Abstract
This chapter reviews the epistemological positions and new economic currents that emerged over the past 60 years, distinguishing the two phases of “economic imperialism” and “reverse imperialism”. The description of the first phase starts with Milton Friedman’s position, moving on to discuss the influence of twentieth-century epistemological conceptions on economics. The limits of Gary Becker’s research project are noted, while some precisions on maximization shed some light on the confusions that it often creates. Methodological individualism and the program of “micro-foundations” are then introduced. A shorter account of the second phase includes a special reference to behavioral and experimental economics.
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Notes
- 1.
Epistemology is usually construed as the theory of knowledge, while methodology is a part of epistemology that studies the criteria for determining the correct method of science.
- 2.
Mark Blaug says that Friedman’s essay, without citing Popper, “presents a sort of vulgar, Mickey Mouse Popperianism” (1994, p. 22). In fact, Friedman recognized the simplicity of his proposal as compared to Popper’s. Blaug, who died recently, was a Dutch economic historiographer and methodologist who spent most of his life in the United States and England. Popper’s thesis is that science differentiates itself from ordinary knowledge by its ability to undertake experiments with conditions that can be put to the test and eventually “falsified”. If no conceivable event could falsify it, a theory is meaningless. Given the so called “induction problem” (the conclusion of an enumerative induction can never be universal, as that induction itself cannot be universal), verification can never be definite, but “falsification” could be. In his autobiography, Friedman recalls that, at Mont Pelerin Society’s founding meeting in 1947, Popper and Stigler talked about the epistemological ideas contained in Popper’s Logik der Forschung. Friedman could not read the book because it was only published in German (until the English translation was released in 1959, after his essay). Nonetheless, it is clear that this conversation substantially influenced the final version of Friedman’s essay (in Friedman 1998, p. 215).
- 3.
Cf., for example, the classic essays by Nagel, Caldwell, Musgrave and Boland included in the book edited by Bruce Caldwell, Appraisal and Criticism in Economics: A Book of Readings, Allen and Unwin, Boston, 1984. Friedman himself, op. cit., (1998, p. 215), recognizes the importance of books by Abraham Hirsch and Neil de Marchi, Milton Friedman: Economics in Theory and Practice, University of Michigan Press, 1990, and Daniel Hammond (Theory and Measurement: Causality Issues in Milton Friedman’s Monetary Economics, Cambridge University Press: Cambridge, 1996). To mark the 50th anniversary of the publication of Friedman’s essay, several scientific meetings were held to debate it. The contributions of Thomas Mayer, Uskali Mäki, D. Wade Hands, Lawrence Boland and Melvin Reder at one of these meetings are compiled in the Journal of Economic Methodology 10/4, December, (2003). Mäki later edited a book with presentations from another conference, entitled The Methodology of Positive Economics: Reflections on the Milton Friedman Legacy, Cambridge University Press, 2009. Friedman never liked responding to his critics. It could be said that Friedman’s essay is eclectic and confusing from an epistemological point of view. However, leaving aside his exaggerated emphasis on the irrelevance of assumptions, his main thesis—prediction as the criterion of scientificity—is (partially) true and extremely persuasive.
- 4.
I thank Javier Finkman for this quotation of Newton.
- 5.
This concern about the relevance of economic theory is not a minor issue. Leaving aside the heterodox statements from several schools of thought, old orthodox economists express their dissatisfaction in this respect. See, for example, the Announcement “A plea for a pluralistic and rigorous economics,” signed by 47 top economists (American Economic Review, 82/2, 1992), the “Petition to Reform Graduate Education,” signed by 463 other economics professors (American Economic Review, 83/5, 1993). Also noteworthy are the works by Daniel Bell and Irving Kristol (The Crisis in Economic Theory, Basic Books, New York, 1981.), Oskar Morgenstern (“Thirteen Critical Points in Contemporary Economic Theory: An Interpretation,” in Journal of Economic Literature, 10/4, 1972, pp. 1163–89), Phyllis Deane (“The Scope and Method of Economic Science,” in The Economic Journal, 93/369, 1983, pp. 1–12), Mark Blaug (“Disturbing Currents in Modern Economics,” in Challenge, 41/3, 1998, pp. 11-34), Terence Hutchison (The Uses and Abuses of Economics. Contentions Essays on History and Method, Routledge, London and New York, 1994 p. 247).
- 6.
More than half were published in the 1970s and 1980s: cf. Fox (1997, p. 9).
- 7.
On this topic, see econometrist Edward Leamer’s article 1983.
- 8.
Some of Lakatos’ ideas had been introduced by Fritz Machlup’s (1955) excellent work.
- 9.
This led to an interesting debate between Larry Boland and Bruce Caldwell.
- 10.
This is the view that underlies Levitt and Dubner’s best-seller (2005).
- 11.
- 12.
On the fallacy of ambiguity, see Copi and Cohen (1998), Chapter 6; 191ff.
- 13.
For an updated collection of readings about “mainstream pluralism”, see Davis and Hands 2011.
- 14.
Allais’ paradox, or the ultimatum game, for example.
- 15.
It is also fair to mention Maurice Allais’ seminal work, “Le Comportement de l’Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l’Ecole Americaine”, Econometrica, 21/4, 1953, pp. 503–546.
- 16.
For an analysis and appraisal of the methodology of experimental economics, cf. Francesco Guala (2005). Even in the field of philosophy, traditionally only conceptual and abstract, experiments are emerging as a means to glean philosophical knowledge from ordinary people’s intuitions.
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Crespo, R.F. (2013). Ideas on Economic Science and its Method Over the Past Sixty Years. In: Philosophy of the Economy. SpringerBriefs in Philosophy. Springer, Cham. https://doi.org/10.1007/978-3-319-02648-0_7
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