What is economic theory?

3 May, 2013 at 10:48 | Posted in Economics, Theory of Science & Methodology | Comments Off on What is economic theory?

what is theoryEconomics is a discipline with the avowed ambition to produce theory for the real world. But it fails in this ambition, Lars Pålsson Syll asserts in Chapter 12, at least as far as the dominant mainstream neoclassical economic theory is concerned. Overly confident in deductivistic Euclidian methodology, neoclassical economic theory lines up series of mathematical models that display elaborate internal consistency but lack clear counterparts in the real world. Such models are at best unhelpful, if not outright harmful, and it is time for economic theory to take a critical realist perspective and explain economic life in depth rather than merely modeling it axiomatically.

The state of economic theory is not as bad as Pålsson Syll describes, Fredrik Hansen retorts in Chapter 13. Looking outside the mainstream neoclassic tradition, one can find numerous economic perspectives that are open to other disciplines and manifest growing interest in methodological matters. He is confident that theoretical and methodological pluralism will be able to refresh the debate on economic theory, particularly concerning the nature of realism in economic theory, a matter about which Pålsson Syll and Hansen clearly disagree.

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