Abstract
When economics moves from “description” to “prescription,” the research shifts from basic science to applied science. Chapter 13 emphasizes the interdependence between prediction and prescription in economics, which is connected with the “descriptive” and “normative” realms. The interest moves from prediction as a test to a guide for policy-making, which involves the use of prediction for public policy as well as quantitative and qualitative considerations.
In this sphere of economics, the insufficiency of prediction is clear, as is the need for prescription. Thus, it may be a move from predictivist instrumentalism to the possible primacy of prescription. In any case, economic prescription needs values. The axiological content of prescription is relevant and involves internal and external values of prescriptions. It seems clear that the relation between prediction and prescription in economics is a central tenet for future developments.
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Notes
- 1.
The policy-maker “is not only likely to be concerned with forecast error on average, but also with the maximum size of error that he is liable to be faced with. Hence, the main emphasis is on the overall range of forecast error” (Llewellyn et al. 1985, p. 96). On prediction and decision-making in economics, see also Granger and Machina (2006). A philosophical reflection on predicting and deciding can be found in Pears (1964).
- 2.
“Normative” is used here as opposite to “descriptive,” but in economics these “norms” are—in principle—more flexible than in other sciences.
- 3.
On the philosophico-methodological issues related to representation and models in science, see Gonzalez (2014).
- 4.
In addition, “political and social changes taking place pari passu with developments in political economy must have affected the way political economy is interpreted” (Sen 1983, p. 95).
- 5.
Frequently, the first use of prediction in the social sciences has received more attention than the other two. But Kaplan long recognized that “since events occurring at the human level are essentially the products of human effort and experience, it is reasonable to suppose that greater predictability in the social sciences will enhance man’s control over his destiny as a social being” (1940, p. 492).
- 6.
In my conversations with Herbert Simon, he insisted several times on this idea: some social events (e.g., public transportation) can have a very strong regularity.
- 7.
According to Granger, economic forecasters can potentially have the ability to influence the actual economy “if the forecaster is particularly accomplished and has a previous good performance record” (Granger 2012, p. 326).
- 8.
“Provided that the response to the announcement varies continuously as the announcement alters, such a bandwagon effect could be in principle incorporated into the forecast” (Turner 2001, p. 34).
- 9.
- 10.
“A deep knowledge of the nature of (…) particular statistics as well as a grasp of the lessons of economic history is incredible important to being a successful forecaster for policy-makers” (Pagan and Robertson 2002, p. 153).
- 11.
“The non-quantitative macroeconomic forecasting techniques are primarily concerned with predicting whether a cyclical turn will occur. Since the process of detecting business cycle changes is different from making quantitative predictions, forecasting methods based on indicators were designed to recognize and predict turning points” (Stekler 1991, p. 376).
- 12.
His position is not accurate from the point of view that it seems clear that “description” is quite different from “prescription” and that prediction has its roots in the descriptive realm although it can be used in a prescriptive context.
- 13.
- 14.
Before the publication of Thomas Kuhn’s methodological essays, the insistence on prediction as an evaluative criterion was common among economists: “an emphasis on prediction as the criterion by which to evaluate economic theories was also characteristic of the group of economists centred on [R. G.] Lipsey and [G. C.] Archibald working at the LSE around 1960. Their aims were the quantification and the testing of economic theory. As with the economists just mentioned, they started with a view of the nature of science, which was assumed to apply with minimal modifications (greater reliance on the law of large numbers) to economics (see Lipsey 1963: ch. 1)” (Backhouse 1994b, p. 183).
- 15.
“The faith in a priori theory, uncontaminated by empirical observations, has been weakened—even among ‘rational expectationists’. More and more economists are beginning to look for the facts they need in actual observation of business decision making and in laboratory experiments on economic markets and organizations” (Simon 1992a, p. 7).
- 16.
- 17.
- 18.
- 19.
- 20.
On the different econometric conceptions, in general, and on the determinist position, in particular, cf. Morgan (1990).
- 21.
The analysis of these topics was enlarged in the new version of the book of 1996: Hausman and McPherson (2006).
- 22.
See also the papers, such as Kitcher (2010) and Schefczyk and Peacock (2010), included in the monographic section on altruism of the journal Economics and Philosophy, vol. 26, no. 2.
- 23.
For Granger, this feature of avoiding a biased viewpoint is central for ethical values in economics (2012, p. 326).
- 24.
This expression is used in the sense now frequent after the publication of the book of Laudan (1984). But there are several differences from him, which come from the approach itself: he analyzes epistemic values, whereas here the realm is wider, both in the number of values (it includes, for example, practical values) and in the perspective, which is richer than his proposal (i.e., it includes a conception of a system). See, in this regard, Gonzalez (2013a).
- 25.
In this regard, Frank Hahn seems optimistic: “What occurs when we pass to the more distant future is that economics provides a fairly powerful tool for evaluating alternative policies” (1993, p. 93).
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Gonzalez, W. (2015). The Relation Between Prediction and Prescription in Economics. In: Philosophico-Methodological Analysis of Prediction and its Role in Economics. Theory and Decision Library A:, vol 50. Springer, Cham. https://doi.org/10.1007/978-3-319-08885-3_12
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