1. Methodological Concepts and Perspectives
Lecture 3

2. Organization of this lecture
Concepts & Perspective in Methodology:
Defining science
Considering knowledge
Classification of types of knowledge
Role of personal objectivity
Role of facts, theory and hypothesis

3. Science
Science is the organized accumulation of systematic [reliable] knowledge for the purpose of intelligent explanation/prediction (Williams, 1984)

4. ie. “if X, Y, and Z occur, W will follow”
Science is systematic inquiry -- it is not a static or unchanging entity.
Its intended purpose is explanation / prediction ; science is especially concerned with conditional prediction
ie. “if X, Y, and Z occur, W will follow”
Research and Science are mutually interdependent
Science is accumulated, reliable knowledge
Research is a process through which science is expanded and tested for validity

5. Science does not consist of “factual truth”, devoid of human values or personal views.
Science is inherently a social enterprise and scientific knowledge is shaped by human values, limitations, and social contexts
Personal beliefs can affect scientific judgment and people are fallible.
Scientists should not blindly accept (or reject) ideas, observations or concepts

6. Economics as Art and Science (Is Economics a Science?)
Economics is a science because it accumulates (reliable?) knowledge through systematic inquiry
It is also is an art which applies knowledge to current issues and problems.
Good economic research requires intuition, creativity, and worldly experience

7. Physical vs Social Science
Social science places heavy emphasis on development and use of theories
Physical sciences generate data under controlled conditions to test their theories – postulated relationships between physical forces , verified through experimental design and data generation.
Theories in social science tend to address more complex phenomenon of individual and group motivation and behavior, and effects on societal institutions. (Often can’t be directly observed or quantified under controlled conditions.)

8. Knowledge (How do we “know” what we know?)
Postivistic vs. Normativistic Knowledge (Johnson, 1986)
Private vs. Public Knowledge (Larrabee, 1964)

9. Positivistic vs. Normativistic Knowledge
Positivisitic – knowledge of conditions, or things that are directly observable or measurable
Normativistic – knowledge about values
prescriptive knowledge – what ought or ought not to be done to solve a problem. Inherently embodies judgement
knowledge of values – the goodness and badness of conditions and situations (not observable)

10. Private vs. Public Knowledge (another way to classify knowledge)
Public knowledge can be demonstrated to others through logic and/or evidence. It is reliable knowledge and is shared publically.
Private knowledge is that which we know ourselves but cannot be demonstrated to others. eg. religious beliefs, “faith”
Private knowledge can lead to public knowledge if we set to demonstrate its reliability
Only public knowledge can be reliable in a scientific sense, but what is accepted as public knowledge can be culturally and time dependent

11. Ways We Obtain Knowledge
Six primary means:
the senses, experience, intuition, revelation, measurement, and reasoning
All ways of “knowing” can be placed in one of these categories, or some combination.

12. The Senses Knowledge through sight, sound, touch, taste and smell
These are generally privately perceived and help in forming the basis for each of the other avenues to knowledge, except reasoning

13. Experience
The accumulated total of one’s exposure to and interaction with people, places, things, circumstances, ideas, senses etc..
Experience knowledge is a disorderly and unorganized means of learning, however, it is an essential component of making sense of knowledge we possess.
We use our experience to evaluate new knowledge in its relation to prior knowledge

14. Intuition Sensing or feeling of something being accurate or not
Inherently private knowledge
However, this might lead to an orderly exploration and logical development which can lead to public knowledge
Intuition can be important for the creative research process, but cant be accepted as reliable on its own.

15. Revelation
The reception of knowledge from an undefined or unknown source
Not confined to divine revelation; something can just “occur to us”… “out of the blue”
Not a reliable source of knowledge, unless it is tested for reliability

16. Measurement
Knowledge gained through measurement (quantification) such as data.
Its connection to senses and experience is obvious
It is generally considered factual knowledge and reliable, with understanding of sampling or measurement error
Economic research involves a lot of statistical sampling and data gathering

17. Reasoning
The final means of gaining knowledge -- also thought of as “interpretation”. Integrates the other ways
Knowledge gained through reasoning is the only way to derive reliable knowledge of relationships and patterns ,through which we develop explanatory or predictive capability
Reasoning is the main avenue to useful disciplinary, subject-matter, and problem-solving knowledge
Reasoning can be deductive, inductive, or both.

18. Reliability of (Public) Knowledge
Two criteria for establishing reliability of knowledge:
Supported by evidence (quantitative data or complex logical constructions). This should be measureable
The way the evidence is obtained or generated can be demonstrated or reproduced
The reliability of things that cannot be directly observed, is through reasoning and logic.

19. Two Types of Logic (Deductive and Inductive)
Deductive logic
The process of reasoning from general premises (e.g. assumptions) to specific results or conclusions. Economic theory is largely based on deductive logic.
We establish a series of assumptions about conditions, motivations and behaviors, and logically work through to variables and parameters we wish to explain or predict.

20. Inductive Logic
Is reasoning from the specific circumstances or outcomes to a conclusion about general circumstances or outcomes
It is an empirical process of reaching a conclusion or arriving at new principles from known data and experience by observing objective realities.
The most applicable explanation of induction from economics is statistical inference
Collect data from a sample using established standards and criteria to infer characteristics and behavior of the entire population

21. Logical Fallacies
Errors in reasoning, which can lead to errors in conclusions or unreliable information
List of logical fallacies
Special pleading (selective use of information)
Affirming the consequent (validity of premises??)
Attacking the person (person representing issue)
Appeal to the people (majority “rules”)
Appeal to authority (“X” says its so)
False cause (attributing wrong cause to an effect)
Argument by analogy (analogous cases act the same)
Composition and division (true for part, true for whole, and vice versa)

22. Tests for Reliability
Besides avoiding logical fallacies, more comprehensive guidelines are needed
Four tests are recognized:
logical coherence,
correspondence
clarity (comprehensiveness)
the pragmatic test of workability

23. Test of Logical Coherence
Examining an outcome or proposition to see if it is free of logical contradiction (errors and fallacies)
Meeting the test of logical coherence does not ensure the reliability of the outcome but its reliability fails if the test is not met
When applied to theory, it is a test of whether the conclusions follow logically from the assumptions.

24. Test of Correspondence
Comparing an outcome or statement to what is already ‘known’ to see if it is consistent with prior knowledge.
When applied to theory, it examines whether conclusions are supported by empirical evidence.

25. Test of Clarity
Examines the outcome or proposition for lack of ambiguity or vagueness.
If more than one meaning, it fails the test
Use of a concept in which terms used are not well defined so the meanings are vague

26. Test of Workability (Pragmatism)
The results have to solve the problem or issue addressed.
The results must work, be relevant, and be reliable
Example:
Physician giving a child a smallpox vaccination.
Correspondence – yes – it has worked before, but for child no (lack prior knowledge)
Coherence – yes for doctor but not for child
Clarity – yes for doctor and not for child
Workability – did it work for the child?
If these tests are met, the knowledge can be considered tentatively reliable, subject to further tests.
We must consider all of the relevant evidence when evaluating reliability of knowledge

27. Role of Personal Objectivity
Fundamental to reliable knowledge
Avoid trying to impose our private values and beliefs on others
Subjectivity is associated with beliefs, values and opinion. Reliable public knowledge cannot be derived from personal subjective positions.
Objectivity relies on what is demonstrable by observation, measurement, and logic.

28. Objectivity is the cornerstone of science and reliable knowledge.
However, no scientist is completely objective. All introduce some subjectivity in our work, even by deciding what issues to study.
Strive for scientific neutrality, by avoiding personal values influencing research. Be open to any research outcome.

29. Scientific Prediction
Scientific prediction involves theory used in conjunction with empirical (experimental) knowledge and experience.
It involves the interaction of the following terms:
Fact – a verifiable observation
Theory – logical relationships among facts
Hypothesis – a testable proposition

30. Facts Observations that we establish through sense or measurement
Facts are positive (directly observable or measureable) and independent of personal judgment
Facts are not necessarily “permanent”
They are not by themselves used for prediction
Facts and values need to be differentiated, but there can be facts about values

31. Theory
Theories establish relationships, using deductive logic and facts as building blocks
A theory is not unfounded speculation, as in the popular phrase “that may be true in theory, but …” This is wrong!
Theories are used for predictive and explanatory purposes
Theories are tested by their internal logic
Theories are abstractions, simplifications, and/or generalizations

32. Functions of Theory in Economic Research
Orientation – framework to establish a problem or queston
Classification – defined meanings that facilitate understanding of complex concepts
Conceptualization – visualizing how something works or suggesting causes and effects
Summarization
Empirical generalization
Generalized relationships

33. Functions of Theory … cont.
Provision of precision – help to relate facts and concepts
Prediction of facts or identification of hypotheses
Identification of gaps in our knowledge

34. Hypothesis A result or outcome that is not yet evaluated or tested
It is a tentative assertion of a relationship between factors or events that is subject to verification
eg. Statistical hypothesis testing in econometrics:
significance of individual parameters
statistical fit of the entire model

35. Hypothesis … cont. Three categories of hypotheses:
Maintained hypotheses – things assumed true for the purposes of a study
Diagnostic hypotheses – propositions about the cause of a problem
Remedial hypotheses – proposed solutions to problems