Disentangling the Philosophy of Economics

144 Pages·2018·11.977 MB·English

by  Mariusz Maziarz

Monographs IBRKK-PIB
Disentangling
the philosophy of economy
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D Mariusz Maziarz
ISBN 978-83-61284-63-5
mono_disentangling_MONT_8mm.indd 1 2018-09-21 11:40:45
Disentangling
the philosophy of economy
Mariusz Maziarz
WARSAW 2018
Review: Tomasz Dołęgowski, Paweł Kawalec
Proofreading: Małgorzata Wieteska-Rostek
Typesetting: Sławomir Jarząbek
© Copyright by Institute for Market, Consumption
and Business Cycles Research –
National Research Institute
Warszawa 2018
Materials contained in the monograph shall be protected by the copy right.
Text reprint may have occurred only with the publisher's consent.
Institute for Market, Consumption and Business Cycles Research –
National Research Institute
02-001 Warszawa, Al. Jerozolimskie 87
phone: [phone]
fax: [phone]
e-mail: [email protected]
http://www.ibrkk.pl
ISBN 978-83-61284-63-5
Table of Contents
ACKNOWLEDGMENT ..................................................................................................7
PREFACE ..........................................................................................................................8
Economic methodology: a menu of approaches.............................................................9
The book layout ............................................................................................................10
INTRODuCTION: ThE ENTANGLEMENT OF ECONOMIC
METhODOLOGy ........................................................................................................12
1. The six schools .........................................................................................................12
2. Why the two dimensions? ........................................................................................14
3. The disentanglement .................................................................................................16
1. LOGICAL POsITIvIsM ........................................................................................18
Various readings ...........................................................................................................18
Economists’ (mis-)understanding .................................................................................19
1.1. The neopositivist views on science .......................................................................20
Regularities, laws, and causality ..................................................................................20
The demarcation criterion ............................................................................................21
Verification and confirmation .......................................................................................22
Scientific explanation ...................................................................................................23
The theory-observation distinction ...............................................................................25
1.2. Logical empiricism and economic methodology ..................................................26
The neopositivist philosophy of economics .................................................................26
Criticism of the mainstream economics .......................................................................27
Positive and normative economics ...............................................................................28
Economists’ interpretations ..........................................................................................29
Is economics a neopositivist science? ..........................................................................30
1.3. Neopositivist economics........................................................................................31
Scientific economics.....................................................................................................31
Explanation, causality, and laws ...................................................................................33
4
DISENTANGLING THE PHILOSOPHY OF ECONOMY
2. FALsIFICATION AND ThE METhODOLOGy OF ECONOMICs ............34
2.1. The fallibilist epistemology ...................................................................................35
The problem of demarcation ........................................................................................35
Dismissing induction from science ..............................................................................36
Theory-ladeness of observations ..................................................................................37
The fallibilist method ...................................................................................................38
Getting closer to the truth .............................................................................................39
Testing theories .............................................................................................................41
The (literal) falsity of social sciences ...........................................................................43
Popper’s followers ........................................................................................................45
2.2. The falsificationist methodology in the philosophy of economics ........................48
Blaug’s version of the Popperian methodology ...........................................................49
The naïve and fully-fledged stances .............................................................................51
Boland’s reading ...........................................................................................................52
Caldwell’s falsificationism ...........................................................................................53
Hands’ disentanglement ...............................................................................................54
Research programs in economics .................................................................................55
2.3. The fallibilist methodology ...................................................................................56
Fallibilist science ..........................................................................................................56
Truth of economic theories ...........................................................................................58
3. INsTRuMENTALIsM ............................................................................................61
3.1. The sources of the instrumentalist methodology ...................................................62
Pragmatism ...................................................................................................................63
The aims and methods of science .................................................................................64
3.2. Friedman’s essay and its (mis-)interpretations ......................................................65
Reading F53 .................................................................................................................65
Why so many interpretations? ......................................................................................69
Missed interpretations ..................................................................................................70
Various intstrumentalisms ............................................................................................72
Contradicting your own methodology ..........................................................................75
3.3. The instrumentalist economics ..............................................................................75
Dismissing the unobservables debate ...........................................................................75
Causality .......................................................................................................................76
The purpose of models and theories .............................................................................77
Skepticism ....................................................................................................................78
5

4. sCIENTIFIC REALIsM .........................................................................................80
4.1. Development and main arguments ........................................................................81
The rejection of the received view ...............................................................................81
Why is science successful?...........................................................................................82
Counterarguments ........................................................................................................83
Refined positions ..........................................................................................................85
4.2. The scientific-realist philosophy of economics .....................................................86
Models and reality ........................................................................................................86
Unrealistic but true .......................................................................................................87
The evolution of Mäki’s stance ....................................................................................89
Econometric models .....................................................................................................90
The realism-antirealism debate ....................................................................................91
A skeptical turn? ...........................................................................................................92
4.3. Successful modeling ..............................................................................................93
Truth .............................................................................................................................93
The role of causal explanation......................................................................................94
Theory appraisal ...........................................................................................................95
Fallibilism .....................................................................................................................95
5. CRITICAL REALIsM .............................................................................................97
5.1. Roy Bhaskar’s philosophy of science ...................................................................97
Economics without constant regularities ......................................................................98
Criticism .......................................................................................................................99
5.2. The Lawsonian critique of the mainstream economics .........................................99
Social and natural sciences .........................................................................................100
The openness of the social world ...............................................................................101
The Lawsonian criticism ............................................................................................102
5.3. The methodology of critical realism ...................................................................102
Examples of the critical-realist economics .................................................................103
Research guidance ......................................................................................................104
6. ThE CONsTRuCTIvIsT APPROACh ............................................................106
6.1. The constructivist philosophy of science ............................................................106
Scientific revolutions ..................................................................................................107
Feyerabend’s anarchism .............................................................................................108
6.2. The rhetorical approach (and other constructivists in the methodology
of economics) .....................................................................................................109
6
The rhetoric of economics ..........................................................................................109
Other constructivists ...................................................................................................111
6.3. Methodological anarchism ..................................................................................112
‘Anything goes’ in economics ....................................................................................112
7. CONCLuDING REMARKs .................................................................................113
7.1. The normative approaches to ontology ...............................................................113
Logical positivism ......................................................................................................116
Critical realism ...........................................................................................................116
7.2. The normative approaches to epistemology ........................................................117
Logical positivism ......................................................................................................118
Instrumentalism ..........................................................................................................119
Falsificationism ..........................................................................................................120
Critical realism ...........................................................................................................121
Constructivism............................................................................................................122
7.3. The descriptive approaches to ontology ..............................................................123
Scientific realism ........................................................................................................123
Falsificationism ..........................................................................................................124
Instrumentalism ..........................................................................................................124
7.4. The descriptive approaches to epistemology .......................................................125
Scientific realism ........................................................................................................126
Constructivism............................................................................................................126
7.5. The unended inquiry ............................................................................................127
BIBLIOGRAPhy .........................................................................................................130
7
ACKNOWLEDGMENT
ACKNOWLEDGMENT
Economists face severe difficulties with measuring well-being. Similarly, „thank-
fulness‟ is also immeasurable. Nevertheless, I primarily need to voice my gratitude
to those who commented on the earlier version of the book. The colleagues from
the Faculty of Metaeconomics, Institute for Market, Consumption, and Business
Cycle Research – Polish Research Institute, i.e., Tomasz Kwarciński, Robert Mróz,
Krzysztof Nowak-Posadzy, and Agnieszka Wincewicz-Price (listed alphabetically)
commented on the draft version of the book and helped in improving the manuscript.
Also, the encouragement and comments voiced by the two reviewers helped in pol-
ishing my book project. My colleagues from the Polish Philosophy of Economics
Network actively supported and encouraged my research. Most notably, I am grateful
to Jarosław Boruszewski, Marcin Gorazda, Łukasz Hardt, and Mateusz Kucz (listed
alphabetically) who commented on my PPEN-seminar presentations. The partial re-
sults were presented at several conferences1 whose participants indicated (hopefully
fulfilled in the current version) gaps in my reasoning. I am especially indebted to
Julian Reiss for his comments. Many thanks go to Gabriela Staroń, without whom
this book would have been written much earlier. I am also grateful to my parents. For
everything. Last but not least, I would like to thank my Ph.D. thesis advisors from the
Wroclaw University of Economics: Stanisław Czaja and Bartosz Scheuer with whom
I have spent long hours discussing economics and philosophy.
1 The International Network for Economic Method Biannual Conference (San Sebastian), The Nordic Network for
Philosophy of Science 2017 Conference (Copenhagen), The Sixth Conference of the European Network for the
Philosophy of Social Sciences (Kraków), and the Erasmus Institute for Philosophy and Economics 20th Anniversary
Conference (Rotterdam).
8
DISENTANGLING THE PHILOSOPHY OF ECONOMY
PREFACE
The philosophy of economics is a branch of the philosophy of science that fo-
cuses on studying research practice of economists and the results of their work
(the philosophy of science about economics). It is a subdiscipline of ‘metaeconom-
ics’1 that covers (1) the study of economics as a science (philosophy of economics),
(2) ethical considerations, and (3) sociology of knowledge. The book focuses on
the former topic that is also synonymously labeled ‘methodology of economics’.
Certainly, the metascientific investigation of economics cannot proceed without ethi-
cal and anthropological considerations. Considering that economics is ultimately the
science that studies human behavior, the ethical and anthropological issues are at
hand. The research conducted at the intersections of ethics and economics seems to
be usually labeled ‘economics and philosophy’ (EAP, in short). Other topics usually
included in the economic sciences are studies by psychologists and anthropologists.
However, the scope of the book is limited to the philosophy of science about econom-
ics (aka philosophy/methodology of economics). The methodology of economics has
been fiercely debated for the last decades (Mireles-Flores 2018) raising the interest of
not only philosophers but also economists what boosts the demand for the systemati-
zation of the discipline.
The purpose of the book is to enlighten the differences and similarities between
the six schools of the philosophy of economics and analyze the connections between
the approaches to the philosophy of science and the schools of economic methodol-
ogy. This book is intended for economists (as a textbook introducing into the philoso-
phy of economics and systematizing their familiarity with it) and the philosophers of
economics as a reference book. Furthermore, it can serve as a handbook of economic
methodology for graduate-level economics students. The book offers the introduction
into six main philosophical schools within the methodology of economics and dis-
cusses their relation to the general philosophy of science. These schools often deliver
differing views on particular topics. The entanglement or, to put it differently, mistak-
ing various purposes for which philosophizing about economics is conducted produce
a mistaken view that philosophers of economics contradict each other. The book de-
velops the philosophy-of-economics discussion by putting forth the two-dimensional
topology of the repertoire of views. The disentanglement between (1) the purpose of
philosophizing (normative and descriptive approach) and (2) the scope (ontology and
epistemology) proves useful in understanding the similarities and differences between
the six schools and shows that some of the inconsistencies present in the literature re-
1 The term was coined by Karl Menger (1954 [1936].
9
PREFACE
sulted from different goals and interests of philosophers. There are a few introductory
textbooks into the philosophy of economics on the bookshelves (cf. Boumans and
Davis 2015; Caldwell 1994; Hands 2001; Maas 2014), but Disentangling explicitly
focuses on discussing and analyzing various schools of thought instead of employing
the usual problem-related layout.
Even though the philosophy of science sensu stricto is a young branch of philoso-
phy that dates back to the beginnings of the twentieth century when the Vienna- and
Berlin Circles started to meet regularly (Schnikus 2010; McGrew, Alspector-Kelly
and Allhoff 2009), philosophical considerations over science are as old as science
itself. The current debates can often be traced back to the ancient-Greek philosophy.
For example, realism about abstract entities put forth by Plato is a protoplast of the
current scientific-realist position (Hamilton et al. 1961). John Stewart Mill was prob-
ably the first economist and philosopher who practiced the philosophy of econom-
ics in the contemporary sense. Some ideas become forgotten and, reinvented, win
new followers. Others are believed to be novel due to being employed in new fields.
Contrary to the general field, philosophy of economics has not yet developed progres-
sively over time. In the analytic tradition of the philosophy of economics, six schools
coexist and support divergent and often inconsistent viewpoints what resembles the
situation in economics that is a heterodox science. The following six main approach-
es in the methodology of economics are discussed in the following chapters: logi-
cal positivism, falsificationism, instrumentalism, scientific realism, critical realism,
and constructivism. For the purpose of the analysis, these approaches to economic
methodology are labeled ‘schools’ instead of paradigms with a view not to raise the
problem of incommensurability. Economists (e.g., Gerrard 1996; Snowdon and Vane
2005) seem to prefer discussing schools instead of employing the Kuhnian perspec-
tive when discussing various approaches to economics.
Economic methodology: a menu of approaches
In contrast to the natural sciences2, economics is divided regarding research meth-
ods and theories. There is a dominance of mainstream economics that characterizes
the focus on theoretical modeling. Other, heterodox schools of economics reject cer-
tain premises on which the mainstream is based such as the assumption of equilibrium
or nonexistent transaction costs or employ different research methods such as experi-
ments, simulation, and various quantitative, empirical methods (Lo et al. 2017). Dani
Rodrick (2015, p. 8) recently compared economics to a library of models: various
models have different scope and the area of applicability. Various approaches to re-
search are (rarely explicitly) grounded in different philosophy-of-science stances. For
2 However, even the natural sciences experience the presence of inconsistent theoretical approaches in certain areas
such as string theory or cosmology.