What is a Paradigm?

What is a paradigm?  Why is it so important to understand what it is?  Why has economics changed so little even after its obvious failure in the recent global economic crisis?

Durability of Paradigm

Most people commonly misuse the word "paradigm" as a synonym for an idea, a theory or a model.  It means much more than that, as it was expounded by Thomas Kuhn (1962) in "The Structure of Scientific Revolutions".  The concept of the paradigm explains why the geocentric theory of Ptolemy for the motion of the planets took many centuries to overthrow.  It took 30 years after the posthumous publication (Copernicus, 1543) of the "Revolutions of the Celestial Spheres" for the heliocentric theory to revolutionize astronomy.  It took a Copernican revolution to change a long-held paradigm in astronomy.

Definition of Paradigm

A paradigm is an intellectual framework consisting of a set of key questions to be addressed, a set of core assumptions and a set of standard methodologies (Sy, 2012).  Such a framework facilitates more rapid development of knowledge through a network of cooperating individuals working within the same framework.  The paradigm defines what is the accepted knowledge and has great power in commanding resources for its further development.

The economic paradigm is the orthodoxy or the conventional economics which is widely accepted as the framework for understanding the economy and for making economic decisions.  The ideas and concepts of the economic paradigm have major impact on public policy, business and finance.  Public policy statements by politicians, regulation by bureaucrats, speeches by central bankers and discussions by mainstream journalists are all evidentially conformal to the economic paradigm.  In fact, the economic world, and therefore the material well-being of humanity, is ruled by the economic paradigm and little else (Keynes, 1936, p383).  The critical role of the economic paradigm in determining human welfare is not well understood particularly by economists.

Power of the Paradigm

In not understanding the importance of the paradigm, most economists did not, and still do not, accept any responsibility for the global financial crisis.  All they did collectively was to point out that many heterodox economists had sounded warnings about the existence of housing bubbles, excessive credit growth and so on.  The economic profession has exonerated itself from blame, because some unorthodox economists had anticipated trouble and issued warnings; instead, the blame was placed on the authorities who were not listening.

But the authorities, by definition, do not listen to the economic fringe (with alternative paradigms) and hence the warnings were useless, falling on deaf ears.  In any case, the authorities were incapable of understanding ideas of bubbles and crises which have been excluded from conventional economics (not even in its vocabulary).  It was impossible to recognize, let alone think about, or anticipate, something which is believed not to exist or exists only unpredictably and exogenously like earthquakes.  The paradigm of conventional economics has induced a widespread "dogmatic blindness", through a flawed education affecting economic practice.

Responsibility for the Paradigm

All economists are responsible for what is in introductory textbooks, because the textbooks are considered to contain the economic consensus with its core concepts and knowledge of the whole profession.  The economic paradigm is the foundation for more advanced studies by academics, and more importantly, for decision making by business and government in the real world. The assumed perfectly-functioning economies of textbooks do not acknowledge the existence of crises and therefore there were little awareness that they could occur, let alone having theories to explain, anticipate or ameliorate their occurrence.

There is no lack of "new" or different ideas in the heterodox economic literature.  But they do not directly address or sufficiently challenge or successfully alter the core assumptions of conventional economics and therefore have little material impact or relevance in the real-world.  The crux of the matter is not for the want of new ideas, rather, it is for want of courage to challenge established ideas which will make a difference in creating change in the paradigm and the real world.

The economic paradigm defines what are the key economic issues, assumptions and methods that we should use to develop economic knowledge.  The paradigm determines practical economic discussions, policies, decisions and hence the economic well-being of humanity.  Since the global financial crisis, the economic paradigm has not changed and no improvement of any real economic significance has occurred.  The economic crisis has been addressed by governments administering economic palliatives which assume and apply the unscientific orthodoxy, in ever increasing doses, to mask the continued crisis, rather than to stop it.

Fallacies of the Paradigm

Economics has a paradigm which is full of fallacies and has also many other out-of-favor alternatives, which co-exist in unresolved antagonism.  Unlike other true sciences, economists spread their efforts among many paradigms, instead of concentrating on improving the one prevailing paradigm which matters most as it pretends to be scientific and is trusted and commonly applied.

It is important to have a scientific economic paradigm, which is free from the fallacies of orthodox economics and capable of addressing important economic issues of our time.  Establishing a scientific economic paradigm is in fact a scientific revolution, in its true sense. It is the purpose of this blog to set this scientific revolution in motion.

In a previous post, we showed that the Keynesian multiplier, taught in introductory textbooks, has influenced government policy for decades and has led to a secular decline in the US economy.

References and citations

This entry was posted in Methodology, Paradigm. Bookmark the permalink.

Leave a Reply