Current situation >> Definitions and explanations
As the concepts used to describe economic sciences are open to multiple interpretations and often closely related to each other, it is worthwhile to further define the concepts used in this research project. This page describes how we separate concepts that seem closely related to each other, and how we define two core concepts. First, the hierarchy discipline, approach, sub-branch, model, and second, the approach known as neoclassical economics.
What is the difference between a discipline, an approach, a sub-branch and a model?
Within the social sciences, a discipline is a branch of science that can be separated from other disciplines by (1) the characteristics of the societal system it studies, or (2) the field in society it studies. E.g. sociology, economics and political science.
Within a discipline, there are theoretical approaches. These are distinct analytical frameworks consisting of specific concepts, assumptions and reasoning that are used to describe and/or understand various elements of societal systems. Approaches are thus distinguishable from each other in their analytical framework. E.g. Austrian economics, feminist economics and neoclassical economics.
Within a theoretical approach, there are sub-branches. Sub-branches are a set of ideas that are very similar and thus a specific version of a theoretical approach. The different sub-branches within an approach can thus be in opposition to each other. For example the sub-branches new classical macroeconomics and new Keynesian economics, both part of neoclassical economics, have since their existence been in debate with each other. Neoclassical economics thus consists of many sub-branches. Others are environmental economics, general equilibrium theory, monetarism, neo-Keynesian economics and new institutional economics.
Of course, neoclassical economics is not the only theoretical approach that entails different sub-branches. Post-Keynesian economics, for instance, consists of the sub-branches Cambridge Keynesians, early North American post Keynesians, fundamentalist/financial Keynesians, Kaldorians, Kaleckians, modern monetary theory and Sraffians/neo-Ricardians. Similar lists could be drawn up for each of the approaches we distinguish in this study.
Within a sub-branch, there are models. Models describe particular relationships between concepts and phenomena. Within a theoretical approach, two models can thus give a (slightly) different explanation of the same phenomena, even though the models are based on the same framework. E.g. the Solow–Swan and Ramsey–Cass–Koopmans model explain economic growth (slightly) differently, while they are both part of neoclassical growth theory.
Here are some more details on how we define all these approaches in this report.
What are Neoclassical economics and mainstream economics?
Neoclassical economics is one of the theoretical economic approaches distinguished in this report. Among its core axioms are methodological individualism, in a world populated by rational and selfish actors (people and companies), whose decisions are solely motivated by expected utility maximization based on their given and stable preferences. Mathematically deduced from these assumptions about individuals, an analysis of markets arises. These markets work mainly through price mechanisms; their efficiency as well as their potential failures are analysed. This appendix and J. Morgan (2015) contain a more extensive discussion of neoclassical economics.
This report explicitly differentiates between neoclassical economics and mainstream economics. We follow Colander, Holt, and Rosser (2004b, p. 5) in seeing mainstream economics as a sociological category, not a coherent body of thought:
“It is in large part a sociologically defined category. Mainstream consists of the ideas that are held by those individuals who are dominant in the leading academic institutions, organizations, and journals at any given time, especially the leading graduate research institutions. Mainstream economics consists of the ideas that the elite in the profession finds acceptable, where by elite we mean the leading economists in the top graduate schools. It is not a term describing a historically determined school, but is instead a term describing the beliefs that are seen by the top schools and institutions in the profession as intellectually sound and worth working on.”
Mainstream theory is not necessarily a coherent body of thought; it is whatever ideas are dominant at the time, whether or not these flow from shared axioms. Single approaches like neoclassical theory are thus distinguished by their theoretical tenets, not by their current popularity. This means the categories ‘mainstream’ and ‘neoclassical’ do not overlap completely. For example, neo-Keynesian economics is not part of current mainstream economic research, even though it is a sub-branch of neoclassical economics (Colander, 2004). Behavioral economics, which does not adhere to the neoclassical axiom of perfect rationality, is part of the mainstream (Davis, 2006).
Different theoretical approaches and sub-branches thus flow in and out of the mainstream over time. Currently, however, the mainstream in teaching overlaps very much with the theoretical approach known as neoclassical economics.