John Maynard Keynes.
Heterodox economics includes methods and theories outside of mainstream economics. It is a general term that links several schools of economic thought, many of which have little agreement with each other. However, a common criticism is that the neoclassical synthesis, a conflation of earlier economic theories, is inherently inaccurate. Another unorthodox criticism is the methodology used by other economists. Many unorthodox economists reject rational choice theory, the assumption that individual choices will reflect rational decisions.
The term heterodox connects hetero “different” and -dox from orthodox. Literally, heterodox economics means “different from orthodox economics.” Heterodox economists disagree with one or more central tenets of mainstream economic thought.
Mainstream economics, the economics accepted by most economists, is a combination of earlier economic theories. Neoclassical economics focuses on free markets that will achieve efficiency through supply and demand. Keynesian economics, named for the British economist John Maynard Keynes, asserts that a significant amount of government intervention is needed to achieve economic efficiency. Mainstream modern economics is largely a combination of elements from these two theories.
The mixture of neoclassical and Keynesian economics has been called the neoclassical synthesis. Specifically, neoclassical theories apply primarily to microeconomics, the study of individual decisions in an economy. Keynesian economics, on the other hand, applies primarily to macroeconomics, the study of an economy as a whole. Many theorists of the heterodox school of economics reject some or all of the neoclassical synthesis. They claim that this imposes restrictions on a broader understanding of economic activity.
Many heterodox economists criticize the methodology of conventional economics. The problem may be the definition and scope of economics itself. The economy is inherently difficult to draw a line because it is so interconnected with other psychological and social phenomena. Another common problem in heterodox economics is the boundary between experimental and theoretical approaches. In other words, economists disagree about what assumptions about individual behavior can be made without first gathering supporting evidence.
In fact, mainstream economics generally assumes that people will behave like rational agents. This means that they will tend to act in ways that maximize their material condition and well-being. However, what is at issue is how to define a term like “well-being” and whether people actually act in seemingly rational ways all the time. Some heterodox schools of economics challenge the assumption that people generally make rational decisions. Instead, people’s choices are often altered by limited information in ways that cause them to act in seemingly irrational ways.