Methodology
Fundamental Methodological Errors arise from the misguided attempt to apply scientific methods to the study of human beings. Some of these are listed and explained below. An alternative, radically different methodology, utilized by Karl Polanyi in his classic, The Great Transformation, is also discussed below
Brief summary of basic thesis
Science was imported into Europe from Islamic Spain. While experience with scientific and empirical methods led to tremendous advances in science, articulating the philosophy of science was never done correctly -- just like a person can speak a language perfectly well, without being able to articulate the rules of Grammar. Bacon understood scientific methodology to be inductive, but this was wrong. Later, the logical positivists understood scientific methodology to be axiomatic-deductive, but this was also seriously wrong. Currently, massive confusion exists in the philosophy of science, as well described by Hacking, Representing and Intervening. This confusion has not caused much damage to physical sciences because they learn methodology hands-on, apprentice fashion, from practicing scientists. However, mistaken understanding of methodology has seriously damaged the development of social sciences, which have consciously tried to implement mis-understandings of scientific method as a basis for creating a new social science. In many articles, I have explained how current methodology in Economics and Econometrics is based on positivist ideas. Even though these ideas have been disproven and rejected, no one has bothered to re-think the foundations Economics and Econometrics. As a result, these disciplines continue to utilize a wrong methodology which is not suited to the acquisition of knowledge about the real world.
Critiques are not effective unless an alternative is offered. Karl Polanyi offered the deepest and most trenchant critique of capitalism in his book entitled the Great Transformation. There is no methodology explicit in the book, but studying how he argues, I was able to derive several methodological principles which are radically in conflict with underlying assumptions of modern conventional economic thoeries. In fact, many of these assumptions are shared with heterodox economists, which may be one reason why they have not been able to mount an effective critique. They are trapped in the same methodological confusions which gave rise to neoclassical economics. Some of the items listed below discuss this alternative methodology, as a way to move forward from the current impassed being faced by economics.
Sequence of four short posts which elaborates the brief sketch on methodology in the first paragraph above:
The Misconceived Project of Social Science: This post explains the axiomatic-deductive pre-scientific Greek methodology demonstrated by Euclidean geometry. The virtue of this method is that it leads to certainties. The disadvantage is that it is unable to cope with the complexities of real world phenomena. Because observations can only lead to tentative hypothesis and never proofs, the Greeks spurned empirics and sought for certainties. This delayed the discovery of the scientific method for more than a thousand years.
The Emergence of Science: This post shows the dramatic contrasts between the scientific method, which is based on observations, and the axiomatic-deductive method. The Pythagorean theorem cannot be disproven by drawing a right triangle and showing that the squares of the sides do not add to the square of the hypotenuse -- this is because the theorem is a logical certainty based upon the axioms. In stark contrast, scientific hypothesis are distinguished by the fact that they are impossible to prove and can only be falsified. Observations which conflicts with scientific laws refute the law. Abandoning the quest for certainty led to the emergence of the scientific method.
Economists Confuse Greek Method with Science: In a strange and complicated twist of fate, the founders of modern economics in the eary 20th century got the wrong idea, from the logical positivists, that science is axiomatic-deductive, and social science, especially economics, ought to follow this same methodology. Human behavior and social behavior is too complex to satisfy any axioms, but these methodological blinders forced economists to invent crude axioms to characterize homo economicus. Adherence to the axiomatic-deductive methodology means that economists are certain of their conclusion and have no need to check them against the real world. If the real world conflicts with economic theory, so much the worse for the irrational real world.
The Keynesian Revolution and the Monetarist Counter-Revolution: The shock of the Great Depression woke Keynes up to the fact that economic theories were dangerously in conflict with reality. He constructed a radical and revolutionary theory which went against many of the accepted assumptions of classical economic theories of the time. Most importantly, he said that supply and demand do not equilibriate in the labor market with the result that unemployment may persist for long periods of time. The government interventions, in the form of monetary and fiscal policy were necessary to eliminate unemployment and achieve full capacity utilization and growth. His macro theories conflicted with the axiomatic micro theories of the economists, and using these conflicts, Friedman successfully launched a counter-revolution in the 70's which effectively wiped out the Keynesian gains in understanding and went back to pre-Keynesian ideologies.
A long and complex article which puts together these pieces into a full length story:
Deification of Science and its Disastrous Consequences: Our goal is to show that production of knowledge requires different approaches in different areas. In particular, radically different methodologies are suitable for mathematics, science, and humanities. Mathematics requires an axiomatic and deductive approach, while science requires an inductive and empirical approach. Historical events in Europe led to a conflict between science and religion, and a consequent attempt to use science to replace religion. The attempt to prove that science leads to certainty led to the mistaken understanding that scientific methodology is mathematical. The assumption that science is the only valid body of knowledge led to the mistaken attempt to apply this wrong understanding of scientific methodology to the social sciences. These two mistakes have crippled the development of our understanding of human beings and societies. The failure to understand the basic realities of human experience has led to many disasters, and needs to be rectified by correcting this double mistake.
Summary of The Great Transformation to Capitalism: This RWER blog post summarizes the main ideas of Karl Polanyi's classic. It shows the sequence of events by which a Paternalistic and Regulatory Society was transformed to a Unregulated Market Economy. A large number of radical changes were required. The two types of social structures are anti-thetical to each other and so a gradual and evolutionary transformation is not possible. Change has to be by bloody battles, with victors and vanquished, and violent traumas. In terms of methodology, Polanyi takes a radically different approach to understanding economic change, a method which is firmly situated within historical context.
The Methodology of Polanyi's Great Transformation: (RWER blog post: Brief summary of full paper) In contrast with methodological individualism, Polanyi insists that communities and institutions are central and crucial to the process of social change. In addition, the social, political and economic spheres are deeply inter-linked and cannot be analyzed in isolation -- contradiction one of the fundamental methodological assumptions of modern economic theory. Polanyi has deep insights into the drivers of social change, and offers a methodology situated within history, as opposed to the sterile, a-historical neoclassical methodology.
The Methodology of Polanyi's Great Transformation: full length paper, very complex, rather difficult to read (sorry, couldnt do better, was struggling with the ideas myself.
Logical Positivism and Islamic Economics: Provides a detailed explanation of how logical postivism arose, and the fundamental methodological mistake which is embedded in the philosophy. The effects of this mistake on creating misunderstandings about methodology throughout the social sciences. How the newly born discipline of Islamic Economics can escape from the damaging effects of this wrong methodology
