Economic methodology is the study of methods, usually scientific method, in relation to economics, including principles underlying economic reasoning.^[1][2] The term 'methodology' is also commonly, though incorrectly, used as an impressive synonym for method(s). Rather, methodology is the study of method(s).

Many of the general issues that arise in the methodology of the natural sciences also apply to economics. Related or other issues have included:

• the definition of economics^[3]

^[4]

• the scope of economics as defined by its methods^[5]

• the scientific status of economics^[6][7][8][9]
• fundamental principles and operational significance of economic theory^{[10][11][12][13][14]}
• allegedly fruitful and predictive vs. realistic aspects of simplifying assumptions, such as rational choice and profit maximizing.^[15][16]

^[17][18][^[19][20]

• methodological individualism versus holism in economic theory^[21][22]
• the balance of empirical and a priori approaches^[23][24][25]
• analysis of formalization and axiomatic methods in economics^[26][27][28]

^[29]

• limitations on and uses of experimental methods^[30][31]
• analysis of theory and practice in contemporary economics.^[32]

History of economic methods

Commonly-accepted methods and subjects in economics are described as mainstream economics. Heterodox economics includes other approaches that are in various ways presented as alternatives to or criticisms of mainstream economics.^[33]

Economic methods have varied over time and differ between different schools of economic thought. A central area of debate has been whether economics should follow the methods of the social sciences, and be more verbal, historical, and particular, or the methods of the physical sciences, and be more mathematical, theoretical, and universal. This debate on methods has to some degree reflected political differences, with historical schools associated with a welfare state and mathematical schools associated with classical liberalism; this connection is frequent but inexact ? for example, advocates of New Keynesian economics emphasize mathematical methods and a significant role for the state.

The current view in the Anglosphere is that economics should be mathematical, following neoclassical economics, and derived schools such as neo-Keynesian economics, while in Germany the view is that economics should be historical, in the form of the Freiburg school. In developing nations views are quite diverse, with some in development economics arguing Anglophone neoclassical mathematical methods, often in concert with neoliberal economic policies, such as the Chicago Boys, while others, such as Ha-Joon Chang, argue for a historical perspective and economic nationalism.

United Kingdom

In the United Kingdom, economic methodology has been traditionally mathematical, following in classical economics, though this method was criticized by the less influential 19th century English historical school of economics, which advocated a more historical approach.

United States

In the United States prior to the Great Depression, particularly in the 19th century, economic methodology was primarily influenced both by British economics ? classical economics, which was more mathematical, and to a lesser degree the English historical school of economics, which was more historical ? due to shared language and cultural tradition, and by the German historical school, due to Germany being the intellectual center of the time ? many American academics had earned degrees in Germany. In both cases there was mutual influence, as personified by German American Friedrich List, who moved from Germany to America and back in the 1820s through 1840s, and was the second most significant German language economist of his age, after Karl Marx.

At the time of the Great Depression, the school of institutional economics, which emphasized history and particularity was significant in the United States. Following the Great Depression and World War II, the neoclassical synthesis emerged, which focused on mathematical methods, particularly optimization, following the work of Paul Samuelson and his text Economics; while institutional economics continued and continues to some degree, it is significantly less influential than before, and straddles mainstream and heterodox economics.

Germany

In Germany in the 1880s and 1890s this debate was referred to as the Methodenstreit (debate over methods), between the (German) Historical school of economics, and the more mathematical Austrian school, and echoed political differences. In Germany the historical school came to dominate, in the form of the Frieburg school, and post-World War II formed the basis of Germany's Social Market Economy. The Austrian school continues to exist, but is viewed as a heterodox school.

History of economic methodology

Economic methodology has gone from periodic reflections of economists on method to a distinct research field in economics since the 1970s. In one direction, it has expanded to the boundaries of philosophy, including the relation of economics to the philosophy of science and to the theory of knowledge.^[34][35] In the context of philosophy and economics, additional subjects are treated as well, including decision theory and moral philosophy/ethics.^[36][37][38]

See also

• Model (economics)
• Philosophy of economics
• Positive economics
• Normative economics

Notes

References

• John B. Davis et al., ed. (1998). Handbook of Economic Methodology. Publisher's description.
• Hausman, Daniel M. (1984). The Philosophy of Economics: An Anthology. New York : Cambridge University Press, ISBN 0-521-45929-X. Ch.-preview links, pp. v-vi. Ch. 1-3, 5, 7-16, & 19-22 esp.

External links

• Journal of Economic Methodology ? Aims & Scope & links to issues and abstracts.
• On the Methodology and History of Economics ? sources & links from the New School
• Daniel M. Hausman (2003). "Philosophy of Economics", Stanford Encyclopedia of Philosophy
• Milton Friedman (1953). "The Methodology of Positive Economics," (in 3 links)
• Lionel Robbins (1935, 2nd ed.). ''An Essay on the Nature and Significance of Economic Science''
• Waleed Addas (2008). Methodology of Economics: Secular versus Islamic
• Homophileconomicus (Philosophy and Economics Blog, with useful links, conference announcements, course syllabi, news concerning recent research, etc.)

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