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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 1110
983209 Lawrence A Boland 1982
First published by George Allen and Unwin 1982 and reprinted 1984
The Foundations of This version reset and reprinted at Simon Fraser University 1992 and publishedon internet 1998
Economic MethodAll rights reserved No part of this book may be reprinted orreproduced or utilized in any form or by any electronicmechanical or other means now known or hereafterinvented including photcopying and recording or in anyinformation storage or retrieval system without permission in
LAWRENCE A BOLAND writing from the author
Simon Fraser University Burnaby British Columbia Canada
Publication data for 1982 edition
British Library Cataloguing in Publication Data
Boland Lawrence AThe foundations of economic method1 EconomicsndashMethodologyI Title33001rsquo8 HB 131
ISBN 0-04-330329-5 (hardcover)ISBN 0-04-330328-3 (paperback)
Library of Congress Cataloguing in Publication Data
Boland Lawrence AFirst published byThe foundations of economic method Bibliography pGEORGE ALLEN amp UNWINIncludes indexLondon Boston and Sydney1 EconomicsndashMethodology I TitleHB131B64 330072 82-4100
ISBN 0-04-330329-5 (hardcover)983209 Lawrence A Boland 1982 1992 1998ISBN 0-04-330328-3 (paperback)
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 2110
TO MY FAMILY
Contents Brenna Alana and Irene
Acknowledgements page v
Preface vi
Introduction Understanding the Methodology of Economics 1
Part I THE lsquoHIDDEN AGENDArsquo OF
NEOCLASSICALECONOMICS
1 The Problem of Induction vs the Problem
with Induction 13 2 The Explanatory Problem of Individualism 27
Part II METHODOLOGY IN NEOCLASSICAL
ECONOMIC THEORY
3 Psychologism vs Disequilibrium Models 47
4 Expectations and Theories of
Knowledge 66
5 The lsquoNecessityrsquo of Microfoundations for
Macroeconomics 79
6 Time and Economic Theory 95Part III CONVENTIONALIST METHODOLOGY
IN ECONOMICS
7 Positive Economics as Optimistic
Conventionalism 115
8 Analytical Theory as Defeatist
Conventionalism 129
9 Instrumentalism as a Rejection of
Conventionalism 141
Part IV THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
10 Contemporary Methodology vs Popperrsquos
Philosophy of Science 155
11 Putting Popper on the Agenda 174
12 Problem-Dependent Methodology 188
Bibliography 197
Names Index 205
Subject Index 207
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
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7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
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Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
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THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
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Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 2110
TO MY FAMILY
Contents Brenna Alana and Irene
Acknowledgements page v
Preface vi
Introduction Understanding the Methodology of Economics 1
Part I THE lsquoHIDDEN AGENDArsquo OF
NEOCLASSICALECONOMICS
1 The Problem of Induction vs the Problem
with Induction 13 2 The Explanatory Problem of Individualism 27
Part II METHODOLOGY IN NEOCLASSICAL
ECONOMIC THEORY
3 Psychologism vs Disequilibrium Models 47
4 Expectations and Theories of
Knowledge 66
5 The lsquoNecessityrsquo of Microfoundations for
Macroeconomics 79
6 Time and Economic Theory 95Part III CONVENTIONALIST METHODOLOGY
IN ECONOMICS
7 Positive Economics as Optimistic
Conventionalism 115
8 Analytical Theory as Defeatist
Conventionalism 129
9 Instrumentalism as a Rejection of
Conventionalism 141
Part IV THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
10 Contemporary Methodology vs Popperrsquos
Philosophy of Science 155
11 Putting Popper on the Agenda 174
12 Problem-Dependent Methodology 188
Bibliography 197
Names Index 205
Subject Index 207
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
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PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
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Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 9110
PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 9110
PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 8110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 9110
PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 9110
PART I
THE lsquoHIDDEN AGENDArsquo OF NEOCLASSICAL ECONOMICS
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 12110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 10110
983209 Lawrence A Boland
1The Problem of Induction vs theProblem with Induction
Scientists never lsquoexplainrsquo any behavior by theory or by anyother hook Every description that is superseded by a lsquodeeperexplanationrsquo turns out upon careful examination to have beenreplaced by still another description albeit possibly a moreuseful description that covers and illuminates a wider area Ican illustrate by what everyone will agree is the single mostsuccessful lsquotheoryrsquo of all time I refer to Newtonrsquos theory of universal gravitation
Paul Samuelson [1964]
All theory depends on assumptions which are not quite trueThat is what makes it theory
Robert Solow [1956]
Some Background
The Problem of Induction
Since the time when Adam Smithrsquos friend David Hume observed thatthere was no logical justification for the common belief that much of our
empirical knowledge was based on inductive proofs [Hume 1739Russell 1945] methodologists and philosophers have been plagued withwhat they call the lsquoProblem of Inductionrsquo The paradigmatic instance of the Problem of Induction is the realization that we cannot provide aninductive proof that lsquothe sun will rise tomorrowrsquo This leads many of usto ask lsquoSo how do we know that the sun will rise tomorrowrsquo If it isimpossible to provide a proof then presumably we would have to admitthat we do not know Several writers have recently claimed to havesolved this famous problem [Popper 1972 Hollis and Nell 1975] ndashwhich is quite surprising since it is impossible to solve Nevertheless
what it is and how it is either lsquosolvedrsquo or circumvented is fundamental tounderstanding all contemporary methodological discussions
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 12110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 13110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 11110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 12110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 13110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 14110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 15110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 12110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 13110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 14110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 15110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 13110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 14110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 15110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 14110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 15110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 15110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 16110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 17110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 18110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 19110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 20110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 21110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 22110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 23110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 24110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 25110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 26110
PART II
METHODOLOGY IN NEOCLASSICAL ECONOMIC THEORY
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 27110
983209 Lawrence A Boland
3Psychologism vsDisequilibrium Models
it really is assumed that what you see when you look outthe window is an economy in ordinary general equilibrium
This view has obvious (and intended) affinities tonineteenth-century economic thought Sayrsquos Law and allthat Like that tradition the new equilibrium school faces abasic problem how can it account for the lsquoobviousrsquo large-scale divergences from equilibrium that we think we seeespecially in prolonged depressions
Robert Solow [1979 p 341]
Every explanation of economic crises must include theassumption that entrepreneurs have committed errors But themere fact that entrepreneurs do make errors can hardly beregarded as a sufficient explanation of crises Erroneousdispositions which lead to losses all round will appearprobable only if we can show why entrepreneurs should allsimultaneously make mistakes in the same direction Theexplanation that this is just due to a kind of psychologicalinfection or that for any other reason most entrepreneursshould commit the same avoidable errors of judgement does
not carry much conviction It seems however more likelythat they may all be equally misled by following guides orsymptoms which as a rule prove reliable Or speaking moreconcretely it may be that the prices existing when they maketheir decisions and on which they had to base their viewsabout the future have created expectations which mustnecessarily be disappointed In this case we might have todistinguish between what we may call justified errors causedby the price system and sheer errors about the course of external events
Friedrich Hayek [193339]
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 28110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
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94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 29110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 30110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 31110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 32110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 33110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 70110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 90110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 91110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 92110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 93110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 94110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 95110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 101110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 103110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 104110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 105110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 34110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 53110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 54110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 56110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 57110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 58110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 67110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 68110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 69110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 71110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 72110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 74110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 75110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 76110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 77110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 78110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 89110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 96110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 97110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 98110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 99110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 100110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 102110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 106110
204 THE FOUNDATIONS OF ECONOMIC METHOD
Weisskopf W [1979] lsquoThe method is the idealogy from a Newtonian to aHeisenbergian paradigm in economicsrsquo Journal of Economic Issues 13 869-84
Weintraub E [1977] lsquoThe microfoundations of macroeconomics a criticalsurveyrsquo Journal of Economic Literature 15 1-23
Weintraub E [1979] Microfoundations (Cambridge Cambridge Univ Press)Wisdom J [1963] lsquoThe refutability of irrefutable lawsrsquo British Journal for the
Philosophy of Science 13 303-6Wong S [1973] lsquoThe F-twist and the methodology of Paul Samuelsonrsquo
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 107110
Wong S [1973] The F twist and the methodology of Paul Samuelson American Economic Review 63 312-25
Wong S [1978] The Foundations of Paul Samuelsonrsquos Revealed PreferenceTheory (London Routledge amp Kegan Paul)
983209 Lawrence A Boland
Names Index
Agassi J 6 14 24ndash5 29ndash30 32 36 59 165 171ndash2 184 193 195ndash6 198ndash989 116 158ndash9 166 168 170 173 197 202
Albert H 1 5 28 197Alchian A 7 54 115 197 Gardiner M 25 199
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 108110
Alchian A 7 54 115 197 Gardiner M 25 199Allen RGD 8 200 Gellner E 174 199Archibald CG 21 197 203 GeorgescundashRoegen N 102 199Arrow K 6 31 50ndash2 101 132 197 Gordon D 51 86 102 199
Grossman H 101 197Barro R 101 197 Grossman S 199Bartley W 23 170 197Baumol W 86 197 Haavelmo T 149 200Becker G 7 34 99ndash100 106 115 197 Hahn F 52 200
203 Hanson N 19 130 200Bennett R 127 198 Hattiangadi J 171 200Blaug M 5 15 28ndash9 32 40ndash1 48 90 Hayek F 28 47 58 64 67ndash8 95 105ndash6
155 162 164ndash5 169 171ndash3 193 195 169 178 180ndash1 184ndash5 196 198 200198 Hearnshaw LS 43 200
Bohm-Bawerk E 99ndash100 106 198 Hemple C 23 25 200Boland L 8 18 21ndash2 24 31ndash2 38 50 Hicks J 8 37 80ndash2 84 95ndash7 99ndash100
52 74 90 97ndash8 100ndash1 103ndash4 111 105 107ndash11 160 177ndash8 200119ndash22 132 135ndash6 142ndash3 149ndash52 Hirshleifer J 70 181 200170ndash1 173 178 181 183ndash4 198 202 Hollis M 13 15 137 200
Buchanan J 51 198 Hughes R 130 200Hume D 13 15ndash16 24 37 108 142 149
Caldwell B 21 150 199 203 200Chamberlin 61 197 199 Hutchison T 23 200Chipman J 8 199 Hynes A 51 199Clower R 7 51 80ndash1 92ndash3 199Coase R 59 63 163 199 Jarvie I 34 200Coddington A 17 199
Kaldor N 100 200Davidson P 106 199 Kamin LJ 43 200Davis L 51 199 Keynes JM 79ndash84 88ndash94 96 107ndash10Debreu G 99 199 198ndash200Devany A 64 199 Keynes JN 142 151Dingle M 163 199 Klein L 90 201
Dorfman R 90 199 Koopmans T 51ndash2 86ndash7 99 129 131Duhem P 15 142 199 148ndash9 155 158 163 201
Kuhn T 7 35 132 158 161 165 173Eatwell J 57 202 201Eddington A 15 142 199Einstein A 1 189 199 Lachmann L 105 201
Lakatos I 7 90 151ndash2 165 173 201Frazer W 171 198 Lancaster K 39 201Friedman B 66ndash7 76 199 Latsis S 9 17 109 158 201Friedman M 21 126 141ndash6 148ndash52 156 Leibenstein H 7 62 201
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 109110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 110110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 35110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 36110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 37110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 38110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 39110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 40110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 41110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 42110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 43110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 44110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 45110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 46110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 47110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 48110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 49110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 50110
94 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 51110
expectations concerning the future and those expectations cannot beinductively proven hence decision-makers must make mistakes Thisview has been admirably developed by George Shackle [eg 1972]
We see then that Keynes accepted both the psychologism and the
6Inductivism upon which neoclassical theory is founded Some of hisdefenders may say that this is all the better because he was able to refuteneoclassical theory on its own terms But to criticize neoclassicaleconomics by basing the critique on the logical consequences of accepting psychologism and Inductivism presumes that psychologism Time and Economic Theoryand Inductivism are necessary for lsquorationalrsquo decision-making We willargue below that neither is necessary hence the matter of the success of
economic problems arise always and only in consequence of the Keynesian revolution is still an open question change [T]he economic problem of society is mainly one
of rapid adaptation to changes in the particular circumstances
of time and placeFriedrich Hayek [194548 pp 82-3]
Economics is concerned with decisions decisions come inas the intermediate stage in most of its causal processes Theimmediate cause of an economic effect is nearly always adecision by someone or it may be the combination of decisions that were made by different people But it is notenough in economic analysis to refer to the decision we arealso concerned with the reasons for the decision the causesof the decision
All causative analysis depends on theory If we think thedecisions to be obvious that can only mean that we aretaking the theory for granted
John Hicks [1979 pp 88 67]
Often in the writings of economists the words lsquodynamicrsquo andlsquostaticrsquo are used as nothing more than synonyms for good andbad realistic and unrealistic simple and complex We damnanother manrsquos theory by terming it static and advertise ourown by calling it dynamic
Paul Samuelson [194765 p 311]
1Time in Economics vs Economics in Time
For many it must seem obvious that any discussion of the need toexplain any disequilibrium must also entail the need to explain thedynamics of such an economy since by definition disequilibriumimplies changes over time But not much progress has been madetowards a development of a neoclassical theory of a dynamic economy
The reason according to some critics of neoclassical economics partic
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 52110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 55110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 59110
PART III
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 60110
PART III
CONVENTIONALIST METHODOLOGY IN ECONOMICS
983209 Lawrence A Boland
7
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 61110
7
Positive Economics asOptimistic Conventionalism
The venerable admonition not to quarrel over tastes iscommonly interpreted as advice to terminate a dispute when
it has been resolved into a difference of taste presumablybecause there is no further room for rational persuasionTastes are the unchallenged axioms of a manrsquos behavior
On the traditional view an explanation of economicphenomena that reaches a difference in tastes between peopleor times is the terminus of the argument On our preferredinterpretation one never reaches this impasse the economistcontinues to search for differences in prices or incomes toexplain any difference or changes in behavior
George Stigler and Gary Becker [1977 p 76]
Attacking any theory is easy enough since none is perfectBut the wide class of empirical observation that is explainedby economic theory should caution one against sweeping thattheory aside and setting up new ad hoc theories to explainonly or primarily those events the standard theory will notexplain What is wanted is a generalization of economictheory to obtain an expanded scope of validity withouteliminating any (or lsquotoo muchrsquo) of the class of events forwhich it already is valid
Armen Alchian [1965]
To abandon neoclassical theory is to abandon economics as ascience
Douglass C North [1978]
Our discussions in the previous six chapters have centered on the hiddenagenda of neoclassical economic theory our evidence was the nature of
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 62110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 63110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 64110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 65110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 66110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 73110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 79110
152 THE FOUNDATIONS OF ECONOMIC METHOD 983209 Lawrence A Boland
Moreover as we have shown [Boland 1979a] Lakatos is wrongInstrumentalism on its own terms is devoid of the alleged elementarylogical errors
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 80110
Some Words of Caution
Now before one jumps to the conclusion that the real choice is betweenInstrumentalism (ie Friedmanrsquos methodology) and Conventionalism(ie the methodology of Samuelson or Lucas) and worse that if onerejects Conventionalism one must then embrace Instrumentalism for allof economics let us add some further advice Instrumentalism is alwayslimited to short-run practical problems If one is looking for a moreuniversal lasting understanding of the workings of the economy ndash that
is a true theory of economics ndash then Instrumentalism will never dosince it ignores the truth of theories Of course Conventionalism failshere too since it denies any truth status to theories If a true theory of theeconomy is our objective then we will just have to look beyond thedispute over methodology between Friedmanrsquos Instrumentalism and theConventionalism of Samuelson or Lucas
PART IV
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 81110
THE FOLLY OF AN ALL-PURPOSE METHODOLOGY
983209 Lawrence A Boland
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 82110
10Contemporary Methodology vsPopperrsquos Philosophy of Science
No assumptions about economic behavior are absolutely trueand no theoretical conclusions are valid for all times and
places but would anyone seriously deny that in the matter of techniques and analytical constructs there has been progressin economics
Mark Blaug [1978 p 3]
we look upon economic theory as a sequence of conceptualmodels that seek to express in simplified form differentaspects of an always more complicated reality
Tjalling Koopmans [1957 p 142]
progress in a discipline is better described by a sequence of
theories or models not by a study of individual theories Alsquoresearch programrsquo is the organizing conception to describeit is to characterize the various sequences of models that havefamily resemblance
E Roy Weintraub [1979 p 15]
So far we have examined the effects of the hidden agenda on neoclassi-cal theoretical problems and research programs now we wish to ex-amine its effect on the neoclassical views of methodology Generallyspeaking methodology is rarely discussed in the leading journals We
need to examine this empirical fact before we examine the more subtlequestions of lsquorealismrsquo lsquousefulnessrsquo and the meaning of a lsquosequence of modelsrsquo
Methodology and the Hidden Agenda
Methodology is not considered an urgent topic for neoclassical researchprograms simply because methodology has historically been concernedonly with the nature of the items on the hidden agenda Being concerned
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 83110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 84110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 85110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 86110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 87110
8212019 Boland the Foundations of Economic Method
httpslidepdfcomreaderfullboland-the-foundations-of-economic-method 88110
8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
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8212019 Boland the Foundations of Economic Method
https