Based on my analysis of Polanyi’s methodology, I have come to the conclusion that a radical economics textbook for the twenty first century can be based on a single CORE principle, which REVERSES conventional methodology. Conventional methodology, both heterodox and orthodox, considers economic theories to be a means to understanding economic events. INSTEAD, we should look at how theories emerged as people searched for explanations for emergent historical events. In particular, different theories would favor different group interests and the dominance of one theory over others would be dictated by the political power of the different groups For example, Polanyi shows how theories are generated by historical process — the emergence of the possibility of large scale production led to the emergence of market friendly theories.
This idea was lost from view because of the empiricist illusion that the facts by themselves are sufficient to determine theories. A great deal of creative energy goes into weaving a narrative around any given collection of facts, leaving a great deal of room for human agency, and for blending in class interests into a theory. Instead of using theories to understand economic processes, I would like to use historical context to understand the formation of economic theories. For example:
Raising levels of production vastly beyond subsistence made trade much more important. This led to the rise of Mercantilism, which advocated selling products for gold. This favors the merchant class, but may or may not be aligned with the interests of the labor class.
The controversy over corn laws versus free trade, reflects the battle between landed aristocracy and the newly emerging trading classes, with eventual victory to the latter. The doctrine of free trade emerged in England, when it had a fifty year lead in the industrial revolution over the rest of the world. The doctrine of infant industry emerged in Germany (Friedrich List) when it needed protection from English imports in order to develop its own industry.
The Great Depression led to the creation of Keynesian economics, which is based on a certain analysis of GD 29,
Krugman “Peddling Prosperity” discusses the relationships between popular economic theories and interest groups.
It is not national interest, but narrower class/group interests which are protected by economic theories. For example, Mian & Sufi, in House of Debt, talk about the emergence of the “banking view” which was the basis of policy-making in aftermath of the Global Financial Crisis — this held that allowing banks to fail would collapse the entire economy, and hence bailouts were needed. They argue instead that protecting the mortgagors would have both prevented the crisis and prevented the Great Recession. The emergence and dominance of the banking view was due to the power of the financial lobby. At the same time, the lobby worked hard to popularize the idea that “irresponsible households” should not be bailed out, to prevent the natural solution.
I have only provided barebones outlines of an idea, because I do not have the training required to provide the details. My knowledge of economic history is superficial, wherease a good analysis along the lines proposed would require substantially deeper knowledge.However, I think the project is important, and I would like to invite readers who have the required knowledge to provide textbook style sketches of the analysis of emergence of theories as responses to changes in economic context, and the relationship of these theories to the interests of the various social groups. A brief summary in posts, and links to more detailed expositions would be very welcome,.