The Inexact and Separate Science of Economics.

• Author: Wible, James R.

Daniel Hausman's The Inexact and Separate Science of Economics (ISSE) provides an outsider's view of economics. Hausman is candid and self conscious about his external status. He is no ordinary outsider. Trained as a philosopher, Hausman is one of the founding editors of Economics and Philosophy. Economics is the subject matter of Hausman's own philosophical research program and ISSE. There are three major parts to work. Part I is Hausman's reconstruction of neoclassical microeconomics. Part II is a philosophical appraisal of economic methodology, philosophy of science, and economic science. The last part, an appendix, is a fifty page introduction to philosophy of science.

Hausman's reconstruction of neoclassical microeconomics is quite fascinating. He presents the subject matter in the style of the philosopher. There are two main subdivisions of the discipline, fundamental microeconomics and welfare economics and general equilibrium theory. Fundamental microeconomics is presented as consisting of seven laws or behavioral postulates. This is basically "all there is to fundamental microeconomic theory". Welfare economics and general equilibrium theory are depicted as augmentations of equilibrium theory and not as part of the fundamentals of neoclassical theory. Like equilibrium theory, the arguments implicit in welfare economics are reduced to seven substantive component. The traditional arguments for Pareto optimality are criticized as being invalid. They imply that Pareto optimal states satisfy "all other moral constraints". This is a conclusion which Hausman cannot accept.

After presenting the substantive content of equilibrium theory and welfare economics, Hausman undertakes a philosophical appraisal of the nature, role, and importance of theories and models in economics. He provides an overview of recent philosophical perspectives regarding theories and models. The syntactic, logical view of the positivists are presented and elaborated with Arrow's impossibility theorem. Then the semantic and predicate views of theories are reviewed. What follows is a long discussion of the difference between models and theories. This leads eventually to Weber's conception of ideal types.

Having discussed theories and models, Hausman broadens his focus to Kuhn's disciplinary matrices and Lakatos's research programs. He asks whether Kuhn and Lakatos help us understand the "structure and strategy of contemporary economics." His answer is a resounding no...