Phil Armstrong
Published online 26th December 2018
Abstract
Orthodox or neo-classical economics failed to predict the global financial crisis (GFC) or even allow for the possibility of such an event occurring. For optimistic heterodox economists the aftermath of the GFC seemed to provide the opportunity to overthrow the hegemonic mainstream paradigm and replace it with a superior alternative; one which provided both better explanations of the operations of a monetary production economy in general and deep insights leading to an understanding of why the GFC might have arisen. However, from the perspective of heterodoxy, this hope proved to be a false dawn; after a brief period of apparent soul-searching, mainstream economists regained their confidence and the paradigm seemed to regain its ascendency, albeit in a slightly modified form. First, this paper examines the methodology employed by mainstream economists and their attitude to academic freedom in order to establish the reasons behind this outcome. Second, it considers the applicability of critical realism both to the study of economics and to the behaviour of the economics profession itself. Following on from this, the paper goes on to look at the possibility of constructing a heterodox paradigm, explicitly based upon critical realism, which might have the potential to replace current orthodoxy. The nature of such a paradigm and the potential role for Modern Monetary Theory as a key contributor are evaluated and followed by a consideration of the ways to enhance a new approach’s chances of acceptance.
Key terms: paradigm, pluralism, critical realism, heterodox economics, Modern Monetary Theory