariana Mazzucato at UCL’s Faculty of the Built Environment), or as lecturers in Economics in low-ranked universities that prominent Neoclassicals don’t want to work in (such as the University of Western Sydney in Australia, and Kingston University in the UK, where I was respectively a Professor and Head of School).
Given this dominance of the Neoclassical paradigm despite numerous crises, both empirical and logical (Keen 2011), and the co-existence of incompatible rival paradigms, the discipline sits in a state of perpetual, understated and unresolved crisis. Neoclassical economics evolves over time, in ways that its adherents believe are scientific revolutions, but it is never replaced in the way that obsolete paradigms are replaced in science. Rival paradigms develop as well, but never lead to the discredited Neoclassical paradigm being displaced.
Perhaps you’re thinking ‘But what about the Keynesian Revolution?’. Keynes certainly saw his work as constituting a clear break with the Neoclassical orthodoxy – which he described as ‘classical economics’:
I accuse the classical economic theory of being itself one of these pretty, polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future. (Keynes 1937, p. 215)
However, Keynes’s revolutionary ideas were snuffed out by John Hicks, in a paper that purported to reach a reconciliation between ‘Mr Keynes and the Classics’ (Hicks 1937) by developing what became known as the IS-LM model.7 Hicks interpreted Keynes as not revolutionary at all, but merely adding ‘the Economics of Depression’ to the existing Neoclassical toolkit:
With this revision, Mr. Keynes takes a big step back to Marshallian orthodoxy, and his theory becomes hard to distinguish from the revised and qualified Marshallian theories, which, as we have seen, are not new. Is there really any difference between them, or is the whole thing a sham fight? Let us have recourse to a diagram. (Hicks 1937, p. 153)
Though he presented his model as ‘a convenient synopsis of Keynesian theory’, and it was accepted as such by the majority of economists, Hicks later admitted that it was a Neoclassical, ‘general equilibrium’ model he had sketched out ‘before I wrote even the first of my papers on Keynes’ (Hicks
