Uncertainty, power, institutions, and crisis: implications for economic analysis and the future of capitalism Amitava Krishna Dutt * Professor of Economics and Political Science, Department of Political Science, University of Notre Dame, IN, USA and Distinguished Professor, FLACSO, Quito, Ecuador This paper argues that the recent global crisis has confirmed in a stark manner that the dominant mainstream approach to the study of economics is seriously deficient. While these deficiencies are multidimensional, a major reason is that the dominant approach fails to take into account seriously and adequately three major aspects of real-world economies: uncertainty, power, and institutions. Incorporating these issues into economic analysis, which is the urgent and important business at hand for critics of mainstream economics, leads to a more appropriate approach to policies that can help to shape more desirable forms of capitalism. Keywords: economic crisis, financial crisis, uncertainty, power, institutions, neoclassical economics, political economy, heterodox macroeconomics JEL codes: B50, B41, E60, E02, P16 1 INTRODUCTION The global financial and economic crisis of 2008, which reduced growth and even out- put, and increased unemployment in many parts of the world – and from which many economies are yet to emerge – has led to much discussion and debate on how capitalist economies, including the global economy, should be analysed, and how they should be reshaped by appropriate policies. Regarding economic analysis, many observers – including some prominent main- stream economists – have been highly critical of standard mainstream economics for its general failure to recognize the onset of the crisis, let alone to precisely predict it. The criticisms of mainstream economics implicit in this indictment are not new. A large minority of economists and other social scientists – the present author included – have for some time raised questions about many aspects of mainstream economics and tried to develop alternative ways of analysing the economy. However, there seems to be little agreement about how, if at all, economic analysis ought to change and whether it will actually do so. Moreover, while there are many critics both inside * I am grateful to the participants of the XI International Colloquium, 6–7 May 2014 on ‘Global Crisis and the Need for Paradigm Change’ at the University of Brasilia (UnB), and of seminars at the University of Sao Paulo and the University of Minas Gerais, Belo Horizonte, Brazil, and to Panos Liossatos and Wilson Perez for useful comments and suggestions. I am also grateful to INET for financial support. Review of Keynesian Economics, Vol. 3 No. 1, Spring 2015, pp. 9–28 © 2015 The Author Journal compilation © 2015 Edward Elgar Publishing Ltd The Lypiatts, 15 Lansdown Road, Cheltenham, Glos GL50 2JA, UK and The William Pratt House, 9 Dewey Court, Northampton MA 01060-3815, USA Downloaded from Elgar Online at 03/03/2016 10:04:39PM via free access