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History of Economic Thought chapter 7 summary
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An Introduction to Economic MethodologyUnderstanding Economics as a Science
Introduction
Economic methodology is the philosophy of science for economics.
Three comments on the nature of economic methodology:
1) Economic methodology should be distinguished from economic method, though
the two terms are often used interchangeably. Economic methodology investigates
the nature of economics as a science. Economic methodology examines the basis
and grounds for the explanations economists give to answer why questions about
the economy. Economic Method attempts to provide answers to how questions,
and concerns the technique and tools that are used by economists when making
their explanations and descriptions.
2) Economic methodology makes use of both
a) Descriptive economic methodology aims to describe the different types of
economic research practices and their results. In philosophy of science,
descriptive methodology is often denoted as positive methodology. Positive
methodology concerns the question of how science is actually practiced.
b) Prescriptive economic methodology distinguishes between good and bad
explanations in economics and considers how good explanation should be
formulated. Prescriptive methodology in philosophy of science is denoted
as normative methodology, and concerns the question of how science
ought to be practiced.
3) There exists a tension in economic methodology. As a result one of the most
important questions in economic methodology is whether an explanation of the
status and character of economics as a social science involves issues that are
significantly different from those involved in explaining the status and character of
the natural and physical sciences.
Chapter 1 The Received View of Science
The received view, also the standard view, derives from the logical positivist program
in philosophy of science. The label “logical positivism” offers a fair description of the
Vienna Circle’s philosophical program, since the members sought actively to combine
aspects of logicism and positivism (which meant empiricism).
The main aim of the logical positivist program was to demarcate scientific knowledge, to
distinguish science from pseudo-science, and to remove any kind of metaphysical or
imagined content from scientific knowledge. Their demarcation rule was to accept only
analytic and synthetic a posteriori propositions or statement as scientific knowledge.
Non-analytic propositions are called synthetic. If these propositions are shown to be
true by empirical research, they are called synthetic a posteriori propositions. Immanuel
Kant introduced a third category of propositions whose truth is not shown by empirical
research and which are not true by definition. These were called synthetic a priori
propositions.
For logical positivists, empiricism consisted of two related theses:
1) All evidence bearing on synthetic statements derives from sense perception.
2) Predicates are meaningful only if it is possible to tell by means of sense
perception whether something belongs to their extension (empirically verifiable).
A non-analytic statement is meaningful only if it is empirically verifiable. This criterion for
meaningfulness was called the verifiability principle.
Syntactics deals with the formal relations between signs or expressions in abstraction
from their signification and interpretation. Semantics deals with the signification and
interpretation of the signs or expressions. The aims of the logical positivists can therefore
be summarized as follows:
1) To formulate precisely such central philosophical notions as a criterion of
meaningfulness and the distinction between analytic claims and synthetic claims.
2) To develop precise definitions of central scientific notions such as theory,
explanation, confirmation, etc.
, The logical positivists also made a distinction between what they termed the context of
discovery and the context of justification. This means that a distinction should be
drawn between the way in which a theory is discovered and the context of its
justification, which involves a rational reconstruction of the theory according to the tenets
of logical positivism for the purpose of its justification.
Scientific theories were accordingly seen as systematic collections of concepts,
principles, and explanations that organize our empirical knowledge of the world.
According to the logical positivist understanding of theory, also referred to as the
syntactic view, the proper characterization of a scientific theory consists of an
axiomatization in first-order formal language. A first-order formal language consists
only of symbols representing variables (denoted by x,y,z,…), function symbols (denoted
by A(·), B(·), C(·),…), predicate symbols (denoted by A, B, C,…), and the symbols ¬
(‘not’), ∨ (‘or’), ∧ (‘and’), → (‘if … then’), ∀ (‘for all individuals’), and ∃ (‘for some
individual’). The language of the theory is divided strictly into two parts:
1) Observation statements that describe observable objects or processes
2) Theoretical statements
The theoretical terms are identified with their observational counterpart by means of
correspondence rules, which are rules that specify admissible experimental procedures
for applying theories to phenomena. When theoretical terms are defined completely in
observational terms, they are said to be operationalized. According to the received view,
for a proposition to be meaningful it is necessary that all the theoretical terms are
operationalized Operationalization Operationalism.
An explanation is an answer to a why question. A scientific explanation should
show some event or some regularity to be an instance of a fundamental law. Carl
Hempel developed the deductive-nomological (DN) model of explanation (or
covering-law model). In a DN explanation, a statement of what is to be explained (the
explanandum) is deducted from a set of true statements that includes at least one law
(nomos).
Explanans:
Laws: L1 , … , Lm
True statements of initial conditions: c1 , … , cn
Explanandum: E
An explaining law should accordingly identify causally relevant factors, but Hempel’s DN
model, which focus merely on (logical) deduction from a law, does not require this.
There is, however, an even more fundamental problem with this model of explanation. It
requires that the generalizations in the explanans be laws.
Symmetry thesis:
? Laws Laws
Initial conditions ? Initial conditions
explanandum explanandum ?
Because it is always possible that a future observation might not conform to a past
generalization, as Hume argued, observation can only justify singular statements. This is
what is called the problem of induction. This created a dilemma for the logical
positivists, to which they offered two different responses:
1. Instrumentalism. This is the view that laws are merely useful instruments
whose value is measured not by whether they are true or false, but by how
effectively they explain and predict phenomena.
2. Confirmationism. Laws do now express certain knowledge about the world, but
instead express probabilistic knowledge. Probability statements should be based
on empirical research. Probability measure is sometimes called the degree of
confirmation of a statement.
The logical positivist has to admit that some terms have no meaning apart from the
particular theory that implicitly defines them. For this reason logical positivist attempt at
demarcating science from non-science fails.
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