Changing Aims in Economics.

• Author: Guthrie, William

To the non-specialist, economic methodology is a confusing field. It is full of unfamiliar terms - hermeneutics, praxeology, sophisticated falsificationism - to list only a few. It examines issues that seem irrelevant or simply settled to practicing economists: the philosophical and intellectual foundations of the discipline; the epistemological status of economic "knowledge;" the scope and limits of economic inquiry; the propriety of various methods, approaches and techniques; the aptness of alternative units of analysis; the roles of subjective judgments, intuition and values; alternative criteria for appraising the validity of hypotheses; the role of theory; and professional norms for policy advising. Accordingly, before reviewing Hutchison's latest contribution, it is worth our while to briefly summarize - I do not pretend that this is the whole story - the evolution and current state of methodological thought in economics.

Early classical political economists - Cantillon, Petty and Adam Smith, for example - followed a rough and ready approach that mixed induction and deduction, analysis and synthesis, and in which empirical evidence was largely historical or anecdotal, and typically presented in literary form. The later classicals - e.g., Ricardo, Senior, James and John Mill - adopted Utilitarianism as their philosophic foundation. Believing the whole equals the sum of the parts (i.e., in "atomism"), these later classicals were able to introduce higher levels of abstraction, and increasingly more deductive reasoning into their investigations. Moreover, Utilitarianism provided an explicit criteria for guiding policy: the greatest good of the greatest number. The effects of alternative policy proposals, it was supposed, could be examined for their extent, propinquity, intensity, certainty, duration, etc. Then judgment could be passed as to which policy seemed superior. Note that the appeal was not to experience - how could one have experience with policies not yet implemented - but to reason and judgment.

Classical political economy and its Utilitarian foundations dominated economic thought in England but were challenged on the continent by German Historicism - grounded upon the Idealistic philosophies of Kant and Hegel - and, more importantly for our purposes, Positivism - founded by Auguste Comte.

The original positivism of Comte was purely empirical. Comte maintained that correlations among observations are all that we can "know." Causation and explanation are metaphysical illusions; theories mere metaphysical speculations. It was as though we can only "know" what, where and when; but never how or why.

Critics of Comte's vision - among them John Stuart Mill - were quick to point out that in practice it is impossible to make all observations, and that some insight, hunch, intuition or theory - call what one may - would have to guide the selection of what observations one should make. Furthermore, observations and correlations would have to be "public," that is available for inter-subjective verification. Finally, the human desire to "understand" demands explanation in the sense of stating logical connections among observations that render them systematic, dependable and orderly. Nevertheless, establishing validity would henceforth require an appeal to experience, not to "values," intuition or judgment. Indeed, the goal of the Positivists was to make knowledge universal, value free (i.e., wertfrei), objective and not contingent upon the temporal, spatial or cultural situation of the observer.

In time, Positivism evolved, in response to these and other criticisms, into what was called the Logical Positivism of the Vienna Circle (of philosophers and scientists: e.g., Carnap, Schlick and Wittgenstein). Theories and hypotheses - derived from whatever source - were to be "tested" against data. The more quantifiable the data, the better. (After all, what could be more transpersonal and less biased than mathematics and statistics?) Verification against empirical data became the criteria for warranting that knowledge is "scientific."

The doctrine of verification drew opposition from Karl Popper. Seeking to verify theories, Popper argued, readily degenerates into a pursuit of evidence that will confirm them. With a little selection and imagination, evidence could be made to confirm virtually any hypothesis. Confirmationism might then validate theories or hypotheses that were in competition with one another or even mutually exclusive of one another. The better, the truly scientific, strategy is to seek to falsify theories and hypotheses. Any statement that cannot be (even conceivably) falsified was demarcated as lying outside the realm of science. Statements that remain unfalsified, after passing through many stringent tests, are to be tentatively accepted as scientific knowledge. Therefore, an appeal to intersubjective experience remained the criteria for warranting that knowledge is "scientifically" valid.

Popper's falsificationist reformation of positivism served - in one form or...