The Methodology of Economics: Or How Economists

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The Methodology of Economics: Or How Economists Explain. 2nd ed. Blaug Mark. Cambridge: Cambridge University Press, 1992, 286 + xxviii pages. John Dupré Economics and Philosophy / Volume 10 / Issue 01 / April 1994, pp 138 - 145 DOI: 10.1017/S0266267100001802, Published online: 05 December 2008

Link to this article: http://journals.cambridge.org/abstract_S0266267100001802 How to cite this article: John Dupré (1994). Economics and Philosophy, 10, pp 138-145 doi:10.1017/ S0266267100001802 Request Permissions : Click here

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proponents of comparable worth. They often reject the market ideal, holding that wage determination is inherently political and that a benefit of comparable worth is that it makes the politics of wages more transparent. Even in the imperfect democracies we know, a more politicized process of wage determination can be expected to lead to the compression of wage differentials generally (as it did in Australia), an outcome many proponents of comparable worth would welcome. Given the importance of this theoretical framework to the controversy over comparable worth, it is surprising that Rhoads does not examine it more critically. He does have a brief discussion of what he calls "power-centered" theories (pp. 228-30), but they are not examined in any depth. More significantly, there is no attention to important theoretical developments bearing on these issues, such as the new institutionalism represented by economists such as Akerlof or Williamson. Because of the many anomalies confronting traditional, neoclassical labor-market theories, Rhoads's arguments would be more persuasive if they were less dependent on that framework. Nonetheless, his case

studies illustrate the kinds of problems that must be confronted in implementing comparable-worth programs. It constitutes a serious challenge to advocates of pay equity.

). Donald Moon Wesleyan University REFERENCE England, Paula. 1992. Comparable Worth: Theories and Evidence. New York: Aldine De Gruyter.

The Methodology of Economics: Or How Economists Explain. 2nd ed. MARK BLAUG.

Cambridge: Cambridge University Press, 1992, 286 + xxviii

pages. In this book Mark Blaug has provided a succinct yet authoritative sketch of the history of the methodological views of the great economists of the past two centuries and of a range of the most interesting debates in contemporary economics. Blaug not only describes the central issues, but also offers an intelligent and informed evaluation of the successes and failures of these various parts of economics past and present. The third part of the book, in which Blaug provides critical appraisals of consumer behavior theory, the theory of the firm, general equilibrium theory, marginal productivity theory, theory of international trade, the

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debate between Keynesians and monetarists, and human capital theory including the "new household economics," will be invaluable for readers with a wide range of interests in science but limited knowledge of economics. And even those with a good knowledge of these topics are likely to learn from Blaug's sensitive evaluation of the empirical achievements (or general lack of empirical achievements) of these various projects. There is thus a great deal that is valuable in this book. I shall, however, partly because of my own areas of expertise and partly because criticism is generally more interesting than eulogy, focus in this review on aspects of the book that seem to me less satisfactory. My major reservations concern the philosophical framework in which the major arguments of the book are presented. The first part offers an overview of the philosophy of science of the last few decades, and Blaug comes out strongly in favor of what he takes to be the methodological position of Karl Popper. Although Blaug has a more complex and sophisticated account of Popper's methodology than do many of Popper's critics indeed he insists that Popper should be classified, in Lakatos's terminology, as a sophisticated rather than a naive falsificationist - it does not seem to me that he succeeds in deflecting the criticisms that have made the majority of philosophers of science extremely skeptical of Popper's position. And, perhaps more seriously, it seems to me that Blaug's attempts to pose his methodological criticisms of economic theory in this Popperian framework often obscure the force of his points. Before expanding upon these claims I want to discuss a quite different philosophical issue, however - the relation between positive and normative economics. Blaug devotes a chapter to this question, but it is not altogether easy to decide what view he ultimately arrives at. At the very end of this chapter he appeals in a characteristically Popperian vein to the "mechanism of hypothesis testing that can be relied on to weed out political and social prejudices at a rate faster than the one at which they are being continually recreated by new circumstances." How is this to be done? In the same concluding paragraph Blaug recalls his earlier arguments both that "the realm of 'ises' continually invades the realm of 'oughts' " and that "is-statements are constantly being assessed in the light of ought-statements." "The mutual interplay of facts and values," he continues "is precisely the fuel that fires scientific work." But scientific progress can nevertheless take place when "we strive to maximize the role of facts and minimize the role of values," to which end "economists must give absolute priority to the task of producing and testing falsifiable economic theories" (p. 134). The problem with this is that if, as the interplay between is-statements and ought-statements suggests, economic theories are inevitably a blend of the factual and the normative, it is unclear why any meth-


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odology of empirical testing should tend selectively to weed out the normative. The empirical world may tell me that my theory of unemployment is good or bad at predicting how many people will be out of work at any time, but if that theory somehow presupposes, for example, that unemployment is a bad thing, I cannot see how any amount of Popperian testing could tend to cast doubt on that judgment. A little more detail is required as to exactly how Blaug thinks the positive and the normative are interconnected. Blaug begins^ the chapter I am currently considering with a brief discussion of Hume's famous insistence on the logical gulf between factual and evaluative statements. He then puts forward some pointed reservations about this distinction, most significantly that value judgments are frequently strongly influenced by factual claims. For example, the belief that capital punishment is wrong might not survive a sufficiently convincing demonstration that capital punishment effectively deterred potential murderers (p. 115). What this leads him to is a distinction between impure and pure value judgments, the latter being those that are held to regardless of the facts. Beliefs about pure values, according to Blaug, form the point at which rational argument must stop (p. 116). (No doubt this is related to the surprisingly crude noncognitivist metaethics he appears to endorse when he describes value judgments as "the expression of approval or disapproval of certain states of the world" (p. 121).) Blaug's belief that factual statements are impregnated with normative views, though sometimes strongly expressed, turns out to be weakly grounded. It appears that the only sense in which he thinks factual statements are ineliminably normative is that there are conventions which we ought to obey - that determine when we should acknowledge their truth. The rest, the political and social biases, should be eliminated by the critical rational discussion which he takes (in the manner of Weberian Wertungsdiskussionen) to be partially constitutive of the essential social dimension of science. But it seems to me that though Blaug devotes a good deal of criticism to various ideas about how apparently factual statements in economics might be value-laden, he does not get to the bottom of the matter. In particular, he never considers the possibility that key economic terms might inevitably depend on value judgments for their very definitions. An example of the preceding suggestion is the concept of employment and its contrary (not, on current definitions, contradictory) unemployment. Roughly speaking, employment in contemporary economics refers to activities for which some financial payment is accorded (commonly this is referred to as "compensation" importing the common but significant value judgment that paid employment is always unpleasant). If one's concern is with the market in which the price of labor is determined, this has an obvious rationale. But if one wants this concept


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to be of general descriptive relevance to a society, a host of ultimately normative questions arise. Is employment to be contrasted with leisure or with idleness? Is there any important difference between growing vegetables in one's back yard (leisure) and growing them for an employer on someone else's land (employment)? And most generally, in what sense of the term "unemployment" is it something universally to be avoided or minimized? And so on. When, as is often the case, employment is equated with production of goods (sic!) and services as in the foundational macroeconomic equation of income and output, a further host of value judgments are ushered in. Why should economic output exclude the productive labor of most of the women in the world, for example, but include the production of toxic waste and nuclear weapons? Standard definitions of economic output can be catastrophic, as has been demonstrated by feminist critics of traditional development economics (for example, Waring, 1988). Even the example Blaug offers as a clearly value-free statement, "the import elasticity of demand for automobiles in Britain in, say, 1979 is 1.3" (p. 121) is not obviously normatively innocent. Why does it matter whether an inhabitant of Manchester buys an automobile manufactured 100 miles away in Cowley or 10,000 miles away in Japan? The answer to this question is extremely complex, but parts of it, I suggest, invoke ultimately normative conceptions of such things as statehood and nationality. Of course, and this is a crucial point, the fact that normative assumptions underlie the economic questions that we address, does not mean that there can be no objective answers. I agree with Blaug that this statement is either true or false (at least in the sufficiently short term). What these examples do show is that the way that (as Blaug notes, p. 117) "ideological bias creeps into the very selection of the questions that social scientists investigate" is a much deeper problem than he acknowledges. The consequences of this need not, however, be as fatal to the

empiricism that Blaug aims to defend as he might be led to suppose. Apart from the point just noted that a normative rationale for a question does not preclude an objective answer, it is also possible to take a more optimistic view of the prospects for rational argument about even "pure" value statements. Value statements are not just sophisticated grunts of approval or cries of disgust. Many philosophers now espouse a moral realism according to which such statements are true or false in just the way that any other statement is. But without needing to go that far, most accounts of the basis of normative statements provide possibilities for rational discussion. Of course this may be said merely to push the question back to one of differing metaethics. But while this is a difficult and controversial area, I know of no argument that its problems are ultimately insoluble or, for that matter, any less likely to be solved than those of (positive) economics.


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Let me now turn to the issue I wanted to address that runs throughout Blaug's book, his Popperian account of scientific methodology. After his survey of philosophy of science in part 1, the denouement of which is the triumphant entry of sophisticated falsificationism, in part 2 Blaug presents a history of economic theory that recapitulates essentially the plot of part 1. Chapter 3 traces the history of economic methodology from Adam Smith to Lionel Robbins, and is a story of benighted adherence to the view that Blaug refers to as "verificationism." Chapter 4 opens with Hutchison's introduction of Popper's falsification criterion into economics, and although economists generally failed to practice what they preached, the dominant view of methodology that became established in theory among economists was the true Popperian one. Blaug's sense of "verificationism" requires some comment. In part 1, Blaug introduces Popper (reasonably enough) first, as rejecting the classical positivist verificationist theory of meaning (p. 12); second, as substituting falsifiability for induction as a criterion of scientificity (p. 13); and third, as presenting the logical advantages of falsificationism as

those of modus tollens over the fallacy of affirming the consequent (p. 14). The last two points naturally suggest that verificationism, as opposed to Popper's falsificationism, should consist in the attempt to support scientific claims either by induction or by the confirmation of their empirical consequences or both. But it appears that while Blaug does occasionally condemn each of these strategies in a consistently Popperian fashion, what he really objects to in pre-Popperian economic methodology is the tendency to take the basic assumptions of economics (utilitymaximizing consumers, profit-maximizing firms, and so on) as self-evident or even a priori true, and hence not an appropriate subject of empirical test. This methodological stance is indeed adumbrated in famous works by J. S. Mill, Lionel Robbins, and others. The problem with it is that if the assumptions are taken as irrefutable, then any apparent discrepancy between the implications of the theory and empirical fact must be accommodated by appeal to further auxiliary or ad hoc assumptions, and there appears to be no point at which the procedure is exposed to any kind of empirical test. If the basic assumptions of the theory are taken to be irrefutable, it makes no sense to suppose that they might be empirically refuted. It is an attractive empiricist response to this to suggest that divergence between the predictions of a theory and empirical reality should have much direr consequences for a theory, perhaps even its falsification. But there are serious difficulties with the way matters have been expounded so far. To take false predictions as refutations of the theories that gave rise to them would be to succumb to the naive falsificationism that Blaug and, as Blaug insists, Popper explicitly eschew. It is naive


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because the derivation of a prediction requires a host of data, further auxiliary assumptions both factual and theoretical, and so on, so that to infer the falsity of a particular theoretical proposition (that supposedly under test) would be wholly unwarranted. Successful research programs have progressed by assuming that the basic theoretical tenets are true and attempting to explain anomalous observations by appeal to further auxiliary assumptions. The delicate attempt to distinguish legitimate auxiliary assumptions from ad hoc assumptions whose only plausibility is that they help to save the theory is at the heart of Imre Lakatos's (very) sophisticated falsificationism, a methodology toward which Blaug is generally very sympathetic. But as we move toward sophisticated falsificationism, it becomes increasingly difficult to see what the sins of the so-called verificationists really amount to. This is even clearer when we note that methodologists such as Mill were quite insistent that discrepancies between prediction and observation certainly required careful investigation. The problem with falsificationism, then, is that once we abandon its naive version, its advantages over verification (in the natural sense of confirming the predictions of a theory) are evanescent. It is true that a confirmation is logically incapable of showing a theory to be true but, as just noted, a failed prediction cannot show it to be false. Arguably, indeed, just as the realization of how much typically goes into a prediction makes failure uninformative, so it makes successful predictions that much more impressive in arguing for the truth of a theory. (Or as Popper would have put it, in my view perversely, the failure of a bold prediction to refute a theory is in some sense to its credit.) I have been somewhat harsh about Blaug's choice of philosophical frame, but I must now confess that once this is disentangled from his more substantive analysis of economic theory, I find most of what he says persuasive and important. The general theme that runs through the latter parts of the book is that a great deal of work in economics is

distressingly far removed from empirical evidence. Blaug shows how the work that is most applauded in all the areas of economics he considers is highly technical model-building that either has no possible bearing on empirical fact or, when it does, is empirically quite unsuccessful. The fact that his pleas for empiricism tend to be dressed up as calls for falsifiable predictions is largely irrelevant; the indictment of the empirical credentials of much of economics is impressive indeed. What should we conclude from this dismal empirical failure? Blaug supports some fairly uncontroversial empiricist proposals: More effort should be accorded to data collection; less prestige should accrue to empirically vacuous mathematical pyrotechnics; data should be used to test hypotheses rather than as a resource from which, with enough perseverance, a publishable hypothesis can be extracted; and so on. But


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while I certainly do not disagree with any of these suggestions, one might wonder why Blaug is not drawn to a more radical conclusion. Perhaps the reason is that Blaug is aware that a sweeping indictment of the enterprise of economics is certain to be ignored by economists: "any methodological prescription that amounts to wiping clean the entire slate of received economics and to starting all over again from scratch may be dismissed out of hand as self-defeating: economists have always ignored and will continue to ignore the advice of those who claim that because one cannot run, it is pointless to try and walk (p.105)." But perhaps if one cannot even crawl, one is deluded in supposing one even knows how to go about trying to walk. Recently the philosopher Alexander Rosenberg (1992), hardly known as a radical iconoclast, has concluded that economics is not an empirical science at all, but a branch of applied mathematics. There is little in Blaug's book to contradict this discouraging conclusion. Blaug occasionally lists, but never discusses, the marginal schools of economics (Marxist, institutionalist, radical, and others) that do reject

the entire framework of neoclassical economics. And in view of the legitimacy of skepticism about mainstream economics, Blaug anticipates that these will flourish, constituting "too many, rather than too few, competing economic research programs (p. 247)." Unfortunately, since these schools tend to address different sets of questions, they cannot readily be compared on the basis of empirical evidence. The best that we can do, he concludes, is to expose these various research programs to appropriate (presumably Lakatosian?) discriminatory criteria, and attempt to decide under what circumstances we would be forced to abandon the whole research program. One might wonder whether this Popperian/Lakatosian conception of methodology is not somewhat premature for a science with the dubious empirical credentials of economics. One might, perhaps, do better to draw on Kuhn for the idea of a science in the pre-paradigm stage. Certainly this would lead us to promote a range of different approaches to economics, but not because all these approaches were not yet decisively degenerating research programs, but rather because no approach had yet established itself as providing the foundation for a legitimate scientific research program. But given the time and effort that has been devoted to economics, this also suggests an even more radical possibility: Perhaps economic phenomena are not amenable to illumination by anything we would readily recognize as a science [an idea of which I have provided a preliminary exploration elsewhere (Dupr£, 1993)]. At any rate, I certainly do not intend my dissent from a good deal of Blaug's philosophical background to contradict my very positive assessment at the outset of this review. But it is a book I would recommend more enthusiastically to philosophers, who will be familiar with the debates on which Blaug takes somewhat contentious positions, than to


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economists, who may be given a somewhat misleading impression of current thinking in the philosophy of science.

John Dupr£

Stanford University REFERENCES

Duprg, John. 1993. "Could There Be a Science of Economics?" Midwest Studies in Philosophy 18. Rosenberg, Alexander. 1992. Economics - Mathematical Politics or Science of Diminishing Re-

turns? Chicago: University of Chicago Press. Waring, Marilyn. 1988. // Women Counted: A New Feminist Economics. San Francisco: Harper and Row.

Truth versus Precision in Economics, THOMAS MAYER. Aldershot: Edward Elgar, 1993, Mayer's book conveys very well, without ever being overly critical, the difficulty of shaping differently, not to say breaking, the shared rules of scientific correctness that keep the economics profession together. This code is what produces the sense of isolation and oppression felt by whomever tries new paths outside the established ones. What are these codified rules? Mayer's answer can be put very concisely. In the last forty-five years the evolved set of norms and values that has been selected as a criterion of economic scientific validity coincides with the strict predominance of formalist theory. By formalist theory Mayer means the procedure of rigorously deriving results from

an assumed set of axioms. Within this approach mathematics and logic are the exemplars that provide the criteria of judgment as well as the rules of professional morality and aesthetics: elegance, generality, parsimony, and formal demonstration. Relative to formalist theory, empirical science economics, which focuses on explaining past observations and predicting future ones, has lost ground. Moreover, in trying to meet the high and unrealistic standards of rigor and precision of formalist theory, even economists who favor empirical science often lose sight of the relevance of the problem as well as of the need for more flexible reasoning (pp. 68-69). In describing the recently emerged model of scientific economic correctness Mayer shows how it has become a self-reinforcing paradigm that every economist has an interest not to violate. Like the production of a public good, the production of scientific research provides econo-


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