The Economic Realms: Economic Methodology

Saturday, 1 December 2012

Economic Methodology

Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles underlying economic reasoning.^[1] In contemporary English, 'methodology' may reference theoretical or systematic aspects of a method (or several methods). Philosophy and economics also takes up methodology at the intersection of the two subjects.

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[edit] Scope

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General methodological issues include similarities and contrasts to the natural sciences and to other social sciences and, in particular, to:

the definition of economics^[2]
the scope of economics as defined by its methods^[3]
fundamental principles and operational significance of economic theory^[4]
methodological individualism versus holism in economics^[5]
the role of simplifying assumptions such as rational choice and profit maximizing in explaining or predicting phenomena^[6]
descriptive/positive, prescriptive/normative, and applied^[7] uses of theory^[8]
the scientific status^[9] and expanding domain of economics^[10]
issues critical to the practice and progress of econometrics^[11]
the balance of empirical and philosophical approaches^[12]
the role of experiments in economics^[13]
the role of mathematics and mathematical economics in economics^[14]
the writing^[15] and rhetoric of economics^[16]
the relation between theory, observation, application, and methodology in contemporary economics.^[17]

Economic methodology has gone from periodic reflections of economists on method to a distinct research field in economics since the 1970s. In one direction, it has expanded to the boundaries of philosophy, including the relation of economics to the philosophy of science, the theory of knowledge^[18] In another direction of philosophy and economics, additional subjects are treated include decision theory and ethics.^[19]

[edit] Quotes

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A historical sample of general methodological statements, not all of them subsequently accepted, include the following:

Happily there is nothing in the laws of value which remains for the present or any future writer to clear up; the theory of the subject is complete.

—John Stuart Mill, 1848 [1965], The Principles of Political Economy Book 3. University of Toronto Press, p. 594

So far no chemist has discovered exchange value either in a pearl or a diamond.

—Karl Marx, 1867 [1967]. Capital, Volume I, New York, International Publishers, p. 87

Economic doctrine is ... not a body of concrete truth but an engine for the discovery of concrete truth, similar say to the theory of mechanics.

—Alfred Marshall, 1885. "The Present Position of Economics", reprinted in A.C. Pigou, ed., 1925, Memorials of Alfred Marshall, Macmillan, p. 159.

The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions.

—John Maynard Keynes, 1922 "Introduction to the Cambridge Economic Handbooks Series", in D. H. Robertson, 1922, Money, p. v

[A]lmost every statement which we — or for that matter anyone else — runs afoul of some existing opinion, and, by the very nature of things, most opinions thus far could hardly have been proved or disproved within the field of social theory. It is therefore a great help that all our assertions can be borne out by specific examples from the theory of games and strategy.

—John von Neumann and Oskar Morgenstern, 1944. Theory of Games and Economic Behavior, Princeton University Press, p. 43.

The fact that economics is not physics does not mean that we should not aim to apply the same fundamental standards for what constitutes legitimate argument; we can insist that the ultimate criterion for judging economic ideas is the degree to which they help us order and summarize data, that it is not legitimate to try to protect attractive theories from the data.

—Christopher A. Sims, 1996. "Macroeconomics and Methodology", Journal of Economic Perspectives, 10(1), p. 111.

[edit] See also

Please expand this article. Some suggested sources are given hereafter. More information might be found in a section of the talk page. (July 2012)

[edit] Notes

^ :Press + button to enlarge small-text links below.
   • Roger E. Backhouse, 2008. "methodology of economics", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • Lawrence A. Boland, 1987. "methodology", The New Palgrave: A Dictionary of Economics, v. 3, pp. 455-56.
   • Daniel M. Hausman, 1989. "Economic Methodology in a Nutshell", Journal of Economic Perspectives, 3(2), pp. 115-127.
   • Kevin D. Hoover, 1995. "Review Article: Why Does Methodology Matter for Economics?" Economic Journal, 105(430), pp. 715-734.
^ • John Stuart Mill, 1844. "On the Definition of Political Economy; and on the Method of Investigation Proper to It", Essay V, in Essays on Some Unsettled Questions of Political Economy.
• Roger E. Backhouse and Steven Medema, 2008. "economics, definition of", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• _____. 2009. "Retrospectives: On the Definition of Economics", Journal of Economic Perspectives, 23(1), pp. 221–33 (close Bookmarks tab) Abstract.
^ John Neville Keynes, 1891. The Scope and Method of Political Economy. Annotated chapter links. 4th ed., 1917 [1999]. Full Contents.
^ • John R. Hicks, 1939. Value and Capital: An Inquiry into Some Fundamental Principles of Economic Theory.
   • Terence W. Hutchison, 1938. The Significance and Basic Postulates of Economic Theory.
  • Martin Hollis and Edward J. Nell, 1975. Rational Economic Man, ch. 3,4,5 and 7. Cambridge University Press.
  • Paul A. Samuelson, 1947. Foundations of Economic Analysis.
   • Richard G. Lipsey, 2008. "positive economics." The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.
   • Lawrence A. Boland, 2008. "instrumentalism and operationalism", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • _____, 2003. The Foundations of Economic Method, 2nd Edition. Description and chapter links.
^ • Kaushik Basu, 2008. "methodological individualism", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  • Edward J. Nell, 1998. General Theory of Transformational Growth, Part I. Cambridge University Press.
   • Harold Kincaid, 2008. "individualism versus holism", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • F.A. Hayek, 1948. Individualism and Economic Order. Chapter-preview links.
   • George J. Stigler and Paul A. Samuelson, 1963. "A Dialogue on the Proper Economic Role of the State." Selected Papers, No. 7. University of Chicago Graduate School of Business.
   • James M. Buchanan, 1990. "The Domain of Constitutional Economics", Constitutional Political Economy, 1(1), pp. 1-18, adapted as "Constitutional Political Economy" in C. K. Rowley and F. Schneider, ed., 2004, The Encyclopedia of Public Choice, v. 2, pp. 60-67.
   • Kenneth J. Arrow, 1994. "Methodological Individualism and Social Knowledge", American Economic Review, 84(2), pp. 1-9.
   • Richard H. Thaler and Cass R. Sunstein, 2008. Nudge: Improving Decisions about Health, Wealth, and Happiness. Yale. Description and preview.
   • Shiozawa, Y. 2004 Evolutinary Economics in the 21st Century: A Manifest, Evolutionary and Institutional Economics Review, 1(1): 5-47.
^ • Lawrence A. Boland, 2008. "assumptions controversy", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • Milton Friedman, 1953. "The Methodology of Positive Economics" in Essays in Positive Economics.
   • Paul A. Samuelson, 1963. "Problems of Methodology: Discussion", American Economic Review, 53(2) American Economic Review, pp. 231-236. Reprinted in J.C. Wood & R.N. Woods, ed., 1990, Milton Friedman: Critical Assessments, v. I, pp. 107-13. Preview. Routledge.
   • Stanley Wong, 1973. "The 'F-Twist' and the Methodology of Paul Samuelson", American Economic Review, 63(3) p p. 312-325. Reprinted in J.C. Wood & R.N. Woods, ed., Milton Friedman: Critical Assessments, v. II, pp. 224-43.
   • Shaun Hargreaves Heap, 2008. "economic man", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • Kenneth J. Arrow, [1987] 1989. "Economic theory and the hypothesis of rationality", in The New Palgrave: Utility and Probability, pp. 25-39.
   • Duncan K. Foley, 2004. "Rationality and Ideology in Economics", Social Research, pp. 329-342. Pre-publication version.
   • Thomas J. Sargent, 1994. Bounded Rationality in Macroeconomics, Oxford. Description and chapter-preview 1st-page links.
   • Vernon L. Smith, 2008. Rationality in Economics: Constructivist and Ecological Forms, Cambridge. Description/contents links and preview.
^ • David Colander (1992). "Retrospectives: The Lost Art of Economics", Journal of Economic Perspectives, 6(3), pp. 191-198.
• John Neville Keynes, 1891. The Scope and Method of Political Economy. ch. I-II. Annotated chapter links. 4th ed., 1917 [1999]. Full Contents.
^ • Richard G. Lipsey, 2008. "positive economics." The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.
   • Amartya Sen, 1980. "Description as Choice", Oxford Economic Papers, N.S., 32(3), pp. 353-369. Reprinted in Sen, 1982, Choice, Welfare and Measurement, Oxford, Basil Blackwell. Chapter-preview link, p. 432-449.
   • John Neville Keynes, 1891. The Scope and Method of Political Economy. ch. I, III. Annotated chapter links. 4th ed., 1917 [1999]. Full Contents.
   • Colin F. Camerer, 2003. Behavioral Game Theory: Experiments in Strategic Interaction, pp. 5-7 (scroll to at 1.1 What Is Game Theory Good For?).
   • Kenneth E. Boulding, 1969. "Economics as a Moral Science", American Economic Review, 59(1), pp. 1–12.
   • A. B. Atkinson, 2009. "Economics as a Moral Science", Economica, 76(1), pp. 791–804.
   • "Economics as a Moral Science" session, 2011. American Economic Review, 101(3), article-abstract links.
^ • Lionel Robbins, 1932. An Essay on the Nature and Significance of Economic Science.
   • Richard G. Lipsey, 2009. "Some Legacies of Robbins’ An Essay on the Nature and Significance of Economic Science", Economica, 76(302), pp. 845-56 (press + button).
   • Alexander Rosenberg (1983). "If Economics Isn't Science, What Is It?" Philosophical Forum, 14, pp. 296-314. Reprinted in M. Martin and L. C. McIntyre (1996), Readings in the Philosophy of Social Science, pp. 661-674.
   • Douglas W. Hands, 1984. "What Economics Is Not: An Economist's Response to Rosenberg", Philosophy of Science, 51(3), p p. 495-503.
   • Daniel M. Hausman, 1992. The Inexact and Separate Science of Economics. Description, to ch. 1 link, preview, and reviews, 1st pages: [1][2].
^ • Edward P. Lazear, 2000. "Economic Imperialism", Quarterly Journal of Economics, 115(1), pp. 99-146.
   • George J. Stigler, 1984. "Economics—The Imperial Science?" Scandinavian Journal of Economics, 86(3), p p. 301-313.
   • Ben Fine, 2000. " Economics Imperialism and Intellectual Progress: The Present as History of Economic Thought?" History of Economics Review, 32, pp. 10-36.
   • Jack Hirshleifer, 1985. "The Expanding Domain of Economics", American Economic Review, 75(6), pp. 53-68 (press +). Reprinted in Jack Hirshleifer, 2001, The Dark Side of the Force: Economic Foundations of Conflict Theory, ch.14, pp. 306- 42.
   • Gary S. Becker, 1976. The Economic Approach to Human Behavior. Description and preview.
   • _____, 1992. "The Economic Way of Looking at Life." Nobel Lecture link, also in 1993, Journal of Political Economy, 101(3), pp. 383-409.
^ • Kevin D. Hoover, 2008. "causality in economics and econometrics", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract and galley proof.
   • H. Wold 1954. "Causality and Econometrics", Econometrica, 22(2), p p. 162-177.
   • C. W. J. Granger and P. Newbold, 1974. "Spurious Regressions in Econometrics", Journal of Econometrics, 2(2), pp. 111-120.
   • David F. Hendry, 1980. "Econometrics — Alchemy or Science?" Economica, N.S., 47(188), pp. 387-406.
   • _____ 2001a. "Achievements and Challenges in Econometric Methodology", Journal of Econometrics, 100(1), pp. 7-10. PDF, pp. 1-4.
   • _____, 2001b. Econometrics: Alchemy or Science Essays in Econometric Methodology, 2nd Edition. Oxford. Description and contents. Review in the Economic Journal.
   • Edward E. Leamer, 1983. "Let's Take the Con Out of Econometrics", American Economic Review, 73(1), pp. 31-43.
   • Christopher A. Sims, 1980. "Macroeconomics and Reality", Econometrica,48, No. 1, pp. 1-48.
   • Fischer Black, 1982. "The Trouble with Econometric Models", Financial Analysts Journal, 38(2), pp. 29-37. Reprinted in Black, 2009, Business Cycles and Equilibrium, Wiley. Updated version, pp. 135 - 150.
   • From Truman F. Bewley, ed., 1987. Advances in Econometrics: Fifth World Congress, Cambridge v. 2:
         Edward E. Leamer, "Econometric Metaphors", pp. 1- 28.
         David F. Hendry. "Econometric Methodology: A Personal Perspective", pp. 29- 42.
   • P.C.B. Phillips, 1988. "Reflections on Econometric Methodology", Economic Record, 64(4), pp. 344–359. Abstract.
   • David F. Hendry, Edward E. Leamer, and Dale J. Poirier, 1990. "The ET Dialogue: A Conversation on Econometric Methodology", Econometric Theory, 6(2), pp. 171-261.
   • Deirdre N. McCloskey and Stephen T. Ziliak, 1996. "The Standard Error of Regressions", Journal of Economic Literature, 34(1), pp. 97–114.
   • Kevin D. Hoover and Mark V. Siegler, 2008. "Sound and Fury: McCloskey and Significance Testing in Economics", Journal of Economic Methodology, 15(1), pp. 1–37; McCloskey and Ziliak, "Signifying Nothing: Reply to ..." [preprint] and Hoover and Siegler, "... Rejoinder to ..., pp. 39–68;
   • Edward J. Nell and Karim Errouaki, 2011. Rational Econometric Man,Part I and ch. 10. Edward Elgar.
^ • Mark Blaug, 2007. "The Social Sciences: Economics", Postwar developments, Methodological considerations in contemporary economics, The New Encyclopædia Britannica, v. 27, pp. 346-47.
   • Edward J. Nell (2004) "Critical Realism and Transformational Growth." In Transforming Economics. Edited by P. Lewis. London: Routledge.76-95.
   • Frank H. Knight, 1924. "The Limitations of Scientific Method in Economics", in The Trend of Economics, R.G. Tugwell, ed., pp. 229-67. Reprinted in Frank H. Knight, 1935 [1997], The Ethics of Competition, pp. 97- 139.
   •Daniel M. Hausman, 1983. "The Limits of Economic Science", in The Limits of Lawfulness: Studies on the Scope and Nature of Scientific Knowledge, N. Rescher, ed. Reprinted in D.M. Hausman, 1992, Essays on Philosophy and Economic Methodology, pp. 99-108.
   • Ludwig von Mises, 1949. Human Action.
   • Bruce Caldwell, [1987] 2008. "positivism", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
^ • C.F. Bastable, [1925] 1987. "experimental methods in economics", i, The New Palgrave: A Dictionary of Economics, v. 2, p. 241.
   • Vernon L. Smith, [1987] 2008a. "experimental methods in economics", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • _____, 2008b. "experimental economics", The New Palgrave Dictionary of Economics, 2nd Edition, Abstract.
   • Herman O. Wold (1969). "Econometrics as Pioneering in Nonexperimental Model Building", Econometrica, 37(3), p p. 369-381.
^ • W. Stanley Jevons, 1879. The Theory of Political Economy, 2nd ed., ch. I, "Introduction", pp. 1-29.
   • Paul A. Samuelson, 1952. "Economic Theory and Mathematics — An Appraisal", American Economic Review, 42(2), pp. 56-66.
   • D.W. Bushaw and R.W. Clower, 1957. Introduction to Mathematical Economics, pp. vii-viii and ch. 1, pp. 3-8.
   • Gérard Debreu, ([1987] 2008). "mathematical economics", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. (First published with revisions from 1986, "Theoretic Models: Mathematical Form and Economic Content", Econometrica, 54(6), pp. 1259-1270.)
   • _____ 1991. "The Mathematization of Economic Theory", American Economic Review, 81(1), pp. 1-7.
   • Robert W. Clower, 1994. "Economics as an Inductive Science", Southern Economic Journal, 60(4), pp. 805-814.
   • _____, 1995. "Axiomatics in Economics", Southern Economic Journal, 62(2), pp. 307-319.
   • Mark Blaug, 2003. "The Formalist Revolution of the 1950s", Journal of the History of Economic Thought, 25(2), pp. 145-156. Abstract. Reprinted in Warren J. Samuels, et al., ed., 2003, A Companion to the History of Economic Thought, Wiley, pp. 395- 409.
   • _____, 1998. "Disturbing Currents in Modern Economics", Challenge, 41(3), pp. 11-34. Reprint.
   • Paul Krugman, 1998, "Two Cheers for Formalism", Economic Journal, 108(451), pp. 1829-1836.
   • Terence Hutchison, 2000. On the Methodology of Economics and the Formalist Revolution, Edward Elgar. Description and preview.
   • E. Roy Weintraub, 2008. "mathematics and economics", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
   • _____, 2002. How Economics Became a Mathematical Science, Duke University Press. Description, preview, and review extract.
   • Kenneth J. Arrow, 1951. Social Choice and Individual Values.
   • Amartya K. Sen, 1970 [1984]. Collective Choice and Social Welfare ISBN 0-444-85127-5.
   • _____, 2008. "social choice", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
^ • William Thomson, 1999. "The Young Person's Guide to Writing Economic Theory," Journal of Economic Literature, 37(1), pp. 157-183.
   • _____, 2001. A Guide for the Young Economist: Writing and Speaking Effectively about Economics. Chapter-preview links.
   • Eric Rasmusen, 2001. "Aphorisms on Writing, Speaking, and Listening", in E. Rasmusen, ed., Readings in Games and Information, pp. 389-420. PDF.
   • Donald McCloskey, 1985. "Economical Writing", Economic Inquiry, 23(2), pp. 187-222.
   • David N. Laband and Christopher N. Taylor, 1992. "The Impact of Bad Writing in Economics", Economic Inquiry, 30(4), pp. 673-688. [3]
^ • D.N. McCloskey, 1983. "The Rhetoric of Economics", Journal of Economic Literature, 21(2), pp. 481-517.
   • _____, [1985] 1998, 2nd ed. The Rhetoric of Economics. Chapter-preview links.
   • Roger Backhouse, T. Dudley-Evans, and Willie Henderson, 1993. "Exploring the Language and Rhetoric of Economics", in Willie Henderson et al., Economics and Language, pp. 1-20 (preview)
   • John Kenneth Galbraith, 1962. "The Language of Economics", Fortune, LXVI(6), Dec. pp. 12-30, 169, 31. Excerpt at [CNN] "FORTUNE: John Kenneth Galbraith, excerpts from his writing", May 17, 2006.
^ • Wassily Leontief, 1971. "Theoretical Assumptions and Nonobserved Facts", American Economic Review, 61(1), pp. 1-7. Reprinted in W. Leontief, 1977, Essays in Economics, v. 1, ch. III, pp. 24-34.
   • Mark Blaug, 1992. The Methodology of Economics: Or How Economists Explain, 2nd ed., Cambridge. Description and Preview.
   • Roger Backhouse and Mark Blaug, 1994. New Directions in Economic Methodology, Routledge. Contents preview.
   • P.A.G. van Bergeijk et al., 1997. Economic Science and Practice: The Roles of Academic Economists and Policy-Makers. Description & preview links.
   • D. Wade Hands, 2001. Without Rules: Economic Methodology and Contemporary Science Theory, Oxford. Desription and contents preview.
   • Christopher A. Sims, 1996. "Macroeconomics and Methodology", Journal of Economic Perspectives, 10(1), pp. 105-120.
   • Kevin D. Hoover, 2001. The Methodology of Empirical Macroeconomics, Oxford. Description and preview.
   • Bruno S. Frey, 2001. "Why Economists Disregard Economic Methodology, Journal of Economic Methodology, 8(1), pp. 41–47.
^ Lawrence A. Boland, 2006. "Seven Decades of Economic Methodology: A Popperian Perspective", in Karl Popper: A Centenary Assessment, v. 3, ed. Ian Charles Jarvie et al., pp. 219
^ • _____, [1994] 2006, Economic Analysis and Moral Philosophy, 2nd ed. New York, Cambridge University Press. ISBN 0521558506

[edit] References

John Bryan Davis, D. Wade Hands, Uskali Mäki (1998). Handbook of Economic Methodology, E. Elgar
Hands, D. Wade, ed. (1993). The Philosophy And Methodology Of Economics, Duke University
Hausman, Daniel M. (1984). The Philosophy of Economics: An Anthology. New York: Cambridge University Press, ISBN 052145929X
Boland, L. (1982) The Foundations of Economic Method, London: Geo. Allen & Unwin.
Boland, L. (1989) The Methodology of Economic Model Building: Methodology after Samuelson, London: Routledge.
Boland, L. (1997) Critical Economic Methodology: A Personal Odyssey, London: Routledge
Boland, L. (2003) The Foundations of Economic Method: A Popperian Perspective, London: Routledge
D.N. McCloskey (1983). The Rhetoric of Economics, Univ of Wisconsin Press, 1998
Daniel M. Hausman (1992). Essays on Philosophy and Economic Methodology, Cambridge University Press, 1992
Nell, E.J. and Errouaki, K. (2011) Rational Econometric Man. Edward Elgar.

[edit] External links

Journal of Economic Methodology - page @ EconPapers
Daniel M. Hausman, Philosophy of Economics (with focus on methodology), Stanford Encyclopedia of Philosophy
Milton Friedman, "The Methodology of Positive Economics"

The Blogger Ref Link http://www.p2pfoundation.net/Transfinancial_Economics

The Economic Realms

Saturday, 1 December 2012

Economic Methodology

Contents

[edit] Scope

[edit] Quotes

[edit] See also

[edit] Notes

[edit] References

[edit] External links

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