 &ULWLFDOHFRQRPLFPHWKRGRORJ\                                                           /DZUHQFH $ %RODQG             The Foundations of Economic MethodologyMethodology for a New Microeconomics: The Critical Foundations  The Methodology of Economic Model Building: Methodology after Samuelson   The Principles of Economics: Some Lies My Teachers Told Me  &ULWLFDOHFRQRPLF PHWKRGRORJ\ $SHUVRQDORG\VVH\                           ¤     7KLVYHUVLRQZDVSURGXFHGLQ%XUQDE\%&&DQDGD         British Library Cataloging in Publication Data   Library of Congress Cataloging in Publication Data                 &RQWHQWV Preface      Methodology’s demand and supply  Outline of the book  Part I Friedman’s methodology essay     The saga of my 1979  paper      The usefulness of logic  ‘Instrumentalism’ and the relationship between logic, truth and theories  A reader’s guide to Friedman’s essay  The critics  On criticizing instrumentalism       The sociology of economics vs defeatist conventionalism  Evidence of the hostile atmosphere  Satisficing in methodology  Friedman’s methodology vs conventional empiricism  ‘Sound methodology’ vs ‘logically sound’ argument  Popper vs conventionalist-Popper  Do institutionalist economists really believe in formalism?       Friedman’s alleged inconsistencies in correspondence  Limits to the history of contemporary thought   Critical economic methodology   Part II Methodological criticism and neoclassical economics         Types of criticism and the maximization hypothesis  The logical basis for criticism  The importance of distinguishing between tautologies and metaphysics      Appraisal as criticism  The poverty of conventionalist methodology in economics  Part III Criticizing the methods of economic methodology     Knowledge and truth status: historically speaking  Epistemology vs methodology: the theoretical perspective  The practice of economic methodology      Positive economics vs what?  Positivism as rhetoric  What everyone seems to think ‘ positive’ is  Modern economic positivism is profoundly confused  Positive science or positive engineering?  Positive evidence about positive economics  Explaining the use of the standard article format  Positive success or positive failure?      Methodology of Economics Suggestions for another revised edition  Will the real Popper stand up, please!  On the utility of ‘methodological appraisal’  Some suggestions     Methodological pluralism vs problem-dependent methodology  Diversity as non-comprehension  From idiosyncratic to mainstream  Contents  Part IV Criticizing the methods of economic analysis    Explanation as applied ‘rationality’  Individualism as a research program  Individualism and eighteenth-century mechanical rationalism  Unity through mechanics and universality through uniqueness  Methodological individualism and unity-vs-diversity     The analytical problem of price adjustment    closure of the analytical equilibrium model  Toward closure through  ignorance  Exogenous convergence with forced learning  Endogenous convergence with autonomous learning  Are the foundations complete?     The problem with traditional explanations of dynamic processes  Time, logic and true statements  Time and knowledge: the Problem of Rational Dynamics  A possible solution to the Problem of Rational Dynamics  Alternative solutions to the Problem of Rational Dynamics  Concluding lessons     Psychologism in economics: Pareto revisited  Psychologism and values  Explanation and psychologism  Psychologism and general equilibrium  Psychologism and values again  Values as social conventions     Integrating the infinitesimal  Proofs vs infinity-based assumptions  The axiom of choice  False hopes of set theory  Unrealistic discontinuities  Integers vs the explanation of prices  Infinite sets vs complete explanation   Critical economic methodology   Inductive knowledge and infinity-based assumptions  Lessons unlearned     Stylized facts in use today  Criticizing stylized methodology  Part V Popper and economic methodology    Is there a Popperian legacy in economics?  Criticism of Popper’s view of science  Understanding Popper’s view of science  Falsifiability in economics  Attempts to create a Popperian legacy  The rhetoric of Popper’s view of science      The popular Popper  The Socratic Popper  Popper’s seminar and the hijacker  Popper’s disciples vs Popper and the hijacker  The popular Popper vs the important Popper  The future of Popperian economic methodology       The sociology of journal referees  The intolerance of liberal-minded pluralism  The hypocrisy of specialized journals  The hypocrisy in matters deemed to be ideological  The future of substantive methodology  The imperviousness of neoclassical economics  Bibliography  Name index Subject index  3UHIDFH                                                                                                                                                                                              Critical economic methodology                                                                                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                               Preface                                                                                                                                                                                                                                         L.A.B. Burnaby, British Columbia 17 March 1996  3URORJXH  &ULWLFLVPYVWLWLOODWLQJ  PHWKRGRORJ\                                                                                                                                                               Critical economic methodology                                                                                                                            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                                                                       Prologue                    METHODOLOGY’S DEMAND AND SUPPLY                                         about                                                                                                                                                                  Critical economic methodology                                                                                                                            might                         Journal of Economic Literature                               American Economic Review                                                Prologue  OUTLINE OF THE BOOK      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                                                    Journal of Economic LiteratureJEL          American Economic ReviewAER 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       Critical economic methodology               © Lawrence A. Boland 3DUW, )ULHGPDQ·VPHWKRGRORJ\ HVVD\ © Lawrence A. Boland  (FRQRPLFPHWKRGRORJ\  SULRUWR Pangloss taught metaphysico-theologo-cosmolo-nigology. He proved incontestably that there is no effect without a cause, and that in this best of all possible worlds, his lordship’s country seat was the most beautiful of mansions and her ladyship the best of all possible ladyships. One day Cunégonde was walking near the house in a little coppice, called ‘the park’, when she saw Dr Pangloss behind some bushes giving a lesson in experimental philosophy to her mother’s waiting- woman, a pretty little brunette who seemed eminently teachable. Since Lady Cunégonde took a great interest in science, she watched the experiments being repeated with breathless fascination. She saw clearly the Doctor’s ‘sufficient reason’, and took note of cause and effect. Then, in a disturbed and thoughtful state of mind, she returned home filled with a desire for learning, and fancied that she could reason equally well with young Candide and he with her. Voltaire [Candide, Chapter 1] When I began studying methodology in the early 1960s, there was little to read. There was, of course, the ubiquitous 1953 article by Milton Friedman and the ubiquitous textbook references to it. Being an aspiring methodolo- gist, it is reasonable to think that my reading would have begun with this article, but for two reasons it did not. First, I had read Paul Samuelson’s critique which convinced me that Friedman’s methodology was ‘wrong’. Second, coincidentally, a fellow graduate student told me of his experience with the Journal of Political Economy (JPE), where he had recently sub- mitted a paper on methodology. He was told that without including a refer- ence to Friedman’s article, there was little chance of publication. In an immature, petulant state of mind, I vowed never to read Friedman’s article – a vow that was kept for over ten years. During those ten years my reading was devoted almost entirely to philosophy of science literature – not just any philosophy of science litera- ture but exclusively that devoted to Karl Popper’s views. My PhD thesis [...]... thesis © Lawrence A Boland 10 Friedman·s methodology essay Economic methodology prior to 1979 11 was an application of Popper’s view to economic model building with virtually no reference to methodology of economics literature [see Boland 1989, Chapters 2 and 3] My only motivation for the study of methodology was that I saw it as an avenue to the advancement of economic theory and model building Beyond... literature Bruce Caldwell [1989, pp 11–12] Milton Friedman’s essay ‘The methodology of positive economics’ [1953] is considered authoritative by almost every textbook writer who wishes to discuss the methodology of economics Nevertheless, virtually all the journal articles that have been written about that essay have been very critical This is a rather unusual situation The critics condemn Friedman’s... 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LQFOXGH WKH UHFRPPHQGDWLRQ WR µDYRLG GLVFXVVLRQ RI ³PDWKHPDWLFV LQ HFRQRPLFV´ OLNH WKH SODJXH¶ DQG WR µJLYH QR WKRXJKW DW DOO WR PHWKRGRORJ\¶ 7RQ\ /DZVRQ > S @ ‹ /DZUHQFH $ %RODQG  Critical economic methodology ,Q WKH V , DWWHQGHG D FRQIHUHQFH ZKHUH WKH RUJDQL]HUV XQNQRZLQJO\ DVVLJQHG D PHWKRGRORJ\ SDSHU WR D VHVVLRQ WKDW DOVR ZDV DVVLJQHG D SDSHU E\ D KLJKO\ UHJDUGHG PDLQVWUHDP HFRQRPLF... scope of my reading One might be that I had a copy of Sherman Krupp’s 1966 collection of essays on economic methodology, but since there was only one mention of Popper in this book, I basically dismissed it Another exception might be my cursory examination of Fritz Machlup’s ‘The problem of verification in economics’ [1955], but since it was concerned solely with verification and Popper had exposed the... Petulance aside, if one was not interested in the grumblings and gossip surrounding Friedman’s essay, there really was little to read about economic methodology in the 1960s and early 1970s It was clear to me that everything substantive that could be said about methodology was clearly laid out in the opening chapters of most intermediate theory textbooks Unless one could add to these, there was nothing... Friedman, Samuelson and Maclup as ‘logical positivists’ The other group 2 includes those textbooks that did not mention methodology at all Moreover, the only thing in common with those that did mention methodology was a concern for the mainstay, the ubiquitous positive vs normative distinction Methodology in the 1960s and 1970s can easily be characterized by one question: whose side are you on, Friedman’s... normative economics, there was nothing in Friedman’s essay that could be considered a clear version of positivism or even logical positivism Actually, Friedman’s essay was more an argument against positivist methodologists I wrote up my paper and presented it to my methodology seminar that semester On two occasions in the next two years I attempted to get it on the program of the meetings of the Canadian Economics... order to get some feedback and criticism Both times it was rejected Rarely are methodology papers accepted for the CEA meetings – and surely never 12 Friedman·s methodology essay would one be accepted that might be seen to defend Friedman in any way So in March 1978 I decided to submit my paper to the home of Friedman’s methodology, the Chicago School’s Journal of Political Economy Simultaneously,... FRQGLWLRQ IRU WKH µEHVW¶ WKHRU\ LV IDOVLILDELOLW\ 7KHVH NLQGV RI PHHWLQJV FDQ EH YHU\ ERULQJ )HZ RI WKHVH SDSHUV FRQWDLQ DQ\WKLQJ RULJLQDO 7RR RIWHQ WKH\ DUH SURPRW ‹ /DZUHQFH $ %RODQG  Critical economic methodology LQJ WKHLU IDYRULWH SKLORVRSKHU RI VFLHQFH DV DQ DXWKRULW\ IRU WKHLU PHWKRG RORJLFDO SURQRXQFHPHQWV 6XUHO\ RQH RI WKH PDLQ UHDVRQV WKDW PDLQVWUHDP HFRQRPLVWV GHQ\ DQ\ LQWHUHVW LQ .  The Foundations of Economic Methodology  Methodology for a New Microeconomics: The Critical Foundations  The Methodology of Economic Model Building: Methodology after Samuelson. sociology of economics vs defeatist conventionalism  Evidence of the hostile atmosphere  Satisficing in methodology  Friedman’s methodology vs conventional empiricism  ‘Sound methodology . the history of contemporary thought   Critical economic methodology   Part II Methodological criticism and neoclassical economics   