The real world is complex and chaotic. Theories are developed in an attempt to make sense of such complexity, to provide predictions about whatever is the interest of a particular branch of learning. Theories will be developed and used to guide research. Over time, some particular theories will be ‘highly regarded’ and regularly utilised by scholars to explain phenomena and assume the status of ‘orthodoxy’ within the discipline.

What happens, however, when a theory, especially one that is viewed as orthodoxy, experiences problems with its predictions or in explaining behaviour? How should scholars proceed? One approach would be to take account of what will be called theoretical loose ends and develop an alternative, new, or revised (or whatever you want to call it) theory which provides a better examination of real-world phenomena. Alternatively, there might be an attempt to try and reinterpret real-world phenomena to ensure the ‘veracity’ or survival of the theory. Redefine the pieces of the puzzle so as to make sure they seemingly fit into the jigsaw rather than develop a new ‘puzzle’. Theory is used to explain reality, not vice versa. Trying to fit real-world phenomena into a theory is an exercise in not thinking; of escaping serious contemplation of deriving an understanding of how the real world operates; of believing that it is more important to support ‘orthodoxy’ than search for knowledge – in effect, religion masquerading as science.

The problem of how to respond to weaknesses and problems (loose ends) associated with economic theory is the major focus of Geoffrey M Hodgson From Marx to Markets: An Intellectual Odyssey. Hodgson describes himself as an evolutionary and institutional economist; a Keynesian in macroeconomics (vii). From Marx to Markets is an outstanding work of scholarship. It comprises extensive reading across a wide range of disciplines, mainly in the social sciences, but also in the physical sciences, such as biology. So much is happening on each page that the text needs to be read slowly to absorb the depth and subtlety of Hodgson’s multifaceted analysis.

In his opening paragraph, Hodgson says

His book is about economics and politics (vi). Much of his discussion of debates in economics is conducted alongside an examination of political developments, especially within Great Britain and other parts of the globe.

Hodgson was born into a family of teachers who supported left-wing causes. His grandparents and father were members of the Communist Party during the 1940s. His father subsequently left the party. When at university, Hodgson joined the International Socialists.

At school Hodgson was good at mathematics and physics. He developed an interest in computers and studied mathematics at university. The major lesson he learnt from this period was that despite the increasing speed and sophistication of computers, they were unable to ‘model’ the complexity of economic phenomena, and there were insurmountable problems with approximating or ‘finding’ an internal consistency to a very large class of deductive systems (28-29). This realisation helps explain his eventual rejection of Marxist economics and claims of some proponents that central planning (or socialism) could replace the market as the best means to run an economy.

Hodgson found himself caught up in the political ferment of the 1960s that affected the youth of that period. He developed an interest in economics, and given his leftist orientation, was attracted to Marxist analysis.

Most of the first half of the book focuses on Hodgson’s engagement with Marxism. He contributed to Marxist debates and to leading Marxist economic journals. He eventually abandoned Marxism as a useful mode of analysis for three reasons. The first was theoretical; he found loose ends that couldn’t be resolved. Two major concerns were problems with operationalising the labour theory of value and the Marxist prediction of the falling rate of profit. With complex production processes, how could labour, or various labour, contributions to value be isolated and measured? And the rate of profit did not seem to fall; there was a problem called technological change. Then there was the issue of how a central body could make decisions concerning the operation of an economy once socialism had been achieved. His mathematical background told him this was impossible.

Second, there was the problem of the reception he received from Marxists when he raised such issues. Many/most did not want to hear his criticisms. He was attacking their view of the world, their belief system. He found he was dealing with a cult.

Third, ‘Every self-declared Marxist experiment in history, had degenerated into purges and mass killings’; 65 million deaths in China, 20 million in the Soviet Union (62, 80-81). Marxism/socialism did not bring progress; it was associated with devastation and despair.

Hodgson sees markets as being important to the operation of an economy. He focuses his attention on neoclassical economics and on those models that rely on the axiom of utility maximisation, what he calls Max U. In much the same way that he discovered weaknesses with Marxism, he finds that there are also problems with Max U, and hence neoclassical economics.

A major problem Hodgson has with Max U is that it pays so little attention to the complexities of human psychology. ‘It is ironic that a discipline that often celebrates individualism pays so little attention to real human individuals’ (68).

Hodgson had discovered another sect which was impervious to criticism and, like Marxists, uninterested in understanding how the real world operates. This sect has its high priests who determine what is published in ‘leading’ publications that are produced in a handful of American universities. ‘Departments of economics outside the US tend to mimic the research agendas and approaches of the leading departments in the US’ (281). This is an approach which emphasises mathematical technique and econometrics over conceptual thinking.

In the second half of From Marx to Markets Hodgson examines alternative approaches, which acknowledge the important role of markets, to the traditional neoclassical Max U model of economics. In doing so, he pays attention to their respective loose ends and investigates ways to improve their usefulness as tools of analysis. These chapters, in particular, display a deep understanding of a wide variety of leading thinkers across a broad range of disciplines.

His first chapter in this section is concerned with the nature and importance of definitions. His major point here is that in using mathematical models, most economists pay inadequate attention to the meaning of key concepts or variables. He observes that ‘Formalism can mask bad science’ (139). He advocates that more attention should be paid to the meaning of various terms to enhance debate between economists. To not do so is to close off debate. ‘Definitions are not easy, and we need to think about them carefully. The nature and construction of definitions is a scandalously neglected area of teaching and scholarship’ (140-141).

Having done this, he then proceeds to examine developments in heterodox, evolutionary, and institutional economics, all literatures to which he has been a major contributor over the last twenty or so years. He finds that heterodox economists have been unable to agree on a definition of what heterodox economics is. This may not be surprising, given the common-sense meaning of the term ‘heterodox’. To the extent that he can find a commonality, it has a left-wing bias, which is anti-capitalist. Hodgson says, if this is correct, ‘it should be made explicit. It would prioritise politics and policy over finding what is wrong with the analytical core of orthodox economics’ (166).

In his discussion of evolutionary economics, Hodgson combines insights from Darwinian biology with precepts of morality. He argues that Darwin’s notions of variation, selection and replication can be applied to the operation of markets and economic agents. He also maintains that individuals do not have a fixed utility variable, that much of their action has a moral dimension – a desire ‘to do the right thing’ – which provides a richer understanding of economic behaviour than Max U.

Max U affords a limited role for the state. If anything, its adherents want intervention by the state and government kept to a minimum. Economic agents should not be interfered with, and markets should be left alone. Such an approach is rejected by institutional economists. It sees the state as playing an important role in the operation of a market-based system. The state defines and determines such things as property rights, corporations, other firms, contracts, markets, money and the rule of law.

Hodgson argues that markets should be understood in institutional terms. They do not operate as depicted in Max U. ‘Markets are not the universal ether of human interaction. There are many ways of organising markets and various kinds of rules governing their operation…Markets are organized exchange’ (213).

Hodgson is worried about the inability of mainstream economics to deal with real-world problems. He points to the Great Crash of 2008, where the state bailed out banks, and climate exchange as major examples. He sees this problem being linked ‘to the defective training of economists. A preference for mathematical technique over real-world substance diverted many economists from looking at the real picture’ (232). Leading economic departments and journals emphasise proficiency with technique over engagement with the development of conceptual and discursive skills.

Hodgson wants economics ‘to grapple with big and worldly issues, and not simply with technical puzzles’ (267). He argues that evolutionary and institutional economics is more able to do this than Max U because of its engagement with how economic agents act and behave, rather than a model based on axiomatic assumptions. In developing his case, he returns to issues associated with defining key terms which guide analysis.

Following on from this, Hodgson goes on to advocate a more pluralistic and interdisciplinary approach to the training of economists. There needs to be an end to the monopolistic, anti-competitive fixation with Max U. He sees major advantages in students being exposed to a wider menu of theoretical and conceptual approaches which exist in economics.

It is to be seen if economic departments, especially leading ones, will adopt such a course of action and expose students to alternative theoretical approaches to Max U and neoclassical economics. If they decide to do so, they would be well advised to employ Geoffrey M. Hodgson’s From Marx to Markets: An Intellectual Odyssey as a basic text in examining such approaches. His thoroughly researched and clear examination of a myriad of complex methodological and theoretical issues makes an invaluable contribution to an understanding of the economic project. This is a major, seminal work which should be read by all economists and other social scientists.