Epistemological Subsumption

This part of the study discusses the implicit epistemological assumptions of the concept of potential output with respect to the key characteristics of the economic system as well as the resulting prospects and limitations for forecasting potential output. As a theoretical framework for this discussion we employ the conception of general systems theory, which is designed for the investigation of the properties and dynamic behaviour of various types of systems. The first section introduces the notion of a “system” as well as some basic concepts of general systems theory according to von Bertalanffy (1949) and briefly outlines their influence on economic and social science theory (section 4.2). Subsequently, we sketch the natural science paradigm that forms the basis for the idea of closed systems along with their properties and systems behaviour (section 4.3). We then discuss the influence of the paradigm and presumptions relevant for closed systems on economic modelling as well as the implications resulting with respect to systems behaviour and, in particular, the possibilities for forecasting (section 4.4). After that, the underlying paradigm and the properties and systems behaviour of open systems are discussed (section 4.5). Finally, we examine the options for modelling the economic system as an open, dynamic system and discuss the consequences for systems behaviour and forecasting potentials (section 4.6).