Six central methodological problems Although the different branches and schools of economics raise a wide variety of epistemological and ontological issues concerning economics, six problems have been central to methodological reflection in this philosophical sense concerning economics: 2. Those who have wondered whether social sciences must differ fundamentally from the natural sciences seem to have been concerned mainly with three questions: i Are there fundamental differences between the structure or concepts of theories and explanations in the natural and social sciences?
Influential approaches to economic methodology The past half century has witnessed the emergence of a large literature devoted to economic methodology. Here is a list of three of the many areas of current interest: 1. Rational choice theory Insofar as economics explains and predicts phenomena as consequences of individual choices, which are themselves explained in terms of alleged reasons, it must depict agents as to some extent rational. P if P then Q Q Individual 1 true true true Individual 2 false true false Individual 3 true false false Society true true false The judgments of each of the individuals are consistent with the principles of logic, while social judgments violate them.
Economics and ethics As discussed above in Section 2. Conclusions The frontiers between economics and philosophy concerned with methodology, rationality, ethics and normative social and political philosophy are buzzing with activity. Bibliography The following bibliography is not comprehensive. Economic methodology Ackroyd, S. Fleetwood, Alchian, A. Alt, J. Levi, and E. Ostrom eds. Amariglio, J. Cullenberg, D. Ruccio eds. Angyrous, G. Ardalan, K. Ariely, D. Arrow, K. Hahn, Aruka, Y. Auerbach, P. Ayer, A.
Backhouse, R. Hausman, and U. Medema, Fontaine eds. The Unsocial Social Science? Bateman, Balzer, W. Hamminga eds. Philosophy of Economics , Dordrecht: Kluwer-Nijhoff. Bardsley, Nicholas and Robin Cubitt, Barker, D. Kuiper eds.
Introduction: The New Philosophy of Economics
Bateman, B. Baumberger, J. Bear, D. Orr, Becker, G. Beckert, J. Beed, C. Begg, D. Bell, D. Kristol eds. Ben-Ner, A. Putterman eds. Berger, L. Bhaskar, R. Archer, A. Collier, T. Lawson, and A. Norrie eds. Critical Realism , London: Routledge. Billings, D. Binder, C. Heilmann, and J. Vromen, Birks, S. Birner, J. Dissertation, University of Amsterdam. Blaug, M.
The Cambridge Revolution. Success or Failure? Blinder, A. Boehm, S. Is There Progress in Economics? Boettke, P. Coyne, eds. Boland, L. Bonar, J. Boulding, K. Boulier, B. Boumans, M. Davis, Boylan, T. Branas—Garza, P. Cabrales eds. Experimental Economics , 2 volumes, London: Macmillan. Bray, J. Brennan J. Jaworski, Brennan, T. Bronfenbrenner, M.
Broome, J. Brousseau, E. Glachant eds. Brown, Andrew and Steve Fleetwood, Critical Realism and Marxism , London: Routledge. Bruni, L. Brunner, K. Brzezinski, J. Coniglione, R. Kuipers, and L. Nowak eds. Buchanan, J. What Should Economists Do? Indianapolis: Liberty Press. Vanberg, Buechner, M. Cairnes, J. Kelley, Caldwell, B. How Should It Be Practiced? Camerer, C. Loewenstein, and M. Rabin eds. Loewenstein and D. Prelec, Cohen, E. Fehr, P. Glimcher, D.
Laibson, G. Loewenstein, and R. Montague, Kagel and A. Roth eds. Loewenstein eds. Caplin, A. Schotter eds. Carter, M. Maddock, Rational Expectations: Macroeconomics for the s? London: Macmillan. Chipman, J. Martindale ed. Clift, E. Coase, R. Coats, A. Coddington, A. Cohen, I. Daniels, and N. Eyal eds. Colander, D. Klamer, Cole, K.
Cameron, and C. Edwards, What Economists Disagree , 2nd ed. London: Longmans. Coleman, J. Collins, H. Cook, S. Cooter, R. Rappoport, Coyne, C. Storr eds. Crespo, R. Cross, R. Cullenberg, S. Amariglio, and F. Postmodernism, Economics, and Knowledge , London: Routledge. Cyert, R. Grunberg, Pottinger, Danner, P. Cartelier eds. Is Economics Becoming a Hard Science? Davies, William, Davis, J.
Boumans, Wade Hands eds. Marciano, and J. Runde eds. De Alessi, L. Deaton, A. Debreu, G. Theory of Value , New York: Wiley. Dekker, E. Delorme, R. De Marchi, D. Blaug eds. DeVroey, M. Diesing, P. Dietrich, F. List, Dillard, D. Dolan, E. Dolan, Paul and Daniel Kahneman, Dopfer, K. Potts, Dow, S. Dugger, W. Durlauf, Steven and Lawrence Blume eds. Dyke, C. Edwards, P. Mahoney, and S. Vincent eds. Eichner, A. Eichner ed. Sharpe, pp. Elster, J. Roemer eds. Engle, R. Hendry, and J. Richard, Engelskirchen, H. Etzioni, A.
The Moral Dimension. Fama, E. Ferber, M. Nelson eds. Fisher, R. Fleetwood, S. Foldvary, F. Fox, G. Frank, R. Frankfurter, G. McGoun eds. Fraser, L. Economic Thought and Language.
- The Boxcar Children Beginning (The Boxcar Children).
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- AI 2016: Advances in Artificial Intelligence: 29th Australasian Joint Conference, Hobart, TAS, Australia, December 5-8, 2016, Proceedings?
Freedman, C. Frey, B. Friedman, M. Rima ed. Fullbrook, E. The Crisis in Economics , London: Routledge. Furubotn, E. Richter eds. Gani, M. Gaus, G. Gay, D. George, D. Gerrard, B. Georgescu-Roegen, N. Geweke, J. Hildenbrand ed. Gibbard, A. Varian, Giocoli, Nicola, Glimcher, P. Foundations of Neuroeconomic Analysis.
New York: Oxford University Press. Camerer, R. Poldrack, and E. Fehr eds. Neuroeconomics , second edition, New York: Academic Press. Gonzalez, W. Gordon, D. Granger, C. Granovetter, M. Grapard, U. Hewitson eds. Green, E. Grossbard-Shechtman, S. Clague eds. Grundberg, E. Guala, F. Gugerty, Mary Kay and Dean Karlan, Gul, F. Pesandorfer, Gurak, H. Gustafsson, B. Knudsen, and U. Haavelmo, T. Hahn, F. Hagedorn, H. Hollis eds. Hall, R. Hitch, Hamminga, B. DeMarchi eds. Idealization in Economics , Amsterdam: Rodopi. Hammond, J. Hands, D.
Mirowski, Harcourt, G. Kriesler eds. Hardt, L. Harrod, R. Hausman, D. Journal of Economic Methodology. The Philosophy of Economics: An Anthology , 3rd. Cambridge: Cambridge University Press. Hausman, J. Hayek, F. Heilbroner, R. Helm, D. Henderson, W. Dudley-Evans, and R. Backhouse eds. Economics and Language , London: Routledge.
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Hendry, D. Econometrics — Alchemy or Science? Herrmann-Pillath, C. Herzog, L. Hey, J. Experiments in Economics , Oxford: Blackwell. Hicks, J.
Allen, Hirsch, A. Hirsch, F. Hirschman, A. Hodgson, B. Hodgson, G. London: University of Chicago Press. Knudsen, Holcombe, R. Holland, J. Holyoak, R. Nisbett, and P. Thagard, Hollis, M. Nell, Hoover, K. Horn, K. Horwitz, S. Hull, D. Hume, D. Rotwein ed. Humphries, J.
The Ultimate Foundation of Economic Science: An Essay on Method
Gender and Economics , Aldershot: Edward Elgar. Hutchison, T. Infante, G. Lecouteux, and R. Sugden, Jacquemet, N. Jacobs, M. Mazzucato eds. Jalladeau, J. Janssen, M. Tan, Jarvie, I. Zamora-Bonilla, Jensen, M. Meckling, Jespersen, J. Jevons, W. Johnson, J. Nowak, P. But this, too, is logically meaningless so long as differentiation of product is, as claimed, essential and not to be put aside. What does it mean to say that the cost and demand curves of a firm producing bulldozers are identical with those of a firm producing hairpins? And if it is meaningless for bulldozers and hairpins, it is meaningless also for two brands of toothpaste — so long as it is insisted that the difference between the two brands is fundamentally important.
The theory of monopolistic competition offers no tools for the analysis of an industry and so no stopping place between the firm at one extreme and general equilibrium at the other. It is therefore incompetent to contribute to the analysis of a host of important problems: the one extreme is too narrow to be of great interest; the other, too broad to permit meaningful generalisations.
Economics as a positive science is a body of tentatively accepted generalisations about economic phenomena that can be used to predict the consequences of changes in circumstances. Progress in expanding this body of generalisations, strengthening our confidence in their validity, and improving the accuracy of the predictions they yield is hindered not only by the limitations of human ability that impede all search for knowledge but also by obstacles that are especially important for the social sciences in general and economics in particular, though by no means peculiar to them.
Familiarity with the subject matter of economics breeds contempt for special knowledge about it. The importance of its subject matter to everyday life and to major issues of public policy impedes objectivity and promotes confusion between scientific analysis and normative judgment. The necessity of relying on uncontrolled experience rather than on controlled experiment makes it difficult to produce dramatic and clear-cut evidence to justify the acceptance of tentative hypotheses. Reliance on uncontrolled experience does not affect the fundamental methodological principle that a hypothesis can be tested only by the conformity of its implications or predictions with observable phenomena; but it does render the task of testing hypotheses more difficult and gives greater scope for confusion about the methodological principles involved.
More than other scientists, social scientists need to be self-conscious about their methodology. A meaningful scientific hypothesis or theory typically asserts that certain forces are, and other forces are not, important in understanding a particular class of phenomena. It is frequently convenient to present such a hypothesis by stating that the phenomena it is desired to predict behave in the world of observation as if they occurred in a hypothetical and highly simplified world containing only the forces that the hypothesis asserts to be important.
The choice among such alternative assumptions is made on the grounds of the resulting economy, clarity, and precision in presenting the hypothesis; their capacity to bring indirect evidence to bear on the validity of the hypothesis by suggesting some of its implications that can be readily checked with observation or by bringing out its connection with other hypotheses dealing with related phenomena; and similar considerations. Yet the belief that a theory can be tested by the realism of its assumptions independently of the accuracy of its predictions is widespread and the source of much of the perennial criticism of economic theory as unrealistic.
Such criticism is largely irrelevant, and, in consequence, most attempts to reform economic theory that it has stimulated have been unsuccessful. The irrelevance of so much criticism of economic theory does not of course imply that existing economic theory deserves any high degree of confidence. These criticisms may miss the target, yet there may be a target for criticism. In a trivial sense, of course, there obviously is. Any theory is necessarily provisional and subject to change with the advance of knowledge.
A comprehensive evaluation of the present state of positive economics, summary of the evidence bearing on its validity, and assessment of the relative confidence that each part deserves is clearly a task for a treatise or a set of treatises, if it be possible at all, not for a brief paper on methodology. About all that is possible here is the cursory expression of a personal view. Existing relative price theory, which is designed to explain the allocation of resources among alternative ends and the division of the product among the co-operating resources and which reached almost its present form in Marshall's Principles of Economics, seems to me both extremely fruitful and deserving of much confidence for the kind of economic system that characterises Western nations.
Despite the appearance of considerable controversy, this is true equally of existing static monetary theory, which is designed to explain the structural or secular level of absolute prices, aggregate output, and other variables for the economy as a whole, and which has had a form of the quantity theory of money as its basic core in all of its major variants from David Hume to the Cambridge School to Irving Fisher to John Maynard Keynes.
The weakest and least satisfactory part of current economic theory seems to me to be in the field of monetary dynamics, which is concerned with the process of adaptation of the economy as a whole to changes in conditions and so with short-period fluctuations in aggregate activity.
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Of course, even in relative price and static monetary theory there is enormous room for extending the scope and improving the accuracy of existing theory. For that reason the discussion is often openly normative, tinged with the conviction that social discourse is more than costs and benefits and that economics cannot be fully evaluated by the methods - economic methods - that are the subject of the evaluation.
These essays could not have been written without considerable encouragement and help from colleagues and friends. I am very much in their debt.
The Limits of Economic Science - Essays on Methodology | R.B. McKenzie | Springer