What is wrong with modern economics, and why does it stay wrong?

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Lawson, T. (2017)
‘What Is Wrong With Modern Economics, and Why Does It Stay Wrong?’
Journal of Australian Political Economy
No. 80, pp. 26-42.
WHAT IS WRONG WITH MODERN
ECONOMICS, AND WHY DOES IT STAY
WRONG?
Tony Lawson
What is wrong with modern economics? The clear answer is that it is
mostly simply irrelevant. It has been becoming increasingly so for about
seventy to eighty years now. Its formulations, in the main, are patently
and repeatedly unrealistic, and so able to provide little or no explanatory
insight or understanding of the world in which we live. Human beings, in
the formulations of modern economists, are regularly endowed with
perfect foresight, rational expectations, omniscience, amazing powers of
calculation or ‘rationality’, rendered homogeneous, placed in scenarios
where just two commodities exist etc., etc. It is all really quite ludicrous
if the goal is social illumination.
Indeed the situation is so bad that failings of the discipline are openly
acknowledged not just by those that identify as heterodox, but also, at
least occasionally, by mainstream practitioners too, even including some
Nobel Memorial Prize winners in economics. Nor is this an especially
recent development. Thirty five years ago prize winner Wassily Leontief
lamented that the discipline had reached a point where ‘Page after page
of professional economic journals are filled with […] entirely arbitrary
assumptions [leading] to precisely stated but irrelevant theoretical
conclusions....’ (Leontief 1982:104), whilst 17 years later even Milton
Friedman criticised the discipline for no longer ‘dealing with real
economic problems’ (Friedman 1999:137), and Ronald Coase reported
that ‘Existing economics is a theoretical system which floats in the air
and which bears little relation to what happens in the real world’ (Coase
1999:2).

WHAT IS WRONG WITH MODERN ECONOMICS? 27
So what is the explanation? It is simply that modern economists persist
in insisting that a set of tools be everywhere adopted that are mostly
inadequate to social analysis, given the nature of social phenomena.
Specifically, modern economists rely on certain deductivist (defined
below) methods of mathematical modelling: this is more or less
compulsory for, and indeed defining of, the modern mainstream project
that dominates the discipline, but many heterodox economists are also
clearly enamoured. However, social reality is of a nature that the sorts of
mathematical tools regularly employed by economists (mainstream and
heterodox alike) are simply not up to the task of successful social
analysis.
To put the matter bluntly (the pun may be useful), it is like attempting to
cut the grass with a hammer or a piece of paper. The latter objects have
their uses, but mowing the lawn is not one of them. Methods of applied
mathematics of the sort economists wield have their uses, but
illuminating social reality is not one of them, or at best, is so only in
exceptional circumstances. I hope that it is clear that this explanation,
whether correct or not, reflects a stance that is not anti-mathematics but
anti a mismatch of tool and object -- and so, given the circumstances,
anti the abuse of mathematics.
Mathematical modelling methods of the deductivist sort that economists
use, to be relevant, presuppose the existence of closed systems, those in
which event regularities or correlations (whether actual, imagined,
deterministic or stochastic, simple or complex) occur. Deductivism just is
any form of explanation that relies upon such closed systems. For these
to be covered by theories, the entities posited in the latter must in effect
take the form of isolated atoms. By an atom I mean a causal factor that
has the same independent and invariable effect whatever the context.
The factors have to be isolated to prevent external factors affecting the
outcome and undermining and presumed correlation.
So the modern dominant emphasis on various methods of mathematical
modelling presupposes a ubiquity of closed systems of isolated atoms. It
is easy enough to show that social reality is in general not at all like this
(see, for example, Lawson 1997, 2003, 2015a). In brief, social reality is
not only open (explaining the failure of econometrics and other
modelling projects over the last 80 years), but highly internally related,
meaning that everything social, including our social identities and ways
of going on, are constituted in relation to everything else social

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(undermining the isolationist assumption of economic modelling).
Additionally, the phenomena of the social world are everywhere
continually undergoing processes of transformation (undermining the
assumption of atomism). Further still, social reality is also chacterised by
meaning and value; and the whole system revolves around processes of
social positioning whereby existing phenomena are incorporated as
components of emergent social totalities (see, for example, Lawson 2012,
2015b, 2016).
If the mathematical methods used presuppose a world of a nature other
than that which generally obtains, then the continuous reliance upon such
methods regardless necessitates that social reality must be regularly
distorted in theorising. Thus, assumptions like rationality, perfect
foresight, two commodity worlds and so on prevail not because anyone
thinks they are realistic. Rather, they adopted simply because they (or
other claims like them) conform to the specifications of closed systems
composed of isolated atoms. The result is more or less worthless if social
understanding is the goal, however well-meaning and skilful the
modeller1.
Notice too that the account advanced here is extraordinarily powerful in
terms of phenomena that it can explain. It can render intelligible the fact
that the discipline was explanatorily successful before the introduction of
mathematical methods but not after; the continuing failings of the
discipline both before and since the recent crisis (despite the numerous
[modelling] changes introduced as a response); the uniform failings of
the discipline across the board including within macro, micro and
econometrics, as well as ‘novel’ developments like neuro- and
1 Let X be a set of conclusions we suppose are true, or desirable to reach, or simply the
properties of a data set. We can easily generate, and that sense deductively ‘explain’, X just
by assuming ‘A’, and ‘A implies X’. Where modelling is involved the assumptions
required, as we have seen, are necessarily false. That is, if ‘A’, and ‘A implies X’ comprise
the set of mathematical model specifications, either or both will typically be false. In which
case what is the point? Certainly we cannot say that X is explained, or indeed that X
receives any support at all. After all, if we can use one set of unrealistic assumptions why
not any other? If, for example, X is a policy conclusion considered desirable by the
modeller, an opponent can just assume ‘B’, and ‘B implies not X’, (deriving not X). All
such lines of reasoning are on par in being worthless, adding nothing at all to understanding.
This can change only if we agree to employ claims that we believe (have grounds for
supposing) to be true. But then the claims employed will be about phenomena of the open
social system in which we live, and so methods of mathematical modelling will/must be
mostly cast aside.

WHAT IS WRONG WITH MODERN ECONOMICS? 29
behavioural economics; the use of traditional atomising assumptions
(such as claims of rationality) as well as the more recent (equally
atomising) importations from neuroscience, psychology and the like; and
so on.
So why does the dire situation of modern economics prevail? Why do we
not just change our methods? Specifically why do we not just make use
of ontology to tailor our methods to the nature of the stuff being
analysed, as they do in other disciplines (particle colliders constructed
according to conceptions of Higgs boson particles to test theories of
mass; telescopes designed to assess theories about distance phenomena,
and so on), and as indeed was common practice in economics itself prior
to about 70 or 80 years ago2. In particular, why do we not take the fact
of an open complex social reality seriously in method design? Achieving
the latter is certainly feasible3, and indeed we all do it successfully in our
day to day non-academic interactions.
This is where matters get more complex. Prima facie the possible
explanations could be any of various kinds including: (1) psychological;
2 As with any other successful discipline, it was once fairly standard to put ontological
reasoning up front. Keynes wrote his A Treatise on Probability to question if social reality
was of a nature that probability judgements (of various forms) were relevant to its analysis.
He concluded in the main that it was not, and later applied this ontological analysis to
demonstrating the inappropriateness of econometric methods. Arguably Karl Marx’s
Capital is a book that almost entirely on ontology. It is common place to recall that Marx
opens with a chapter on the commodity. But more than that he questions its nature. In
finding it to be characterised by both use value and exchange value, Marx moves to
studying the nature of value itself, and thereafter the nature of labour, labour-power and
money. Using the term metaphysics as a substitute for ontology Marx sums his initial
findings in section IV of the opening chapter on commodities as follows:
A commodity appears, at first sight, a very trivial thing and easily understood.
Its analysis shows that it is, in reality, a very strange thing, abounding in
metaphysical subtleties and theological niceties (Marx 1974:76).
Further, Veblen’s whole argument about evolutionary science and the place of institutions
is ontological, as is Hayek’s account of social order. Those mentioned, like most other
contributors of the time, drew out implications of ontological reasoning for social analysis.
It was with the turn to a heavy mathematical emphasis that this all changed. For, with the
onset of mathematical-modelling reductionism, there was no longer a perceived need for
questioning the nature of phenomena. Instead of using ontological insight to fashion
appropriate methods of analysis, the latter were determined a priori. This unhelpful way of
proceeding is the dominant practice of the discipline today.
3 For applications (and discussions) of methods (in particular of dialectical methods of
contrast explanation) that are appropriate for dealing with phenomena generated in open
systems see, for example, Lawson (2009); Morgan (2013); Morgan and Patomäki (2017).

30 JOURNAL OF AUSTRALIAN POLITICAL ECONOMY No 80
(2) political, including conspiratorial; (3) plain ignorance, error, or lack
of criticality; or (4) institutional.
No doubt all four types here identified have some bearing, and indeed
interconnect and mutually reinforce. Most critics seem to suppose that
the problems of the discipline are wholly political, and so focus almost
entirely on the second kind of explanation. This assessment and
response, I will suggest, is not only misguided but serves mostly to
reinforce the emphasis on mathematical modelling, by deflecting
attention from more relevant criticism. But let me say at least something
about each type of explanation, in the order they are listed.
Psychological explanations
It is often noted that many of us, especially those brought up gendered as
men, have a psychological disposition to overemphasise the possibility of
predictability and control. It seems that in many cases the recognising
and embracing of openness and contingency is scary. Julie Nelson
(2003), for example, defends a specifically ‘feminist critique of
economic methodology’, arguing along these lines:
The idea that the universe may be open, in some ways fundamentally
unpredictable, and intrinsically purposive – in contrast to being a
closed system, ultimately distillable into formulae, controllable, and
fundamentally indifferent – is not simply a reasonable alternative
ontology that can be carefully weighed for its logical implications and
neutrally evaluated for its relative merit. [….] The idea of an open
universe feels fundamentally scary for those who sense that not only
their status as scientists set above the objects they study, but also their
safety vis-à-vis chaos, their ‘manhood’ (whether actual, or, in the case
of female scientists, symbolic), and their very own distinct selfhood
are threatened unless they can keep the living, novel, relational aspects
of nature safely at bay (Nelson 2003:111).
In similar fashion, Vinca Bigo (2008) writes of fantasies of supremacy
and prediction as gendered coping mechanisms in the face of, and for
dealing with, an open social system 4, mechanisms traceable to infant
development, with experiences that vary according to gender assigned5.
4 Bigo writes: ‘Both coping mechanisms basically work by allowing the individual to feel
‘in control’. They serve to compensate for the loss of control that derives from the
recognition of, first, different others and, second, mortality. In the former case, the

WHAT IS WRONG WITH MODERN ECONOMICS? 31
But still the openness of social reality is always with us. If mainstream
economists, or economic modellers more generally, were to behave as
they do in the academy in everyday life (when crossing roads, planning
events, indeed making any decisions) it seems unlikely they would long
survive, let alone get by at all adequately with anything. However
important in society at large may be the mechanisms and processes that
Nelson and Bigo identify, the practices they bear upon and contribute to
explaining seem to intensify and become rather more bizarre as
individuals become positioned participants in the economics academy.
Something more must be going on as well.
Political, including conspiratorial, explanations
Amongst heterodox economists the main explanation of the irrelevant
and indeed often incredible assumptions of modern economics, or rather
of those deemed mainstream or ‘neoclassical’, is, as noted, that it is
mostly down to politics and, specifically, political conspiracy founded on
economic/political ideology. It is the assumptions that come first, or
matter the most, leading to poor models; the role of modelling itself
overlooked.
As the French heterodox economist Bernard Guerrien asks of the ‘totally
irrelevant’ mainstream: ‘how [is it that] such intelligent people can
propose – and endlessly study – such stupid models?’ (2004[2009]:160-
1). After describing the sorts of assumptions typically made in
mainstream modelling exercises (such as ‘perfect competition and an
‘omniscient’ ‘representative agent’), Guerrien asks ‘How can a normal
emergent fantasy entails demeaning different others, thereby rendering the differences
somehow less threatening. In the latter case, the fantasy entails treating the future as open to
manipulation, thereby rendering our mortality somehow less real. The puzzle of modern
economics with which I started, as I say, can clearly be seen as a particular manifestation of
the fantasies in question. First, the emphasis of mainstream practitioners on the
unquestionable superiority of their methods, and (so) output, over any heterodox alternative
is a particular example of the fantasy of supremacy. Second, the emphasis on formalistic
economic modelling, is a playing out of the fantasy of prediction’ (Bigo 2008:543).
5 Bigo adds: ‘In summary, […] I show that certain puzzling features of the practices of
modern mainstream economists are forms of fantasies encountered in certain practices in
society at large [being…] manifestations of mechanisms of defence against (real or
perceived) separation anxiety [traceable …] back to infant development and identity
formation, in so far as they constitute a ‘blueprint’ for dealing with differences and
uncertainty later on in life’ (Bigo 2008:550).

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person make any sense of this?’ (ibid:161). Guerrien plumps for the
following answer: ‘I only see one reason for that: ideology (intuitive
beliefs which render them blind)’.
But economic or political ideology is not the explanation. Most
mainstream economists, in my experience, do not think about the way
they proceed: they are more sheep than conspirators. Few understand
terms like neo-liberal, or neo-classical or care what they mean. And the
small band amongst them that do think at all critically are well
represented by the likes of Frank Hahn who warns against a blind focus
on conceptions like equilibrium states just because such a focus ‘is easily
convertible into an apologia for existing economic arrangements’
(1970:88-9). Indeed, despite being an equilibrium theorist himself, Hahn
worries that ‘there is something scandalous in the spectacle of so many
people refining the analyses of economic [equilibrium] states which they
give no reason to suppose will ever, or have ever, come about’ (1970:88-
9).6.
In effect, rather than knowingly leading the way (say, in promoting a
market based society oriented to accumulation) mainstream economists
are better described as lost, as not even knowing where any paths they
are on in fact will lead; they really do not know what they are doing. As
Ariel Rubinstein, himself a mainstream ‘theorist’ put it in a speech to
honour the award of the Noble Memorial Prize to the game theorist John
Nash:
The issue of interpreting economic theory is [...] the most serious
problem now facing economic theorists. The feeling among many of
us can be summarized as follows. Economic theory should deal with
the real world. It is not a branch of abstract mathematics even though
it utilises mathematical tools. Since it is about the real world, people
expect the theory to prove useful in achieving practical goals. But
economic theory has not delivered the goods. Predictions from
economic theory are not nearly as accurate as those by the natural
sciences, and the link between economic theory and practical
problems [...] is tenuous at best. Economic theory lacks a consensus as
to its purpose and interpretation. Again and again, we find ourselves
asking the question ‘where does it lead?’ (Rubinstein 1995:12).
6 Elsewhere, Hahn reveals in rather dramatic fashion what he feels should happen if people
contemplate using such models for policy: ‘When policy conclusions are drawn from such
models, it is time to reach for one's gun’ (Hahn 1982: 29).

WHAT IS WRONG WITH MODERN ECONOMICS? 33
Numerous heterodox economists, however, suppose the situation to be
otherwise. Many even distinguish themselves as heterodox not by
reducing their emphasis on mathematical modelling, but according to the
sorts of policy conclusions (for example anti-austerity) they profess to
support with their modelling. In so doing, of course, they are most of the
time simply reproducing the typical mistakes made by most other
modellers; their results, if left-leaning, or ‘alternative’, are mostly just as
irrelevant because of the manner in which they are produced.
By here suggesting that mainstream economics are not in the main
politically motivated, that economic/political ideology does not explain
their choice of modelling activities, I do not deny that the mathematical
deductivist project has received political support qua a mathematical
project. But this has rarely been achieved as a result of any intentional
design by modellers themselves; usually it is but a fortuitous contingent
happening akin to the evolutionary environmental selection of some
population trait that is in no way laudable, but merely well suited to
developments in context. Essentially, the project receives support (where
it does) because it is irrelevant.
An example is the impact on the discipline of economics of the
McCarthyite witch-hunts in the US the face of the Cold War, following
the Second World War. The group most feared and mistrusted by the
McCarthyites were the intellectuals (Reinert 2000). Under the conditions
of the witch-hunts, the nature of the output of economics faculties -
traditionally a form of political economy, a field that attracted those who
sought a more humane system than capitalism - became a particularly
sensitive matter. In such a scenario, administrators of economic research
found the project of mathematising the discipline to be especially
attractive in that it carried scientific pretensions whilst being significantly
devoid of any necessary empirical content or basis for critical reflection.
These features rendered acts of supporting the project extremely
convenient, not just to insecure or fearful university officers but also to
the funding agencies of US social scientific research (who were
especially important in this period – see for example, Coats 1992;
Goodwin 1998; Yonay 1998). Clearly, by allocating funding to the
mathematising economics project there was little risk to these bodies of
being accused of supporting those who wanted to transform the
economic system; for by everyone’s account the mathematising project
had little obvious bearing on social reality (on all this see especially
Lawson 2003, chapter 10; also Lawson 2015a).

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Such cases, however, if interesting, do not allow us to understand either
why so many were already pursuing mathematical economics – allowing
others the opportunity to financially support it – or why the dominance of
the project still persists despite around 70 years of fairly unmitigated
failure at providing insight. Even less do they account for the current
popularity of these practices amongst many of those who identify as
heterodox. If such developments allow us to understand how economics
arrived at its current state (for a fuller account see Lawson 2003: ch. 10)
they do not explain why it survives, and does so almost unchallenged.
Lack of philosophical nous and criticality
The more immediate explanation of this ongoing situation, I suggest, is
that the sort of factors just summarised have conspired to bring about a
scenario or culture wherein modern economists, including those who
identify as heterodox, are, with some notable exceptions, just unable, or
find it difficult and overly laborious, to think outside the modelling box.
They are methodologically blinkered, and unable or unwilling to
question the presuppositions of the dominant generation. Behind it all,
perhaps, is a widespread and understandable, if ultimately erroneous (see
Lawson 1997, 2003 2015a) notion that mathematics of some form is
essential to science, coupled with the desire to be scientific. In any case,
the practices in question go largely uncriticised. Mostly, as noted, the
heterodox label for modelling is ‘justified’ by the sorts of results reached
being interpreted as radical or progressive. As a result, most of the
critical focus taken within heterodoxy is on the sorts of conclusions or
assumptions that mainstream modellers choose to defend. This critical
focus is again understandable. Nevertheless, making this the only or the
primary one is a major obstacle to going forward. Nearly 100 years ago,
Alfred North Whitehead warned of the dangers of directing attention
primarily to the most apparent and contested, rather than seeking to
uncover the taken-for-granted:
When you are criticising the philosophy of an epoch do not chiefly
direct your attention to those intellectual positions which its exponents
feel it necessary explicitly to defend. There will be some fundamental
assumptions which adherents of all the variant systems within the
epoch unconsciously presuppose. Such assumptions appear so
obvious that people do not know what they are assuming because no
other way of putting things has ever occurred to them. With these

WHAT IS WRONG WITH MODERN ECONOMICS? 35
assumptions a certain limited number of types of philosophic systems
are possible, and this group of systems constitutes the philosophy of
the epoch (Alfred North Whitehead 1926: 61).
More than a quarter of a century even before Whitehead’s observations,
Thorstein Veblen coined the term neo-classical precisely to capture those
economists who were making this sort of mistake (see Lawson 2013).
More precisely, Veblen used the term for those that were being somewhat
astute in recognising, at least in a very general manner, significant
advances at the level of ontology, but who failed to question adequately
the (ontological) presuppositions of their own methods, and in so failing
in this way, persevered with methods inconsistent with explicit
ontological assessments.
In Veblen’s terms, the sort of social ontology that I have defended as
realistic is referred to under the head of (evolutionary) processes of
cumulative causation (grounding an evolutionary science of economics),
whilst the emphasis on correlation analysis or pattern prediction is
termed taxonomic. As I say, it is for the inconsistent attempt to maintain
both that Veblen introduced the label neo-classical (use of the latter
methods being regarded as classical and adherence to the former more
realistic ontology warranting the suffix neo).7
Interestingly, Veblen sought to illustrate the sort of inconsistent practices
he had in mind using the examples of Alfred Marshall and John Neville
Keynes (Maynard Keynes’ father). Neither were philosophical slouches,
and such examples indicate that methodological presuppositions can
linger even in the best of contributors. The central taken-for-granted
presupposition which these two failed fully to challenge was that results
should take the form of correlations or uniformities or event associations,
i.e., that analysis is taxonomic:
There is a curious reminiscence of the perfect taxonomic day in Mr.
Keynes’s characterisation of political economy as a ‘positive science,’
the sole province of which is to establish economic uniformities; and
in this resort to the associationist expedient of defining a natural law
as a ‘uniformity,’ Mr. Keynes is also borne out by Professor Marshall
(Veblen 1900: 265).
The evolutionary-ontological view of cumulative causation that Veblen
defends was perceived as relatively new at the time, and (so) Veblen was
relatively restrained in his criticism. Instead of accusing the likes of
7 On all this see Lawson (2013).

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Marshall of being hopelessly incoherent, Veblen allows that as yet such
contributors had just not found a way to render method consistent with
social ontological insights which, at a general level, they embraced.
Specifically neoclassical economists had yet to develop methods of
analysis appropriate to evolutionary preconceptions. As Veblen puts it:
All this gives an air of evolutionism to the work. Indeed, the work of
the neo-classical economics might be compared, probably without
offending any of its adepts, with that of the early generation of
Darwinians, though such a comparison might somewhat shrewdly
have to avoid any but superficial features. Economists of the present
day are commonly evolutionists, in a general way. They commonly
accept, as other men do, the general results of the evolutionary
speculation in those directions in which the evolutionary method has
made its way. But the habit of handling by evolutionist methods the
facts with which their own science is concerned has made its way
among the economists to but a very uncertain degree. The prime
postulate of evolutionary science, the preconception constantly
underlying the inquiry, is the notion of a cumulative causal sequence;
and writers on economics are in the habit of recognising that the
phenomena with which they are occupied are subject to such a law of
development. Expressions of assent to this proposition abound. But
the economists have not worked out or hit upon a method by which
the inquiry in economics may consistently be conducted under the
guidance of this postulate (Veblen 1900: 265-66) .
There is clearly a good deal of irony here for modern heterodoxy,
especially for some of those that style themselves institutionalist in the
Veblenian mould. For many openly (and without apparent restraint) use
the term ‘neoclassical economics’ as a term of abuse or derision for
others. Yet they themselves express realistic visions of an open social
system of cumulative causation in a general fairly loose fashion, whilst
seeking to provide insight into it using (mathematical) methods that
presuppose it is closed. This is precisely the combination for which
Veblen coined the term neoclassical.
More than a century has passed since Veblen wrote, allowing sufficient
opportunity for the methodological and other implications of this
ontology to be fully recognised, and the nature of his neoclassical
critique of Marshall and others appreciated. Moreover, in the intervening
period, many others, including Keynes, have been explicit in criticising
(mathematical deductivist) methods that rely upon event correlations, on

WHAT IS WRONG WITH MODERN ECONOMICS? 37
similar ontological grounds. Thus, on various occasions, Keynes warns
that:
If we are dealing with the action of numerically measurable,
independent forces, adequately analysed so that we were dealing with
independent atomic factors and between them completely
comprehensive, acting with fluctuating relative strength on material
constant and homogeneous through time, we might be able to use the
method of multiple correlation with some confidence for disentangling
the laws of their action . . . . In fact we know that every one of these
conditions is far from being satisfied by the economic material under
investigation (Keynes 1973: 285-6).
And yet many post-Keynesian modellers, like original (Veblenian)
institutionalist counterparts, continue in a way that is not merely
internally inconsistent in the manner Veblen termed neo-classical and
explicitly rejected by Keynes, but is sometimes even presented as
advancing in the spirit of their figureheads.
The ‘justification’ offered for their practices, to repeat, is merely the
claim that results achieved can be interpreted as somehow alternative or
radical. Clearly, this is inadequate. The reason for it can only be that
these modellers do not fully grasp the nature of their errors, that they fail
to consider the deeper issues involved in a sufficiently serious or critical
fashion. After all, many explicitly identify as heterodox and set
themselves up as opposing the mainstream. So they are presumably not
seeking mainstream accolades. And yet, in their modelling endeavour,
they are very often no more relevant than the mainstream or
‘neoclassicals’ that they criticise.
Institutional explanation
Why do the criticisms made not run deeper? As already touched upon in
passing, I can only think it is a failure of the system, a result of
institutional conditioning. Most modern economists, whether mainstream
or heterodox, are educated in departments where philosophy is no longer
on the agenda. Criticism everywhere is couched in terms only of
contrasting substantive theories developed and policy implications
drawn, not in terms of methods or orientations that can be justified.
Ontology of an explicit and systematic sort, in particular, is mostly
absent. Although the discipline has been an explanatory failure over the
last sixty years or so, it has successfully fostered a culture wherein the

38 JOURNAL OF AUSTRALIAN POLITICAL ECONOMY No 80
necessity of using methods of mathematical modelling in most instances
has become part of the background common sense, accepted by critics as
much as proponents of substantives positions developed. A
methodological ideology thus prevails in much of the modern economics
academy whereupon a reliance upon mathematical methods is the proper
way to proceed. In fact, some heterodox economists, just like their
mainstream counterparts, have come to accept, as an unexamined
presupposition, that contributions that are not mathematical are not
serious, scientific or other than woolly. The result, then, is a falling away
of criticality precisely where currently it matters most.
At the same time, the inevitable failure of the project to illuminate entails
that a good deal of dissent and advocacy of change of some sort regularly
emerges. Currently, in the wake of the recent economic crisis, this is
significant. Much of this is led by the students, especially through the
rethinking economics movement. And they are being heard. But even
here there is insufficient analysis of where the problems lie. In
particular, sympathetic academic economists coming to aid this
movement are mostly, if unwittingly, offering more of the same.
The Institute for New Economic Thinking (INET) sponsored by George
Soros also supports the rethinking economics students, especially
financially. But although INET no doubt sponsors a few projects that do
avoid the noted problems, in the main, and despite Soros’ own best
intentions (see Lawson 2015a, chapter 9), the enterprise mostly seeks to
promote endeavour that focuses on revising model assumptions, applying
novel types of mathematical (deductivist) models, or developing
alternative approaches to model estimation, etc., and mostly it fails to
address the discipline’s more fundamental problems. It risks constituting
an enormous waste of resources and opportunity.
In the light of all this, it is perhaps unsurprising that a glance at the
students’ own programmes for ‘rethinking economics’ conferences and
workshops reveals that a similar imbalance tends to be reproduced. If
philosophical contributions appear at all, they are usually marginalised,
being placed in sessions within multiple ‘parallel streams’, while the
plenaries are mostly reserved for supporters of ‘alternative’ economic
theories and policies, almost always supported by the results of economic
modelling.
The outcome, then, is that, despite widespread dissatisfaction with the
state of the modern academic discipline, the real source of its major

WHAT IS WRONG WITH MODERN ECONOMICS? 39
problems remains almost unchallenged, as any critical attention is mostly
given to presenting theories and policies, derived by modellers, that are
interpreted as more radical in nature. And so the irrelevance of modern
economics continues.
The way forward
So what is to be done? Clearly we need to go beyond an unreflective
claiming or attribution of labels like heterodox or neoclassical. In
particular, is not sufficient merely to establish departments of economics
where courses taught are labelled heterodox (or anti-neoclassical) but
which focus merely on substantive theories and policies. Despite the best
of intentions of those involved, the latter can all too easily degenerate
into courses where mathematical modelling exercises remain overly
emphasised, if given radical-sounding interpretations. It is not
uncommon to find teachers even arguing that it is a duty to ensure that
modelling methods dominate curricula, or assessing ‘stronger’ students in
terms of modelling abilities. This is a particular concern if such courses
end up diverting those students attracted because brave enough to seek to
prioritise relevance as much as career.
The solution can come only through the inclusion, and indeed
prioritisation, of courses that are overtly philosophical in nature and
encouraging of critical thinking. I do not see how ontology can be
reasonably excluded. This assessment may sound dogmatic. But it is no
more than a recognition that researchers cannot hope to get anywhere
worthwhile without explicit consideration of the nature of the subject-
matter with which they intend to work. Although I hold to a particular
set of ontological conceptions, defending the latter is not my primary
goal here. All claims, including ontological ones, are fallible. The
essential point is simply that a return to critical, philosophically,
including ontologically, informed thinking, as a systematic and sustained
programme, is vital if economics is to regain relevance. Ontology, as a
form of study, needs to be reclaimed.
Heterodox economists ought not to be resisting this assessment. Most
and perhaps all the figureheads of the modern heterodox traditions, for
example Marx, Veblen, Keynes, and Hayek, engaged explicitly and in a
sustained fashion in philosophy and specifically ontology (albeit if often
calling it metaphysics).

40 JOURNAL OF AUSTRALIAN POLITICAL ECONOMY No 80
Further, most heterodox economists seemingly embrace the idea of
pluralism. The need for pluralism, however, applies not just at the level
of substantive theorising and policy formulation, but also at the level of
method, with informed choices necessitating philosophical reflection and
analysis. As I have often repeated, there is no need to exclude methods of
mathematical modelling from the tool box; but there are many other
methods and approaches that can be fruitfully (and with greater reason)
included. A reliance upon any warrants explanation.
No doubt it is the case that those who teach/research social ontology
explicitly are currently thin on the ground. But in truth we all are
ontologists in our daily practices; we all regularly successfully navigate
the social world.8 All that is required is an allocation of intellectual
space within the academy to open critical thinking about the nature of
phenomena that we deal with on a daily basis; with time allocated to
determining how to make our academic practices relevant to them. What
specifically is the nature of money, the corporation, care, technology,
gender, the market, value, capital, capitalism, the economy, human
nature, social community, social relations, power, rights, obligations,
norms, trust, and so on? We deal with these sorts of phenomena all the
time, so we are already familiar with our subject-matter under some
description. Addressing them in an explicit, systematic and non-
superficial fashion, allows for methods appropriate to their analysis to be
easily recognised.
Ontology, explicitly conceived, is equally relevant to projects of
progressive change. Only if we include the systematic study of human
nature and the possibilities for human flourishing (along with the
flourishing of other beings), as well as the nature of social reality and the
possibilities for its competent social (emancipatory) transformation, will
the discipline be appropriately placed to contribute to making the world a
better place (on all this, see Lawson 2015c).
There is a good deal wrong with modern economics. There is much to be
done to remedy matters at all levels of analysis. But little can improve at
any level until we discard the widely-worn methodological blinkers
which encourage the view that mathematical modelling is everywhere
8 Ontology is ever present; the only issue of choice is whether to leave our presuppositions
about the nature of social reality implicit and unexamined, or to do ontology in an explicit,
systematic, sustained, and thereby more coherent, fashion.

WHAT IS WRONG WITH MODERN ECONOMICS? 41
automatically relevant, even essential, so that paying explicit attention to
matters of ontology is unnecessary.
Tony Lawson is Professor of Economics at Cambridge University.
He is grateful for helpful feedback on an earlier draft from three referees
for this journal.
Tony.lawson@econ.cam.ac.uk
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