Abstract
In Chapters 2 to 4 above the attempt was made to characterize the essential features of modern science; and in Chapter 5 the PTL model of scientific explanation was presented against the background of this characterization. The three key notions in this approach to science are principles, laws and theories; and the principles concerned have been specified as those of uniformity, substance and causality. These principles, conceived of in their paradigmatic modern-scientific form, imply strict determinism, a perpetually existing physical substance, and the operation solely of efficient causes which are contiguous with their effects.
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Referred to by Machlup as “the postulate of rational action, the ‘economic principle’ of aiming at the attainment of a maximum of given ends” (1955, p. 147). That Machlup sees such a principle as being on a par with our (refined) principles of modern science is evident where he speaks of “the fundamental postulates in physics — such as the laws of conservation of energy, of angular momentum, of motion — or ... the fundamental postulates in economics — such as the laws of maximizing utility and profits” (1961, p. 167). On the problems inherent in dealing with the rationality principle from within a Popperian perspective, see Hands (1985).
A leading proponent of this view is Herbert Simon, who suggests employing the notion of ‘bounded’ rationality, according to which economic actors attempt to ‘satisfice’ their benefits rather than maximize them, leading to markets in which equilibrium is not achieved. In this regard see e.g. Simon (1979).
See e.g. Johansen (1979), where it is argued that game theory, which prima facie applies best to oligopolistic markets, should constitute the basis of economics.
See e.g. Robinson (1962) nn. 77–80.
In this general regard, cf. Machlup (1956), p. 201: “Such propositions are neither ‘true or false’ nor empirically meaningless. They cannot be false because what they predicate is predicated about ideal constructs, not about things or events of reality. Yet they are not empirically ‘meaningless,’ because they are supposed to ‘apply’ or correspond broadly to experienced events. They cannot be ‘falsified’ by observed facts, or even be ‘proved inapplicable,’ because auxiliary assumptions can be brought in to establish correspondence with almost any kind of facts; but they can be superseded by other propositions which are in better agreement with these facts without recourse to so many auxiliary assumptions.” That economics may be approaching such an intellectual revolution is suggested by the content of Daly (1992).
It is thus in the light of the distinction between data and facts that we must interpret Schumpeter’s view that the very subject-matter of economics presents itself in quantitative form (Samuelson, 1972, p. 249), as well as Machlup’s comment that “Economics is the only field in which the raw data of experience are already in numerical form.” (1961, p. 168).
In this regard see e.g. Schmalensee (1989), p. 959, where he explicitly claims to be seeking economic laws, and Wilhelm Wundt (cited in Machlup, 1960, p. 233), who claims statistical regularities in the social sciences as having the right to be called empirical laws. On p. 1000 of his (1989), Schmalensee draws the same distinction as made in the present study between empirical laws and theoretical models: “[I]nter-industry research in industrial organization should generally be viewed as a search for empirical regularities, not as a set of exercises in structural estimation. [R]esearch in this tradition has indeed uncovered many stable, robust, empirical regularities. Inter-industry research has taught us much about how markets look, ... even if it has not shown us exactly how markets work.”
Here it must be pointed our that there exists a particular tension in the economist’s conception of human action. On the one hand the notion of free will is integral to it, since without free will the rationality principle would make no sense. On the other hand, however, no economic actor has the freedom not to follow the rationality principle, which itself determines how he or she is to act.
See Schmalensee (1989) for a use of this terminology, as well as an enumeration of various stylized facts stemming from empirical inter-industry studies.
In this regard cf. Robbins (1935), p. 120: “Whether the theory of competition or of monopoly is applicable to a given situation is a matter for inquiry. As in the applications of the broad principles of the natural sciences, so in the application of economic principles we must be careful to enquire concerning the nature of our material. It is not assumed that any of the many possible forms of competitive or monopolistic conditions must necessarily always exist. But while it is important to realise how many are the subsidiary assumptions which necessarily arise as our theory becomes more and more complicated, it is equally important to realise how widely applicable are the main assumptions on which it rests. As we have seen, the chief of them are applicable whenever and wherever the conditions which give rise to economic phenomena are present.”
Hotelling (1929), p. 41; next quote, p. 45.
Ibid., pp. 45–48.
As suggested by Veblen (1909, pp. 176–177), “The distinctive character given to this system of theory by these postulates [principles] and by the point of view resulting from their acceptance may be summed up broadly and concisely in saying that the theory is confined to the ground of sufficient reason instead of proceeding on the ground of efficient cause.”
As suggested by Lionel Robbins (1935, p. 125): “The idea of an end, which is fundamental to our conception of the economic, is not possible to define in terms of external behaviour only. [E]ven if we restrict the object of Economics to the explanation of such observable things as prices, we shall find that in fact it is impossible to explain them unless we invoke elements of a subjective or psychological nature.”
“Hence, social phenomena are explained only if they are attributed to definite types of action which are ‘understood’ in terms of the values motivating those who decide and act. This concern with values — not values which the investigator entertains but values he understands to be effective in guiding the actions which bring about the events he studies — is the crucial difference between the social sciences and the natural sciences.” Machlup (1961), p. 352. This of course is not to say that all economic change is intended. In this regard see Weber (1903–06), p. 188.
Cf. Machlup (1967), p. 9: “In this causal connection the firm is only a theoretical link, a mental construct helping to explain how one gets from the cause to the effect.” Intentional constructs as depicted here may be seen as constituting a further refinement of Weber’s notion of an ideal type: in this regard see e.g. Machlup (1960). Also of interest here may be Freud’s depiction of the aims of his psychology: “We seek not merely to describe and to classify phenomena, but to understand them as signs of an interplay of forces in the mind, as a manifestation of purposeful intentions working concurrently or in mutual opposition. ... On our view the phenomena that are perceived must yield in importance to trends which are only hypothetical.” (1916–17), pp. 94–95.
“And this imposes on the social sciences a requirement which does not exist in the natural sciences: that all types of action that are used in the abstract models constructed for purposes of analysis be ‘understandable’ to most of us in the sense that we could conceive of sensible men acting (sometimes at least) in the way postulated by the ideal type in question.” Machlup (1955), pp. 151–152.
In this regard cf. Adam Smith (1790, p. 9): “As we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation.” Our notion of empathetic understanding is essentially the same as Weber’s notion of Verstehen. However, Weber unfortunately seems to see understanding as necessarily being connected with our ‘inner experience,’ thereby conflating two kinds of understanding and missing the fact that the notion is equally as applicable to the natural sciences as it is to the social sciences: cf. e.g. Weber (1903–06), pp. 64–66 and 123ff.
Cf. L. M. Lachmann (1969), p. 306: “[I]n the study of human action we are able to achieve something which must for ever remain beyond the purview of the natural sciences, viz. to make events intelligible by explaining them in terms of the plans which guide action.”
Hotelling (1929), p. 42.
Ibid., pp. 54–57.
This categorial difference is evidenced e.g. as regards the potential testability of hypotheses from the different levels. As expressed by Machlup: “Can there be any doubt that a direct empirical test of the motivations behind businessmen’s actions, such as a test whether their decisions are made in an attempt to maximize profits, would be ‘more diffiicult,’ to say the least, than a test that higher prices are paid for bicycles?” (1956, p. 202).
In this context reference may be made again to Weber’s notion of an ideal type. In his words: “Such ideal-typical constructions are exemplified by the concepts and ‘laws’ [principles] formulated in pure economic theory. They state what course human conduct of a particular kind would take if it were strictly rational (in a subjective sense built into the type), unaffected by error and emotion and, furthermore, if it were completely and uniquely oriented toward only one objective, namely, economizing. In reality, action rarely corresponds to the idealized conduct hypothesized in the ideal type ... and even then it does so at best approximately.” Wirtschaft und Gesellschaft, Tubingen: J. C. B. Mohr, 1922, p. 4; quoted in Machlup (1960), p. 238.
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Dilworth, C. (1996). The Social Sciences: A Consideration of Economics. In: The Metaphysics of Science. Boston Studies in the Philosophy of Science, vol 173. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-8621-4_7
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