by What Skidelsky and other critics of mainstream economics (both in its micro and macro parts) fail to recognise is that no new big idea willappear because mainstream economics is a deliberate result of the need to avoid considering the reality of capitalism. Its theories are ideological justifications of capitalism( its supposed tendency to harmonious growth, equilibrium and equality). When reality does not bear out the mainstream, it is ignored. That’s because ‘mainstream’ means support for the existing dominant ideology. ‘Political economy’ started as an analysis of the nature of capitalism on an ‘objective’ basis by the great classical economists Adam Smith, David Ricardo, James Mill and others. But once capitalism became the dominant mode of production in the major economies and it
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What Skidelsky and other critics of mainstream economics (both in its micro and macro parts) fail to recognise is that no new big idea willappear because mainstream economics is a deliberate result of the need to avoid considering the reality of capitalism. Its theories are ideological justifications of capitalism( its supposed tendency to harmonious growth, equilibrium and equality). When reality does not bear out the mainstream, it is ignored. That’s because ‘mainstream’ means support for the existing dominant ideology.
‘Political economy’ started as an analysis of the nature of capitalism on an ‘objective’ basis by the great classical economists Adam Smith, David Ricardo, James Mill and others. But once capitalism became the dominant mode of production in the major economies and it became clear that capitalism was another form of the exploitation of labour (this time by capital), then economics quickly moved to deny that reality. Instead, mainstream economics became an apologia for capitalism, with general equilibrium replacing real competition; marginal utility replacing the labour theory of value and Say’s law replacing crises.
Even the so-called Keynesian revolution that came out of the experience of the Great Depression was hardly ever applied and was soon dumped when capitalism faced renewed crisis in the 1970s. The Keynesians are now either advocates of theory that is ‘good enough’ or critics with no ‘big new idea’.The new "big idea" needs to be a framework for generating competing theories. Rationality based on microfoundations and general equilibrium assuming full employment isn't it. Now the question is what the next iteration is.
That would require admitting the nature of contemporary financial and managerial capitalism, for one thing, and, more specifically, the role of power in rent extraction, which the "mainstream" is so far unwilling to do.
This would involve integrating economics and finance, rather than treating them as separate and unrelated disciplines owing to the erroneous assumption of money neutrality. As a consequence, this would necessitate operational analysis of monetary regimes based on the difference between currency issuer and currency users.
I would envision the new big idea being a fusion of Post Keynesianism and Institutionalism as MMT has done, along with Marxian economics based on class power.
Michael Roberts Blog
The macro: what’s the big idea?
Michael Roberts