Instrumentalism about Economics

Most economists are aware that homo economicus is not a ‘conception of man,’ but only a useful assumption. Still, homo economicus is usually interpreted as an assumption about individual agents. It...

James Forder, professor of political economy at Balliol College, University of Oxford, is one of the most well-known and distinguished figures in the contemporary historiography of economics. His p...

Throughout the history of mankind, energy security has been always seen as a means of protection from disruptions of essential energy systems. The idea of protection from disorders emerged from the process of securing political and military control over energy resources to set up policies and measures on managing risks that affect all elements of energy systems. The various systems placed in a place to achieve energy security are the driving force towards the energy innovations or emerging trends in the (...) energy sector. Our paper discusses energy security status and innovations in the energy sector in European Union (EU). We analyze the recent up-to-date developments of the energy policy and exploitation of energy sources, as well as scrutinize the channels of energy streaming to the EU countries and the risks associated with this energy import. Moreover, we argue that the shift to the low-carbon production of energy and the massive deployment of renewable energy sources (RES) might become the key issue in ensuring the energy security and independency of the EU from its external energy supplies. Both RES, distributed energy resources (DER) and “green energy” that will be based on the energy efficiency and the shift to the alternative energy supply might change the energy security status quo for the EU. (shrink)

I distinguish several doctrines that economic methodologists have found attractive, all of which have a positivist flavour. One of these is the doctrine that preference assignments in economics are just shorthand descriptions of agents' choice behaviour. Although most of these doctrines are problematic, the latter doctrine about preference assignments is a respectable one, I argue. It doesn't entail any of the problematic doctrines, and indeed it is warranted independently of them.

Julian Reiss correctly identified a trilemma about economic models: we cannot maintain that they are false, but nevertheless explain and that only true accounts explain. In this reply we give reasons to reject the second premise ? that economic models explain. Intuitions to the contrary should be distrusted.

This article is a prelude to an experimental study of the preference concept in economics. I argue that a new empirical approach called experimental philosophy of science is a promising approach to advance the philosophy of economics. In particular, I discuss two debates in the field, the neuroeconomics controversy and the commonsensible realism debate, and suggest how experimental and survey techniques can generate data that will inform these debates. Some of the likely objections from philosophers and economists are addressed, and (...) possible ways of operationalizing different preference concepts are illustrated. (shrink)

This paper aims to provide characterizations of realism and instrumentalism that are philosophically interesting and applicable to economics; and to defend instrumentalism against realism as a methodological stance in economics. Starting point is the observation that ‘all models are false’, which, or so I argue, is difficult to square with the realist's aim of truth, even if the latter is understood as ‘partial’ or ‘approximate’. The three cheers in favour of instrumentalism are: Once we have usefulness, truth is redundant. There (...) is something disturbing about causal structure. It's better to do what one can than to chase rainbows. View HTML Send article to KindleTo send this article to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle. Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply. Find out more about the Kindle Personal Document Service.IDEALIZATION AND THE AIMS OF ECONOMICS: THREE CHEERS FOR INSTRUMENTALISMVolume 28, Issue 3Julian Reiss DOI: https://doi.org/10.1017/S0266267112000284Your Kindle email address Please provide your Kindle [email protected]@kindle.com Available formats PDF Please select a format to send. By using this service, you agree that you will only keep articles for personal use, and will not openly distribute them via Dropbox, Google Drive or other file sharing services. Please confirm that you accept the terms of use. Cancel Send ×Send article to Dropbox To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about sending content to Dropbox. IDEALIZATION AND THE AIMS OF ECONOMICS: THREE CHEERS FOR INSTRUMENTALISMVolume 28, Issue 3Julian Reiss DOI: https://doi.org/10.1017/S0266267112000284Available formats PDF Please select a format to send. By using this service, you agree that you will only keep articles for personal use, and will not openly distribute them via Dropbox, Google Drive or other file sharing services. Please confirm that you accept the terms of use. Cancel Send ×Send article to Google Drive To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about sending content to Google Drive. IDEALIZATION AND THE AIMS OF ECONOMICS: THREE CHEERS FOR INSTRUMENTALISMVolume 28, Issue 3Julian Reiss DOI: https://doi.org/10.1017/S0266267112000284Available formats PDF Please select a format to send. By using this service, you agree that you will only keep articles for personal use, and will not openly distribute them via Dropbox, Google Drive or other file sharing services. Please confirm that you accept the terms of use. Cancel Send ×Export citation Request permission. (shrink)

Milton Friedman’s 1953 essay created controversy and consternation amongst economists. It provided a prescription, based on empirically generated predictive success, of how to do economics, yet many saw it as a concession of the search for truth and theoretical beauty within the discipline. This article reviews a 50th anniversary festschrift devoted to views of the essay. The purpose of the volume is to provide today’s reader with the essay, responses, and a guide to interpreting it. The volume is selective and (...) several contributors have their own agendas, but the feeling of tumult the essay still engenders is nicely conveyed. (shrink)

The models Feldstein and Rothschild, on the hand, and Jorgenson on the other adopted in 1974 to highlight the replacement ratio are identical. Yet, the authors reached opposite conclusions and the latter's view prevailed, which is weaker in terms of theoretical and empirical foundations. This paper argues that both puzzles may be resolved by reference to the differences in the methodological preconceptions of the authors involved, the operational advantages of the theorem of proportionality, the accumulated data that facilitate research, the (...) inertia of the status quo, the lack of a model leading to a more useful theorem, the lack of communication among economists and their aversion toward complex solutions and policy prescriptions. In this light it is concluded that the time has come for research efforts to be directed towards constructing and testing models in which the useful life of capital is determined endogenously in the presence of embodied technological change. (shrink)

Hutchison's 1938 essay has been mainly interpreted as introducing positivism and ultra-empiricism into economics. Such interpretations misrepresent his position. While he clearly drew on logical positivism, his methodology stems from a more moderate form of empiricism. However the issue at stake is not the exact degree of Hutchison's empiricism, but rather the extent to which such negative labelling has trivialised his position and distracted attention from the main concern of his 1938 essay. This was to mount a sustained and systematic (...) criticism of the traditional abstract-deductive method in economics. In its place Hutchison sought to promote a more empirical, inductive approach. The paper is concerned with demonstrating the extent to which Machlup failed to provide evidence of Hutchison's ultra-empiricism. It thereby seeks to clear the way towards a reappraisal of Hutchison's methodology and towards a reappraisal of its relevance in our post-positivist era. (shrink)

In this paper I study how the theoretical categories of consumption theory were used by Milton Friedman in order to classify empirical data and obtain predictions. Friedman advocated a case by case definition of these categories that traded theoretical coherence for empirical content. I contend that this methodological strategy puts a clear incentive to contest any prediction contrary to our interest: it can always be argued that these predictions rest on a wrong classification of data. My conjecture is that this (...) methodological strategy can contribute to explain why Friedman’s predictions never generated the consensus he expected among his peers. (shrink)

The firm is a real entity and not an imaginary, fictitious or linguistic entity. This implies that the firm as a whole exhibits a sufficient degree of unity or cohesiveness and is durable and persistent through time. The firm is essentially composed of a particular combination of constituents that are bound together by something that acts as an ontological glue, and is therefore non-reducible to other more basic entities, i.e., to its parts or its members. From our perspective, the firm (...) is not simply an aggregate or a collection. It is a real integrated entity and a dynamic causal system. Institutional and organizational aspects enter the picture. These assertions stand in sharp contrast with mainstream theories of the firm whose proponents are more preoccupied with questions of contractual provisions, vertical integration or opportunism than the general and more fundamental questions related to what firms really are. (shrink)

In this paper I study Milton Friedman’s statistical education, paying special attention to the different methodological approaches (Fisher, Neyman and Savage) to which he was exposed. I contend that these statistical procedures involved different views as to the evaluation of statistical predictions. In this light, the thesis defended in Friedman’s 1953 methodological essay appears substantially ungrounded.

Milton Friedman's famous methodology essay is one of the most cited in economics literature. There was a time when it was usually cited as a prime example of positivist methodology. But since the publication of my 1979 critique of the critics of his essay, almost everyone now recognizes his essay as a prime example of what I called instrumentalism. Most economists, who when questioned about their views of methodology, will agree with Friedman's instrumentalism but only if Friedman's name is not (...) mentioned. But many of those same economists will claim to disagree with instrumentalism when it is explicitly identified as Friedman's methodology. Unfortunately, such disagreement leads too often to unfair criticism. The question considered is whether this unfair criticism is merely a matter of ideological hypocrisy or more likely a matter of ignorance of methodology. (shrink)

This paper examines two conflicting views that have emerged within the recent methodological literature regarding the relationship between Friedman 's famous essay and the formalist revolution. I focus on three influential contributors to this ongoing debate: Mark Blaug, Terence Hutchison, and Thomas Mayer. Blaug and Hutchison have argued repeatedly that Friedman 's essay licensed the formalist revolution while Mayer has argued precisely the opposite; the formalist revolution was a result of not following Friedman 's methodological advice. The juxtaposition of these (...) views is particularly interesting since the authors disagree sharply about the impact of Friedman 's essay, and yet seem to agree about most other aspects of economic methodology. (shrink)

Most economists will agree that Milton Friedman is a brilliant economist. Yet, the majority assessment is that his work is ideologically flawed, and that the Marshallian economics he advocates has been superseded by Walrasian economics. In this paper I argue that the reason for this negative assessment is that Friedman, like Alfred Marshall before him, tried to straddle a fence between policy and logical-deductive theory, combining the artistic science of the historical and institutional school with the logical-deductive science of economics (...) under a single category which Friedman called positive economics. This combination worked for Marshall, but did not work for Friedman, I argue that the profession's criticisms of Friedman stand, if he is viewed as a positive scientist as the profession currently defines positive economics - as logical deductive exercises. But that, I argue, is not how Friedman should be viewed; he should, instead, be viewed as an economic artist - as an applied policy economist extraordinaire - whose primary flaw has been his failure to make clear the importance of the artistic component of his economic science. (shrink)

McCloskey's work on the rhetoric of economics has little to say about Imre Lakatos, and indeed the scientific method prescribed by Lakatos, as it stands, would support McCloskey's claim that philosophers? imperatives bear little relation to what economists actually do. But a Bayesianized version of Lakatos is a different matter, and provides a yardstick against which the various rhetorical devices noted by McCloskey can be measured. We argue that McCloskey's list can be divided into those forms of persuasion which would (...) and would not remain convincing once the reader saw how the persuasion was being worked, and that this distinction corresponds precisely to those forms of persuasion which do and do not represent the ?Bayesianized Lakatos? method. (shrink)

This book brings together ten previously published essays on the philosophy of economics and economic methodology. The general theme is the application of Karl Popper's philosophy of science to economics -- not only by Popper himself but also by other members of the "Popperian school." There are three major issues that surface repeatedly: the applicability of Popper's falsificationist philosophy of science; the applicability of I. Lakatos's "methodology of scientific research programs" to economics; and the question of Popper's "situational analysis" approach (...) to social science. (shrink)

Many of the things that we try to explain, in both our common sense and our scientific engagement with the world, are capable of being explained more or less finely: that is, with greater or lesser attention to the detail of the producing mechanism. A natural assumption, pervasive if not always explicit, is that other things being equal, the more finegrained an explanation, the better. Thus, Jon Elster, who also thinks there are instrumental reasons for wanting a more fine-grained explanation, (...) assumes that in any case the mere fact of getting nearer the detail of production makes such an explanation intrinsically superior: “a more detailed explanation is also an end in itself”. Michael Taylor agrees: “A good explanation should be, amongst other things, as fine-grained as possible.”. (shrink)

A review of A. Hisch and N. de Marchi's thorough historical study on Milton Friedman's life-long work as an economist (and more specifically as a monetary economist) and as an economic methodologist (in his famous essay "The Methodology of Positive Economics".

Economics today cannot predict the likely outcome of specific events any better than it could in the time of Adam Smith. This is Alexander Rosenberg's controversial challenge to the scientific status of economics. Rosenberg explains that the defining characteristic of any science is predictive improvability--the capacity to create more precise forecasts by evaluating the success of earlier predictions--and he forcefully argues that because economics has not been able to increase its predictive power for over two centuries, it is not a (...) science. (shrink)

According to the instrumentalism of Friedman and Machlup it is irrelevant whether the explanatory principles or “assumptions” of a theory satisfy any criterion of “plausibility,” “realism,” “credibility,” or “soundness.” In this view the main or only criterion for selecting theories is whether a theory yields empirically testable implications that turn out to be consistent with observations. All we should require or expect from a theory is that it is a useful instrument for the purpose of prediction. Considerations of the “efficiency” (...) of a theory for the purpose of ordering our experiences are permitted, but considerations of “plausibility” are not. “Explanatory assumptions” are not really explanatory in the sense that they claim to represent underlying causal processes in reality; they only serve to generate, by deduction, implications that are in accordance with as many observations as possible. (shrink)

The F-twist is giving way to the methodology of scientific research programs. Milton Friedman's “Methodology for Economics” is being supplanted as the orthodox rationale for neoclassical economics by Imre Lakatos' account of scientific respectability. Friedman's instrumentalist thesis that theories are to be judged by the confirmation of their consequences and not the realism of their assumptions has long been widely endorsed by economists, under Paul Samuelson's catchy rubric “the F-twist.” It retains its popularity among economists who want no truck with (...) methodology, but among the increasing number of able economists who are writing on methodology the F-twist has been surrendered, not so much because these writers have decided it is false, as because something better has finally come along. (shrink)