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Outlining research programmes in economics,

a first step(a history of men –and women!– in white)

Bruno Tinel

Biodiversity, agriculture and environmental justice: a meeting to discuss and debate issues in interdisciplinary research

Interdisciplinary Workshop2nd, 5-6th November 2007

EERU, University of the Western Cape

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• 1. Reminder about RP

• 2. Different approaches in economics

• 3. The RP of neoclassical economics

• 4. The french school’s theory of regulation

• 5. Main features of the differentiation

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1. Reminder: what is a research programme (Lakatos) ?

• Appraising historically the growth of scientific knowledge “in terms of progressive and degenerating problemshifts in series of scientific theories”

→ A RP embodies not one but several theories (with a continuity between them)

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• A RP is made of methodological rules formulated as ‘metaphysical principles’.

• A RP combines different elements:

• 1. The ‘hard core’ of the programme:Irrefutable hypotheses = ‘negative heuristic’ that

tells us what path of research to avoid.

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• 2. The protective belt is made of ‘positive heuristic’, it tells us what path to pursue and “consists of a partially articulated set of suggestions (…) on how to change, develop the ‘refutable variants’ of the research-programme, how to modify, sophisticate, the ‘refutable’ protective belt”

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• → chain of ever more complicated models simulating reality and dealing with anomalies and counterexamples.It is made of :– ad hoc hypotheses,

– hypotheses to be tested, designed to expand the world of explainable facts.

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•♪

•♫• (transition)

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2. Different approaches in economics

• Economics counts different approaches expressed explicitly as such. We usually present them to under graduate students by naming the four founding traditions: classics, marxists, neoclassics and keynesian.

• Nowadays, these approaches still exist but they have more or less changed.

• => for each one of them, it is worth to trying to distinguish what still remains of what has disappeared; this historical method is a good way to clarify the different types of hypotheses. As time passes, it helps to define more accurately the hard core hypotheses which are common to all sub-theories belonging to the same research programme.

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• This method is interesting because it allows to take into account important facts which are maybe also true for others disciplines than only economics:

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• For the last fifty years, hybridizations have occurred between the different approaches with more or less success

• → new RP or extension of protective belt?• Hegemony and imperialism: one RP tends to dominate more and

more the institutional devices of reproduction in the discipline (top reviews, recruitments, research financing…)

• → fading away others RP because of internal degeneration or because of institutional obstacles?

• Some RP have widely developed and thus fragmented• → a RP is not made of a single stock, it can rather be considered as

a proliferating tree.

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• The following picture which some of us have already seen gives an illustration (it is not comprehensive) of some theories composing the main RP in economics.

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Concurrence parfaite (Arrow Debreu)

Individualisme Méthodologique Holisme Methodologique

Théorie des contrats (Coase)

Néo-institutionnalisme (Williamson, North)

Keynes

Post-keynésianisme(Robinson, Kaldor, Kalecki) Régulationnisme

(Boyer, Aglietta)

Evolutionnistes(Nelson, Winter, Dosi)

Conventionnalistes (Favreau, Orléans, Salais)

Théorie des jeux (Nash, Von Neumann, Morgenstern)

Synthèse néoclassique (Samuelson)

Macro à fondements micro-Modèle de Solow-Cycles Réels (Kydland, Prescott) -Croissance Endogène (Barro, Lucas, Romer)

Classiques (Smith, Ricardo)

Marx

Structuralisme(Furtado,Gunder Frank)

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An example of two competing RP: the level of employment (i.e. of labor demand

emanating from employers)• Neoclassical theory: labor demand is a

decreasing function of real wage• → labor policy have to deal with labor market’s

functioning.

• Keynesian theory: labor demand is an increasing function of expected demand in goods and services (i.e. growth of activity)

• → labor policy have to deal with growth improving and agregate demand.

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Differences between RP can lead to drastically opposite policy prescriptions (this political aspect of economics explains largely –but not exclusively– the institutional difficulties of some RP).

• In this case we have two competing RP but it is not straightforward as complementarity is also possible.

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• Let’s try to understand more in details the differences between RP in economics by focusing on hypotheses about human behaviour in neoclassical economics and in regulation theory.

• Everybody should keep in mind that what follows is extremely simplified in order to facilitate inter-disciplinary understanding and discussion.

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3. The RP of neoclassical economics

• At first, neoclassical economics built itself around the notions of perfect competition and of general equilibrium.

• Problematics : under the hypotheses of perfect competition, does a price vector that equals all individual supplies and demands exist?

• Methodological individualism: the whole (the society) is deduced from the interactions of the parties (the individuals) which are defined independently from the social and historical context. The theory is the same for either the micro or the macro levels.

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• => Crucial hypotheses about• → individuals• → institutional framework : the way by which

individuals interact.

• Tools: differential calculus (derivative and optimization) which supposes that the functions in use satisfy specific mathematical properties (continuity…); those properties are themselves both mathematical and economical hypotheses.

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• Individuals:• The consumer is represented by a utility function

and his initial endowment;• The producer is represented by a production

function.

• Each agent is an autonomous self interested decision center: no discussion, only price watching.

• Behaviour: each agent maximizes utility or profit under budget or technological constraint (perfect or substantial rationality) => no psychology, no habits, no social rules, no power relations...

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• Under those restrictive hypothesis (and many others) there exist a general equilibrium, i.e. a vector of prices that equals all quantities supplied and demanded for each good;

• This equilibrium is Pareto optimal (it is not possible to improve the situation of one individual without damage for at least one other agent).

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Neoclassical RP1:perfect competition

Hard Core

Utility and production functions

Optimization

Pareto optimality

Methodological individualism

Rational choice

…

Ad hoc hypothesis

Price taker agents

No exchange out of equilibrium

Substitutability

Perfect information

Perfect rationality

No externality

…

Hypotheses to be tested

Objective: measure and reduce (by normative prescriptions) the gap between second best and first best.

Imperfect competition:

-Indivisibilities

-Price making agents

Irrationality:

-Laws

-Social norms

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• A new period has opened these past forty years for the neoclassical RP, leading thus to what can by called the “neoclassical RP2”.

• Roughly, the objective is to analyse everything in the social life with the same rational choice methodology by making “endogenous” more and more exogenous variables and by “relaxing” all the constraining hypotheses of the perfect competition model.

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• → Imperialistic RP both inside economics and inside social science, see Ben Fine.

• → Explosion of partial and singular models each one treating of many different aspects of social life.

• → There is less and less a general framework unifying this RP; only the method consisting in applying the rational choice to everything remains common to all neoclassical studies and even the term “neoclassical” is disappearing. They only call their method “economics” which testify to the hegemony of this RP.

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Neoclassical RP2:market failures

Hard Core

Utility and production functions

Optimization

Pareto optimality

Methodological individualism

Rational choice

…

Ad hoc hypothesis

Price taker/price maker agents

Partial equilibrium

Substitutability

Complementarities

imperfect information

strategic rationality

Externalities

…

Hypotheses to be tested

Objective: ranking equilibriums, reaching the second best.

Incentives and contracts

Role of extra price factors on exchanges

Endogenous preferences

Neoinstitutionalism: institutions, organizations

Social norms, laws, habits, power relations, identity…

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• The lists of ad hoc hypotheses and hypotheses to be tested are always growing !

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4. The french school’s theory of regulation

• “Regulation” refer to the mechanisms by which the economic system is able to reproduce itself given the existing economic structures and social forms.

• History matters: regulation theory (RT) defines and characterises different periods in the evolution of capitalist economies.

Why doesn’t capitalism collapse despite the numerous crisis it experiences periodically?

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• Behaviour of agents: rejection of a general principle of rationality.

• - Rationality results from social relations and economic structures; it varies with context.

• - Regularities of behaviour and rules are coherent; they contribute to shape individual and collective choices.

• => Taking seriously studies in anthropology leads to recognize the relativity of the rationality concept, which can’t be reduced to the neoclassical Homo œconomicus.

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The Regulation theory is clearly non imperialistic both inside and outside economics because it insists on discontinuities

between theories (for instance: micro and macro can’t be dealt with the same model)

and between disciplines (learning from other social sciences instead of teaching them what they should do).

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Regulation theory RPHard CoreMethodological holism

Accumulation regime

Regulation mode

Institutional forms (labour relations, competition, international relations, monetary constraints, state and public interventions)

Hierarchy of institutions

Using both history and macro models, econometrics.

Ad hoc hypothesisIndivisibilities and discontinuities

Path dependence and hysteresis

Class struggle (?)

Fordism: wages and labour productivity increase at the same rate, high level of investment, collective negotiation, plenty of capital: low real interest rates (expensive monetary policy), financial asset markets subordinated to bank intermediation, public deficit spending…

Hypotheses to be testedUS economic and social history: fordism

Fordism in Europe and in Japan

Crisis of fordism

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5. Comparing the two views

• In the neoclassical model, individuals are taken independently the one from the others; their rules of behaviour are genetically programmed.

• The “choice” under constraints is mechanical, there is in fact no deliberation and thus no freedom of individuals.

• Contrary to the regulation framework, individuals are not influenced by history or social interactions.

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• No hesitation, no feelings, no politics: calculus but no cleverness

• (and no humanity:• if someone is charitable he only maximizes his utility

function (he likes to be generous);• if someone kills his neighbour and goes in jail he only

maximizes his utility function, i.e. he showed that for him the disutility of his neighbour was larger than the disutility of jail, he has only a particular utility function).

Everything (and its reverse) can be “explained” ex post with this method.

Which science can “explain” everything?!

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• More generally, the central tools involved by neoclassical rational choice theory, which are optimization and differential calculus, imply that everything (agents, goods, skills…) is supposed to be more or less substitutable or subject to arbitration (fongibilité, PL).

• On the contrary, the regulation school supposes that interactions, discontinuities, complementarities and cumulative effects are essential: factor alterity (altérité des facteurs, CL).

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Exercise

• The Agricultural Research Council (ARC) made the following hypothesis : “technology is not scale dependent and not culture dependent”.

• To which RP does it belong? Justify your response.

• Which alternative hypothesis could be made on this same subject?

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to be continued…