Heterodox Economics Newsletter

Issue 362July 20, 2026 web pdf Heterodox Economics Directory

The craving for exactness and rigor, that characterizes so many efforts undertaken in mainstream economics, has transformed over the past decades from a focus on formal-analytical rigor towards an emphasis on ‚clean identification‘ of (allegedly) ‚causal‘ effects. And while the ghosts of formal-deductive reasoning still linger, this change had a profound impact on the discipline: in some way it changed the nature of the discipline (from more rationalist to more empiricist) and impacted prevailing methodological standards as well as dominant policy views (e.g. on the minimum wage) within the profession.

I observed this transformation not only in my role as a part-time historian of thought, but also as a real-life witness, because this transformation was quite visible in the economics department of the Johannes Kepler University, my alma mater. This department started out as a somewhat pluralist econ department in the 1970s (with Rothschild, Laszki or Riese as key figures) but had transformed into a conventional mainstream department by the time I arrived as a student some thirty years later. Over the decades I have become involved in the Linz econ department in various ways: as a student, as a lecturer, as an observer, as a colleague, as a PhD-advisor and the like…

The econ department in Linz was an interesting microcosm to observe this transition and the consequences it entailed: new priorities in the teaching canon, a change away from core econ topics towards „whatever brings good data meriting publication“ and, of course, changing standards in the evaluation of research and thereby also shifts in internal hierarchy. And while I was highly skeptical about the constraints imposed by the empirical turn on young econ researchers on very narrow, data-driven and career-instrumental paths, I could see how thinking about identification was – in some way – probably better than writing up the random, a-theoretical or all-too-simple-minded exercises that coined my (more old-school) econometrics-classes.

Aside from that, I always had the impression that there is a common denominator between the mainstream drive for identification and the heterodox notion of pluralism. Both care, albeit in different ways, about multi-causality and the complexity it brings. Research designs are employed in the hope of isolating a clear-cut relationship within a mess of causal pathways. Pluralism’s inherent contribution is to raise awareness about exactly that mess — and to insist that thinking without dogma is a necessary condition for illuminating complexity.

Just a few weeks ago, the person I considered the main architect of the empirical turn at the Linz econ department, Rudi Winter-Ebmer, retired and on this occasion I was invited to contribute to a „book of abstracts“ that collects ideas on papers that we could have written jointly with Rudi, but have never actually done so.

As you might imagine, I took this opportunity to reflect on the above intuition and contributed the short abstract shared below, which reflects on how this alleged complementarity between the key intuition behind the empirical turn and the notion of pluralism in heterodox economics could play out in practice.

Have a good time and all the best,

Jakob

Causality and Pluralism (An extended abstract)

The credibility revolution in econometrics has delivered powerful tools for causal analysis and with them a new standard of local, internally valid causal claims. Yet precision, however admirable, is not the same as understanding. A coefficient, no matter how cleanly identified, does not interpret itself; and a finding, no matter how robust, may bring quite different implications if we dare to shift our theoretical frame of reference.

In addressing this key conundrum, this paper argues that causal econometrics and pluralist economic methodology are in fact natural complements -- and that bringing them into dialogue addresses a surprisingly obvious gap in both literatures.

Drawing on a critical-rationalist epistemology, we emphasize that no single hypothesis, however well-identified, can exhaust the space of relevant explanations for complex economic phenomena. Competing and complementary hypotheses are not a nuisance, but a resource: their systematic comparison enhances external validity, internal coherence and theoretical robustness, by forcing researchers to specify the scope conditions and mechanisms that make a causal story credible in the first place. Conversely, pluralist economics gains from engaging with the demand for well-defined counterfactuals and identification strategies, which serves as a productive input when distinguishing pluralism-with-rigor from pluralism-as-anything-goes.

On this foundation, we sketch a framework in which the local precision of modern causal econometrics and the broader ambition of pluralist contextualization are treated not as rivals but as mutually reinforcing research strategies. The result, we suggest, is better economics: more honest about what a given study can and cannot establish, more attentive to the institutional and theoretical embeddedness of causal claims, and — perhaps most importantly — less likely to mistake a well-identified fragment for the whole story.

Keywords: science, foundations, causality, identification, happy retirement ;-)

JEL Codes: B41, B52, C18

© public domain

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