I have argued not that economics has no predictive content, but that it is limited, or at least has so far been limited to generic predictions. Now this is an important kind of prediction, and almost certainly a necessary preliminary to specific or quantitative predictions. But if the sketch of an important episode in the twentieth century history of the subject I have given is both correct and representative, then economics seems pretty well stuck at the level of generic prediction. (...) And at least some influential economists and philosophers of economics seem well satisfied with stopping at the point of generic prediction. Or at least they give no other reason than its power to produce such predictions as a justification for the character of economic theory. But this leads to the question that is the title of my paper, is generic prediction enough? (shrink)

“Utility,” in plain English, means usefulness. In Australia, a ute is a useful vehicle. Jeremy Bentham specialized the meaning to a particular sort of usefulness. “By utility,” he said, “is meant that property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness or to prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered”. The “principle of utility” is the principle that actions are to be judged by their usefulness (...) in this sense: their tendency to produce benefit, advantage, pleasure, good, or happiness. When John Stuart Mill spoke of the “perfectly just conception of Utility or Happiness, considered as the directive rule of human conduct,” he was using “Utility” as a short name for this principle. “The greatest happiness principle” was another name for it. People who subscribed to this principle came to be known as utilitarians. (shrink)

This essay attempts to distinguish the pressing issues for economists and economic methodologists concerning realism in economics from those issues that are of comparatively slight importance. In particular I shall argue that issues concerning the goals of science are of considerable interest in economics, unlike issues concerning the evidence for claims about unobservables, which have comparatively little relevance. In making this argument, this essay raises doubts about the two programs in contemporary economic methodology that raise the banner of realism. In (...) particular I argue that the banner makes it more difficult to relate the concerns of those who wave it to those of other methodologists. Although this essay argues that many of the debates in this century between scientific realists and their opponents are not relevant to economics, it does not attack scientific realism, and it does not urge economists or economic methodologists to reject it. (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)

Das Problem, unter welchen Bedingungen eine Hypothese oder Theorienmodifikation als methodologisch akzeptabel gilt, wird in der wissenschaftstheoretischen Tradition als die Frage des Ad-Hoc-Charakters von Hypothesen diskutiert. Das gleichartige Problem tritt aber auch in Lakatos' Methodologie wissenschaftlicher Forschungsprogramme auf, welche von methodologisch zulässigen Theorienänderungen die Vorhersage 'neuer Tatsachen' verlangt. Über diesen Begriff der neuen Tatsache und damit der Adäquatheitsbedingungen für wissenschaftliche Erklärungen hat sich eine weitgefächerte Debatte entsponnen. In diesem Papier wird der Versuch unternommen, die Forderung der unabhängigen Testbarkeit einer Hypothese, (...) welche im Rahmen der Diskussion des Ad-hoc-Charakters von Hypothesen eine wichtige Rolle spielt, auch für die Frage der Spezifizierung von 'neuen Tatsachen' fruchtbar zu machen. Ich argumentiere zugunsten der Bedingung, daß eine Hypothese als methodologisch akzeptabel gelten sollte, wenn sie zumindest zwei unabhängige Tatsachen erklärt. Ein derartiger Ansatz verlangt die Kennzeichnung dessen, was als 'eine Tatsache' zu gelten hat. Die Schwierigkeit einer derartigen Kennzeichnung ist ein notorisches Problem jedes Kriteriums, das auf unabhängige Testbarkeit zielt. Eine Klärung dieses Problems wird über das Konzept der empirischen Generalisierung versucht. Als 'eine Tatsache' im methodologischen Sinne gilt demnach ein gesetzmäßiger Zusammenhang zwischen zwei Meßgrößen. Dies erlaubt weiterführend eine Klärung des Problems, was methodologisch als 'ein Experiment' zu werten ist, d. h. was als Reproduktion desselben und was als andersartiges Experiment gelten soll. Mit Hilfe dieser Klärungen wird unter anderem der Ad-hoc-Charakter der Lorentzschen Kontraktionshypothese sowie das Problem der Gleich- oder Verschiedenartigkeit von Michelson-Morley- und Kennedy-Thorndike-Experiment untersucht. (shrink)

In the standard analysis of economic institutions--which include social conventions, the working rules of an economy, and entitlement regimes --economists invoke the same theories they use when analyzing individual behavior. In this profoundly innovative book, Daniel Bromley challenges these theories, arguing instead for "volitional pragmatism" as a plausible way of thinking about the evolution of economic institutions. Economies are always in the process of becoming. Here is a theory of how they become. Bromley argues that standard economic accounts see institutions (...) as mere constraints on otherwise autonomous individual action. Some approaches to institutional economics--particularly the "new" institutional economics--suggest that economic institutions emerge spontaneously from the voluntary interaction of economic agents as they go about pursuing their best advantage. He suggests that this approach misses the central fact that economic institutions are the explicit and intended result of authoritative agents--legislators, judges, administrative officers, heads of states, village leaders--who volitionally decide upon working rules and entitlement regimes whose very purpose is to induce behaviors that constitute the sufficient reasons for the institutional arrangements they create. Bromley's approach avoids the prescriptive consequentialism of contemporary economics and asks, instead, that we see these emergent and evolving institutions as the reasons for the individual and aggregate behavior their very adoption anticipates. These hoped-for outcomes comprise sufficient reasons for new laws, judicial decrees, and administrative rulings, which then become instrumental to the realization of desired individual behaviors and thus aggregate outcomes. (shrink)

This book was first published in 1984, as the revised edition of a 1979 original. The text is composed of studies in a descending sequence from perfect rationality, through imperfect and problematical rationality, to irrationality. Specifically human rationality is characterized by its capacity to relate strategically to the future, in contrast to the myopic 'gradient climbing' of natural selection. There is trenchant analysis of some of the parallels proposed in this connection between the biological and the social sciences. In the (...) chapter on imperfect rationality the crucial notion is that of 'binding oneself', as Ulysses did before setting out to the Sirens, when weakness of will may prevent us from using our capacity for perfect rationality. The second half of the book deals with rational-actor theory, comparing its logical power and success to rival approaches, and with the varieties of irrationality expressed in contradictory beliefs and desires. (shrink)

There is an increasingly widespread belief, both within and outside the discipline, that modern economics is irrelevant to the understanding of the real world. Economics and Reality traces this irrelevance to the failure of economists to match their methods with their subject, showing that formal, mathematical models are unsuitable to the social realities economists purport to address. Tony Lawson examines the various ways in which mainstream economics is rooted in positivist philosophy and examines the problems this causes. It focuses on (...) human agency, social structure and their interaction and explores how the understanding of this social phenomena can be used to transform the nature of economic practice. Economics and Reality concludes by showing how this newly transformed economics might set about shaping economic policy. (shrink)

The experimental approach in economics is a driving force behind some of the most exciting developments in the field. The 'experimental revolution' was based on a series of bold philosophical premises which have remained until now mostly unexplored. This book provides the first comprehensive analysis and critical discussion of the methodology of experimental economics, written by a philosopher of science with expertise in the field. It outlines the fundamental principles of experimental inference in order to investigate their power, scope and (...) limitations. The author demonstrates that experimental economists have a lot to gain by discussing openly the philosophical principles that guide their work, and that philosophers of science have a lot to learn from their ingenious techniques devised by experimenters in order to tackle difficult scientific problems. (shrink)

Is economics a science? Deidre McCloskey says 'Yes, but'. Yes, economics measures and predicts, but - like other sciences - it uses literary methods too. Economists use stories as geologists do, and metaphors as physicists do. The result is that the sciences, economics among them, must be read as 'rhetoric', in the sense of writing with intent. McCloskey's books, The Rhetoric of Economics and If You're So Smart, have been widely discussed. In Knowledge and Persuasion in Economics he converses with (...) his critics, suggesting that they too can gain from knowing their rhetoric. The humanistic and mathematical approaches to economics, says McCloskey, fit together in a new 'interpretive' economics. Along the way he places economics within the sciences, examines the role of mathematics in the field, replies to critics from the left, right and centre, and shows how economics can again take a leading place in the conversation of humankind. (shrink)

This book is an investigation of the methodological and epistemological foundations of macroeconomic theory, based on an examination of the theories of Keynes and Lucas. It is divided into two parts. In the first Professor Vercelli discusses the methodological issues which lie behind the conflict among different schools of thought in macroeconomics. These issues are central to the current debate not only in many branches of economics, but also in other scientific disciplines. The traditional point of view of science based (...) on equilibrium, stability and determinism has been increasingly challenged by a new point of view in which disequilibrium, instability and uncertainty play a crucial role. This, the author argues, is bound to put macroeconomics in a new, more promising position. In the second part of the book the author compares the two main alternative research programmes in macroeconomics: that outlined by Keynes in his 'General Theory', and that suggested by Lucas, the leader of the new classical economists. (shrink)

This book details the results of the authors' research using laboratory animals to investigate individual choice theory in economics-consumer-demand and labour supply behaviour and choice under uncertainty. The use of laboratory animals provides the opportunity to conduct controlled experiments involving precise and demanding tests of economic theory with rewards and punishments of real consequence. Economic models are compared to psychological and biological choice models along with the results of experiments testing between these competing explanations. Results of animal experiments are used (...) to address questions of social policy importance. (shrink)

The Methodology of Empirical Macroeconomics stakes out a pragmatic middle-ground between traditional, prescriptive economic methodology and recent descriptive methodology. The former is sometimes seen as arrogantly telling economists how to do their work and the latter as irrelevant to their practice. The lectures are built around a case study of a concrete example of macroeconomic analysis. They demonstrate that economic methodology and the philosophy of science offer insights that help to resolve the genuine concerns of macroeconomists. Some examples of questions (...) addressed include: What is the relationship between theoretical models and empirical observations? What is the relevance of macroeconomics to policy? Should macroeconomics be viewed as a special case of microeconomics? What is the place of long-standing philosophical issues in macroeconomics, such as the scope and nature of economic laws, the role of idealizations, methodological individualism, and the problem of causality? (shrink)

This 1993 book discusses the rise of the marginalist conception of the firm in the context of economic thought over the past two centuries, and explains why economists continue to defend a theory with demonstrable shortcomings. Professor Schrader argues that the marginalist view of the firm retains its support not through any comparative advantage in empirical or predictive power, but by virtue of its being a part of the predominant marginalist economic programme. The clear problems that beset the marginalist approach (...) to the firm signal a general dilemma for economic theory as a whole. (shrink)

What is the correct concept behind measures of inflation? Does money cause business activity or is it the other way around? Shall we stimulate growth by raising aggregate demand or rather by lowering taxes and thereby providing incentives to produce? Policy-relevant questions such as these are of immediate and obvious importance to the welfare of societies. The standard approach in dealing with them is to build a model, based on economic theory, answer the question for the model world and then (...) apply the results to economic phenomena outside. Data come in, if at all, only in testing a limited number of the model's consequences. Despite some critical voices, economic methodology too has by and large subscribed to a "theory first" approach to applied economics. Error in Economics systematically develops an alternative to the theory-based orthodoxy. It places the methodical study of evidence at the centre of the scientific enterprise and thus provides a foundation for a methodology of evidence-based economics. But the book does not stop at the truism that claims should be based on the best available evidence. Rather, detailed studies in the areas of measurement, causal inference and policy analysis show what it means for a claim to be evidence-based in the context of a concrete case. The examples discussed concern topics as diverse as consumer price indices, radio spectrum auctions, the transmission mechanism, natural experiments on minimum wages and the evaluation of counterfactuals for policy. Error in Economics is essential reading for economic methodologists, philosophers of science and anyone interested in how claims about socio-economic matters are validated. (shrink)

The main theme of this book is the methodological problem of rationality in economic thought. The author investigates the different interpretations of this problem advanced by major figures in the history of economic thought. The book examines the history and rationality of the 'theory of value' from Adam Smith to Alfred Marshall and attempts to understand these arguments and criticisms within a general methodological vein. It goes on to provide a complete historical account of the ideas and arguments on value (...) propounded by Smith, Ricardo, Marx, Jevons, Walras and Marshall as well as by more recent scholars such as Sraffa and Debreu and interprets their methodological differences. The author proposes a novel 'pragmatic-pluralist' methodological interpretation which borrows and creatively synthesizes ideas from many sources, including Wittgenstein (language-games), Searle (performatives), Habermas (communicative reason), hermeneutics, Marx and the pragmatic tradition. Rationality in Economic Thought will be of interest to students and scholars of the history of economic thought, economic methodology and the philosophy of the social sciences. (shrink)

This volume is concerned with the concept of rationality and the interrelations between rationality, belief and desire in the explanation and evaluation of ...

What is the score card for economics at the start of the new millennium? While there are many different schools of economic thought, it is the neo-classical school, with its alleged understanding and simplistic advocacy of the market, that has become equated in the public mind with economics. This book shows that virtually every aspect of conventional neo-classical economics' thinking is intellectually unsound. Steve Keen draws on an impressive array of advanced critical thinking. He constitutes a profound critique of the (...) principle concepts, theories, and methodologies of the mainstream discipline. Keen raises grave doubts about economics' pretensions to established scientific status and its reliability as a guide to understanding the real world of economic life and its policy-making. (shrink)

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This work shows that an econometrician with the proper understanding of economic theory and the right kind of questions can gain knowledge about characteristic features of the social world. It addresses varied topics in both classical and Bayesian econometrics.

In this study, Robert H. Nelson explores the genesis, the prophets, the prophesies, and the tenets of what he sees as a religion of economics that has come into full blossom in latter-day America. Nelson does not see &"theology&" as a bad word, and his examination of the theology underlying Samuelsonian and Chicagoan economics is not a put-down. It is a way of seeing the rhetoric of fundamental belief&—what has been called &"vision.&".

This book explores aspects of science from an economic point of view. The author begins with economic models of misconduct in science, moving on to discuss other important issues, including market failure and the market place of ideas.

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)