Part I Classic Discussions: 1 On the definition and method of political economy John Stuart Mill 2 Objectivity and understanding in economics Max Weber 3 The nature and significance of economic science Lionel Robbins 4 Economics and human action Frank Knight 5 Philosophical foundations of economics: three texts Karl Marx 6 The limitations of marginal utility Thorstein Veblen Part II Positivist and Popperian Views: 7 The methodology of positive economics Milton Friedman 8 Testability and approximation Herbert Simon 9 Why look under the hood? Daniel M Hausman 10 Popper and Lakatos in economic methodology D Wade Hands Part III Ideology and Normative Economics: 11 Science and ideology Joseph Schumpeter 12 Welfare propositions of economics and interpersonal comparisons of utility Nicholas Kaldor 13 The philosophical foundations of mainstream normative economics Daniel M Hausman and Michael S McPherson 14 Why is cost-benefit analysis so controversial? Robert Frank 15 Capability and well-being Amartya Sen Part IV Branches and Schools of Economics and their Methodological Problems: 16 Econometrics as observation: the Lucas critique and the nature of econometric inference Kevin Hoover 17 Does macroeconomics need microfoundations? Kevin Hoover 18 Economics in the laboratory Vernon Smith 19 Neuroeconomics: using neuroscience to make economic predictions Colin F Camerer 20 The market as a creative process James M Buchanan and Viktor J Vanberg 21 What is the essence of institutional economics? Geoffrey Hodgson Part V New Directions in Economic Methodology: 22 The rhetoric of this economics Deirdre McCloskey 23 Realism Uskali Maki 24 What has realism got to do with it? Tony Lawson 25 Feminism and economics Julie Nelson 26 Credible worlds: the status of theoretical models in economics Robert Sugden

The Philosophy of Economics: An Anthology

he literature on economic methodology is concerned mainly with questions of theory confirmation or disconfirmation or empirical theory choice. The central question is usually, "How one can tell whether a particular bit of economics is good science?" Economists would like methodologists to provide the algorithm for doing good economic science-and they want the algorithm to vindicate their own practice and to reveal the foolishness of those who do economics differently. For example, Milton Friedman (1953) tells economists that good theories are those that provide correct and useful predictions, while Paul Samuelson (1947, 1963) tells economists to formulate theories with "operational" concepts that are, ideally, logically equivalent to their descriptive consequences. In my view, not only are these (and most other) specific views on theory appraisal mistaken, but the concern with problems of empirical appraisal is exaggerated, for there are also interesting methodological questions to consider-both normative and descriptive-concerning the structure, strategy, goals and heuristics of various economic theories. For example, few writers on economic methodology recognize that the activities of formulating economic models and investigating their implications are a sort of conceptual exploration. Instead, most mistakenly regard these activities as offering empirical hypotheses and assess them in terms of some philosophical model of confirmation or falsification. As a tendentious survey of standard methodological literature, this essay will, however, share its preoccupation with the empirical appraisal of theory, microeconomic theory in particular. I shall in particular discuss four approaches to praising or damning microeconomic theory that have dominated methodological discussions.

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Economic Methodology in a Nutshell

Robert Aumann argues that common knowledge of rationality implies backward induction in finite games of perfect information. I have argued that it does not. A literature now exists in which various formal arguments are offered in support of both positions. This paper argues that Aumann's claim can be justified if knowledge is suitably reinterpreted.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S1742360000001763

Interpreting Knowledge in the Backward Induction Problem

In this paper the general notion of Bourbaki structures, interpreted in terms of Suppes predicates, will be used to axiomatize a system of meta-rankings in the sense introduced by A. K. Sen. It will be argued that this axiomatization must take place in a “Kantian-ruled” world in order to provide a link between meta-rankings and individual actions.

Suppes predicates for meta-ranking structures

In jeder Wissenschaft bilden sich im Laufe ihrer Entwicklung Verfahren (Methoden) heraus, die nach uberwiegender Meinung am besten geeignet sind, der Losung ihrer Aufgaben zu dienen. In der nachstehenden Einleitung wird versucht, die Methodik der Wirtschaftswissenschaft in ihren Grundzugen zu skizzieren und an Beispielen zu zeigen, wie bei der Arbeit an ihren vier Aufgabenbereichen, der Beschreibung, Erklarung und Prognose wirtschaftlicher Vorgange sowie der Beratung bei ihrer Beeinflussung, vorzugehen ist. Zunachst wird ein Uberblick uber die zugrundeliegende Sicht des Wirtschaftsprozesses gegeben, unter der die Gesamtheit der heute von der Mehrheit der Wirtschaftswissenschaftler bei seiner Analyse verwendeten Voraussetzungen, Fragestellungen, zentralen Begriffe und Hypothesen zu verstehen ist. Der 2. Abschnitt erlautert die Unterscheidung zwischen positiver und normativer Fragestellung; und anschliesend werden mit dem Konzept der Verhaltensfunktion, dem Verfahren der Erklarung wirtschaftlicher Vorgange und dem „Denken in Anderungen“ zentrale Bausteine der wirtschaftswissenschaftlichen Methodik vorgestellt. Diese sind auf allen Betrachtungsebenen des Wirtschaftswissenschaftlers verwendbar, die zusammen mit dem Problem der Aggregation anschliesend erlautert werden. Die Abschnitte 7 bis 9 sind dem wirtschaftswissenschaftlichen Modell und damit dem wichtigsten Instrument zur Untersuchung gedachter wie tatsachlicher wirtschaftlicher Vorgange gewidmet. Besondere Beachtung wird hierbei in Abschnitt 8 der Frage geschenkt, unter welchen Bedingungen aus Modellen gewonnene Aussagen zutreffend auf die Realitat ubertragbar sind. Anschliesend wird an einem einfachen Beispiel die Erklarung wirtschaftlicher Vorgange unter Heranziehung statistischer Beobachtungen in der Praxis der Okonometrie gezeigt.

Einleitung: Methodische Grundlagen

1.- Neoclassical Theory Structure and Theory Development: The Ohlin Samuelson Programme in the Theory of International Trade.- Empirical Claims in Exchange Economics.- Ramsey-Elimination of Utility in Utility Maximizing Regression Approaches.- Structure and Problems of Equilibrium and Disequilibrium Theory.- A General Net Structure for Theoretical Economics.- General Equilibrium Theory - An Empirical Theory?.- 2.- The Basic Core of the Marxian Economic Theory.- A Structuralist Reconstruction of Marx's Economics.- x2018 Value': A Problem for the Philosopher of Science.- The Economics of Property Rights - A New Paradigm in Social Science?.- 3.- Subjunctive Conditionals in Decision and Game Theory.- The Logical Structure of Bayesian Decision Theory.- Computational Costs and Bounded Rationality.- How to Make Sense of Game Theory.- On the Economics of Organization.- How to Reconcile Individual Rights with Collective Action.- List of Contributors and Participants.

Wolfgang Balzer

Papers

Philosophy of economics : proceedings, Munich, July 1981