The Other Canon
Encyclopedia
The Other Canon Foundation is a center and network for research of heterodox economics
founded by Erik Reinert. The name refers to the founders' message of there being another economic canon, alternative to the ruling neoclassical economics
. Their suggestions, they claim, are valid for and can be applicated in the first, second and third world.
, Carlota Perez
and Geoffrey Hodgson
. In addition to the executive chairman Erik Reinert and the earlier mentioned Drechsler, the current executive board also employes Rainer Kattel
.
The Other Canon is highly eclectic and gathers ideas from many authors of various epochs. Joseph Schumpeter
, John Maynard Keynes
, Karl Marx
, Gunnar Myrdal
, Gustav von Schmoller
, Werner Sombart
, Nicholas Kaldor
, Max Weber
and Adam Smith
(for considerations of the primary sector) are among the theorists to have influenced The Other Canon.
In accordance with Schumpeter, The Other Canon emphasizes the role of "man the producer" over "man the consumer" and intends to seek the reasons for growth and innovation rather than seeing it as something innate to capital and a simple result of adding it to human labour. They argue that the state is needed to stimulate entrepreneurship to maximise growth.
The importance of role of the state is also underlined in development economics. In his book How Rich Countries Got Rich ... and Why Poor Countries Stay Poor (2007), Reinert criticises liberal economists for ignoring empirical evidence when they promote free-trade as the solution to third world countries. He claims poor countries should, and should be allowed to, use protectionism to build up their own industries until they can compete internationally and that the state should be involved in this process.
and no diversity/likeness of economic activity). Conforming with Schumpeterian theory The Other Canon emphasises the constant change in the economy and that entrepreneurs and capitalists all the time create temporary monopolies based on advantages of knowledge and/or uncertain assumptions about the future. The fact that mainstream economics sees innovation and novelty, and hence growth (of which capitalism is absolutely dependent), as exogenous phenomena does not fall lightly with The Other Canon who sees these factors as pivotal to the economy and something that is maximised through stimulation in the form of state policy.
The Other Canon claims reintroducing increasing and diminishing (decreasing) returns to scale can help us understand the economic development and why neo-classical economy has failed to explain the uneven development of nations. Reinerts claims poor country's concentrating their production on industries with diminishing returns to scale will lead them to become more inefficient the more they invest while the opposite thing will happen to the rich countries with their primarily increasing returns to scale industries. This, he argues, is why following Ricardian Economics
, mainly his theory of comparative advantage
, will, instead of leading to the factor price equalisation neo-liberals profess, in fact usher poor countries into "specialising in beeing poor and inefficient". Paul Krugman
, however, takes use of increasing returns to scale in his New Trade Theory
to explain the succes of the industrialised countries, but leaves out diminishing returns to scale explaining the misery of the Third World
.
The view of the economy as largely independent from society and the financial sector not being distinct from the real economy are also disputed by The Other Canon claiming that the economy is indeed embedded into society and that conflicts between the financial sector are normal and hence must be regulated.
and others.
Heterodox economics
"Heterodox economics" refers to approaches or to schools of economic thought that are considered outside of "mainstream economics". Mainstream economists sometimes assert that it has little or no influence on the vast majority of academic economists in the English speaking world. "Mainstream...
founded by Erik Reinert. The name refers to the founders' message of there being another economic canon, alternative to the ruling neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
. Their suggestions, they claim, are valid for and can be applicated in the first, second and third world.
History
The Other Canon was founded in 2000 by Erik Reinert and 10 co-founders with different backgrounds in economics and social sciences. The founders also have distinct backgrounds coming from North America, Latin America, Asia, Eastern and Western Europe. Notable names among them are Wolfgang DrechslerWolfgang Drechsler
Wolfgang Drechsler is a Public Administration, Political Philosophy and Innovation Policy scholar. He is Professor and Chair of Governance, and one of the founders and directors of the Technology Governance program, at the Tallinn University of Technology, Tallinn, Estonia.Drechsler holds degrees...
, Carlota Perez
Carlota Perez
Carlota Perez is a Venezuelan scholar and expert on technology and socio-economic development most famous for her concept of Techno-Economic Paradigm Shifts and her theory of great surges, a further development of the Kondratieff waves.-Career:...
and Geoffrey Hodgson
Geoffrey Hodgson
Geoffrey M. Hodgson is a Research Professor of Business Studies in the University of Hertfordshire, and also the editor-in-chief of the Journal of Institutional Economics.Prof...
. In addition to the executive chairman Erik Reinert and the earlier mentioned Drechsler, the current executive board also employes Rainer Kattel
Rainer Kattel
Rainer Kattel is an Estonian academic and science administrator; he is an expert on innovation as well as political philosophy....
.
Theories and influences
The ideological foundation of The Other Canon is not defined in a left-right perspective, claiming both sides have fallen into the same traps failing to explain and develop valid theories for today's economics. Central to the group is the Theory of Uneven Development, which aims to explain how and why the international economic landscape (of rich and poor nations) is as it is today. History of Economic Policy is used as an important tool in this process.The Other Canon is highly eclectic and gathers ideas from many authors of various epochs. Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...
, John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
, Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
, Gunnar Myrdal
Gunnar Myrdal
Karl Gunnar Myrdal was a Swedish Nobel Laureate economist, sociologist, and politician. In 1974, he received the Nobel Memorial Prize in Economic Sciences with Friedrich Hayek for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the...
, Gustav von Schmoller
Gustav von Schmoller
Gustav von Schmoller was the leader of the "younger" German historical school of economics.-Life:Schmoller was born in Heilbronn. His father was a Württemberg civil servant. Young Schmoller studied Staatswissenschaften at the University of Tübingen...
, Werner Sombart
Werner Sombart
Werner Sombart was a German economist and sociologist, the head of the “Youngest Historical School” and one of the leading Continental European social scientists during the first quarter of the 20th century....
, Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...
, Max Weber
Max Weber
Karl Emil Maximilian "Max" Weber was a German sociologist and political economist who profoundly influenced social theory, social research, and the discipline of sociology itself...
and Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
(for considerations of the primary sector) are among the theorists to have influenced The Other Canon.
In accordance with Schumpeter, The Other Canon emphasizes the role of "man the producer" over "man the consumer" and intends to seek the reasons for growth and innovation rather than seeing it as something innate to capital and a simple result of adding it to human labour. They argue that the state is needed to stimulate entrepreneurship to maximise growth.
The importance of role of the state is also underlined in development economics. In his book How Rich Countries Got Rich ... and Why Poor Countries Stay Poor (2007), Reinert criticises liberal economists for ignoring empirical evidence when they promote free-trade as the solution to third world countries. He claims poor countries should, and should be allowed to, use protectionism to build up their own industries until they can compete internationally and that the state should be involved in this process.
Differences to and criticism of the mainstream economics
Much of The Others Canon's criticism of the mainstream economics regards the focus on equilibrium and the static, as well as what the neoclassical models takes as given (perfect information, perfect foresight, constant returns to scaleReturns to scale
In economics, returns to scale and economies of scale are related terms that describe what happens as the scale of production increases in the long run, when all input levels including physical capital usage are variable...
and no diversity/likeness of economic activity). Conforming with Schumpeterian theory The Other Canon emphasises the constant change in the economy and that entrepreneurs and capitalists all the time create temporary monopolies based on advantages of knowledge and/or uncertain assumptions about the future. The fact that mainstream economics sees innovation and novelty, and hence growth (of which capitalism is absolutely dependent), as exogenous phenomena does not fall lightly with The Other Canon who sees these factors as pivotal to the economy and something that is maximised through stimulation in the form of state policy.
The Other Canon claims reintroducing increasing and diminishing (decreasing) returns to scale can help us understand the economic development and why neo-classical economy has failed to explain the uneven development of nations. Reinerts claims poor country's concentrating their production on industries with diminishing returns to scale will lead them to become more inefficient the more they invest while the opposite thing will happen to the rich countries with their primarily increasing returns to scale industries. This, he argues, is why following Ricardian Economics
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
, mainly his theory of comparative advantage
Comparative advantage
In economics, the law of comparative advantage says that two countries will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods...
, will, instead of leading to the factor price equalisation neo-liberals profess, in fact usher poor countries into "specialising in beeing poor and inefficient". Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
, however, takes use of increasing returns to scale in his New Trade Theory
New Trade Theory
New Trade Theory is a collection of economic models in international trade which focuses on the role of increasing returns to scale and network effects, which were developed in the late 1970s and early 1980s....
to explain the succes of the industrialised countries, but leaves out diminishing returns to scale explaining the misery of the Third World
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
.
The view of the economy as largely independent from society and the financial sector not being distinct from the real economy are also disputed by The Other Canon claiming that the economy is indeed embedded into society and that conflicts between the financial sector are normal and hence must be regulated.
Publishing
Since 2009, The Other Canon has its own book publishing series with Anthem Press in London, called TAOCS - The Anthem Other Canon Series. So far, publications include- a new biography of Joseph Alois Schumpeter by Schumpeter Society chairman Esben Sloth Andersen
- a FestschriftFestschriftIn academia, a Festschrift , is a book honoring a respected person, especially an academic, and presented during his or her lifetime. The term, borrowed from German, could be translated as celebration publication or celebratory writing...
for Carlota PerezCarlota PerezCarlota Perez is a Venezuelan scholar and expert on technology and socio-economic development most famous for her concept of Techno-Economic Paradigm Shifts and her theory of great surges, a further development of the Kondratieff waves.-Career:...
, on Techno-Economic Paradigms, edited by Wolfgang DrechslerWolfgang DrechslerWolfgang Drechsler is a Public Administration, Political Philosophy and Innovation Policy scholar. He is Professor and Chair of Governance, and one of the founders and directors of the Technology Governance program, at the Tallinn University of Technology, Tallinn, Estonia.Drechsler holds degrees...
and others - a re-edition of the complete English works of Ragnar NurkseRagnar NurkseRagnar Nurkse was an Estonian international economist and policy maker mainly in the fields of international finance and economic development.-Life:...
and a volume on Nurkse edited by Rainer KattelRainer KattelRainer Kattel is an Estonian academic and science administrator; he is an expert on innovation as well as political philosophy....
and others - a new edition of Bengt-Åke LundvallBengt-Åke LundvallBengt-Åke Lundvall is professor at the Department of Business Studies at Aalborg University and at Sciences-Po in Paris, France, since 2007. He was also a visiting professor at the Tsinghua University in Beijing in 2004-06...
's work on National Innovation Systems
and others.