Neoclassical vs. Heterodox Economic Ideas: a Parallax?

     By "parallax" I have in mind a situation where two ideas or phenomena are simply incommensurable. It's not that one is more right or the other more wrong just that they can't be brought together.

    You get something like this in quantum physics where something is a particle accept when it's being observed-then it's a wave. Or something like that. I may have mixed it up and it's a particle under observation...

     "Parallax is a displacement or difference in the apparent position of an object viewed along two different lines of sight, and is measured by the angle or semi-angle of inclination between those two lines.^[1][2] The term is derived from the Greek παράλλαξις (parallaxis), meaning "alteration". Nearby objects have a larger parallax than more distant objects when observed from different positions, so parallax can be used to determine distances."

     "A simple everyday example of parallax can be seen in the dashboard of motor vehicles that use a needle-style speedometer gauge. When viewed from directly in front, the speed may show exactly 60; but when viewed from the passenger seat the needle may appear to show a slightly different speed, due to the angle of viewing."

     http://en.wikipedia.org/wiki/Parallax

     I'm thinking about this in light of a very interesting discussion in the comments section of a recent post. Actually it was two posts.

    http://diaryofarepublicanhater.blogspot.com/2013/02/do-we-need-banks-and-phystical-cash.html

     http://diaryofarepublicanhater.blogspot.com/2013/02/sumners-advice-to-keynesians-not-gdp.html?showComment=1359857425339#c49425102356932387

     A commentator, Tom Brown, has made some interesting comments and there's been some discussion from long time commentator Greg-I think I can call you that now Greg! as well as the Market Monetarist economist Nick Rowe-whether you agree with him on everything or not I really always appreciate his commentary and the discussion gains a lot from it.

   One thing Tom talked about is how difficult is can be for people with heterodox economic views to speak to mainstream econ guys.

    It really does seem sometimes that you have to first learn a second language first before you engage with a neoclassical economist, a dilemma that Tom describes well. Here he responds to a Nick Rowe comment:

    "Nick if I get the gist of your "short term, mid term, and long term argument" which I really don't, since I admittedly need a better education in fundamental mainstream economic theories, you say that in the long term the CB can influence the private money creation process in my above example by adjusting interest rates every six weeks to hit their inflation target (long term). So how does this play in my simple example? Does it ultimately affect the price of the house next time this scenario plays out? Mike if you know the answer I'm all ears. I know Nick's argument will involve variables like r and Y etc and IS/LM curves and the words "perfectly elastic with respect to" and "perfectly inelastic with respect to" and that's where he loses me. I guess I'm just looking for a little insight into how his argument fits into my super simple example. Price of houses purchased in this fashion (i.e. w/o any reserves permanently created) in the long term? Size of the "spreads" involved? ... or is the answer "get an econ 101 book and come back when you've finished it and we'll talk?"

     http://diaryofarepublicanhater.blogspot.com/2013/02/do-we-need-banks-and-phystical-cash.html

     I do feel that this is the case. Nick I must credit for being a very reasonable patient guy who's willing to engage with people who question his own framework a bit. Sumner for whatever reason seems much less willing to do so than he used to be. He in the past wrote some posts directed at MMTers. What I notice is now he simply prefers to dismiss them out of hand has taken those posts out of his "favorite posts" archives.

     It seems that economics as opposed to politics is where you're told that you can't discuss it as you're either to stupid or at least just lack the training. Sumner likes to say that there is no such thing as public opinion in economics. I answered Tom's observation:

     "Yes Tom often it seems that's what mainstream economists want to tell amateurs-you're not smart enough to understand, or at least, you lack the background."

      "It does seem suspiciously like a priest telling you to convert and then you'll understand Catholicism."

       Tom's response to my response:

        "Mike, I do feel a little guilty for not learning neo-classical basics in a systematic way (guilt -- Aha, your "Catholic" analogy may be right!)... I'm just kind of absorbing what I can here and there. My mind has already been "poisoned" against it by reading about a 1/3 of Keen's book. But rather than just getting pure negative propaganda, I'd like to hear the story the acolytes hear. It honestly doesn't sound that hard (how's that for arrogant? Ha!)... but I wish, for example, that Nick could demonstrate what he's talking about sometimes with graphs in his posts... instead he ends up describing the graph with words... and for folks who know what he's talking about that's fine I guess, but I don't have a good feel for it, so it leaves me cold."

         I do think that as he says, if you're goal is understanding economics and the monetary world, you have do have to read the Neoclassical guys on their own terms as well. I've read Keen as well and think he's right about a lot of stuff, but you can't confine yourself to Keen. If you are a heterodox econ guy you can't relegate your knowledge of Neoclassical economics to Keen and reading a few MMT sites.

        Not if your goal is understanding, I'd say that one guy who is very good to read in this regard is Unlearning Econ. He had an in depth reading over months of both Keen's book and also a look at the criticism's of the book that are out there.

        While he generally agrees with Keen, he does point out places he fails to do justice to the Neo school-and so makes himself easier to dismiss.

        http://unlearningeconomics.wordpress.com/2013/01/03/debunking-economics-closing-notes/

        My vantage point is similar to Tom's in that I'm an interested layman. All the mathematical symbols are another language to me-though I find I'm starting to follow some of it easier-still have a long way to go.

         Often I'll read an argument form someone like Sumner that intuitively I feel is wrong but I lack the theoretical firepower to show why exactly. Sumner can therefore dismiss it as just being ignorant of econ or "public finance" or whatever.

       Unlearning is therefore a good resource. In general you just have to be bi-dimensional in reading both heterodox and mainstream econ. As long as the mainstream is Neoclassical you have to read Neoclassical stuff so you can even criticize it in an informed way. Snarky comments over at New Economic Perspectives may feel satisfying but at the end of the day have you furthered understanding? That's the question that counts.