Economics is a science - at least positive economics must be. And science is in part applied mathematics, in part empirical observations and tests. Looking at the history of economics, one cannot find much testing done before the twentieth century, and even the collection of data, even in the manner Marx engaged in, was not common in his day. It is true that economic policy is an older field, and in that field much information is deployed for the purpose of (...) prescribing a course of action. But this is not to say that the information procured for that purpose is either based on observation or has been tested. In the seventeenth century some alchemists and economists hoped to boost the economy by manufacturing gold, others feared inflation; and the British Parliament legislated against manufacturing gold. David Hume proved in the eighteenth century - quite a priori - that doubling the quantity of gold will only double the price of each commodity and he thus set things at rest for a while. Later the question was opened again when Marx, for example, showed historically how the gold robbed from the Americas started Europe's boom. Yet the theory - the quantity theory of money, as it is called - which Hume proved a priori, is still contested and still hardly tested to economists' satisfaction: is the price level fixed mainly by the amount of available money? Some economists answer yes, others no. (shrink)

Can social phenomena be understood by analyzing their parts? Contemporary economic theory often assumes that they can. The methodology of constructing models which trace the behavior of perfectly rational agents in idealized environments rests on the premise that such models, while restricted, help us isolate tendencies, that is, the stable separate effects of economic causes that can be used to explain and predict economic phenomena. In this paper, I question both the claim that models in economics supply claims about tendencies (...) and also the view that economics, when successful, necessarily follows this method. When economics licenses successful policy interventions, as it did in the case of the Federal Communications Commission spectrum auctions, its method is not to study tendencies but rather to study the phenomenon as a whole. Key Words: economic models • tendencies • economic experiments • policy making • John Stuart Mill. (shrink)

Is methodology fruitless? Intense controversy has resulted from attempts to understand economics through philosophy of science. This collection clarifies and responds to the issues raised, arguing that methodology is an essential activity.

The answer in a nutshell is: Yes, five years ago, but nobody has noticed. Nobody noticed because the majority of social scientists subscribe to one of the following views: (1) the ‘anomalous’ behaviour observed in standard prisoner’s dilemma or ultimatum game experiments has refuted standard game theory a long time ago; (2) game theory is flexible enough to accommodate any observed choices by ‘refining’ players’ preferences; or (3) it is just a piece of pure mathematics (a tautology). None of these (...) views is correct. This paper defends the view that GT as commonly understood is not a tautology, that it suffers from important (albeit very recently discovered) empirical anomalies, and that it is not flexible enough to accommodate all the anomalies in its theoretical framework. It also discusses the experiments that finally refuted game theory, and concludes trying to explain why it took so long for experimental game theorists to design experiments that could adequately test the theory. (shrink)

The focus here is Robert L. Heilbroner's critique, in the last chapter of the 7th edition of The Worldly Philosophers, of the idea that economics is, or should be, scientific. Heilbroner's conception of economics as essentially tied to capitalism is too narrow, and at odds with his own commentary on the rise of pauperism after the English common-land enclosures; and his critique of contemporary economics-as-social science is overdrawn. Nevertheless, there is indeed an important role for the “visionary” economics for which (...) Heilbroner hankers: assessing the benefits and drawbacks of different ways of ordering the production and distribution of goods and services. (shrink)

This intriguing new book examines and analyses the role of critical realism in economics and specifically how this line of thought can be applied to the real world. With contributions from such varying commentators as Sheila Dow, Wendy Olsen and Fred Lee, this new book is unique in its approach and will be of great interest to both economic methodologists and those involved in applied economic studies.

There is a growing perception among economists that their field is becoming increasingly irrelevant due to its disregard for reality. Critical realism addresses the failure of mainstream economics to explain economic reality and proposes an alternative approach. This book debates the relative strengths and weaknesses of critical realism, in the hopes of developing a more fruitful and relevant socio-economic ontology and methodology. With contributions from some of the leading authorities in economic philosophy, it includes the work of theorists critical of (...) this approach. In the first part, contributors develop and deepen economics as a realist social theory by considering the work of individuals, various schools of thought, socio- economic phenomena and methodology. In the second part, contributors weigh the strengths and weaknesses of critical realism. (shrink)

Social thinkers frequently remind us that people differ in their views on what constitutes personal well-being, but that even when they don't differ, they disagree over the extent to which one person's well-being can be permitted to be traded off against another's. In this paper I show, by offering an account of the development of development economics, that in professional debates on social policy, economists speak or write as though they agree on values but differ on their reading of facts. (...) A number of ethicists have concluded from this near-exclusive interest in facts that modern economics must be an ethical desert. It is shown here that the reason research economists analyze facts rather than values is that modern economics is built on broad ethical foundations, capable of being reduced as special cases to the various ethical theories that are currently on offer. Ethics has taken a back seat in modern economics not because contemporary economists are wedded to a “value-free” enterprise, but because the ethical foundations of the subject were constructed over five decades ago and are now regarded to be a settled matter. (shrink)

In this paper I study how the theoretical categories of consumption theory were used by Milton Friedman in order to classify empirical data and obtain predictions. Friedman advocated a case by case definition of these categories that traded theoretical coherence for empirical content. I contend that this methodological strategy puts a clear incentive to contest any prediction contrary to our interest: it can always be argued that these predictions rest on a wrong classification of data. My conjecture is that this (...) methodological strategy can contribute to explain why Friedman’s predictions never generated the consensus he expected among his peers. (shrink)

In this paper I explore a positivist methodological tradition in early demand theory, as exemplified by several common traits that I draw from the works of V. Pareto, H. L. Moore and H. Schultz. Assuming a current approach to explanation in the social sciences, I will discuss the building of their various explanans, showing that the three authors agreed on two distinctive methodological features: the exclusion of any causal commitment to psychology when explaining individual choice and the mandate to test (...) the truth of demand theory on aggregate data by statistical means. However, I also contend, from an epistemological point of view, that the truth of demand theory was conceived of in three different ways by our authors. Inspired by Poincaré, Pareto assumed that many different theories could account for the same data on individual choice, coming close to a kind of conventionalism -though I prefer to refer to this position as theoreticism. Moore was himself akin to Pearson's approach, which could be named descriptivist insofar as it resolved scientific laws into statistical descriptions of the data. Finally, Schultz tried to reconcile both approaches in an adequationist stance with no success, as we shall see. (shrink)

Until quite recently, some economic methodologists (particularly, those who began their careers in the late 1970s) were of the opinion that Karl Popper was misguided about economics. Some others claimed that Popper said little about economics. Yet, many economics students who began their appreciation of Popper after reading his Open Society and Its Enemies have quickly realized how easy that book is to understand because it is a generalization of neoclassical economics in terms of both methodological individualism and situational analysis. (...) While today it might be easy to complain that basing one's understanding of Popper on neoclassical economics leads to a narrow and useless appreciation of Popper, this too is misleading. The problem is not neoclassical economics but neoclassical economists. After all, Popper himself thought the best way to teach economists about his views concerning methodology was to emphasize that his views can easily be understood as a generalization of neoclassical economics. (shrink)

In this paper I study how the theoretical categories of consumption theory were used by Milton Friedman in order to classify empirical data and obtain predictions. Friedman advocated a case by case definition of these categories that traded theoretical coherence for empirical content. I contend that this methodological strategy puts a clear incentive to contest any prediction contrary to our interest: it can always be argued that these predictions rest on a wrong classification of data. My conjecture is that this (...) methodological strategy can contribute to explain why Friedman’s predictions never generated the consensus he expected among his peers. (shrink)

In this paper I explore a positivist methodological tradition in early demand theory, as exemplified by several common traits that I draw from the works of V. Pareto, H. L. Moore and H. Schultz. Assuming a current approach to explanation in the social sciences, I will discuss the building of their various explanans, showing that the three authors agreed on two distinctive methodological features: the exclusion of any causal commitment to psychology when explaining individual choice and the mandate to test (...) the truth of demand theory on aggregate data by statistical means. However, I also contend, from an epistemological point of view, that the truth of demand theory was conceived of in three different ways by our authors. Inspired by Poincaré, Pareto assumed that many different theories could account for the same data on individual choice, coming close to a kind of conventionalism -though I prefer to refer to this position as theoreticism. Moore was himself akin to Pearson's approach, which could be named descriptivist insofar as it resolved scientific laws into statistical descriptions of the data. Finally, Schultz tried to reconcile both approaches in an adequationist stance with no success, as we shall see. (shrink)