1.2.1 Theory Construction
The scientific method should be distinguished from the aims and results of science, such as knowledge, predictions or control. The method is the means by which these are achieved.
Explanation is a process of describing what caused an event. It encompasses the concepts of
physical causation and
rational influence. Physical causation is a physical process that takes place in reality, while rational influence is a mental process that takes place in rational thought. Rational influences shape the steps of scientific justification in the transition from theory (assuming something is true) to conclusions. Scientific reasoning sets out a set of criteria for evaluating causal theories. Justification may be inductive, abductive, or deductive. Other models of reasoning are more informal, such as intuitive reasoning and verbal reasoning.
This is a form of logical reference which states that observation occurs first, followed by generalization, and thus the theory emerges. In Baconian model (Bacon, [1620] 2000) one observes nature, proposes a law to generalize observed behavior, confirms it through a multitude of observations, attempts to formulate a slightly broader law, and confirms it through many more observations, while rejecting unconfirmed laws.
Speculation about an argument supports the conclusion but does not substantiate it. It is about attributing properties or configurations to metaphysical formulations, based on the observations of similar phenomena.
This is a form of logical reference which from observation leads to a theory that applies to that observation. It is formulated in the process of seeking the most straightforward and most likely interpretation and is based on rationality in choosing the best explanation. The original assumptions do not validate the conclusion. This is the process of creating a set of justifications and selecting an instance from that set (proof by contradiction).
This is the kind of reasoning in which the conclusion is a sub-case or a specialization of a hypothesis. Assumptions or theorems are posited, and empirical verification is sought.
In order words, it refers to the creation of a theoretical hypothesis and its confirmation or rejection by observation. According to deductivism, certain interpretation hypotheses are first introduced and then, while some environmental conditions are taken into account, the ability of hypotheses to adequately interpret real data is empirically investigated.
John Stuart Mill (1806â1873) was the main proponent of deductivism. As Hausman (1989) points out: âAccording to Mill ([1843] 2002) a complex object, such as political economy, can only be scientifically studied through the deductive method. Since so many causal factors affect economic phenomena and experimentation is not generally feasible, there is no way to apply the methods of inductivism directly. The only solution is first to inductively substantiate basic psychological or technical lawsâsuch as âpeople seek more wealthâ or the law of diminishing returnsâand then formulate their economic implications given the specific parameters of the relevant circumstances. Empirical confirmation or verification plays an important role in determining whether deductive conclusions are applicable, both in checking the correctness of the deductions and in determining whether significant causal factors have been omitted. Such control is not based on oneâs unreasonable commitment to basic âlaws.â These have already been documented by insight or experimentation. In this respect, civil economics is similar to science which adopts independently substantiated laws.â
A crucial conflict has developed between deductivism and inductivism. In his work, The Logic of Scientific Discovery, Karl Popper ([1934] 1959) advocates deductivism and criticizes inductivism (Popperian Deductivism). His criticism was so intense that he proposed eliminating inductivism from the sciences and replacing it with the deductive method. As Popper argues: âThe empirical basis of objective science, therefore, contains nothing absolute. Science is not based on a strong foundation. The structure of its theories rests on a marsh. Itâs like a building erected on piles. The piles are driven from a height down in the marsh, though not on a natural or âgivenâ basis. And if we stop driving the piles deeper, this is not because we have reached solid ground. We simply stop when we are satisfied that the piles are strong enough to bear the construction, at least for the time being.â Popperâs contribution was so significant that positivism is often referred to as the Popperian view.
1.2.2 Positivism Versus Normativism in Economic Theory
Comte (1798â1857) developed his thoughts on positivism1 in the process of setting out the organizing principles of the science of sociology (of which he is considered the âfatherâ) based on empirical infrastructures. His approach was based on two main axes: Methodological monism and the assumption that reality is empirical in nature and relates to empirical data (that is, information perceived by the senses). Methodological monism holds that there is a single scientific method, independent of the kind of phenomena being analyzed, and, this scientific method is the one followed in the natural sciences. Positivism holds that a theoretical proposition is valid only when it is logically verifiable, either directly or indirectly through empirically verifiable conclusions. In this sense, we may accept that positivism is a stricter version of deductivism.
Normative economics stands in contrast to positivistic economics, which includes policy choices from alternative proposals. So, what we âsee happeningâ (positivism) is counterbalanced by âwhat should happenâ (normativism) which is the fundamental conception of the ânormativeâ approach. Positivism developed in the nineteenth century and eventually replaced (in the 1960s and 1970s) the orthodox traditional view of Mill (which was based on deductivism) which had prevailed until then.
Normativismâs views express value or normative judgments about what the outcome of economic policy should be. To the extent that normative judgments are linked to data or knowledge, they may be purely scientific or changes in variables. Admittedly, it is possible that positive reasoning leads to normative outcomes, but this is another story.
Ceteris paribus clauses accompany the views of
positivism. This is a societyâs mode of operation following general laws (to the exclusion of instinctual or metaphysical concerns). According to positivism, knowledge is based on the âpositiveâ contents of empirical verification and limits the purpose of the sciences to acknowledgement and recording rather than the interpretation of facts and phenomena. Thus, observation and measurement are at the core of any scientific endeavor. For these reasons, according to the positivist doctrine of science, any scientific theory should be based on the same critical preconditions:
- 1.
Rational documentation of a theory that purports to be scientific (including the principle of falsification)
- 2.
- 3.
Positivism received major support through the contributions of Popper ([1934] 1959) and Lakatos (1970). It proposed to economists a more verifiable methodology for evaluating the reliability of a theory. Popper moreover argued ...