The Limits of Economic Science: Essays on Methodology

134 Pages·1982·2.924 MB·English

by  Richard B. McKenzie (auth.)

The Limits of Economic Science
Kluwer·Nijhoff Studies in Human Issues
Previously published books in the series:
Barnett, Laurence, Population Policy and The U.S. Constitution
The Limits of Economic Science
Essays on Methodology
Richard B. McKenzie
Professor of Economics, Clemson University
Senior Fellow, Heritage Foundation
Kluwer·Nijhoff Publishing
Boston The Hague London
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Kluwer·Nijhoff Publishing
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Library of Congress Cataloging in Publication Data
McKenzie, Richard B.
The limits of economic science.
(Kluwer-Nijhoff studies in human issues)
Bibliography: p.
Includes index.
1. Economics - Addresses, essays, lectures. 2. Economics
Methodology - Addresses, essays, lectures.
I. Title. II. Series.
ISBN-13: 978-94-009-7423-4 e-ISBN-13: 978-94-009-7421-0
001: 10.1007/978-94-009-7421-0
Copyright © 1983 by Klu_r·NIJhoff Publishing. No part of this book
may be reproduced in any form by print, photoprlnt, microfilm, or any
other means, without written permission from the publisher.
Softcover reprint of the hardcover 1st edition 1983
To my daughter
Susan Elizabeth McKenzie
Contents
Preface ix
1
Introduction 1
The New World of Economics 1
On Defining Boundaries of Science 4
Purposes as Limitations on Theory 7
Concluding Comments 9
2
On the Methodological Boundaries of Economic Analysis:
A Review and Partial Synthesis 11
The Logic of Choice and Its Boundaries 12
From a Logic of Choice to a Predictive Science 19
From a Predictive Science to Control 20
On the Rise of Predictive Science 22
Concluding Comments 23
3
The Nonrational Domain and the Limits of Economic Analysis 27
The Perceived Scope of the Economic Method 28
The Nonrational Domain 32
Nonrationality and the Necessity of Social Interaction 34
Concluding Comments 36
4
The Neoclassicists vs. the Austrians: A Partial Reconciliation
of Competing World Views 41
The Nature of the Discipline 42
The Predictability of Human Action 47
The Nature and Purpose of Theory 48
Concluding Comments 53
vii
Vlll CONTENTS
5
The Necessary Normative Context of Positive Economics 57
Economics as a Science 59
Einstein, Friedman, and Economics 61
The Catch-22 in Science 64
The Individual, Freedom, and Science 65
Concluding Comments 68
6
The Economic and Social Philosophy of Albert Einstein:
A Study in Comparative Methods 73
Views on Labor Markets 74
Views on Technology 75
Remedies for Recession 78
Views on World Trade 81
The Philosophical Triangle: Physics, Economics, and Dostoevsky 81
Concluding Comments 88
7
PostScript 91
Conceptual vs. Practical Limits to Science 91
Free Will and Economic Science 96
The Limits of "as if" 97
Appendix 99
Bibliography 119
Index 123
PREFACE
The essays in this volume were a challenge to me to write. I am an economist to
the core, inclined to evaluate most observed behavior and public policies with
conventional neoclassical theory. The essays represent my attempt to come to
grips with the meaning and importance of what I try to do as a professional
economist. They reflect my attempt to acquire a new and improved understanding
of the usefulness and limitations of the writings of professional economists,
especially my own. In this regard, although I hope others will find the thoughts
useful, the volume represents a personal statement of how one economist views his
and others' work. For that reason the discussion is often openly normative, tinged
with the conviction that social discourse is more than costs and benefits and that
economics cannot be fully evaluated by the methods - economic methods
- that are the subject of the evaluation.
These essays could not have been written without considerable encouragement
and help from colleagues and friends. The following people are recognized for
having read one or more chapters and for having contributed critical, substantive
comments: Diana Bailey, Wilfred Beckerman, Geoffrey Brennan, William Briet,
James Buchanan, Delores Martin, David Maxwell, Mary Ann McKenzie, Warren
Samuels, Robert Staaf, Richard Wagner, Karen Vaughn, and Bruce Yandle. I am
very much in their debt. However, they should not be held accountable for any of
the positions taken and any errors that may remain. Jill Williams and Betsy
Gourlay deserve special thanks for typing the original manuscripts. Karen Lea
Jones and Lisa Kiel did an outstanding job of computerizing the final draft of the
book. Without their dedicated assistance this book would have been far more
difficult to develop.
Several of the essays in this book appeared originally as journal articles:
chapter 2 (Journal of Economic Issues, September 1978), chapter 3 (Southern
Economic Journal, July 1979), chapter 4 (Southern Economic Journal, July
1980), chapter 5 (Journal of Economic Issues, September 1981), and chapter 7
(Southern Economic Journal, April 1981). Because of the importance of the work
to the author and the extent to which it is cited, extensive excerpts of Frank
Knight's' 'The Limitations of Scientific Method of Economics" is included in the
appendix with permission of the Mrs. Ethel Knight. My articles are reprinted here
with permission of the journals with only modest revisions, and the articles were
adjusted for the purpose of making the arguments flow in a logical progression
from chapter to chapter.
ix
x PREFACE
I am indebted to the J .R. Sirrine Foundation for partially funding the research
that led to the development of these essays and this book.
Finally, every father should have a thirteen-year-old daughter like mine. She
has been an inspiration to me and has contributed indirectly to all that I have
written.
In spite oft he foregoing, there is a science ofe conomics, a true, and even
exact, science, which reaches laws as universal as those ofm athematics
and mechanics. The greatest needfor the development of economics as a
growing body of thought and practice is an adequate appreciation of the
meaning, and the limitations, of this body ofa ccurate premises and rigor
ously established conclusions. It comes about in the same general way as
all science, except in higher degree, i. e., through abstraction. There are no
laws regarding the content of economic behavior, but there are laws
universally valid as to its form. There is an abstract rationale ofa ll conduct
which is rational at all, and a rationale ofa ll social relations arising
through the organization ofr ational activity . We cannot tell what particular
goods any person will desire, but we can be sure that within limits he will
prefer more ofa ny good to less, and that there will be limits beyond which
the opposite will be true. We do not know what specific things will be wealth
at any given time, but we know quite well what must be the attitude ofa ny
sane individual toward wealth wherever a social situation exists which
gives the concept meaning . ..
Frank H. Knight
'The Limitations ofS cientific
Method in Economics"