RH351Rhetoric of Economic Thought

TransparenciesSet 9

Methodological Disputes

Epistomology

• What are the necessary and sufficient conditions of knowledge? What are its sources? What is its structure, and what are its limits?

• How are we to understand the concept of justification? What makes justified beliefs justified? Is justification internal or external to one's own mind?

• Understood more broadly, epistemology is about issues having to do with the creation and dissemination of knowledge in particular areas of inquiry.

Epistemology is that branch of philosophy that concerns the study of knowledge and justified belief. As the study of knowledge, epistemology deals with the following questions:

Stanford Encyclopedia of Philosophy, http://plato.stanford.edu

Philosophy of Science

Positivism (Compte, 1798 – 1857; Durkheim, 1858 – 1917)

• Replacement of metaphysics by the scientific method• Progress through accumulations of “scientific” knowledge

Logical Positivism (Vienna Circle, 1922 – 1936)• Stricter version of positivism; fiercely empiricist• Statements that cannot be subjected to empirical tests “have no

cognitive significance.”

Critical Rationalism (Karl Popper)• Critical Rationalism: Scientific theories are abstract, and can be

tested only indirectly by reference to their implications.• Verification vs. Falsification

Scientific Revolutions and Paradigm Shifts (Thomas Kuhn, 1962)

Methodological Pluralism and “Rhetorical” Approaches

• Paul Feyerabend, Against Method (1975)• A view that there are no methodogical rules defining a unique “scientific

method”

Lionel Robbins The Nature and Significanceof Economic Science (1932)

Milton Friedman The Methodologyof Positive Economics (1956)

John Stuart Mill On the Definition and Methodof Political Economy (1836)

Donald McCloskeyThe Rhetoric of Economics (1983)

Terrence HutchisonThe Significance and Basic Postulates of Economic Theory (1938)

Milestones in Economic Methodology

John Neville KeynesThe Scope and Methodof Political Economy (1890)

Economic Methodology – The “Deductive” Approach

The propositions of economic theory, like all scientific theory, are obviously deductions from a series of postulates … These are not postulates the existenceof whose counterpart in reality admits of extensive dispute once their nature is fully realized. We do notneed controlled experiments to establish their validity:they are so much the stuff of our everyday experiencethat they have only to be stated to be recognized as obvious.

An Essay on the Nature and Significance of Economic Science (1935)

Lionel Robbins

Economic Methodology – The Positivist View

The reason why scientists, unlike philosophers, can build on and advance their predecessors' work rather than each being simply "influenced" by it and starting afresh right from the beginning at the same problems with some complete new system, is that "scientists" have definite, agreed, and relatively conclusive criteria for the testing of propositions, solutions, and theories which "philosophers" do not accept.

The Significance and Basic Postulates of Economic Theory (1938)

Terrence Hutchison

Economic Methodology – The “Modernist” Approach

The ultimate goal of a positive science is the development of a “theory” or “hypothesis” that yieldsvalid and meaningful predictions about phenomenanot yet observed …

Factual evidence can never “prove” a hypothesis; it can only fail to disprove it, which is what we generally mean when we say, somewhat inexactly, that the hypothesis has been “confirmed” by experience …

… the relevant question to ask about the “assumptions” of a theory is not whether they are descriptively “realistic,” for they never are, but whether they are sufficiently good approximations for the purpose in hand. And this questioncan be answered only by seeing whether the theory works,Which means whether it yields sufficiently accurate predictions.

The Methodology of positive economics (1953)

Milton Friedman

Economic Methodology – The “Functional” Approach

The view that the worth of a theory is to be judgedsolely by the extent and accuracy of its predictionsseems to me wrong ... a theory is not like an airlineor bus timetable We are not interested simply in theaccuracy of its predictions. A theory also serves as a base for thinking. It helps us to understand what is going on by enabling us to organize our thoughts.Faced with a choice between a theory which predictswell but gives us little insight into how the system works and one which gives us this insight but predictsbadly, I would choose the latter, and I am inclined tothink that most economists would do the same.

How Should Economists Choose? (1981)

Ronald Coase

McCloskey on the “Rhetoric” of Economics

Economists should become more self-conscious a bout their rhetoric, because they will then better know why they agree or disagree, and will find it less easy to dismiss contrary arguments on merely methodological grounds …

By “rhetoric” is not meant a verbal shell game, as in “empty rhetoric” or mere rhetoric” … Rhetoric is “the art of probing what men believe they ought to believe, rather than proving what is true according to abstract methods” … Rhetoric is exploring thought by conversation.

Economists do not follow the laws of enquiry their methodologies lay down. A good thing, too …

Economists in fact argue on wider grounds, and should. Their genuine workaday rhetoric, the way they argue inside their heads or their seminar rooms, diverges from the official rhetoric.

Donald McCloskey

The Rhetoric of Economics (1983)

Economic Methodology

Scientists constantly utilize parables, paradigms, strong polar models to help understand more complicated reality. The degree to which these do more good than harm is always an open question, more like an art than a science.Paul Samuelson, “Theory and

Realism: A Reply,” American Economic Review (1964)

Paul Samuelson

Economics and other social sciences deal with knowledge and truth of a different category from that of the natural sciences, truth which is related to sense observation – and ultimately even to logic – in a very different way from that arrived at by the methodology of natural science. But it is still knowledge of reality.

“What is Truth in Economics?” (1940)

Frank Knight