Is There a Methodological Crisis in Economics?

Abstract

The key lesson of the global crisis is that there is no such thing as inherent stability in economic systems and only a continuously revised and self-critical theory can provide knowledge, guidance and warnings on how a crisis can be dealt with or avoided altogether. Yet, the propagation of economic ideas in general and the teaching of economics in particular, are frequently characterized by overconfidence and lack of self-critical awareness. Some approaches are indulging in complex calculations disregarding the realism of the assumptions on which they are premised, while other schools of thought preach their ideas, no matter how they come to terms with reality. But economics are going to enjoy neither the deterministic certainties of natural sciences, nor the aloofness of philosophical purity. It is destined to be a knowledge system intrinsically linked to social dynamics and, therefore, continuously challenged by unforeseen problems. A major inspiration for improving this knowledge is by thoroughly reading the history of ideas and how they shaped, and were themselves triggered by, economic history.