We Need to Start Talking About Statistics: Social Scientism, Individualism, and Paradigmatic Economics and Statistics

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We Need to Start Talking About Statistics:
Social Scientism, Individualism, and Paradigmatic Economics and Statistics

by Paulo dos Santos

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In The Structure of Scientific Revolutions, Thomas Kuhn (1962) framed scientific development as a punctuated process shaped by the evolution of paradigms organising inquiry in specific disciplines. Paradigms can be understood as constituted by epistemic systems and institutional structures. Epistemic systems organise reasoning within a domain, including a discipline’s recognised canonical problems, its accepted methods of investigation and standards of explanation, background abstractions and metaphysics, and a shared sense among its researchers of what constitutes a good theory or solution. Institutional structures organise the social and material conditions for inquiry, including the instruments and modalities for training practitioners and researchers, and forms of engagement with the wider public about the discipline, its findings, and its material needs.

Kuhn offered a simple but evocative schematisation of how the historical and social evolution of paradigms shapes scientific progress. An emerging paradigm offers a discipline the ability to organise and pursue inquiry successfully over a certain period. Invariably its usefulness starts to fray as new observations and results appear to challenge its premises. First cast as empirical errors or anomalies, their persistence and accumulation soon beget explicit explanation. This typically ushers in an epicyclical moment as new facts are interpreted as special cases, explainable on the basis of increasingly elaborate and inelegant grafts onto paradigmatic conceptual structures [1]. The proliferation of epicyclical variants of a paradigm offering contradicting ways to accommodate “anomalies” within its terms is soon followed by explicitly foundational debates, interrogating a paradigm’s conceptual foundations, sometimes even identifying them clearly for the first time. This is a moment of crisis.

Revolution is not the inevitable consequence of a paradigmatic crisis. With institutions under the control of older, senior researchers committed to what is increasingly asserted as orthodoxy, alternative conceptual frameworks and their proponents are systematically marginalised. Control over authoritative journals, research appointments, the writing of canonical texts, and even the ability to define what is considered to be within the bounds of “the discipline” are all marshalled in defence of the status quo. In his celebrated discussion of the history of Statistical Mechanics and the substantive bases for its remarkable scientific success, mathematical physicist Edwin T Jaynes (1967) called those maximum-compression periods: Moments in the history of a discipline where the full range of institutional and career incentives are deployed to inhibit the development of new paradigms that may address the incongruences fuelling the crisis. A scientific revolution takes place when a non-paradigmatic conceptual framework proves capable of addressing some of those incongruences, shows the promise to address the remaining ones, and opens new lines of inquiry in spaces that may not even have been discernible under old orthodoxies. This typically involves work by younger or marginalised researchers who had not been fully socialised in the old orthodoxy and are willing to persist in the face of its strong, conservative headwinds.

Periods of maximum compression are typically short lived at the time scales of scientific progress. The epicycles prove too unwieldy, as the inventory of “exceptional cases” grows too big and conceptually disjointed; the explanatory failures, retractions, and even scientific scandals become too big to ignore; disciplines become parochial, focussed more on internal problems of their fraying conceptual frameworks rather than with crucial realities of their domains of inquiry. Fundamental change eventually happens, even if only generationally as “its opponents gradually die out,” as grimly put by Max Planck (1950, p 33).

Unless the discipline is Economics… or Statistics.

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A Familiar Case of Paradigm Maintenance

Heterodox economists may not yet know the term maximum compression. But they certainly know what it is like to work in a discipline experiencing one across several generations.

Economics has a remarkable tolerance for zombie ideas, lingering in professional and public debates despite decades of accumulated empirical evidence and logical arguments refuting them; like the contention that money is valuable because and in the measure to which it is “scarce.” Much of the profession continues to be preoccupied by insular, epicyclical concerns: Diamond and Dybvig won the Sveriges Riksbank Prize in Economic Sciences in 2022 for work showing that bank runs observed as far back as the collapse of Bardi and Peruzzi in the 1340s and grasped in their essential logic and mechanics centuries ago are, in fact, the expression of equilibrium strategies in a mid-twentieth-century game-theoretic model of interacting utility-maximising rational agents.

The discipline has also shown a revealing resistance to error correction: When then-PhD student Thomas Herndon found tendentious methodological choices and coding errors in highly influential work by leading orthodox scholars claiming to have found statistical evidence that large fiscal deficits reduce economic growth, neither the scholars nor their underlying substantive claim saw their standing or credence diminish among economists. At a deeper conceptual level, conventional economic thinking continues to be substantively anchored on an individualist abstraction whose profound limitations have long been partly understood by unusually critical voices among leading figures like Arrow (1994), and more fully taken apart by critical voices outside of paradigmatic spaces [2].

While keeping ideas and scholars offering fundamental critiques and alternatives outside its recognised boundaries, the discipline has also evolved paradigmatic spaces where researchers can engage with empirical economic realities without challenging the paradigm’s conceptual foundations. In the years following Leamer’s (1983) call for a “credibility revolution” in econometrics, empirical work seeking statistical evidence of causal relations in natural or quasi-experimental re-search designs grew to the point where it has come to dominate research in orthodox Economics.

This “empirical turn” was not a response to a corresponding shift in the pressing questions facing economic analysis; it followed its own paradigmatic imperatives. By their very logical requirements and construction, studies based on natural and quasi-experimental identification yield findings internal to specific, localised settings and processes [3]. Their results carry no necessary implication for core conceptual tenets in the orthodox paradigm, enabling their epicyclical interpretation within those terms—much like the celebrated findings of Card and Krueger (1994) were interpreted in terms of “monopsony” in conventional approaches to the competitive behaviour of firms, not as pointing to the need to move beyond those approaches. As the absolute and relative measure of this work grew, Economics became steadily smaller and narrower in its scope of concern. All while climate change, the geographical reconfiguration of global production, and rising measures of income and wealth inequality posed difficult, potentially existential questions, demanding precisely the big, ambitious, and non-paradigmatic approaches to economic analysis the discipline has marginalised.

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Compressed Statistics

Statistics has experienced its own version of “maximum compression,” defined over its own concerns and history, but showing crucial sociological and substantive parallels with the experience in Economics.

Between the 1920s and 1930s orthodox statistics had become clearly organised around a “frequentist” paradigm, founded on the view that the probability of an event or proposition is a property of the objects involved, given by the relative frequency with which the event or proposition occurs over large numbers of instances or “trials”. Probabilistic reasoning and statistical analysis became identified with the idea of grappling with “random” or “stochastic” processes in objects of inquiry. Heterodoxy has centred on the alternative view that probabilities are properties of an observer’s knowledge state about objects of inquiry, given by logically consistent measures of the plausibility that observer assigns to an event or proposition, given what they know. There is no such thing as “randomness” or “stochastic processes” under this view, at least not beyond quantum-mechanical scales. There is only incomplete knowledge about the objects confronted by different disciplines, which researchers work to reduce by considering new evidence and making inferences to update their beliefs. As Jaynes argued by drawing on the work of Pierre-Simon Laplace, Willard Gibbs, Richard T Cox, Harold Jeffreys, and John M Keynes, Probability Theory is the generalisation of logical reasoning to propositions of unknown veracity.

Differences between this latter epistemic characterisation and the conventional, frequentist interpretation of probability may seem subtle and abstract. But they ultimately resulted in starkly different approaches to the nature, explanatory goals, and instruments of statistical inference, with frequentist stances dominating the discipline’s substantive commitments and institutional spaces until the present.

The frequentist paradigm has been able to sustain itself despite mounting evidence of the analytical advantages of models and inference procedures anchored on epistemic principles, and the pitfalls in aspects of its approach to statistical inference. The wider availability of computing power since the early 1990s made implementation of computationally intensive Bayesian instruments practically feasible. Many of them have since become used widely in statistical inference, but overwhelmingly only as advantageous practical tools deployed with no reference or grounding in the epistemic interpretation of probability they presuppose.

More recently, evidence that large proportions of statistical results reported in medical, psychology, and social-science journals could not be replicated posed very serious questions going to the very heart of the frequentist paradigm’s approach to statistical inference [4]. In 2016 the Ameri-can Statistical Association issued a statement on the use of p-values in statistical significance tests, clarifying their logical content within the paradigm and identifying errors and abuses in many applications using them [5].The statement did not take on the deeper conceptual problems Bayesians have long recognised in frequentist hypothesis testing and how they contributed to the “reproducibility crises” raging across many disciplines. The general pedagogy, working culture, and the explicit or implicit background abstractions and metaphysical commitments anchoring most statistical work have remained frequentist.

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Social Foundations and Content of the Frequentist Paradigm

The staying power of frequentist treatments of probability and statistical analysis has historical and social foundations that heterodox economists should readily recognise. Modern statistics was developed by scholars who were leading eugenicist theorists and advocates in late-nineteenth and early-twentieth-century Britain. Men like Francis Galton, Karl Pearson, and Ronald Fisher laid the discipline’s conceptual foundations as part of their efforts to establish “scientifically” that inherent and inherited individual human abilities are decisive determinants of social outcomes, and that society ought to encourage selective “breeding” favouring socially privileged, white, Anglo-Saxon men like themselves. Eugenicist objectives, presumptions, and metaphysical commitments left clear, substantive marks on statistical theory and practice.

Aubrey Clayton (2021) argues in this context that it was not the analytical merits but the discursive power of frequentist statistical analysis that led to its rise to dominance. The founders of modern statistics were looking for bases to make authoritative statements of “scientific” eugenicist “fact” to the general public. An epistemic characterisation of probability under which statistical analysis yields conclusions about an observer’s beliefs conditional on their explicit assumptions and knowledge offers comparatively poor bases for this ideological project. Frequentist abstractions fit the task much better, delivering seemingly authoritative, mathematically formal statements about aspects of objective “random processes” based on “impartial” inferences from “the data.”

Recent contributions have located a further, distinct eugenicist legacy at the heart of modern statistics; one concerning not the interpretation of probability but the explanatory individualism embedded in its basic abstractions (dos Santos, 2020; 2024). Fisher’s formative statistical work addressed problems of heredity in plants under controlled laboratory conditions. In that setting each individual can reasonably be treated as an instance of a single homogeneous reality. Accordingly, explanation can be taken to mean the identification of a general statistical relationships between individual outcomes and individual characteristics, holding uniformly and independently across all individuals. Transplanting this framework to more general analytical settings presumes that individual outcomes can be explained without reference to interaction, relational structures, or systemic effects between individuals. Doing so to social and economic settings mirrors the funda-mental, defining fallacy in eugenicist thought: The attribution of social differentiation exclusively to individual characteristics and behaviours presumed to be genetically given to individuals, with no reference to social hierarchies and interrelations, or to historical facts.

While the genetic contentions and explicitly racialist frames have been duly scrubbed from the framework since Fisher’s time, the underlying individualist reductionism has remained deeply ensconced in contemporary statistical analysis.

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Affinities and an Anti-Paradigmatic Agenda

The persistence of maximum-compression states in both Economics and Statistics is conspicuous and reflects the same social realities. Both fields evolved and gained prominence in modern poli-ties as disciplines capable of presenting particular sociopolitical visions and discourses disguised as authoritative “science,” communicated to the public through mathematically formal statements of ostensibly “neutral” or “positive” fact. Their development became bound up with the rhetorical demands of this form of scientism. Both disciplines also came to reflect and reinforce conceptually pervasive social prejudices and analytical biases, most notably in a common commitment to individualist abstractions and explanatory frameworks where individual outcomes are interpreted in relation to individual characteristics and agencies, with no reference to relational structures, macroscopic interactions, or irreducibly systemic relations.

These affinities suggest a few implications for heterodox thought within both disciplinary domains. For heterodox thinkers in statistics, the analytical problems of socioeconomic systems may offer a uniquely rich terrain on which to illustrate the conceptual limitations of frequentist abstractions and the greater generality of Bayesian or epistemic approaches. These systems are irreducibly complex. Their individual members exhibit what philosophers call relational interiority: individual workers, enterprises, and national economies are inherently defined by their relations with other parts of the economic system. Their nature is constituted by their position and interactions within the system’s relational structures—by their class position, their integration into input-output systems and financial relations, and by their specific roles in the global division of labour, respectively. Many of the regularities enabling the development of successful theories of those systems are thus systemic or social in character. They are properties of the relevant relational structure as a whole rather than of any individual considered separately, straining the explanatory power of the naive abstraction of homogeneous, independent individual “trials” sustaining the frequentist paradigm. Further complicating the situation, analysis of these systems proceeds under conditions of chronically incomplete knowledge, with severe restrictions on what can be observed at all, and on the frequencies at which it can be observed. Latent relational structures shaping what may be observed are pervasive, ensuring individualist models defined over observables often misattribute to individual characteristics relationships that in fact involve systemic or social interactions. Analysis also demands careful specification of what is actually observed and what is unobserved, what is known and what is conjectured or assumed for convenience. The defining tenets of epistemic treatments of statistical analysis are more than mere philosophical nuances or preferences. They are often indispensable for effective and consequent analysis.

For heterodox economics, the nature, goals, and foundational abstractions of statistical analysis cannot be seen as extraneous or exoteric distractions. They are in fact a core concern of our shared intellectual project. Economic systems lend themselves to statistical analysis as aggregations of large numbers of constitutive parts, and conventional statistical inference can often be useful as we grapple with aspects of their functioning. But the conceptual foundations for most approaches to statistical inference embed strong and socially meaningful biases at the very heart of quantitative social inquiry [6].

Empirically oriented heterodox researchers thus need to be in a position to evaluate the potential bases and bounds of application of established statistical methods. Otherwise they risk sneaking, through the back door of statistical technique, substantive commitments and discursive thrusts most of them emphatically reject—like the presumption that the goal of social inquiry is to obtain statements of “fact,” or to arrive at individualist, atomistic “explanations” for social outcomes. The critique of statistical analysis and the development of statistical approaches capable of handling irreducibly social regularities and pervasive latent relational structures are crucial pedagogical and research tasks for contemporary heterodox economics.

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Footnotes

[1] The term epicycle originated in astronomy, where the celestial movement of observable planets following elliptical orbits around the sun posed serious difficulties to ancient geocentric cosmologies as well as early heliocentric representations of the solar system.

[2] See Mohun 1994, Lawson 2012, or dos Santos 2024, for instance.

[3] See Reddy 2012, for instance.

[4] Gigerenzer 2004, Ioannidis 2005.

[5] Wasserstein and Lazar, 2016.

[6] dos Santos and Wiener, 2020.

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References

Arrow, K. (1994). Methodological Individualism and Social Knowledge. American Economic Re-view, 84(2), 1–9.

Card, D., & Krueger, A. (1994).  Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. American Economic Review, 84(4), 772–793. Clayton, A. (2021). Bernoulli’s Fallacy: Statistical Illogic and the Crisis of Modern Science. Columbia University Press.

dos Santos, P. and N. Wiener (2020). By the Content of Their Character? Discrimination, social identity, and observed distributions of income. The Journal of Mathematical Sociology, 44 (1), 12–41.

dos Santos, P. (2020). Statistical Equilibria in Economic Systems: Socio-Combinatorial or Individualist-Reductionist Characterizations? European Physical Journal — Special Topics, 229(9), 1603–1622.

dos Santos, P. (2024). Socio-Historical Ontology, Explanations, and Empirical Approaches. In M Ali and A Davis (eds), Radical Political Economics: Principles, Perspectives, and Post-Capitalist Futures. London: Routledge.

Gigerenzer, G. (2004). Mindless Statistics. Journal of Socio-Economics, 33(5), 587–606.

Ioannidis, J. P. A. (2005). Why Most Published Research Findings Are False. PLOS Medicine, 2(8), e124.

Jaynes, E. (1967). Delaware Lecture. In E. T. Jaynes: Papers on Probability, Statistics and Statistical Physics. New York City: Springer, 1989. 87–113.

Kuhn, T. S. (1962). The Structure of Scientific Revolutions. University of Chicago Press. Lawson, T. (2012). Ontology and the study of social reality: emergence, organisation, community, power, social relations, corporations, artefacts and money. Cambridge Journal of Economics, 36(2), 345–385.

Leamer, E. (1983). Let’s Take the Con Out of Econometrics. American Economic Review, 73(1), 31–43.

Mohun, S. (1994). Value, Value-Form and Money: Debates in Value Theory. New York City: St. Martin’s Press.

Planck, M. (1950). Scientific Autobiography and Other Papers (F. Gaynor, Trans.). Williams & Norgate.

Reddy, S. (2012). ”Randomise This! On Poor Economics” Review of Agrarian Studies, 2(2), 60–73.

Wasserstein, R. L., & Lazar, N. A. (2016). The ASA Statement on p-Values: Context, Process, and Purpose. The American Statistician, 70(2), 129–133.

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What Girls’ Perceptions Reveal About Economics

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What Girls’ Perceptions Reveal About Economics

by Maria Georgouli Loupi and Danielle Guizzo

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In a mixed-methods project with Discover Economics and The Health Foundation, Maria Georgouli Loupi, Danielle Guizzo, and Sarah Smith explored how girls perceive economics and what stops them from choosing it as a subject.

The challenge is clear: boys outnumber girls in economics at school and university by two-to-one, even though girls who do study the subject tend to outperform them. Why?

In the first phase of the project, we surveyed Year 10-12 students in UK secondary schools who were not yet studying economics. We asked about their perceptions, beliefs, and likelihood of studying a selection of subjects: economics, psychology, business and maths. The results were striking. Girls ranked psychology first, followed by maths, business, and lastly economics. Boys, on the contrary, preferred maths, then economics, business, and finally psychology. Their understanding of subjects had important gaps: both boys and girls associated inequality and well-being with psychology, not economics, and tended to conflate economics with business, finance, and money. Both groups thought economics was hard, but boys expected it to be easier, more enjoyable, and more social than girls did.

To explore this further, we conducted focus groups with girls aged 14-17 – some of them studying economics for their GCSEs or A-levels, others completely unfamiliar with the subject – to gain a deeper understanding of how they form the perceptions we uncovered in the survey. Our questionnaire explored girls’ likeliness to study a subject and the factors influencing their decisions; what they thought economics was about and what they thought economists should be studying; as well as what they imagined economists were like. Again, we found that girls conflate economics with studying monetary and finance issues, and understand the discipline as being narrower than it is and mostly concerned with mathematics – but, encouragingly, girls who had taken economics were less likely to have these misconceptions.

The topics they thought would be important to study (inequality, economic crises, growth) are the ones they believe are not covered in economics, but in other disciplines such as gender, development, or environmental studies. When asked what economists were like, girls imagined highly intelligent but stubborn men – “obnoxious, know-it-all” types in suits. When reflecting on their future careers, they were concerned with choosing something interesting to them, but more importantly, they wanted a career that would facilitate a way of life away from what they imagined an economist does: a dull 9-5 office job. 

These perceptions show a double barrier: misconceptions about what economics covers, and negative stereotypes about who economists are. So how do we fix them?

Our findings from the focus groups lead to four recommendations to address the two core stereotypes found in economics: the misinterpretations of what the subject is and does; and distorted beliefs of the professionals and students of economics.

1) Improving the Communication of What Economics Is, and What Economists Do

A recurring theme that emerged from the study is that students often struggle to define what the subject actually entails. This suggests a need for better communication about what economics is, the range of careers it can lead to, and its broader societal impact. It is crucial for universities and professional associations to work alongside schools to develop clear, engaging resources that present economics in an accessible way. Career talks, internships, accessible written materials, and networking events could further help students see the wide range of opportunities in the field and counter narrow or misleading stereotypes.

2) Addressing Gender Stereotypes in Economics Early at School

Given that many students, especially girls, perceive economists as competitive, “know-it-all” men, it is crucial to challenge these stereotypes early in their schooling journey. Schools and universities should incorporate discussions about economics into their curricula from a more diverse perspective, showcasing a wider range of economists who do not conform to traditional perceptions – based on identity, aesthetics, sector, and task.

Offering guest lectures, exposing students to booklets, and interactive activities featuring female economists and those from diverse backgrounds could help reshape students’ understanding of what an economist looks like. Highlighting the collaborative and socially impactful aspects of economics (such as those dealing with poverty, inequality, charitable activities, care work), rather than just competition and financial success, as well as the economists that work on them, helps attract a broader pool of students.

Universities, academic associations, and professional bodies should actively promote the contributions of female economists through outreach initiatives, networking events, and social media campaigns. Schools could also include more female-authored readings in economics courses and ensure that classroom discussions highlight the diverse perspectives within the discipline.

3) Make Economics More Accessible and Inclusive in the Classroom

The findings suggest that students, particularly those from less advantaged backgrounds, see economics as an abstract and difficult subject. To address this, educators should emphasise the real-world relevance of economics in ways that connect more closely with students’ everyday experiences. More interdisciplinary teaching approaches, integrating economics with social issues, history, or politics, could help demystify the subject. Additionally, making economics education more engaging through hands-on activities, problem-based tasks, and applied research projects rather than abstract concepts could help change students’ perception of the field. Both these changes could also improve student retention.

Students are sometimes hesitant to take economics because they worry they will not “fit in” with their peers, or they see economics students having certain characteristics they do not identify with or dislike. Promoting a more inclusive learning environment where students feel comfortable participating regardless of their background or gender is key. This could include mentoring schemes, peer support networks, and initiatives to encourage collaborative rather than competitive learning. Ensuring that classroom dynamics allow for diverse voices to be heard, rather than stimulating competition or rewarding “know-it-all” attitudes can help counter the perception of economics as an exclusive or intimidating field. However, such inclusive environment should not be incentivised at schools only, but stimulated and maintained in university classrooms, which are one of the main sources of “exclusivity” or unfriendly attitudes according to our sampled participants.

4) Reconsider the Role of Mathematics in Economics for Entry and Retention

Many students expressed concern that economics is overly mathematical, which may discourage those who do not see themselves as strong in mathematics from pursuing the subject. Students who demonstrated interest in economics topics, such as inequality, poverty, the environment, and development, often preferred to study these issues through other social sciences that employ less mathematical methodologies. Whilst mathematics is an important tool in economics, we stress that it should not be framed as a barrier to entry. One way to address this perception is by incorporating more intuitive, applied teaching methods that connect mathematical concepts to real-world economic issues, emphasising how mathematics and statistics are linked to empirical data or tangible policy questions.

Nonetheless, this raises the challenge of avoiding a misleading representation of economics as a largely non-mathematical discipline, which could create further misconceptions for those choosing economics as a degree. In addition of mathematics being as a barrier of entry, it can also negatively affect student retention and satisfaction. Further reconsiderations of how to employ mathematical content intuitively and critically engage with the economics content seems key, as well as exposing students to models and theories through historical and social lenses, which would allow for a more plural and critical education.

Our research indicates that students are drawn to economics out of a desire to understand society. However, many feel alienated from the discipline due to the prominence of mathematical methods or their perception that economics adopts a narrow analytical approach, often disconnected from their interests or pressing social issues.

5) Reconsidering What Type of Economics We Want

Efforts to broaden participation in economics, either by gender, class, ethnicity, or background are necessary but insufficient on their own. Increasing diversity within a discipline does not automatically transform the knowledge it produces. Our findings suggest that girls’ scepticism is not only about who economists are, but also about what economics appears to value: abstraction over lived experience, technical ability over contextual understanding, and individual optimisation over social relations and structural change.

Attempts to diversify the field risk becoming superficial if economics continues to present itself as a neutral, technical science detached from ethical or political questions. Aiming for a truly inclusive discipline also requires questioning the epistemic foundations that shape what students learn, what methods are privileged, and what counts as “rigorous” or “scientific”. This means recognising that economic knowledge is historically and socially situated, and that its dominant frameworks have often marginalised alternative perspectives – from feminist, ecological, postcolonial, institutional, and political economy traditions.

Reconsidering what type of economics we want therefore requires more than adjusting entry routes or improving communication; it calls for methodological pluralism, greater humility about the limits of economic knowledge, and a willingness to foreground questions of power, care, inequality, and social reproduction as central to economic analysis rather than peripheral.

Crucially, students themselves, especially those currently alienated from mainstream economics should be central participants in rebuilding and reimagining the discipline. Their concerns and intuitions about what economics should study echo decades of critiques from heterodox economists and other social scientists. Creating spaces where students can critically question, debate, and reshape the curriculum is essential for building a more democratic economics.

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Maria Georgouli Loupi is a PhD student and Associate Lecturer in Sociology at Goldsmiths College, University of London, UK.

Danielle Guizzo is Associate Professor in the Economics Department at the University of Bristol, UK.

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Why Learn Statistics? P-Values, Priors, Credibility Crisis and the Myth of Mechanical Objectivity

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Why Learn Statistics?

P-Values, Priors, Credibility Crisis and the Myth of Mechanical Objectivity

by Bruno Miller Theodosio

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Islamic Economics: A Framework for Decolonial Political Economy

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Islamic Economics:

A Framework for Decolonial Political Economy

by Mariam Khawar

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Islamic Economics (IE) presents a vital, yet often overlooked, challenge to the orthodox economic consensus. It offers a compelling reason for engagement by heterodox economists while simultaneously providing a powerful, indigenous framework for advancing the global decoloniality agenda. IEs intrinsic value lies in its roots as a systemic critique of capitalism, its unwavering ethical orientation, and its integration of non-secular dimensions into economic thought. This inherent alignment with the objectives of post-crisis heterodoxy makes IE a crucial area of study for anyone looking to transcend the limitations of neoclassical models.

IE offers a philosophically rich systemic alternative to heterodox economists, grappling with the failures of market fundamentalism exposed by the financial crises of the 21st century. Unlike theories that merely propose modifications to the existing capitalist structure, Islamic economics in its modern iteration was historically conceptualised as a direct to imperialism and capitalist expansion. Its original philosophical aim is to establish a distinct, systematic approach to the economy, centred on moral and social responsibility. This positions it as a significant intellectual resource for movements that seek comprehensive societal change, rather than incremental reform.

Central to this distinction is the discipline’s ethical and social focus. In the Islamic perspective, economics is not the scientia of optimising individual utility or simply analysing markets; it is bound by the higher purposes of Islamic way of life. The economic system must serve specific social goals, chief among them is the fulfilment of basic material needs for all and the establishment of justice and equity. Discussions within IE philosophy therefore focus on the very nature of justice, morality, and equity in economic transactions and societal organisation. This stands in stark contrast to neoclassical economics, which tends to treat ethical considerations as externalities or secondary policy concerns, a failing that has contributed to glaring global inequality. By forcing economists to integrate morality at the foundational, ontological level, Islamic economics offers a powerful tool for developing truly pro-social economic models.

Furthermore, the discipline introduces a critical dimension absent from most conventional and even much of secular heterodox thought: the integration of the spiritual and material. While neoclassical economics operates strictly within a secular, materialist worldview, the Islamic perspective provides a necessary balance of material and spiritual dimensions of human life. This is not about religious dogma dictating market behaviour; rather, it’s about embedding the pursuit of human happiness within a framework of moral responsibility. As contemporary heterodox thought (specifically areas like behavioural and ecological economics) increasingly recognises the limitations of material acquisitiveness and explores the necessity of finding human well-being beyond pure consumerism, the Islamic perspective offers an established framework for reconciling economic action with higher moral and spiritual ends. A revitalised, decolonised Islamic economics could realise its full potential as an alternative to capitalism, focusing squarely on moral and responsible social behaviour as the bedrock of economic activity.

The relationship between IE and the global decoloniality agenda is not merely complementary; it is one of shared genesis and mutual reinforcement. The discipline’s very existence is an intellectual legacy of the anti-colonial struggle, providing a native epistemic framework essential for dismantling Eurocentric dominance in economic thought. The historical trajectory of IE provides the strongest link to the decolonial project. As a contemporary discipline, it emerged directly from the postcolonial struggles of the 1970s, fundamentally cushioned in the rage against imperialist oppression. Even earlier, during the late nineteenth and early twentieth centuries, scholars consciously sought to develop an economic system rooted in the Islamic tradition to serve as a cornerstone in the struggle for liberation from colonising powers. This effort was a political act of epistemological differentiation, a direct attempt to assert a particular group’s identity and prove that its native thought could be just as scientifically and practically valid as the colonisers’ episteme. Thus, the discipline itself represents a historical assertion of intellectual self-sufficiency and independence.

The decoloniality agenda is defined, in part, as the active elimination of Eurocentric biases from academic research and discourse. IE provides the necessary indigenous structure to effect this transformation in the field of economics. The ongoing challenge for all heterodox economists is that modern economic thinking is often not free from Eurocentric bias, meaning that the dominant structure of economic practices and theories remains rooted in Western liberal ideology. Decoloniality in IE provides the critical tool to counter this traditional dominance of European episteme. It demands an indigenisation of knowledge by focusing on epistemologies indigenous to Islamic discourse. This is achieved by moving beyond superficial adaptations and developing economic philosophy from within the Islamic tradition, grounding concepts in the moral cosmology of Islam and its historical scholarship.

Key to this process is the utilisation of native ontological concepts, such as Tawhidic epistemology (the oneness of God and the unity of the universe). Engaging with this native ontology and philosophical tradition is essential because it prevents the subsumption of IE philosophy by foreign methodologies and languages. This decolonial self-assertion ensures that the field develops its own unique questions, methodologies, and solutions, thereby enriching Global Political Economy (GPE) by providing a genuinely non-Eurocentric perspective and challenging its underlying assumptions.

Crucially, the decolonial project in IE extends beyond challenging Western intellectual dominance. It also necessitates confronting modern power structures between previously colonised nations, or internal hegemons. These are the norm-setting entities within the Islamic world, such as states with vast financial power. Their actively capitalist economic goals often dictate the focus of Islamic economic discourse towards banking and financial products, thereby perpetuating the very neoliberal assimilation the discipline should be fighting. The episteme of liberation theology provides the philosophical grounding necessary for both individual and collective liberation, empowering scholars to break from the supposedly natural hegemons of the religious sphere and advocate for structural change.

In its ideal, decolonised state, IE acts as a potent force for structural change and intellectual liberation. It offers the practical blueprint for cracking the concrete of neoliberal thought that has obscured its origins, allowing the native philosophical seed to grow according to its own ethical and traditional pattern, ultimately working toward a more just and equitable global economic system that prioritizes justice over accumulation.

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Dr Mariam Khawar is a post-doctoral researcher at the University of Helsinki, Finland.

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Marx’s Value Theory at the Frontiers

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Marx’s Value Theory at the Frontiers

by Güney Işıkara and Patrick Mokre

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In our new book Marx’s Theory of Value at the Frontiers we provide a coherent value-theoretical foundation to study capitalist competition at the international level, and present empirical evidence demonstrating that international trade in this context is inherently polarising, where structural transfers of value from peripheral to core countries constitute a prominent aspect of imperialism. In investigating the law of value at its own frontiers, we believe our book reaffirms Marx’s theory of value as an indispensable framework for understanding capitalism’s evolving frontiers and enduring contradictions.

Studying capitalism from a systemic perspective is nothing new. Neither is arguing Marx’s own work as well as the broader Marxist theory are fundamental to its understanding. Nevertheless, we think that our new approach contributes to the understanding of capitalism through a consistent, operationalisable theory of value, applied at two frontiers of the law of value: imperialism and ecological breakdown.

Our core argument is that Marx’s theory of value offers the theoretical basis for understanding capitalism’s core contradictions that get us all riled up these days, especially once we start looking where the law is modified, but not negated. That means looking at the empirical deviations between direct prices (which are prices proportional to labour values) and market prices for insights as fundamental as those manifested in their regular relationship. In this blog post, we focus on international transfers of value, which constitute a crucial economic aspect of imperialism. 

Marx’s theory of value is concerned, among other things, with the social forms regulating human working activity, and the resulting ceaseless adjustment of the social division of labour. This perspective is powerful: understanding in which regions and sectors capital will be employed, and consequently, people will (have to) work, is the key for understanding the accumulation-driven destruction of non-human nature as well as one economic core of deepening international inequalities.

Capitalism is a mode of production where the means of production are concentrated in the hands of a few while the rest have no means to subsist but through wage labour. In the absence of (planning) structures regulating the social division of labour, the allocation of capital and labour to different branches of production is established with references to market prices, just like the proportions in which commodities are exchanged are determined. However, a closer look reveals that such observable prices are ultimately regulated by prices proportional to labour values, that is, the socially necessary labour time required for the reproduction of commodities.

Capital owners encounter each other as competitors for market shares and profit, and since profits determine each capital’s rate of expansion, maximising profits becomes a condition of survival. Anwar Shaikh’s theory of real competition likens these antagonistic encounters to war (rather than a state of harmony as pictured by perfect competition and its various satellites), characterised by a dynamic process of steering investment (capital accumulation) to the highest expected profit rates.

The relentless search for above-average profit rates intensifies cost cutting behaviour, and brings about a ceaseless movement of prices and profit rate in a process of turbulent equalisation. A general profit rate forms as the center of gravitation, which is added to socially necessary labour time in every step along the production chain to form what Marx calls prices of production.

These production prices have a remarkably strong predictive power over market prices, tying together aspects of order and disorder, equally real and relevant, resulting from turbulent fluctuations characterising capitalist competition.

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Figure 1: Left panel shows the almost linear relationship between market prices (MP) and production prices (PP), while the right panel shows the same relation between market prices (MP) and direct prices (DP).

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The path from labour values through production prices to market prices contains modifications that generate seeming contradictions. These modifications pertain to what we call the frontiers of the law of value: domains where the theory of value could either lose its explanatory power or gain new dimensions of it. In the book, we examine international transfers of value brought about by cross-country-cross-industry differences in the proportions capital and labour are employed as well as persistent differences in wage levels, and ground rents when land is used as non-reproducible capital.

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Limits to frontiers

It is important to clarify one point: we do not conceptualise non-human nature or international exchange as frontiers in a geographical sense, or as frontiers of capitalism itself. International value transfers (through various channels) were constitutive in generalising commodity production and establishing capitalism as the dominant mode of production. Merchant profits and colonial spoils built the financial foundations for productive capital in England and Europe. The even more inhumane economic practices of trading humans, enslaved labour and expelling native populations were no remnants of earlier modes of production either, but significant drivers of accumulation under capitalism.

With ground rent the picture is similar. The enclosure of agricultural land, its usage as capital, and the extraction of surplus profits by landlords is a cornerstone of any historiography of capitalism. Ground rents on fossil and post-fossil extraction did not only gain importance in the past decades, as debates on the reliance on coal meandering through the political economy of the 19^th century demonstrate. We only use the term frontiers with regards to the body of theory we work in and hope to expand: domains where the functioning of the law of value is modified, and consequently, Marx’s theory of value, too, is either modified or loses its relevance. Unsurprisingly, when it comes to the relationship between competition, transfers of value as one instance of economic imperialism, and ground rent in the context of the ecological breakdown, we opt for modification.

In the spirit of reproducibility and as a starting point for researchers pursuing similar questions, we make all our data and workflow available to anyone interested. In broad strokes, we use environmentally enhanced multiregional input-output tables (EE-MRIOTs) to estimate direct and indirect labour employed for the production of all industrial outputs. We also trace fixed capital use, profit and wage rate equalisation as well as land use and resource extraction. We construct a vector of industrial labour values (direct prices), another one for prices of production (which constitute a tendency reflecting a general profit rate), and a third one for market prices for the global economy, investigate the regular relationship between the three that Marxist value theory predicts, and then analyse the regularities of deviations, which partly result from processes at the frontiers of the law of value.

The EXIOBASE project gathered and harmonised input-output data for 44 countries (mostly from the OECD) and aggregated the rest of the world in five regions. The dataset covers the years 1995 – 2020 and is denoted in 163 industrial sectors. In addition, EXIOBASE satellite accounts cover land use, resource extraction and emissions. Some co-authors of the project also published extensions of the model, including estimations of fixed capital flows between industries at the same resolution.

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International Value Transfers

The notion that there are structural transfers of value between countries attracted the attention of Marxists like Otto Bauer and Henryk Grossman early in the 20^th century, but it was not pursued in subsequent research within or outside of Marxist theory. Emmanuel’s Unequal Exchange (1972) revived this question in a context where dependency theory was flourishing. He first applied the channel of domestic value transfers between industries, namely differences between organic compositions of capital, to the international level. Crucially, Emmanuel argued that the tendency of profit rates to equalise internationally, combined with the relative immobility of labour, creates a second and more fundamental channel for flows of value from the periphery to the imperialist center.

We use the term “international transfers of value” to capture a well-defined, specific channel of transfers, which stem from two sources: differential value compositions of capital (VCC) and differential rates of surplus value (RSV). VCC-based transfers – which Emmanuel regarded as a structural component of capitalist competition and called unequal exchange in the broad sense – arise from the regular operation of the law of value, flowing from low to high capital composition industries during the turbulent equalisation of profit rates. RSV-based transfers – which Emmanuel regarded as an accidental (or political/institutional) feature of the system, and called unequal exchange in the strict sense – result from persistent cross-country wage disparities.

In our book, we measure the overall magnitude of international value transfers and estimate the relative importance of the two channels by isolating value transfers resulting from differential value compositions of capital (VCC) and differential rates of surplus value (RSV) as distinct channels, which are located within a coherent Marxist framework where these transfers are structurally manifested as deviations between price vectors.

We find that aggregate international value transfers are substantial, corresponding to roughly 5.9 percent of global gross production annually in production industries, amounting to over seventy trillion euros across the 1995–2020 period. These gains are very unequally distributed and concentrated in only a few countries. Japan and the United States are among the largest net recipients. Notably, China’s position qualitatively changed over the period, shifting from a net payer to a net recipient of value transfers around 2005–2010.

Transfers induced by value composition of capital and rate of surplus value point in the same direction in almost all cases, but magnitudes vary significantly between countries. The United States receives more than two times more transfers induced by rate of surplus value than value composition of capital, while China receives substantial transfers induced by value composition of capital but has a very small rate-of-surplus-value effect.

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Figure 2: Value transfers by country, computed as average yearly value transfers between 1995 and 2020.

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For some countries, value transfers are crucial: the biggest net recipients over the entire period 1995-2020 (Japan, the US, China, Italy and Great Britain) enjoy value inflows that amount to between 4.5 and 16.1 percent of their domestic gross production. At the other end of the spectrum, we found countries like Mexico and Indonesia who transfer out half of the value created in their domestic production industries.

It is worth emphasising that we use the term transfers of value only to capture the value flows between production industries, resulting from the emergence of international prices of production. This is an important channel of economic imperialism, yet it is not the only one. Non-production industries’ capture of value generated in domestic and foreign production industries is another important mechanism of economic imperialism, as are capital exports in commodity and productive capital form.

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Güney Işıkara is Clinical Associate Professor of Liberal Studies at New York University (NYU), USA.

Patrick Mokre is an economist at the Austrian Federal Chamber of Labor (AK) in Vienna, Austria.

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