Saturday, June 20, 2009

the formalistic and positivistic methodology of mid-20th century economics is still uncritically accepted among economists

TO BE NOTED: From The Austrian Economists"

21st Century Economic Methodology

I recently wrote an essay for a SAGE volume on 21st Century Economic Methodology. My basic argument is that while the methods of economics are constantly changing, and the applications of economics are continuously debated, the formalistic and positivistic methodology of mid-20th century economics is still uncritically accepted among economists.

James Buchanan taught me that all work is work in progress, and that writing is research (and as Richard Wagner has further explained --- thinking without writing is day-dreaming). So it has been a pattern of my research life that I keep reading, thinking and writing on a topic after I finished the initial paper that started me on that topic. I am currently working my way through Harold Kincaid and Don Ross, ed., The Oxford Handbook of Philosophy of Economics (New York: Oxford University Press, 2009). There is much in the volume that reinforces the main points I make in my essay, but some claims that challenge my depiction of the current state of philosophical affairs in economics.

One of the claims from Kincaid and Ross's introduction is that shifts in philosophy and economics have now evolved to admit that: "some of our best science does not emphasize laws in the philosopher's sense as elegant, context-free, universal generalizations, but instead provides accounts of temporally and spatially restricted context-sensitive causal processes as its end product." Molecular biology is cited as a prime example of such a science. "Expression in a clear language, quantitative where possible, is crucial to good science, but the ideal of a full deductive system of axioms and theorems is often unattainable, and not, as far as one can see, actually sought by many scientific subcommunities that are nevertheless thriving."

Older notions of the philosophy of economics, Kincaid and Ross argue, are giving way to a more nuanced philosophy of science, and that economists are in practice resisting all attempts to restrict inquiry by appeal to familiar metaphysical and epistemological criteria.

My reaction to these claims is complicated. I would argue that Kincaid and Ross put an appropriate emphasis on the evolving practice of economics (methods), but they underestimate the scientific conventionalism that embeds what it means to be an economist (methodology).

But what I wonder about is their claim that "causal processes" expressed in "clear language" can be counted as scientific within the discipline. We might want to point to molecular biology (and for over a century many economists from Marshall to Boulding have pointed to biology) as an exemplar of such a science, but this is not the self-image of economists. Changing that self-image requires more than shifts in the philosophy of science. In fact, I argue that the difficulties of shifting this self-image are compounded because rather than a philosophical argument (which can be won or loss), the self-image are a by-product of scientific conventionalism. Economics is what economists do, and what economists do is build parsimonious models and subject them to statistical tests. Deviations from this methodology of inquiry are viewed with skepticism. Some individuals can overcome the skepticism, but most cannot. And even those who deviate, whose works gets a hearing among the elite in the profession, do so because they are perceived as providing insights which can in principle (even if they don't do it) be translated into the model and measure program. I am not making a normative claim here, just a positive claim about what is in elite professional practice. To put this another way, can anyone envision a John Bates Clark medal being won in the next decade by a young scholar whose work focuses on "causal processes" that are expressed in "clear language"? If not, then in what sense is the contemporary methodological practice of economics transforming in the 21st century.

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