Philosophical and Methodologial Issues in Economics
2004 (26) Issue 2
Guest-Editors: Mark S. Peacock / Michael Schefczyk
The 'dismal science of economics', as it was once called, has a mixed reputation. Some praise its clarity and elegance whilst others bewail its futility; others laud the precision of its mathematical form whereas others still descry the source of its irrelevance and unrealism in just this form. Many feel that precision and mathematisation are bought at a price too high, namely unrealistic assumptions, empty models with little or no explanatory power, unreliable predictions and a general state of...
Table of Contents
Title: Autodetermination in Microeconomics. A Methodological Case Study on the Theory of Demand
Author: Olaf L. Müller
Abstract: My philosophical case study concerns textbook presentations of the theory of demand. Does this theory contain anything more than just a collection of tautologies? In order to determine its empirical content, it must be viewed holistically. But then, the theory implies false factual claims. We can avoid this result by embracing the theory's normative character. The resulting consequences will be illuminated with the new autodetermination thesis recently proposed in the philosophy of physics by Oliver Timmer. Applying his ideas to the theory of demand reveals that the statements of this discipline simultaneously concern both values and acts.
Title: Evidence-Based Economics. Issues and Some Preliminary Answers
Author: Julian Reiss
Abstract: This paper presents an outline of a methodology of ?evidence-based economics?. The question whether an economic statement is evidence-based must be answered on three different levels. The first level concerns measurement: it asks whether claims made about economic quantities such as inflation, unemployment, growth or poverty are justified by the data and measurement procedures. The second level concerns induction: it asks whether claims made about the relations between economic quantities (such as ?number of babies born predicts growth?, ?change in money causes change in monetary income?, ?non-borrowed reserves can be used to control the interest rate?), are justified by the inference procedures. The third level concerns idealisation: it asks whether the quantities and relations selected are justified by the stated aim of the inquiry. The paper provides a discussion of these three types of investigation and of some solutions that have been offered.
Title: Perfect or Bounded Rationality? Some Facts, Speculations and Proposals
Author: Werner Güth / Hartmut Kliemt
Abstract: Simple game experiments of the reward allocation, dictator and ultimatum type are used to demonstrate that true explanations of social phenomena cannot conceivably be derived in terms of the perfect rationality concept underlying neo-classical economics. We explore in some depth, if speculatively, how experimental game theory might bring us closer to a new synthesis or at least the nucleus of a general theory of ’games and boundedly rational economic behavior’ with enhanced explanatory power.
Title: The Problems of Testing Preference Axioms with Revealed Preference Theory
Author: Till Grüne
Abstract: In economics, it has often been claimed that testing choice data for violation of certain axioms - particularly if the choice data is observed under laboratory conditions - allows conclusions about the validity of certain preference axioms and the neoclassical maximization hypothesis. In this paper I argue that these conclusions are unfounded. In particular, it is unclear what exactly is tested, and the interpretation of the test results are ambiguous. Further, there are plausible reasons why the postulated choice axioms should not hold. Last, these tests make implicit assumptions about beliefs that further blur the interpretations of the results. The tests therefore say little if anything about the validity of certain preference axioms or the maximization hypothesis.
Title: Social Support among Heterogeneous Partners
Author: Sonja Vogt / Jeroen Weesie
Abstract: This paper derives hypotheses on how dyadic social support is affected by heterogeneity of the actors. We distinguish heterogeneity with respect to three parameters. First, the likelihood of needing support; second, the benefits from support relative to the costs for providing support; and, third, time preferences. The hypotheses are based on a game theoretic analysis of an iterated Support Game. We predict that, given homogeneity in two of these parameters, the prospect for mutual support is optimal if actors are homogeneous with respect to the third parameter as well. Second, under heterogeneity with respect to two of the parameters, support is most likely if there is a specific heterogeneous distribution with respect to the other parameter that "compensates" for the original heterogeneity. Third, under weak conditions, the overall optimal condition for mutual support is full homogeneity of the actors.