A modest proposal for generating useful analyses of economies

from Geoff Davies and current issue of RWER

I propose that economists leave philosophy alone for a while and instead try analysing some actual economic observations.

I have observed much discussion among heterodox economists about what science comprises, whether one could do “scientific” economics, and what ontology, epistemology, etc., etc., might be involved. If, for example, economies are historically contingent, how could one hope to do a rigorous analysis. I have also observed much concern about the complications of people and societies and the resulting alleged need for elaborate statistical analyses to extract an object of interest, followed by the construction of an elaborate mathematical model that includes many nuances of human behaviour.

I think the challenge is not nearly so daunting. An economic analysis does not have to emulate the precision of (some) laboratory physics to be useful. It does not have to yield a literal prediction. If one steps out of the equilibrium mindset of the neoclassical mainstream one can find obvious phenomena crying out for explanation, a financial market crash for example.

It is not a great mystery how one might try to do some scientific economic analysis. Many kinds of scientist do science all the time, mostly without worrying about the philosophical nuances of precisely what kind of process they are engaged in.

The process I illustrate here is drawn from my experience studying Earth’s interior (Davies, 1999). It is a historical science. Earth’s processes are historically contingent and often very complicated. Observations of the interior are difficult, indirect and always incomplete. Yet we have developed considerable understanding of how the interior works to move continents and tectonic plates around the surface. Sometimes a very rough estimate can yield considerable insight.

What follows is expressed in terms that I think apply to many other kinds of science. Worrying about whether this process encompasses all kinds of science is precisely the sort of distraction I want to avoid. In avoiding the philosophy I do not mean to imply there is none involved, I simply want to get on with something that I know to work.

The process, in outline, is to seek some regularity or pattern or striking feature of an observable economy, and to propose a hypothesis that might account for the observed feature. The relationship of the hypothesis to the observation(s) ought to be explained. This might involve mathematics or it might not, and any mathematics used might be simple or sophisticated. Ideally some additional observations would be noted that are consistent with the implications of the hypothesis. One might then conclude by discussing whether the hypothesis appears to provide a useful description of the noted phenomenon and, if it does, how its usefulness might be further tested or enhanced.

http://www.paecon.net/PAEReview/issue95/Davies95.pdf