------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (April 2005)
Lawrence A. Boland, _The Foundations of Economic Method: A Popperian
Perspective_, second edition. London: Routledge, 2003. xx + 332 pp.
$114.95 (cloth), ISBN: 0-415-26774-9.
Reviewed for EH.NET by O.F. Hamouda, Department of Economics, Glendon
College, York University.
In an age when there is a tendency for many scholars to be so lazy as
to rely on chatty internet exchanges for references and ideas about
how to do research, those same are particularly vulnerable to
becoming dependent on the self-proclaimed few who specialize in
distilling the fundamental contributions and practices of
theoreticians into sub-disciplinary textbooks designed to become
short-cut reference tools. The task of the reviewer should become
thus in part ever more devoted to rendering unto Caesar only that
which is Caesar's and recognizing its worth. Nowhere is this truer
than in a subject of great interest to EH.NET readers: economic
methodology.
One might imagine books in the field of economic methodology to be
dry, distant, serious, and strict. The situation is, however, quite
other. The most recent book on the subject, _The Foundations of
Economic Method: A Popperian Perspective_ by Lawrence A. Boland, is
but one example. It is for its part so effusive of language, so
blindingly enthusiastic, so ebullient of terminology, so
gymnastically intricate, and so ambitious in grandeur that it lends
itself not just to necessary multiple re-reads, but, to do it justice
in review, veritable casting as a theatrical play.
Let's set the one-act's stage: at a recent academic gathering on
economics, the neoclassical theoretician, Professor B, runs into the
Philosopher, Lawrence Popper. Somewhere in the book-exhibitors' crowd
is the third character Larry, the decision-maker, busy talking with
his publisher. At a profession cross-roads, the three characters are
going to try, with some levity, to disentangle the real from the
abstract, the rational from the absurd, the serious from the
ridiculous, and the puzzling from the obvious.
Scene I: Professor and Philosopher come to terms
Professor B: So ..., Lawrence. ... Have you seen Larry's second
edition of Foundations?
Philosopher: As a matter of fact, I have. I was just going to ask you
exactly the same question.
Professor B: Well ...
Philosopher: Well, I am, I admit, pleased to know that Popperianism
carries on and draws disciples.
Professor B: You might well be flattered to have a following, but as
a neoclassical economist of note, I don't know what to make of the
book. I find it in fact very confusing ...
Philosopher: Confusing indeed, and here I thought I was the master at
confusing students. But, Larry has done me proud; I expect students
will think they have met my match!
Professor B: You don't really mean it?!
Philosopher: Of course, not. What I really meant is that, although
Larry is really just rehashing the old debates about the method of
decision-making in neoclassical theory, he does try to frame the
discussion of methodology in a different manner because he believes
for some reason that "the methodological questions currently facing
model builders are different" ..., even though he maintains that the
core methodology that he "applied in the first edition is
fundamentally the same" [p. xvii & p. xviii]. From what I can piece
together, while his analysis is pushed a little bit toward the
epistemological perimeter of economics and raises interesting
questions here and there, in terms of making his views clear, the
book is terribly muddled, and he seems to be firing in every
direction.
Professor B: But, Lawrence, I simply don't understand what all of
Larry's philosophical or other nonsense has to do with Economics. As
a neoclassical theorist, I am just applying cost-benefit analysis to
every conceivable situation where material and money is involved; I
could really care less as to whether "in Popper's terms, Schumpeter's
'methodological individualism' should be called 'psychological
individualism' and Blaug's 'methodological holism' should be called
'institutional holism,' while Popper's 'methodological individualism'
should be called 'institutional individualism'" [p. 32], and I care
even less about Larry's understanding of Aumann. Remember where he
says, "it is still not clear what Aumann is advocating. Perhaps he is
just being inconsistent since he seems to be arguing at the
(research) methodology level that we should be Conventionalists but
at a (philosophical) meta-level, he is advocating an Instrumentalist
position to justify his choice of Conventionalism" [p. 28]? And who
is this Blaug anyhow?
Philosopher: Oh! Professor, not so fast! (He pretends to grab a set
of reins.) Surely, Larry would say that those cost-benefit analyses
are carried out by individuals and involve human behaviour ...
Professor B: But, Lawrence, of course I know that, but I still don't
understand what all these philosophical issues that Larry mentions
have to do with the way I do economics?
Philosopher: Let me clarify few things. First of all, this is not
Philosophy as practiced by philosophers, which if properly
contextualized might indeed shed some light on the behavioral
foundations of economics. In the context of Larry's type of book, it
is merely methodology masquerading in philosophical jargon, or at
best, logic. Furthermore, economic methodologists have created an
in-house adaptation of terminology and a way of arguing which makes
even the well-intentioned philosopher-listener lost. From my
perspective as a philosopher, I too find a few things, all be it
different ones, rather disturbing. Larry keeps confusing my ideas
with those of Agassi, a student of mine; that just irritates me
personally! Two, his definition of methodology, "-- a study of
methods of assessing information and of changing knowledge --" [p.
2], is, to say the least, rather intriguing. And third, take, for
example, his general assertion: "The eighteenth-century philosophers'
advocating logic as the only acceptable means of convincing an
audience is merely one example of rhetoric but not one that is
discussed by the rhetoric of economics advocates today" [p. 287]. Did
one in the eighteenth-century really advocate logic as rhetoric? Did
those philosophers use logic because they saw it as the only
acceptable means of convincing an audience?? His reading of Hume [p.
50], Aristotle [p. 51], and many other philosophers is sometimes
bizarre, sometimes pedestrian.
Professor B: Lawrence, do I understand you well? Are you telling me
that Larry is struggling with logic ...?
Philosopher: How shall I say ... ? Hmmmm ... Let me put it this way:
in the context of the foundational issues of economics he raises and
the required level of inquiry needed to tackle them ..., his
understanding of logic is not up to the task; it is rather that of an
elementary textbook. What I found most remarkable is his method of
argumentation. In page after page, one finds sweeping general
assertions, from which he seems to wander at ease, interpreting them
according to the ubiquitous researcher here, the philosopher there,
imputing his own explanation to other authors, and above all, lining
up citation after citation, often as if they speak for themselves in
relation to his text. Now, let me give you a concrete example ...
Professor B: But where does all this leave us???
Philosopher: That is good question. I should be thankful to Larry for
letting the economics profession know that Popper respected
economists and also for his promoting Popperian economics. Let's
leave Larry's methodology aside for a moment, if we can ... Help me,
please, Professor, understand Larry's economics. After all, the
strength of his book, if any, should, I presume, be found in the area
of his expertise, i.e., economics. I must admit his breath-taking
analysis bringing in almost every who-is-who-in-economics, every
who-has-said-anything-about-anything-in-economics is rather
impressive. One might say, like a vacuum cleaner, he has siphoned up
every bit of elementary economics under the sun to shed light on his
arguments about neoclassical economics.
Professor B: Remember, vacuum cleaners collect only dust ...
Philosopher: (not amused) Professor, let us not be too philosophical here ...
Professor B: Well, although I can't speak to his history of economic
thought, a topic of minor relevance to me and about which I know very
little, it seems to me that you are generous in attributing to him
this grandiose and sweeping perspective ...
Philosopher: Let's leave the relevance of the history of economic
thought to Paul Samuelson ... What I meant here was really that Larry
gives the impression that he has read a lot. That's all I meant ...
Professor B: The issue here is not how much he cites, but what his
understanding of economics is, in the context of his so-called
methodological inquiry of individualism in neoclassical economics.
Just before I turn to explaining my attempts to understand his
economics, there is one more methodological issue which is still left
hanging. Perhaps, you could clarify it for me. Here is another of
Larry's definitions: "by the term 'methodology' I mean the
economists' view of the relationship between their theories and their
methods of reaching conclusions about the nature of the real world
using those theories" [p. 1]. Is it compatible with that other one
you just cited? And then, there is also this statement: "a proper
study of methodology should be concerned with the actual role of
methodology as manifested in the nature of neoclassical theories,
models and research agenda." [p.1]
Philosopher: Yes, puzzling, hmmmm, there seems be a bit of shift
there! Are you neoclassical economists really interested in the
nature of the real world?
Professor B: I don't like the words 'real world'; I'm afraid I'll
have to leave that one to you to figure out. Now, as far as Larry's
economics is concerned, he is quite clear: his main concern is
neoclassical economics. By that he means the economics which is
"based on a view that the economy being explained is the result of
decisions made by people acting individually in the pursuit of their
own interest" [pp. 1-2]. The hidden agenda of this dominant
neoclassical economics is "the primary focus of the discussion" in
his book [p. 2]. Furthermore, in order to discuss the methodological
issue of individualism he restricts the sphere of his domain to
modern economics, and by that he means specifically and "primarily
the economics taught today in the first-year economics principles
courses and textbooks found in almost all universities and colleges
in North America and most of Britain and continental Europe" [p. 1].
(Standing nearby, a conference participant, presumably from the
Southern hemisphere, having overheard the conversation, pipes up
loudly, "What do you think the Australians are teaching?!)
Philosopher: (continuing obliviously) It looks like Larry is using
this simplified and vulgarized version of economics as his basic
backdrop, upon which, by throwing in some references from original
sources here and there, he builds up his argument. Have I got it?
Professor B: Frankly, I'm not quite sure what he's done. You know
what I find surprising is not so much his contrasting all the old
economists with our well-established elementary economics, but his
imputing to me imprecision, carelessness, and even my having lost
sight of the meaning of the Lagrange multiplier and my attributing
real-world significance to the mathematical symbol of the Keynesian
marginal propensity to consume [pp. 292-3].... For example, I was
unaware that, "Since Alfred Marshall's time, economists have tended
to use 'rationality' and 'maximization' interchangeably" [p. 53], or
that "Economists are particularly sloppy when discussing the notion
of equilibrium. Usually what is called an equilibrium is merely a
balance. That is, when demand equals supply, this is a balance and
not necessarily an equilibrium. A simple equality (e.g., between
demand and supply) is a static notion but the idea of an equilibrium
implies a dynamic notion" [p.60] ..., or that "Modern textbooks
mistakenly lead students to think that the long run refers to some
point of time in the future" [p. 93]!
Philosopher: Professor, just like you, I am a bit put off by the
distractions of the clutter. I think that you just shouldn't be drawn
too much into the technical issues of the book. It would seem that
most of them are simply a garnish; I suspect that the book would have
been clearer if most of them had simply been left out. The real
catch-terms here are 'time,' 'abstraction,' 'reality,' ... What Larry
seems to be after is to bring out a distinction between two types of
economists: those whose economics is, or is not, compatible with his
type of individualism. Look at it this way: you are on a beach, there
is one type, the 'short-runners,' out riding the waves, and the type,
the 'long-runners,' chasing after the pot of gold, way at the edge of
the horizon ... But for the moment, let's just be Popperians, shall
we?
Professor B: But, Lawrence, if all these technical aspects of
economics are irrelevant, then what's left for me?
Philosopher: I didn't say they are irrelevant, period. I meant they
are of secondary importance as far as Larry's methodology is
concerned. I'm afraid we have to stick first to understanding the
language to get to the foundational premises of behavior pertinent to
economics. You cannot escape this, if you want to debate with Larry.
Professor B: As you know, Lawrence, as a neoclassical, I am used to
expressing my theories in mathematical forms, that is to say, in
equations and symbols, Excitement for me comes from finding the right
specifications, choosing the appropriate variables, counting the
number of unknowns, and above all, from finding solutions to
mathematical puzzles. The ultimate, of course, would be to have my
name associated to theorem, even better to an inequality, like
Tchebysheff. As one of my surrogates puts it, the real world is but a
special case, and it is so difficult that we assume it to be an
uninteresting case. We simply leave it aside and stick to our simple
maximization principle. But now Larry muddles the waters, by
connecting our 'maximization' and us with 'metaphysics.' "Putting
maximization beyond question merely demonstrates that maximization is
the neoclassical economist's metaphysics" [p. 56]. I tried to
understand what he means, but he goes on hysterically about
metaphysics: "... every research program has its metaphysics. ... It
is easy to say that every science can be defined by what it puts
beyond question - this is its metaphysics. ... confusion of
metaphysical statements with tautologies is a common mistake. The
error is due to not recognizing that a tautology is a statement which
is true regardless of the meaning of the non-logical words used
(e.g., the tautological statement 'I am here or I am not there' is
true regardless of who 'I' am or where 'here' is). A tautological
statement is one for which we could never conceive of a
counter-example. That is, a tautology is not conceivably false. This
is not true of a metaphysical statement. .. a metaphysical statement
can be false (which is why it is put beyond question). Clearly, the
assumption that all decision-makers are maximizers is conceivably
false - particularly whenever one also specifies what is supposedly
being maximized."[pp. 56-57].
Philosopher: I think maybe Larry has a point, however, let's just
say, delicately (avoiding the issue), about his discussion of
metaphysics that he does not place the relationship of exogenous and
endogenous disciplinary arguments in their usual philosophical
relationship. Don't you, however, think that maximization indeed is
the soul of neoclassical economics?
Professor B: I thought economics had reached the status of science by
doing away with a soul. Mind you, it now has 'soles' (laughs) and
indeed the Maximization Principle is one of them. Oh, and Rationality
is another, a different one. And, (getting hysterical himself) within
that framework, there too are variants on 'sole': we assume, for
example, some economic agents prefer their sole raw, like in sushi,
and others prefer it fried, in fish and chips. (sobering) Of course,
what is important here is that each agent will go on consistently
eating his sole the way he likes it, adhering to his preference. You
know, we do believe that our agents are consistent, even in their
expectations ...
Philosopher: So, that's how you distinguish maximization from
rationality, and by rationality you only mean consistency?
Professor B: Yes, for me, at least. That is what I always understood
rationality to be, but now, Larry disturbs things, bringing in
history again, for an issue we thought was well established by
consensus. He says that was not always the case: "rationality in the
eighteenth century was more a matter of prescription than
explanation. That is, those promoting rationality when talking about
social policy were often recommending that people be rational or at
least saying that if people were rational they would always avoid
making mistakes. One could easily argue that the French Revolution
was a direct outcome of the belief in the power of rational thought.
Specifically, many 'rationalists' of the eighteenth century were in
effect saying 'kill the king and get rid of the priests.' And the
basis for this advocacy was that it was the rational thing to do" [p.
53].
Philosopher: Yes, I remember that curious passage. It would have been
enlightening to have had a few philosophers' names attached to
context ... Ah, hot coffee is served! I think I need some
refreshment, and some fresh air. Let's walk over to the Exhibitors.
(to himself) Economists have really perfected the art of confusion ...
Scene II: Decision-maker pipes up
Professor B: Oh, there is Larry himself, talking to his publisher ...
Philosopher: Hello, Larry! The Professor and I have just been
discussing your latest book ...
Larry: You ought to! Everybody should be reading my book. It should
be the quintessential reference for every first-year student of
economics, or any social science philosophy course.
Professor B: Is it selling?
Larry: Under the circumstances, it is doing well, but it would sell
better if you guys only realized how methodology can make you better
understand what your practices in economics really are in relation to
what you're preaching.
Professor B: When you say 'you guys,' who do you mean?
Larry: I mean you neoclassical economists.
Professor B: Let us leave the neoclassical economists aside for the
moment. From what I gather, you already have some listening ears in
many subgroups: economics methodologists, historians of thought, post
Keynesians, evolutionary economists. I gather there are now
conferences and journals where your kind of ideas are discussed ...
Larry: Professor, you do not understand, those "so-called heterodox
alternatives such as institutional, Austrian, or Marxist are
regrettably marginal. Modern economics is instead dominated by
neoclassical economics" [p. 1]. That is where the big market is. In
fact, everybody is doing "big-M methodology," and I am trying to
steer the profession away from that approach and bring it to practice
"small-m methodology." I am afraid, however, that the heterodox guys
wander all over outside the boundaries of their profession because
they understand little of economics, which is the reason why they
busy themselves with 'big-M methodology.' It is different for the
neoclassicals ...
Professor B: Wait a minute, Larry ... What is all this about Big and
Small methodology?
Larry: If you can only open your eyes, you will realize that I am
addressing you not them. You neoclassical economists just do not get
it. By 'big-M methodology' I mean that part of methodology which
concerns itself "with just the timeless questions that have bothered
philosophers of science for decades or centuries" [p. xvii]. ... In
fact, without knowing it, you neoclassical economists practice this
very big-M methodology; it is simply a part of your hidden agenda. Do
you follow...? You understand what I mean...? I'm advocating 'small-m
methodology'; it's about "issues that affect the decisions economic
model builders make everyday. And those decisions differ
year-by-year, decade-by-decade. Consequently, the various applied
topics of concern ... will be those found in today's economic
literature" [p. xvii].
Philosopher: Larry, Larry ... Not so fast. I am now really lost in
your definitions of methodology.
Professor B: Wait, Lawrence, (interjecting) I, as the neoclassical
representative, I feel that I am being targeted here. I demand some
clarification. What does your methodological discussion have to do
with us?
Larry: Well, I am a little bit angry with you neoclassical economists
because you do everything to avoid or suppress methodology and you do
not practice what you preach. If you allow me to digress for a moment
... You pretend that you are trying, in your theories, to solve and
remove imperfections, so the market mechanism can work smoothly. Yet,
in everyday practice, in your teaching environment, you are
constantly interfering in a way contrary to ...
Professor B: Larry, what, what are you getting at???
Larry: What I am getting at is, "in the mainstream of the economics
profession, economic methodology is a sideshow that leading economics
departments in North America would never accommodate by including
methodology courses in their curricula," denying methodological
research forever the chance "to make a significant contribution to
neoclassical economics." And, Professor, don't refute it. Methodology
"is always prohibited" [p.222]! You are denying me input and on top
of it, quite a market ...
Professor B: Larry, let us, for a moment, be scientific here. Give me
one slight bit of evidence that neoclassical economists have or are
trying to suppress methodology, or as matter of fact the study of the
history of economic thought in our curricula.
Larry: Please don't mix up my methodology with the work of all those
historians of economic thought. Second, you are asking me to give
evidence. You know quite well that that is absurd. This case is not
an empirical one, but rather an ideological one.
Professor B: What?!
Larry: Yes, you know quite well that methodology as a course offering
is never discussed at all in departmental meetings; it is just part
of your unconscious hidden agenda.
Professor B: Larry, there seems to be an impasse in communication
here. Let's be rational ...
Philosopher: You mean by that, let's come to our senses ...?
Professor B: Yes, the crucial thing for us is to understand what was
the point in your writing the book ... Let us suppose, for a moment,
that all three of us have difficulties with your understanding of
methodology and what you think its purpose is, and further, with your
understanding of economics and what the purpose of economics is.
Since the Philosopher's mind is already wandering, I suspect his
stomach is growling. I would suggest, we take a break for lunch, and
after sushi or fish and chips, when we come back for coffee, you
could perhaps help us by explaining in general terms, perhaps in one
or two sentences, or even better in mathematics or diagrams, what the
main goal of book is. OK?
Philosopher: I like the idea of sushi. Let's go!
Scene III: The Anticlimax
Larry: (over coffee)You are asking me to give you the main objective
of my book, while you show little patience with my framework. That
seems to me a bit inconsequent. Anyway, let me try: I truly believe
that the individualism foundation of economics is constantly
threatened and that a strong push for its abandonment, or an attempt
to sneak in other ideological alternatives, is always being tried.
There is a danger here for the survival of economics as a science!
For my part, "a rejection of individualism would be tantamount to the
advocacy of a denial of intellectual freedom" [p. 31]. Scientific
counterattack, based on the sound methodology I am advancing, is the
only way of preserving that freedom, and neoclassical economics is
the only economics that can guarantee that freedom. I do therefore
certainly agree with North that "To abandon neoclassical theory is to
abandon economics as a science" [p. 295].
Philosopher: That seems to me reasonable ...
Professor B: Yes, Larry, I couldn't agree with you more. Why didn't
you come straight out with it?
Larry: I don't think we really agree here. We do not have the same
neoclassical economics in mind. Your version is entirely built on
"psychologistic individualism"; mine rejects it.
Philosopher: But, since individualism is also for you a corner stone
of the foundation of economics, I presume you must have your own
assumption of what individualism means?
Larry: Yes, I do! I think it is time for economists to avoid assuming
"psychologistic individualism", "the (narrow) version of
individualism which identifies the individual with his or her
psychological state" [p. 33] as the only individualism, and further,
to recognize the inherent limitations of Inductivism and
Conventionlism and to adopt "real-time individualism in the short
run": "that is the view that only individuals make decisions"
combined with "situational analysis, that is, rational-decision
making" [p. 259]. That's it!
Professor B: Larry, what really distinguishes these two versions of
neoclassical economics?
Larry: Without vulgarizing too much, let's imagine the field of
economics as a seaside playground. All our economists are there
having fun, either building models in the sand, mining for data,
riding the merry-go-round (counting the 'ups' and 'downs') or simply
watching the crowd. Let me call all of them to the giant see-saw and
ask each one to jump on the one end or the other, according to
whether his/her economics is compatible or not with my 'real-time
individualism.' One should not be surprised that at the blue end
would be lined up together the Keynesians, the Walrasians, all the
neoclassical macro- and microtheorists who dispense with time but
rely on psychologism, all the evolutionarists, i.e., all the
'long-runners,' and any one of such ilk. On the other, the red end
would be the 'real short-runners,' like Marshall, Hayek, and their
neoclassical disciples. It is obvious that critical mass is on the
side of the blue, especially as the Walrasians are part of it through
their blind adherence to 'psychologism individualism.' My simple
suggestion, inspired by Popper: will make the see-saw tilt back to
the 'red' side, when the critical mass adopts 'real-time
individualism in the short run' as its foundational premise; by the
same token, we will have dispensed "with the ideological motivation
to suppress _at all cost_ any chance of encouraging methodological
holism" [p. 45]. Neoclassical economics will then have become
real-problem specific.
Professor B: (to himself) Although Larry's main contention is with
the foundations of economics, neoclassical economics is flexible
enough to accommodate his 'real-time individualism in the short run.'
I can't understand why he is jumping up and down ... (aloud) Are you
saying that we are all now Marshallians?
Larry: Yes, but only if you blend in "the Popper-Hayek Program to
knowledge recognition in models of neoclassical economics" [p.268].
Take me as an example, since I act accordingly as I preach. A
decision-maker, I act on the maximization principle; I am rational,
in that my methodology is consistent and in my decision making, I am
problem-oriented and learn from my mistakes. Just look at the second
edition of my book. It contains seventy percent new material [p.
xvii]. I learned from experience and from my critics. In fact, as a
result of your very challenging comments, I shall give my Foundations
more thought and speak to my publisher right away letting him know
that my third edition is now in the making. Neoclassical economics
has to come to grips with such reality. It must accept that while we
are all like as _homines economici_, confronting however different
situations as individuals, we are not all the same.
Philosopher: (pondering) Larry, are you sure you are going to have
the needed critical mass on the red end? Aren't you more likely to
find yourself all alone on that end of the plank?
Professor B: Oh, I didn't realize how late it has gotten! Well, it
was very stimulating talking to you both. Bye.
Philosopher: (moving slowly) Yes, indeed, it is time to go ...
(mumbling to himself) ... long over-due. Well, Don Quixote seems
intent on taking his own Road to Serfdom ... but this is the Open
Society ... After all, I think Larry's heart is in the right place.
He certainly raises fundamental questions. Whether they have been
tackled properly should, in the end, I suppose, be beside the point.
I hope he wasn't offended by our questions, since they really were
directed to economic methodologists in general. ... All of them will
eventually have to face the same music, if they want to make a
difference, and as a philosopher, I have only to think of
Wittgenstein to remind myself that the task of a thinker is never
easy.
THE END
O.F. Hamouda is Chair of the Economics Department of Glendon College,
York University (Toronto). Managing Editor of the _Journal of Income
Distribution_, Hamouda is currently at work on money and cyclical
production, inflation and deflation, and credit management in
Wicksell, Keynes, Hayek and Hicks and in the process of co-authoring
a book on Clement Juglar's business cycle.
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