Blog-Reference and Blog-Reference on Feb 15, context adapted
When economists, who after more than 200 years have not figured out what exactly the difference between profit and income is, talk about science and logic things become a bit surreal.
One outstanding characteristic of Heterodoxy, in particular, is that deductivism or the axiomatic-deductive method is abhorred. Consequently, other methods are proposed. One among others is abduction.
This, to be sure, is perfectly legitimate. The question is this: if the abductive method is indeed superior, why not apply it and present concrete results? Success is the best argument. To recall, it was the discoveries of Galileo, Newton or Einstein which cemented the reputation of the axiomatic-deductive method. This method sums up the personal experience of genuine scientists and postulates the primacy of theory over naive empiricism: “This indicates that any attempt logically to derive the basic concepts and laws of mechanics from the ultimate data of experience is doomed to failure.” (Einstein, 1934, p. 166)
It is a remarkable coincidence that Einstein deduced gravity waves from his theory in 1916 and in our days, 100 years later, they are observed. This success is a fine specimen for the primacy of theory and a smashing refutation of naive empiricism.
In marked contrast, abduction postulates the primacy of empiricism: “In inference to the best explanation we start with a body of (purported) data/facts/evidence and search for explanations that can account for these data/facts/evidence.” (See intro)
Now, the fundamental problem is that this may even work satisfactorily on a small scale, but the subject matter of economics is the economy, or more precisely, the world economy. Clearly, the world economy as such cannot be seen or experienced, so there is no other way than to start with a theoretical picture as a first approximation. And this is exactly what Popper has said “And in the social sciences it is even more obvious than in the natural sciences that we cannot see and observe our objects before we have thought about them. For most of the objects of social science, if not all of them, are abstract objects; they are theoretical constructions.” (1960, p. 135)
Here again, we have the primacy of theory. Popper, of course, was not the first to realize this, he got it from an economist: “Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the à priori one, or that of ‘abstract speculation’." (Mill, 1874, V.55)
Like nothing else, ‘abstract speculation’ puts the heterodox economist’s teeth on edge. The horror association is the absolutely vacuous formal exercise of general equilibrium theory. This green cheese nonentity, though, is clearly NOT what Mill had in mind when he spoke of ‘abstract speculation’. For him, facts had always the last word “The ground of confidence in any concrete deductive science is not the à priori reasoning itself, but the accordance between its results and those of observation à posteriori.” (Mill, 2006, p. 896-897)
The axiomatic-deductive method implies that the ultimate criterion for the assessment of a theory is empirical proof/refutation. The methodological blunder of standard economics has never been ‘abstract speculation’ but ‘empirically vacuous speculation’ of the type how-many-angels-can-dance-on-a-pinpoint.
The axiomatic-deductive method was never meant to be a fact-free logical exercise. It was Debreu who pushed it down this blind alley. It is fully justified to reject Debreu’s misapplication, but this gives one no good reason to relinquish the method.
So there is no real need to invent a new method for economics. The scientific method is well-defined and applies here as well “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994, p. 31)
Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.
Economics never rose above logically and empirically inconsistent speculation and storytelling.
Einstein, A. (1934). On the Method of Theoretical Physics. Philosophy of Science, 1(2): 163–169. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.
Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.
As the great economist and methodologist J. S. Mill already knew: Doubtless, the most effectual mode of showing how the Science of Economics may be constructed, would be to construct it.
The paradigm shift has already taken off.* You missed it.
* For an overview see cross-references Paradigm Shift.