Falsificationism about Economics

David Hume’s Treatise on Human Nature famously fell `deadborn from the press’ because it was too far ahead of its time. Basu’s book is one of a number published in recent years that suggest we are at last ready to put its precepts into action.1 Modern game theory provides a framework that makes Hume’s insights genuinely applicable, and I totaly agree with Basu that this is not only the right way forward, but that it now looksincreasingly likely that this is (...) the road that wil actualy be folowed ± not only in political economy, but across the board in the social sciences. (shrink)

The main thesis of this paper is that the empirical success of Keynesianism shows it to be scientific. Keynesianism here refers not to a specific theory, but to a paradigm. It is argued that Kuhn's notion of paradigm can be applied to economics, but, in contrast to the natural sciences, in economics there are always competing paradigms. The principal ones in contemporary economics are the Neoclassical, Keynesian and Marxist. To investigate whether the Keynesian paradigm is scientific we need a criterion (...) for the scientificity of a paradigm. The paper first considers one approach to this problem due to Kant, but this is rejected as incorrect and called 'the Kantian fallacy'. Another approach is then put forward: 'the empirical confirmation principle', and reasons are given for accepting this as correct. Using this principle, it is then argued that that Keynesianism is indeed scientific. (shrink)

Social science employs teleological explanations which depend upon the rationality principle, according to which people exhibit instrumental rationality. Popper points out that people also exhibit critical rationality, the tendency to stand back from, and to question or criticise, their views. I explain how our critical rationality impugns the explanatory value of the rationality principle and thereby threatens the very possibility of social science. I discuss the relationship between instrumental and critical rationality and show how we can reconcile our critical rationality (...) with the possibility of social science if we invoke Popper’s conception of limited rationality and his indeterminism. (shrink)

Abstract: This paper examines Mark Blaug's position on the normative character of Paretian welfare economics: in general, and specifically with respect to his debate with Pieter Hennipman over this question during the 1990s. The paper also clarifies some of the confusions that emerged within the context of this debate, and closes by providing some additional arguments supporting Blaug's position that he himself did not provide.

Mark Blaug’s normative methodology of economics is an attempt to articulate certain intuitions about how economic science could be improved by making it more “realistic”. I discuss two such articulations, one in terms of falsificationist principles, the other in terms of an alleged trade-off between relevance and mathematical rigour. My conclusion is that Blaug’s methodology is itself unrealistic, both descriptively and normatively. His (well intended) methodological prescriptions for the improvement of economics are not based on a systematic, consistent, descriptively adequate, (...) and normatively viable account. I suggest that Blaug’s intuitions can be developed into a more realistic account by incorporating the analysis of two further topics: economic modelling and the institutions of academic research. (shrink)

Milton Friedman’s 1953 essay created controversy and consternation amongst economists. It provided a prescription, based on empirically generated predictive success, of how to do economics, yet many saw it as a concession of the search for truth and theoretical beauty within the discipline. This article reviews a 50th anniversary festschrift devoted to views of the essay. The purpose of the volume is to provide today’s reader with the essay, responses, and a guide to interpreting it. The volume is selective and (...) several contributors have their own agendas, but the feeling of tumult the essay still engenders is nicely conveyed. (shrink)

logical failure or contradiction by a fact. Intuition alone can decide between two competing theories agreeing with the facts. (ibid. ...

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)

This book brings together ten previously published essays on the philosophy of economics and economic methodology. The general theme is the application of Karl Popper's philosophy of science to economics -- not only by Popper himself but also by other members of the "Popperian school." There are three major issues that surface repeatedly: the applicability of Popper's falsificationist philosophy of science; the applicability of I. Lakatos's "methodology of scientific research programs" to economics; and the question of Popper's "situational analysis" approach (...) to social science. (shrink)

Economics today cannot predict the likely outcome of specific events any better than it could in the time of Adam Smith. This is Alexander Rosenberg's controversial challenge to the scientific status of economics. Rosenberg explains that the defining characteristic of any science is predictive improvability--the capacity to create more precise forecasts by evaluating the success of earlier predictions--and he forcefully argues that because economics has not been able to increase its predictive power for over two centuries, it is not a (...) science. (shrink)

As made manifest by Clower's comments on their “science fiction” nature, general equilibrium theories present such peculiar and puzzling features that the methodologist must perforce seek some specific methodological accommodation for this part of economic theory. The role played by such theories in contemporary economics is so fundamental that the impossibility of appraising them by means of any version of falsificationism, and their patent lack of empirical content if approached with the conceptual devices of the methodology of scientific research programs, (...) have prompted several scholars interested in the methodology of economics to search for a reasonable way out. (shrink)

A rejoinder to commentators of the paper by P. Mongin, "Le réalisme des hypothèses et la "Partial Interpretation View"", Philosophy of the Social Sciences, 18, 1988, p. 281-325. (This paper is listed and made available by Philpapers.).

The article discusses Friedman's classic claim that economics can be based on irrealistic assumptions. It exploits Samuelson's distinction between two "F-twists" (that is, "it is an advantage for an economic theory to use irrealistic assumptions" vs "the more irrealistic the assumptions, the better the economic theory"), as well as Nagel's distinction between three philosophy-of-science construals of the basic claim. On examination, only one of Nagel's construals seems promising enough. It involves the neo-positivistic distinction between theoretical and non-theoretical ("observable") terms; so (...) Friedman would in some sense argue for the major role of theoretical terms in economics. The paper uses a model-theoretic apparatus to refine the selected construal and check whether it can be made to support the claim. This inquiry leads to essentially negative results for both F-twists, and the final conclusion is that they are left unsupported. (shrink)

Milton Friedman's famous methodological essay contains, along with much else, some strands that look as though they were taken from the “empirical-scientific” fabric described by Karl Popper. Think, for example, of Friedman's conviction that the way to test a hypothesis is to compare its implications with experience. Or of his more or less explicit espousal of the view that while no amount of facts can ever prove a hypothesis true, a single “fact” may refute it. Or of his assertion that (...) hypotheses are to be accepted only as provisionally true, and then only after repeated efforts to refute them have failed. The appearance of these Popperian ideas is not surprising. (shrink)

Popper's well-known demarcation criterion has often been understood to distinguish statements of empirical science according to their logical form. Implicit in this interpretation of Popper's philosophy is the belief that when the universe of discourse of the empirical scientist is infinite, empirical universal sentences are falsifiable but not verifiable, whereas the converse holds for existential sentences. A remarkable elaboration of this belief is to be found in Watkins's early work on the statements he calls “all-and-some,” such as: “For every metal (...) there is a melting point.” All-and-some statements are both universally and existentially quantified in that order. Watkins argued that AS should be regarded as both nonfalsifiable and nonverifiable, for they partake in the logical fate of both universal and existential statements. This claim is subject to the proviso that the bound variables are “uncircumscribed” ; i.e., that the universe of discourse is infinite. (shrink)

The central argument of this interesting paper is that Popper appears to be inconsistent: on the one hand, he preaches methodological monism-scientific method in the social sciences is identical to scientific method in the natural sciences-and on the other hand he advocates “situational analysis” as the unique method of the social sciences. Situational analysis is nothing but our old neoclassical friend, the rationality principle-individual maximizing behavior subject to constraints-and thus, Popper seems to be saying, neoclassical economics is the only valid (...) kind of social science. (shrink)

Discussions of Karl Popper's falsificationist philosophy of science appear regularly in the recent literature on economic methodology. In this literature, there seem to be two fundamental points of agreement about Popper. First, most economists take Popper's falsificationist method of bold conjecture and severe test to be the correct characterization of scientific conduct in the physical sciences. Second, most economists admit that economic theory fails miserably when judged by these same falsificationist standards. As Latsis states, “the development of economic analysis would (...) look a dismal affair through falsificationist spectacles.”. (shrink)

The paper applies confirmation theory to a famous statement of economics, the law of demand, which says that ceteris paribus, prices and quantities demanded change in opposite directions. Today's economists do not accept the law unless definite restrictions hold, and have shown little interest in deciding whether or not these restrictions were satisfied empirically. However, Hildenbrand (1994) has provided a new derivation of the law of aggregate demand and used this theoretical advance to devise a test that may be the (...) first rigorous one ever performed on the law. The paper accounts for Hildenbrand's and, in less detail, his predecessors' contributions within the philosophical framework of Hempel (1965) and Glymour (1980). Its salient result is that economists have accepted the "consequence condition", and rejected the "converse consequence condition", and thus implicitly adhered to a Hempelian- Glymourian view of confirmation and testability. (shrink)