Showing papers in "Journal of Economic Methodology in 2023"
5 citations
TL;DR: The authors corroborates legitimate concerns that predominant types of mathematization induce a shift of attention away from the key concepts of Austrian economics, and the most prominent representatives of the Austrian School including Carl Menger, Ludwig Mises, Friedrich Hayek, Israel Kirzner, and Peter Boettke neither provide a justification for a wholesale rejection of formalization nor actually reject it.
Abstract: ABSTRACT Mainstream economics has been accused of excessive mathematization, whereas the rejection of mathematical and other formal methods is often cited as a crucial trait of Austrian economics. Based on a systematic discussion of potential benefits and drawbacks of formalization, this paper corroborates legitimate concerns that predominant types of mathematization induce a shift of attention away from the key concepts of Austrian economics. Taking this shift to the extreme, predominant modes of mathematization tend to accompany a detachment from ‘reality’ incompatible with Austrian pleas for realisticness. Contrary to popular prejudice however, the most prominent representatives of the Austrian School including Carl Menger, Ludwig Mises, Friedrich Hayek, Israel Kirzner, and Peter Boettke neither provide a justification for a wholesale rejection of formalization nor actually reject it. Adequate formalization can serve as a remedy for lacking logical and semantic rigor in standard mathematical economics as well as in murky verbal chains of reasoning.
1 citations
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TL;DR: The authors argue that the Homer economicus narrative is methodologically flawed and that its emphasis on cognition advances a distorted view of public policies consisting in fixing malfunctioning individuals, while ignoring the characteristics of the socio-economic environment that influence individuals' behaviours.
Abstract: ABSTRACT A common narrative among some behavioural economists and policy makers is that experimental psychology highlights that individuals are more like Homer Simpson than the Mr Spock imagined by neoclassical economics, and that this justifies policies aiming to ‘correct’ individual behaviours. This narrative is central to nudging policies and suggests that a better understanding of individual cognition will lead to better policy prescriptions. I argue that this Homer economicus narrative is methodologically flawed, and that its emphasis on cognition advances a distorted view of public policies consisting in fixing malfunctioning individuals, while ignoring the characteristics of the socio-economic environment that influence individuals’ behaviours.
TL;DR: In this article , three examples from microeconomics are examined to assess how the discipline performs in this regard and conclude that public distrust of economics and economists can be well-founded, on the basis of the performance of the discipline against these criteria on the examples considered.
Abstract: Whether economics warrants public trust depends on the extent to which assertions by economists can be deemed credible. Three examples from microeconomics are examined to assess how the discipline performs in this regard. First, a purely theoretical argument with broad conceptual implications: a quasi-evolutionary argument for rational choice based on the notion of money pumps. Second, a modelling-related claim with significant social implications: economists’ objection to minimum wages based on a simple supply-demand model. Third, methodological choices with implications for all empirical work in microeconomics: the recent proclamation of a ‘credibility revolution’ in applied microeconomics through the use of experimental and quasi-experimental methods. These are assessed against proposed criteria for credibility: epistemic validity, epistemic reliability, and epistemic reflexivity. On the basis of the performance of the discipline against these criteria on the examples considered, I conclude that public distrust of economics and economists can be well-founded.
TL;DR: In this paper , the authors argue that the epistemic contribution of financial models is that of enabling the model users to envision exactly how a prospective investment could be achieved in various ways through a detailed understanding of the available transaction mechanisms.
Abstract: Financial modelling is an essential tool for studying the possibility of financial transactions. This paper argues that financial models are conventional tools widely used in formulating and establishing possibility claims about a prospective investment transaction, from a set of governing possibility assumptions. What is distinctive about financial models is that they articulate how a transaction possibly could occur in a non-actual investment scenario given a limited base of possibility conditions assumed in the model. For this reason, it is argued that the epistemic contribution of financial models is that of enabling the model users to envision exactly how a prospective investment could be achieved in various ways through a detailed understanding of the available transaction mechanisms. Thus, financial models provide information about the possibility of an investment scenario by showing how a specific transaction mechanism could result from a small set of initial possibility conditions assumed in the model.
TL;DR: In this article , the authors present a new reading of the significance of GDP per capita and argue that it is indicative of an irreducible "group well-being" rather than the welfare of individuals.
Abstract: What is the significance of GDP per capita to a society? What does it represent conceptually? These questions have been addressed in past decades, engendering extensive explorations of the limitations of the indicator, yet answers have proved problematic or partial. The paper presents the main conclusions so far drawn and builds upon them to present a new reading of the significance of GDP per capita. At the heart of this reading is the view that, while GDP per capita is not indicative of the welfare of individuals, it is indicative of an irreducible ‘group well-being.’ This view, however, requires one to relinquish the belief that only individuals can be ‘well.’ It turns out that the allegedly orthodox view, which sees GDP as a human-centered indicator, requires an unorthodox philosophical standpoint, one that accepts an irreducible group well-being. The paper presents this alternative interpretation and addresses its upsides and limitations.
TL;DR: In this paper , the authors aim to assist applied econometricians in understanding the tools of causal inference and to extend those discussed in Nick Huntington-Klein's review of The Book of Why.
Abstract: ABSTRACT This note aims to assist applied econometricians in understanding the tools of causal inference and to extend those discussed in Nick Huntington-Klein's review of The Book of Why.
TL;DR: The authors studied the controversy on Fehr and Schmidt's model of inequity aversion and revealed new insights about the relation of behavioral economics with other sub-fields in economics, as well as with other disciplines.
Abstract: This paper studies the controversy on Fehr and Schmidt's model of inequity aversion. It borrows insights from disciplines such as philosophy and the sociology of science that have specialized in studying scientific controversies. Our goal is to contribute to the historical and methodological literature on behavioral economics, which happens to have neglected behavioral economists' research on social preferences. Our analysis of the controversy reveals some new insights about the relation of behavioral economics with other sub-fields in economics, as well as with other disciplines.
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TL;DR: In this paper, the authors argue that financial models are an essential tool for studying the possibility of financial transactions, and that the epistemic contribution of financial models is that of enabling the model users to envision exactly how a prospective investment could be achieved in various ways through a detailed understanding of the available transaction mechanisms.
Abstract: ABSTRACT Financial modelling is an essential tool for studying the possibility of financial transactions. This paper argues that financial models are conventional tools widely used in formulating and establishing possibility claims about a prospective investment transaction, from a set of governing possibility assumptions. What is distinctive about financial models is that they articulate how a transaction possibly could occur in a non-actual investment scenario given a limited base of possibility conditions assumed in the model. For this reason, it is argued that the epistemic contribution of financial models is that of enabling the model users to envision exactly how a prospective investment could be achieved in various ways through a detailed understanding of the available transaction mechanisms. Thus, financial models provide information about the possibility of an investment scenario by showing how a specific transaction mechanism could result from a small set of initial possibility conditions assumed in the model.
TL;DR: The authors argued that economics possesses "orientational paradigms" in high number, which are similar to Kuhn's paradigm in that they are shared across scientific communities, but dissimilar to Kuhhn's paradigm in that these are not generally accepted as valid guidelines for further research.
Abstract: From the mid-1960s until the late 1980s, the well-known general philosophies of science of the time were applied to economics. The result was disappointing: none seemed to fit. This paper argues that this is due to a special feature of economics: it possesses ‘orientational paradigms’ in high number. Orientational paradigms are similar to Kuhn’s paradigms in that they are shared across scientific communities, but dissimilar to Kuhn’s paradigms in that they are not generally accepted as valid guidelines for further research. As will be shown by several examples, orientational paradigms provide economics with common points of reference that support its epistemic coherence and make scientific discourse more easily possible across school boundaries. With the help of systematicity theory, a newer general philosophy of science, one can further elucidate the role of orientational paradigms with regard to scientific progress.
TL;DR: The authors advocate the abandonment of essentialism by offering three arguments: essentialism seems impracticable in economics because essences are either mostly unavailable or useless, and the Taxonomic Tower of Babel does not necessarily display the negative implications presumably associated with its existence.
Abstract: There is an essentialist view that requires one to specify the set of necessary and sufficient properties of the things that exist when establishing definitions. The endorsement of essentialism for definitions in economics has been largely motivated by the Taxonomic Tower of Babel (TTB), which encompasses two intellectual fears. The fear of scientific aphasia is the fear that scientific progress is hampered because economists do not agree on the definitions they use. The fear of nihilism refers to the fear of the advent of an unmanageable proliferation of definitions of the same term. We advocate the abandonment of essentialism by offering three arguments. First, essentialism seems impracticable in economics because essences are either mostly unavailable or useless. Second, the TTB, rather than a bug, is a feature of economics. Third, the TTB does not necessarily display the negative implications presumably associated with its existence.
TL;DR: The authors argue that this Homer economicus narrative is methodologically flawed, and that its emphasis on cognition advances a distorted view of public policies consisting in fixing malfunctioning individuals, while ignoring the characteristics of the socioeconomic environment that influence individuals' behaviours.
Abstract: A common narrative among some behavioural economists and policy makers is that experimental psychology highlights that individuals are more like Homer Simpson than the Mr Spock imagined by neoclassical economics, and that this justifies policies aiming to ‘correct’ individual behaviours. This narrative is central to nudging policies and suggests that a better understanding of individual cognition will lead to better policy prescriptions. I argue that this Homer economicus narrative is methodologically flawed, and that its emphasis on cognition advances a distorted view of public policies consisting in fixing malfunctioning individuals, while ignoring the characteristics of the socio-economic environment that influence individuals’ behaviours.
TL;DR: In this article , three examples from microeconomics are examined to assess how the discipline performs in this regard, and the authors conclude that public distrust of economics and economists can be wellfounded.
Abstract: ABSTRACT Whether economics warrants public trust depends on the extent to which assertions by economists can be deemed credible. Three examples from microeconomics are examined to assess how the discipline performs in this regard. First, a purely theoretical argument with broad conceptual implications: a quasi-evolutionary argument for rational choice based on the notion of money pumps. Second, a modelling-related claim with significant social implications: economists’ objection to minimum wages based on a simple supply-demand model. Third, methodological choices with implications for all empirical work in microeconomics: the recent proclamation of a ‘credibility revolution’ in applied microeconomics through the use of experimental and quasi-experimental methods. These are assessed against proposed criteria for credibility: epistemic validity, epistemic reliability, and epistemic reflexivity. On the basis of the performance of the discipline against these criteria on the examples considered, I conclude that public distrust of economics and economists can be well-founded.
DOI•
TL;DR: This paper argued that orientational paradigms provide economics with common points of reference that support its epistemic coherence and make scientific discourse more easily possible across school boundaries, and with the help of systematicity theory, a newer general philosophy of science, one can further elucidate the role of orientational paradigm with regard to scientific progress.
Abstract: ABSTRACT From the mid-1960s until the late 1980s, the well-known general philosophies of science of the time were applied to economics. The result was disappointing: none seemed to fit. This paper argues that this is due to a special feature of economics: it possesses ‘orientational paradigms’ in high number. Orientational paradigms are similar to Kuhn’s paradigms in that they are shared across scientific communities, but dissimilar to Kuhn’s paradigms in that they are not generally accepted as valid guidelines for further research. As will be shown by several examples, orientational paradigms provide economics with common points of reference that support its epistemic coherence and make scientific discourse more easily possible across school boundaries. With the help of systematicity theory, a newer general philosophy of science, one can further elucidate the role of orientational paradigms with regard to scientific progress.
TL;DR: In the wake of the financial crisis of 2007-2009, there has been a renewed interest in questions surrounding the core constituents and goals of economics as an epistemic endeavor and as a policy science as discussed by the authors .
Abstract: The Financial Crisis of 2007–2009 has been one of the worst economic crises since the Great Depression of the 1930s. In addition to directly impacting the economy, it had substantial ramifications also for economics as a science (Colander et al., 2011; Kirman, 2010; Lawson, 2009). In its aftermath, there has been considerable soul-searching within the economics profession that concerned, among other things, its methodological and conceptual core, the lack of trust in the epistemic qualities of economic theorizing and concerns about its function as a policy science. This soul-searching was triggered mainly by questions about the potential causes of the crisis and the failure of economics in predicting its occurrence. The claim was that the discipline had failed to accurately predict the crisis and explain its causes, and to offer useful policy recommendations to help its remedy (e.g. Akerlof et al., 2014; Allen & Carletti, 2010; Krugman, 2011). Some critics even questioned the scientific status of economics itself (e.g. Taleb, 2010). This soul-searching led to discussions and a fundamental reassessment of the central assumptions, methodologies, and principles underlying economic theories and models. Scholars from within and from outside economics were puzzled about what was quickly perceived as a lack of performance of economics as a scientific enterprise and the discipline’s failure to fulfill its expected social function (Krugman, 2011). This also revived several more general methodological debates about the usefulness of traditional as well as more recent theoretical, conceptual, and empirical tools used by economists to explain and predict economic phenomena and to suggest policy measures towards enabling social change. Those debates did not only remain within academic circles, but spilled over also to the policy realm, and to the broader public. Indeed, they engendered a deep skepticism in some corners concerning economists’ claims to economic expertise and led to widespread mistrust in their ability to assess and recommend good policies. Today, fifteen years after the crisis, it is time to take stock and ask the question where economics currently stands regarding this soul-search. This special issue provides a platform to present and reflect on the current status, and on some of the main arguments and outcomes of this search. Largely consisting of papers that were presented at a conference entitled The Soul of Economics and organized by Catherine Herfeld, Chiara Lisciandra, and Carlo Martini at the University of Zurich (Switzerland) in 2019, it provides a sketch of debates engaged with the contemporary state of economics fifteen years after the Financial Crisis. The articles collected here reflect in different ways upon economics in its current state in light of recent criticisms and calls for reform. They show that although economics’ conceptual, methodological, epistemological, and policy dimensions have been questioned throughout its existence, there is a renewed and continuing interest in questions surrounding the core constituents and goals of economics as an epistemic endeavor and as a policy science. This ongoing interest among economists, historians and philosophers of economics speaks to the observation that the crisis has renewed those debates and that economics has not yet come to rest. Against this background, the first goal of this special issue is to identify some of the major debates that have been opened or revived after the Financial Crisis and that are representative of what we take the soul-searching in economics to be. The second goal is to enable drawing some preliminary conclusions from the results presented about the current state of economics. The overarching aim of
DOI•
TL;DR: In this article , the authors present a new reading of the significance of GDP per capita and argue that it is indicative of an irreducible "group well-being" rather than the welfare of individuals.
Abstract: ABSTRACT What is the significance of GDP per capita to a society? What does it represent conceptually? These questions have been addressed in past decades, engendering extensive explorations of the limitations of the indicator, yet answers have proved problematic or partial. The paper presents the main conclusions so far drawn and builds upon them to present a new reading of the significance of GDP per capita. At the heart of this reading is the view that, while GDP per capita is not indicative of the welfare of individuals, it is indicative of an irreducible ‘group well-being.’ This view, however, requires one to relinquish the belief that only individuals can be ‘well.’ It turns out that the allegedly orthodox view, which sees GDP as a human-centered indicator, requires an unorthodox philosophical standpoint, one that accepts an irreducible group well-being. The paper presents this alternative interpretation and addresses its upsides and limitations.
TL;DR: In economics, the authors argued that the Homo economicus individual conception is the foundation of the human value system and pointed out the value blindness and fatalism of the view from nowhere approach.
Abstract: This paper addresses objectivity in economics. It criticizes a closed science, ‘view from nowhere’ conception of economics and defends an open science, ‘view from somewhere’ conception of objective science. It ascribes the first conception to mainstream economics, associates it with its principle practices – reductionist modeling, formalization, limited interdisciplinarity, and value neutrality – and argues their foundation is the Homo economicus individual conception. Two problematic consequences of adopting this stance are: (i) value blindness regarding the range and complexity of human values; (ii) fatalism regarding human behavior associated with employing a tenseless representation of time. The paper contrasts the principle practices of an open science, view from science conception – complexity modeling, mixed methods, strong relationships to other disciplines, and value diversity – and argues their foundation is a socially and historically embedded economics individual conception that avoids the value blindness and fatalism problems.
TL;DR: The authors corroborates legitimate concerns that predominant types of mathematization induce a shift of attention away from the key concepts of Austrian economics, and the most prominent representatives of the Austrian School including Carl Menger, Ludwig Mises, Friedrich Hayek, Israel Kirzner, and Peter Boettke neither provide a justification for a wholesale rejection of formalization nor actually reject it.
Abstract: Mainstream economics has been accused of excessive mathematization, whereas the rejection of mathematical and other formal methods is often cited as a crucial trait of Austrian economics. Based on a systematic discussion of potential benefits and drawbacks of formalization, this paper corroborates legitimate concerns that predominant types of mathematization induce a shift of attention away from the key concepts of Austrian economics. Taking this shift to the extreme, predominant modes of mathematization tend to accompany a detachment from ‘reality’ incompatible with Austrian pleas for realisticness. Contrary to popular prejudice however, the most prominent representatives of the Austrian School including Carl Menger, Ludwig Mises, Friedrich Hayek, Israel Kirzner, and Peter Boettke neither provide a justification for a wholesale rejection of formalization nor actually reject it. Adequate formalization can serve as a remedy for lacking logical and semantic rigor in standard mathematical economics as well as in murky verbal chains of reasoning.