The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Occam’s [Ockham’s] Razor

  • S. Hargreaves-Heap
  • M. Hollis
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1590

Abstract

Called after William of Ockham or Occam (c1285–1349), this is the principle usually stated as ‘entities are not to be multiplied beyond necessity’ (entitia non multiplicanda sunt praeter necessitatem). These words are not Ockham’s own, although he does say ‘plurality is not to be assumed without necessity’ and ‘what can be done with less is done in vain with more’. The principle belongs with his radical empiricism, by which only direct experience of particular things and events can be evidence for claims to knowledge, and with his nominalism, by which logical analysis of language can be assured of removing the need for extra-linguistic universals. Nothing is to be assumed in explaining a fact, unless established by experience, by reasoning from experience or by the requirements of Faith. Whatever is real is particular.

Called after William of Ockham or Occam (c1285–1349), this is the principle usually stated as ‘entities are not to be multiplied beyond necessity’ (entitia non multiplicanda sunt praeter necessitatem). These words are not Ockham’s own, although he does say ‘plurality is not to be assumed without necessity’ and ‘what can be done with less is done in vain with more’. The principle belongs with his radical empiricism, by which only direct experience of particular things and events can be evidence for claims to knowledge, and with his nominalism, by which logical analysis of language can be assured of removing the need for extra-linguistic universals. Nothing is to be assumed in explaining a fact, unless established by experience, by reasoning from experience or by the requirements of Faith. Whatever is real is particular.

The context is an old and subtle dispute about how we recognize different things (trees, for instance) as the same. Realism held, in one form or another, that different trees have a common nature. Ockham declared common natures unknowable, unnecessary and indeed unintelligible. They exist only in the sense that trees are rightly all called trees – a fact about the verbal sign and not about the inner being of the tree. For Ockham, the problem of universals reduces to one of showing how concepts arise and function in relation to experience of particulars. His answer is that a concept is an act of understanding the individual things of which it is the concept. This answer has the merit of not multiplying entities beyond necessity. But the problem of universals is still with us and nominalism has never disposed of its critics.

Two examples should serve to illustrate the application of this principle to economics. Consider the use of ordinal and cardinal utility theory. Ordinal theory requires that agents can say whether they prefer option A to B (or are indifferent), whereas cardinal utility theory also assumes that agents can say by how much more they prefer A to B. Both theories can be used to justify the so-called law of demand, but ordinalism is often preferred because it assumes less about agents. Likewise, the neo-Ricardian rejection of Marx’s labour theory of value is based on a similar thought. The price vector can be determined on the basis of the production technology and the real wage: there is no need to use Marx’s labour-values, especially as their calculation also depends on the production technology.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • S. Hargreaves-Heap
    • 1
  • M. Hollis
    • 1
  1. 1.