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Philosophy of Economics (Stanford Encyclopedia of Philosophy)

(economics) a theory of commercial activities (such as the production and consumption of goods)
An equally radical but opposite reaction is Deirdre McCloskey's, whodenies that there are any non-trivial methodological standards thateconomics must meet (1985, 1994). In her view, the only relevant andsignificant criteria for assessing the practices and products of adiscipline are those accepted by the practitioners. Apart from a fewgeneral standards such as honesty and a willingness to listen tocriticisms, the only justifiable criteria for any conversation arethose of the participants. Economists can thus dismiss arrogantpretensions of philosophers to judge economic discourse. Whatever agroup of respected economists takes to be good economics isautomatically good economics. Philosophical standards of empiricalsuccess are just so much hot air. Those who are interested inunderstanding the character of economics and in contributing to itsimprovement should eschew methodology and study instead the“rhetoric” of economics — that is, the means ofargument and persuasion that succeed among economists.

Philosophy of Economics, A Critique of Demarcation, Lanham, MD: ..

Fortunately for the world, but unfortunately for economic theoristsat the time, the data consistently contradicted the trends the theorypredicted (de Marchi 1970). Yet the theory continued to hold sway formore than half a century, and the consistently unfavorable data wereexplained away as due to various “disturbing causes.” It isconsequently not surprising that Senior's and Mill's accounts ofthe method of economics emphasize the relative autonomy of theory.


The theory of value is currently a contested subject

Mill distinguishes between two main kinds of inductive methods. Themethod a posteriori is a method of direct experience. In hisview, it is only suitable for phenomena in which few causal factors areoperating or in which experimental controls are possible. Mill's famousmethods of induction provide an articulation of the method aposteriori. In his method of difference, for example, one holdsfixed every causal factor except one and checks to see whether theeffect ceases to obtain when that one factor is removed.

The first extended reflections on economic methodology appear in thework of Nassau Senior (1836) and John Stuart Mill (1836). Their essaysmust be understood against the background of the economictheory of their times. Like Smith's economics (to which it owed a great deal) andmodern economics, the “classical” economics of the middledecades of the 19th century traced economic regularities to the choicesof individuals facing social and natural constraints. But, as comparedto Smith, more reliance was placed on severely simplified models. David Ricardo's Principles of Political Economy (1817), draws aportrait in which wages above the subsistence level lead toincreases in the population, which in turn require more intensiveagriculture or cultivation of inferior land. The extension ofcultivation leads to lower profits and higher rents; and the whole taleof economic development leads to a gloomy stationary state in whichprofits are too low to command any net investment, wages return tosubsistence levels, and only the landlords are affluent.

Category:Economic theories - Wikipedia

In the wake of the work of (1970) andLakatos (1970), philosophers are much more aware of and interested inthe larger theoretical structures that unify and guide research withinparticular research traditions. Since many theoretical projects orapproaches in economics are systematically unified, they pose questionsabout what guides research, and many economists have applied the workof Kuhn or Lakatos in the attempt to shed light on the overallstructure of economics (Baumberg 1977, Blaug 1976, de Marchi and Blaug1991, Bronfenbrenner 1971, Coats 1969, Dillard 1978, Hands 1985b,Hausman 1992, ch. 6, Hutchison 1978, Latsis 1976, Jalladeau 1978,Kunin and Weaver 1971, Stanfield 1974, Weintraub 1985, Worland1972). Whether these applications have been successful iscontroversial, but the comparison of the structure of economics toKuhn's and Lakatos' schema has at least served to highlightdistinctive features of economics. For example, asking what the“positive heuristic” of mainstream economics consists inpermits one to see that mainstream models typically attempt todemonstrate that an economic equilibrium will obtain, and thus thatmainstream models are unified in more than just their commonassumptions. Since the success of research projects in economics iscontroversial, understanding their global structure and strategy mayclarify their drawbacks as well as their advantages.

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Mill maintains that direct inductive methods cannot be used to studyphenomena in which many causal factors are in play. If, for example,one attempts to investigate whether tariffs enhance or impedeprosperity by comparing the prosperity of nations with high tariffsand nations without high tariffs, the results will be worthlessbecause the prosperity of the countries studied depend on so manyother causal factors. So, Mill argues, one needs instead to employ themethod a priori. Despite its name, this too is an inductivemethod. The difference between the method a priori and themethod a posteriori is that the method a priori isan indirect inductive method. Scientists first determine thelaws governing individual causal factors in domains in which Mill'smethods of induction are applicable. Having then determined the lawsof the individual causes, they investigate their combined consequencesdeductively. Finally, there is a role for “verification”of the combined consequences, but owing to the causal complications,this testing has comparatively little weight. The testing of theconclusions serves only as a check on the scientist's deductions andas an indicator of whether there are significant disturbing causesthat scientists have not yet accounted for.

About fifteen Economics departments claim to be top ten* in the world

For both practical and ethical reasons, it is often hard to experimentin economics (though, as discussed in section 4.5, far fromimpossible). As a substitute for experimentation, in recent yearseconometricians have become very enthusiastic about so-called“instrumental variable” techniques. For example, merely examining thecorrelation between economic growth and development aid, evencontrolling for other factors known to influence economic growth isunlikely to reveal the causal influence of aid on growth, because aidmay depend on growth and well as many factors that are hard to measurethat also influence growth. But if economists can find somevariable x upon which aid depends that influences growth (ifat all) only by its influence on aid and is probabilisticallyindependent of all other determinants of growth, then one can use theeffect of x on growth to estimate the effect of aid ongrowth. Instrumental variable techniques, policy experimentation, andreliance on “natural experiments” are currently very popular, thoughalso problematic and controversial (Deaton 2010).