1. EC 213 Warming up: Agenda setting

2. Definition of economics: What’s wrong with the “standard” definition à la Robbins (1932)? the science which studies human behavior as a relationship btw ends and scarce means which have alternative uses

3. Varieties of definitions As well as –Varieties of methodologies –Varieties of ontologies/subject-matters –Varieties of core assumptions –Varieties of policies Different schools

4. Classical political economy Neoclassic Marxism Institutionalism Austrian ….

5. History of economic thought A linear one? Jumps? Parallel developments?

6. Even within a school of thought, you may not be able to find a coherent approach. E.g. Neoclassical school –Walrasian GE –Marshalian PE

7. Then, how to judge whether a theory is a good one? Do we want to –Explain? –Predict? –Intervene?

8. We need a criterion! What about Knowledge must be based on experience. Hence, a theory is to be judged only according to the accuracy of its predictions.

9. All genuine knowledge is based on sense experience and extended by means of systematic experimentation alone (Positivism of Comte) Friedman 1953: Predictions are crucial; the plausibility of our assumptions is of no importance.

10. Popper’s falsificationism (Logic of Scientific Discovery) Science is to be defined as a practice designed to further knowledge by generating falsifiable hypotheses. Tests for truth and falsity are asymmetric in character

11. METHOD: Generation of such hypotheses and their empirical testing THEORIES: Scientific if they generate empirically falsifiable hypotheses SCIENTIFIC LAWS: are established as long as they are ready for empirical testing and hence rejection but not yet rejected. Science consists of yet-to-be-disproved hypotheses

12. Economists should also start behaving like responsible empirical scientists!

13. Anything wrong with positivism?

14. “Light critiques” What about experimental, observational or statistical errors? Not to mention how to run experiments in social sciences Usually theories are a complex bundle of components (and not a single proposition); hence in the case of a disconfirmation, which particular component needs to be rethought?

15. “Hard critiques” The impossible task of separating the facts from the theory Impossibilities of judging economic theories by the facts Inherent uncertainties

16. An alternative approach Facts do not exist except in conceptual frameworks. Theory and facts are from the same framework. Kuhn (Structure of Scientific Revolutions) describes a system of foundational ideas as a paradigm.

17. Normal science: Problem solving activity in the context of an orthodox theoretical framework Revolutionary science: Overthrown of one of the framework by another in consequence of repeated refutations and the collapse of credibility of a theory