behaviour from the rival manufacturer. We consider the case where franchise fees can be used to extract retailers' surplus. We show that vertical separation is in the collective, as well as individual, interest of manufacturers, and hence facilitates some collusion in the simple setting..

This fine book is a comprehensive and careful survey of the current situation in the methodology of economics. It is directed primarily at economists and students of economics. Indeed, the economist who reads it with the care it deserves will have a better grip on matters of methodology in economics than most philosophers of science, but philosophers and historians of science will also find the work rewarding and interesting. Though a few examples may be beyond the economically untutored reader, they (...) are not essential to the exposition, and other examples are accessible and enlightening: the brief discussions of Paul Samuelson's revealed preference approach and Julie Nelson's criticism of Gary Becker's work on economics of the family are good instances. Chapter 2, “The Methodological Tradition in Economics,” is a calm and brief introduction to its subject.Until quite recently practicing scientists, economists among them, and philosophers of science presupposed several strong theses about science and knowledge: that all genuine knowledge is scientific; that the objects of this knowledge are eternal and free of context; that all knowledge and all science is one, unified at least by a common scientific method; that, though not infallible, this method is progressive—it approaches truth as a limit—and operates in independence of the nonscientific beliefs and values of its practitioners. These principles cannot be presupposed today. Those who would accept any of them must be ready to meet serious criticisms. The import of this contemporary Methodenstreit as it affects economics is the dominant theme of Reflection without Rules. The reader is left with the conviction that the science of economics and the study of its methodology are inseparable and that it was only dedicated and myopic attachment to The Legend that kept this messy business at bay. Nor can there be any return to the age of innocent division of labor—economists to economics, philosophers to methodology.There are too many topics treated in the book even to list in a brief review. There are calm and clear accounts of Thomas Kuhn's work; of logical positivism ; of the deep effects of the collapse of The Legend on Walrasian equilibrium models; of Daniel Hausman's work on the nature of economics; of the strong program, which strives to reduce scientific activity to the effects of the social interests of scientists; of Alvin Goldman's reliabilism and social epistemology ; and of the important differences between pre‐ and post‐Legend views of science and knowledge.The question of values in science arises for economics in a special and pointed way, for economics studies many sorts of values. It also, at least since Adam Smith, deals in the unintended collective consequences of individual intentional actions. Economics evidently consists in the largely unintended consequences of the intentional actions of individual economists, and, once The Legend is discredited, economics is seen to navigate the very currents that it studies. This opens the door to the virtuous possibility of self‐criticism in tune with the strong naturalism of contemporary epistemology.It is not the least virtue of Reflection without Rules that its author wears his impressive erudition gracefully and well. The book is sophisticated and at the same time naive in the best sense. It will fortunately be the standard reference for work in the methodology of economics for some time to come. (shrink)