PDF: 0.17 MB / 35 pages - DoE

DRAFT – please do not cite or excerpt or use without permission Copyright © Lauchlan Mackinnon 2005 Contact [email protected] | 0402 141 131

1

Chapter III – The Methodological Status of ‘Common Sense’ in Economic Theory Author: Lauchlan Mackinnon PhD Student Departments of Economics and Philosophy The University of Queensland St. Lucia Campus, Brisbane, Queensland, Australia Contact Email: [email protected] Phone: 0402 141 131 This is a DRAFT of a chapter that is proposed for inclusion in my doctoral thesis. All constructive comments and feedback very much appreciated Copyright © Lauchlan Mackinnon 2005 Do not cite, excerpt from or use without prior written permission


2

Chapter III – The Methodological Status of ‘Common Sense’ in Economic Theory ........ 1

Introduction..................................................................................................................... 3 Identifying a ‘Hume-Popper position’ on the methodological status of common sense in science ........................................................................................................... 3 The Hume-Popper position as five tenets related to the discipline of economics ...... 6

Common-sense in Scottish common sense philosophy .................................................. 7 Common sense in the economics literature .................................................................... 9 Habitus and Hayek: the contextually located economic agent, well adapted to his or her environment .................................................................................................................. 16 Common sense, practical sense, and economic sense................................................... 18 Common sense and intuition......................................................................................... 19 ‘Economic sense’ or intuition as a link between economic theory and economic reality....................................................................................................................................... 20 ‘Against’ common sense ............................................................................................... 22 Common-sense integrates and processes a diverse range of real-world experiences... 24 Assessing the support for the ‘Hume-Popper position’ ................................................ 25 Three methodological principles suggested by the ‘Hume-Popper position’ ............... 26

The first methodological principle: common-sense acts as a guide ......................... 27 The second methodological principle: the more the premises or conclusions of an argument diverge from common-sense, the greater the burden of proof required ... 29 The third methodological principle: any common-sense observation about the real world should be theoretically ‘admissible’ ............................................................... 30

Conclusions ................................................................................................................... 32 Out-takes ....................................................................................................................... 32 References ..................................................................................................................... 33


3

Introduction As will be shown below, a number of economists, including J. S. Mill, Jevons, and Marshall, have observed that a key feature of economic science is that its subject matter is within the everyday experience of the ‘everyday man’ in the course of carrying out his or her commercial activities. We all have direct experience of and form opinions and beliefs about the economic world that we live in. It is pertinent therefore to inquire what the methodological status of everyday, common-sense observations should be in relation to the claims or propositions of existing theoretical frameworks, such as that of neoclassical economics. Suppose a common-sense observation was made, that to an agent located in the economic system was simply self-evident and obvious, but yet clashed with the axiomatic premises or the predictions of the neoclassical or mainstream economic framework. What epistemic status should be assigned to the common-sense observation? Should a common-sense observation or empirical fact ‘trump’ an unrealistic assumed axiom? These considerations are extremely pertinent to the present thesis as, in the ensuing chapters of the thesis a number of common-sense propositions will be put forward - such as the fact that economists develop ideas or theories regarding economic systems, those ideas are disseminated in society in various forms, and people adapt their behaviours accordingly - and their consequences examined. The present chapter will provide a methodological rationale for supposing that the common-sense propositions to be put forward are methodologically at least as valid as the kind of abstract and unrealistic assumptions routinely assumed in neoclassical economics, such as the existence of maximizing individuals with unlimited computational ability and foresight.

Identifying a ‘Hume-Popper position’ on the methodological status of common sense in science Critical reflection regarding these issues may be greatly illuminated with reference to the work of two highly regarded philosophers, namely David Hume in his Inquiry Concerning Human Understanding (1748/1988) and Karl Popper in his Objective Knowledge (1972). Hume noted a problem with an analytic approach to philosophy1:

It is easy for a profound philosopher to commit a mistake in his subtile reasonings; and while one mistake is a parent of another while he pushes on his consequences, and is not deterred from embracing any conclusion, by its unusual appearance, or its contradiction to popular opinion. But a philosopher, who purposes only to represent the common sense of mankind in more beautiful and more engaging colours, if by accident he falls into error, goes no farther; but renewing his appeal to common sense, and the natural sentiments of the mind, returns

1 A problem that, arguably, might apply to mu ch of modern mainstream economics based on deductive analysis !


4

into the right path, and secures himself from any dangerous illusions. (Hume 1748/1988, Section I, italics added)

Hume makes an even broader commitment to the role of common sense in developing and guiding philosophy in suggesting that:

. . . philosophical discussions are nothing but reflections of the common life, methodised and corrected. (Hume 1748/1988, Section XII, Part II)

Karl Popper, in his Objective Knowledge (1972), made similar observations regarding common sense not only in philosophy but in science. Given its importance to the present discussion, it is worth quoting the central statement of Popper’s position at length:

Science, philosophy, rational thought, must all start from common sense. Not, perhaps, because common-sense is a secure starting point: the term ‘common sense’ which I am using here is a very vague term, simply because it denotes a vague and changing thing – the often adequate or true and often inadequate or false instincts or opinions of many men. How can such a vague and insecure thing as common sense provide us with a starting-point? My answer is: because we do not aim or try to build (as did, say, Descartes or Spinoza or Locke or Berkeley or Kant) a secure system on these ‘foundations’. Any of our commonsense assumptions – our commonsense background knowledge, as it may be called – from which we start can be challenged and criticized at any time; often such an assumption is criticised and rejected (for example the theory that the earth is flat). In such a case, common sense is either modified by the correction, or it is transcended and replaced by a theory which may appear to some people a for shorter or longer period of time as being more or less ‘crazy’. If such a theory needs much training to be understood, it may even fail for ever to be absorbed by common sense. Yet even then we can demand that we try to get as close as possible to the ideal: all science, and all philosophy, are enlightened common sense. Thus we begin with a vague starting-point, and we build on insecure foundations. But we can make progress: we sometimes can, after some criticism, see that we have been wrong: we can learn from our mistakes, from realizing that we have made a mistake . . . My first thesis is thus that our starting point is common sense, and that our great instrument of progress is criticism (Popper 1972: 33-34, italics in the original)

Like Hume, Popper suggests that scientific knowledge essentially is refined, developed common sense. Repeating Popper’s claim for emphasis :

. . . we can demand that we try to get as close as possible to the ideal: all science, and all philosophy, are enlightened common sense (Popper 1972: 34)

I suggest therefore that it is possible to identify what might be called a ‘Hume-Popper position’ on the relationship of common sense to scientific thought, distilled from the positions of Hume and Popper quoted above, consisting of five related tenets or premises namely:

(i) that the starting point of philosophical or scientific knowledge is in common sense experience of, or beliefs about, the world,

(ii) that this common-sense knowledge can be criticized, tested, explored and improved


5

(iii) that which constitutes ‘common sense’ with regard to the domain of concern may itself evolve as scientific or philosophical discussion and investigation proceeds

(iv) that science and philosophy essentially consist of “enlightened” or articulated, refined, developed and tested common sense

(v) that common sense, and the real world context, is a guide to when theory begins to lose real-world relevance, for example due to errors in the assumptions used as premises, or due to subtle errors in the reasoning.

The position demarcated by Hume and by Popper finds many reverberations in contemporary thought. For example, Popper’s view of common sense can also be related to the well-known metaphor due to Otto Neurath:

. . . we have, as it were, to reform ordinary language while using it, as described by Neurath’s metaphor of the ship we have to rebuild while trying to keep afloat in it. This indeed is the situation of critical common sense, as I see it. (Popper 1972: 60)

John Coates (1996: 2) suggests that “the most influential account of common sense derives from Otto Neurath’s metaphor” and, like Popper, suggests that “Common sense is not a timeless body of truths, it is merely the current state of the theory, our inevitable starting-points for further research, starting-points moreover from which we slowly evolve.” Philosopher Stephan Korner (1971) emphasises, like Popper, the role of common-sense as a starting point:

. . . common-sense thinking is . . . the starting point for generalization and system by theoretical scientists and systemic moralists. (Körner 1971: 2, italics added)

Philosopher David Lewis (1986) perhaps articulates a modern philosophical orientation towards common-sense, articulating both a sympathy towards it and a willingness to question it:

Common sense has no absolute authority in philosophy. It’s not that the folk know in their blood what the highfalutin’ philosophers may forget. And it’s not that common sense speaks with the voice of some infallible faculty of “intuition.” It’s just that theoretical conservatism is the only sensible policy for theorists of limited power, who are duly modest about what they could accomplish after a fresh start. Part of this conservatism is reluctance to accept theories that fly in the face of common sense. (Lewis 1986: 134)

Coates (1996) formulates ‘clinging to common-sense until evidence confirming an alternative arrives’ as a rational behaviour:

Common sense merely points to the rational procedure of tenaciously holding on to our current beliefs until enough evidence is mustered to warrant their abandonment. (Coates 1996: 5)


6

The methodological status of common-sense has been taken up in a range of disciplines. In psychology for example this issue has been addressed in the edited collection collated by Jurg Siegfried (1994). In addition to mapping out contributions to a common-sense viewpoint in psychology and in science, Siegfried identified that “common sense also started to sail under different names in the social sciences,” including “natural psychology,” “everyday beliefs,” “folk psychology,” “stock of knowledge,” and “natural languages.” In sociology, a number of contributions such contributions in ethnomethodology have put emphasis on the existing common-sense body of beliefs. The ‘common sense’ position that may be identified from the writing of Hume and Popper and found as a recurring theme in the philosophy of science and the philosophy of the social sciences is, for convenience, here called the ‘Hume-Popper position’ on conceptualizing the methodological status of common-sense.

The Hume-Popper position as five tenets related to the discipline of economics I propose that the tenets of the ‘Hume-Popper position,’ as identified above, may be naturally translated to five claims regarding economic knowledge, namely:

(i) that the starting point of economic knowledge is our common sense experience of, or beliefs about, the social and economic world,


(iii) that what constitutes ‘common sense’ with regard to the domain of concern may itself evolve as economic discussion, debate and investigation proceeds

(iv) that economic theory should - and does - consist of and embody an ‘economic sense’ that is rooted in but has evolved and diverged from a ‘lay’ common-sense regarding economic systems

(v) that common sense, and the real world context, is a guide to when economic theory begins to lose real-world relevance, for example due to errors in the assumptions used as premises, or due to subtle errors in the reasoning.

The goal of the present chapter is to reflect on the applicability of the tenets of the ‘Hume-Popper position’ in the context of specifically economic science, and assess whether they hold up and provide a reasonable account of the general relationship between economic science and common-sense. The chapter will proceed by initially reviewing some of history of the concept of common-sense in Scottish common sense philosophy, before referring to some of the history and literature of economic science to attempt to establish that economic science started from a starting point of common-sense and proceeded to evolve and refine common-sense propositions through the medium of critical engagements and reconstructions in the literature. The chapter will then consider some potential objections in the literature to common-sense and show that the ‘Hume-Popper position’ deals easily with these objections. Finally, some methodological principles arising from a reflection on common-sense knowledge and beliefs in relation to theoretical knowledge will be presented for consideration.


7

Common-sense in Scottish common sense philosophy A detailed historical review of the concept of common-sense in philosophy or any other discipline is beyond the scope of this thesis. Such reviews have been undertaken elsewhere (see for example Coates 1996; Allen 2001), and in any case such a detailed review is unnecessary for the present purposes. For the present purposes, all that is needed is an introduction of the ‘Hume-Popper position’ as has already been presented in the introduction to the chapter, together with reference to relevant material from the history of economic thought and other relevant academic literature. It is however useful to briefly mention the concept of common-sense as used by Thomas Reid (1764/1983; 1785/1983) in Scottish common sense philosophy, and the evolution of the idea of common sense as taken up by some of his intellectual successors. This material has, again, been considered in detail elsewhere (see for example Davie 1976; Coates 1996; Comim 2002) and it is only necessary to emphasize a few key points here. Reid (1764/1983), in the context of an ongoing philosophical debate with Hume (e.g. see Comim 2002: 97), introduced a concept of common sense as follows:

Such original and natural judgments are, therefore, a part of that furniture which Nature hath given to the human understanding. They are the inspiration of the almighty, no less than our notions or simple apprehensions. They serve to direct us in the common affairs of life, where our reasoning faculty would leave us in the dark. They are part of our constitution; and all of the discoveries of our reason are grounded upon them. They make up what is called the common sense of mankind. (Reid 1764/1983: 118)

Reid is widely - and probably quite fairly - interpreted to have taken common sense to consist of “a body of indubitable and natural beliefs” (Coates 1996: 1) which do not change to any great or significant extent. A number of later philosophers however specifically interpreted common-sense as evolving:

. . . while the Scottish school held that there was a timeless core of commo n sense beliefs, [Sidgwick and C. S. Peirce] saw this core as undergoing a slow process of evolution due to the progress of science. More importantly, they saw philosophy as having a role in criticizing and changing these beliefs. (Coates 1996: 18)

For example, Peirce thought that much of our common-sense knowledge is instinctual and has ‘always’ been with us, but that does not mean to say it cannot evolve:

This raises the question of the reas ons for holding our original beliefs. We tend to think that there is some reason for holding them, one that we might have lost sight of. But if we consider them closely, said Peirce, we discover that belief habits have always been with us, unquestioned and fathomless. They are “of the general nature of instincts”; alternatively, they are “ultimate premise[s] . . . held without reference to precise proof.” The instinctual nature of common sense Peirce shared with the Scottish school, but against it he pointed out that man can outgrow the primitive forms of life in which these instincts had their origin. With the development of technology we are put into situations where our ancient beliefs offer us little direction, and in this case criticism is required. (Coates 1996: 20)


8

It is immediately apparent from the quotations reproduced earlier in this chapter to the effect that Hume took philosophy to be “reflections of the common life, methodised and corrected,” that Hume allowed for an evolution or change in scientific or philosophical ideas under philosophical reflection. It does not appear that Reid was opposed to Hume’s view in this respect. Comim (2002 ) noted that:

Reid’s general opinion of Hume’s work is ambivalent. On the one hand, he strongly criticizes Hume’s associationist epistemology and everything related to it. On the other hand, he is complacent about all other aspects of Hume’s theory. Because of this ambivalence it is important to distinguish between the different parts of Hume’s theory as discussed by Reid. (Comim 2002: 98 n4)

In particular, the notion that philosophy starts with and evolves from common-sense would appear to be an area in which Hume and Reid seemed to be in substantial agreement. Reid wrote:

In this unequal contest betwixt Common Sense and Philosophy, the latter will always come off both with dishonour and loss. But, on the other hand, Philosophy has no other root but the principles of Common Sense; it grows out of them, and draws its nourishment from them. (Reid 1764/1983: 7, italics added)

As an aside (it is not especially relevant for the present discussion), the “contest betwixt Common Sense and Philosophy” Reid refers to may be traced back in Scottish common-sense philosophy to tensions between Berkeley and Hutcheson, leading to what has been termed the “central problem of Scottish philosophy” (Davie 1976). Berkeley suggested that the “instincts of the farmer” should be set aside in favour of the “sophistication of the philosopher” and that we should “think with the learned while we talk with the vulgar.” On the other hand, “Hutcheson’s sympathy for Shaftesbury’s common sense intuitionism led him to advocate that ‘we are to respect the instincts of the farmer against the sophistication of the philosopher and initiate a sort of dialogue between the vulgar and the learned, instead of talking down to the farmer from the standpoint of the philosopher.’” Davie (1976) comments:

In course after course of lectures, professor after professor – Reid, Stewart, Brown, Hamilton, Ferrier, and Adam Smith . . . sought to overcome the tension between the common sense of Hutcheson and the paradoxes of Berkeley by producing a system that would harmonize the standpoint of the vulgar with the standpoint of the learned in a moderate philosophy of modern progress. (Davie 1976: 61-62)

For the present purposes it is important to note that later writers taking their inspiration from the Scottish common-sense school of thought have tended to consider philosophy or science to have started from common-sense and consist of evolved and ‘corrected’ common-sense. Sidgwick (1905) for example held a view prior to but analogous to Popper’s, that:

Common sense organised into science continually at once corrects and confirms crude common sense. (Sidgwick 1905: 414)


9

Common sense in the economics literature The ‘tenets’ of the proposed ‘Hume-Popper position’ suggested above, and translated to the context of economic science, were:

(i) that the starting point of economic knowledge is our common sense experience of or knowledge about the social and economic world,


(iii) that what constitutes ‘common sense’ with regard to the domain of economics may itself evolve as economic discussion, debate and investigation proceeds

(iv) that economic theory should - and does - consist of and embody an ‘economic sense’ that is rooted in but has evolved and diverged from a ‘lay’ common-sense regarding economic systems

(v) that common sense, and the real world context, is a guide to when economic theory begins to lose real-world relevance, for example due to errors in the assumptions used as premises, or due to subtle errors in the reasoning.

It is appropriate therefore to begin with demonstrating that the starting point of economic knowledge lies in common-sense experience of, or knowledge of, the social and economic world. Fortunately, this tenet of the ‘Hume-Popper position’ is fairly easy to establish by reference to the history of economic thought. If we look at early writers in political economy, we find a wealth of statements explicitly linking the starting point of economic analysis with common-sense understandings of the socio-economic world. Jean-Baptiste Say (1803/1964) for example wrote that:

A treatise on polit ical economy will then be confined to the enunciation of a few general principles, not requiring even the support of proofs or illustrations; because these will be but the expression of what every one will know, arranged in a form convenient for comprehending them, as well in their whole scope as in their relation to each other. (Say 1803/1964, section I.30, italics added)

Nassau Senior (1836) similarly suggested that the political economist’s

. . . premises consist of a very few general propositions, the result of observation, or consciousness, and scarcely requiring proof, or even formal statement, which almost every man, as soon as he hears them, admits as familiar to his thoughts, or at least as included in his previous knowledge (Senior 1836, italics added)

The pragmatist philosopher Charles Peirce explicitly characterised the political economy of Smith and Ricardo as being grounded in common-sense:

The analytic economics of Adam Smith and of Ricardo were examples of [the sort of science that is founded upon the common experience of all men]. The whole doctrine in its totality is properly termed the Philosophy of Common Sense, of which analytic mechanics and analytical economics are branches. (Charles Peirce, quoted in Hoover 1994: 295)


10

There is a wealth of literature on the role of common-sense in Adam Smith’s thought. For example, Schumpeter suggested that Smith

. . . disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along. (Schumpeter 1954: 185)

Later literature, taking into account Smith’s comments in his Lectures on Rhetoric and Belles Lettres (unavailable to Schumpeter at the time of his writing) accepted that Smith had a more sophisticated rhetorical and discursive strategy than Schumpeter gave Smith credit for. Support remains however for the notion that Smith’s writing was largely philosophically rooted in common-sense notions. Comim (2002) for example developed a coherent and forceful argument to the effect that “a notion of common sense was behind Smith’s view of science . . . it could perhaps be said that Adam Smith provides a good illustration of the use of the notion of common sense in economics and that common sense may be interpreted as an epistemological foundation for the [economic] claims of the Scottish tradition.” In any case, it is clear that Smith’s Wealth of Nations is peppered with common-sense examples familiar to and understandable by the lay man, and in introducing even relatively sophisticated concepts like his ‘invisible hand,’ Smith roots his discussion in readily understood common-sense propositions, such as for example the activities of the baker. J. S. Mill and John Elliott Cairnes argued that the basic facts of economic life were immediately available to common intuition, a position endorsed by William Stanley Jevons:

The science of economics, however, is in some degree peculiar, owing to the fact, pointed out by J. S. Mill and Cairnes, that its ultimate laws are known to us immediately by intuition, or, at any rate, they are furnished for us ready made by other mental or physical sciences. (Jevons 1871/1888: 18, italics added)

Walras’s position in relation to common-sense is readily identified from his Elements (1877/1954):

. . . the pure theory of economics ought to take over from experience certain type concepts, like those of exchange, supply, demand, market, capital, income, productive services and products. From these real-type concepts the pure science of economics should then abstract and define ideal-type concepts in terms of which it carries on its reasoning. The return to reality should not take place until the science is completed and then only with a view to practical applications. (Walras 1877/1954: 71, italics added)

Clearly, in seeing the starting point of pure economics in ‘taking over from experience’ type concepts that may be of value for analysis, Walras is seeing the starting point of economics in common experience or, equivalently, in terms that are consistent with viewing the starting point of economic theorising with common-sense. Walras however rapidly diverges thereafter from the ‘Hume-Popper position’ as he denies a role for common experience in testing and validating the conclusions of the theoretical analysis, and indeed seems to exemplify the kind of analytic reasoner that Hume finds likely to


11

“commit a mistake in his subtile reasonings; and while one mistake is a parent of another while he pushes on his consequences” and that is not “deterred from embracing any conclusion, by its unusual appearance, or its contradiction to popular opinion.” Walras seems to explicitly advocate that, as far as pure economics is concerned, once the type concepts are taken over then whether the conclusions of pure reasoning jar with common experience or not is to be taken as irrelevant. The first tenet of the ‘Hume-Popper position’ - that “the starting point of economic knowledge is our common sense experience of or knowledge about the social and economic world” - clearly, therefore, finds widespread - and eminent - support in the writing of a diverse range of eighteenth and nineteenth century political economists, from Adam Smith through to Léon Walras. It is unnecessary for the present discussion to further multiply examples. It is however worth noting that each significant contributor to political economy (and, later, economic science) viewed themselves as somehow improving on the common-sense observations in some manner. For example, Say (quoted above) noted that the fundamental principles of economic science are not only “what everyone will know,” but “arranged in a form convenient for comprehending them, as well in their whole scope as in their relation to each other.” The common-sense knowledge has been refined, elaborated and organised. Henry George (1897) nicely articulated the notion of political economists refining and improving the material available to common-sense into a more systematically developed and articulated theory:

In proposing to my readers to go with me in an attempt to work out the main principles of political economy , I am not asking them to think of matters they have never thought of before, but merely to think of them in a careful and systematic way. For we all have some sort of political economy..... (George 1897, italics added)

Alfred Marshall (1890) similarly saw economic science as an articulation of common-sense, refined by “organized analysis and general reasoning”:

We have seen that the economist must be greedy of facts; but that facts by themselves teach nothing. History tells of sequences and coincidences; but reason alone can interpret and draw lessons from them. The work to be done is so various that much of it must be left to be dealt with by trained common sense, which is the ultimate arbiter in every practical problem. Economic science is but the working of common sense aided by appliances of organized analysis and general reasoning, which facilitate the task of collecting, arranging, and drawing inferences from particular facts. Though its scope is always limited, though its work without the aid of common sense is vain, yet it enables common sense to go further in difficult problems than would otherwise be possible. (Marshall 1890: Book 1, Ch 4, italics added)

While economic theory started from observations drawn from common-sense, i.e. from the same subject material as laymen naturally had opinions of and understandings of, political economists systematically analysed and refined these common-sense


12

observations into a body of theory that began to evolve away from and became distinct from common-sense. This body of theory was in turn itself refined, criticised and improved. The proposition that political economists tried to improve their body of knowledge and that the mechanism of progress was critical interaction within the discipline is probably rather uncontentious. It is pertinent however to note that if political economists and economic scientists had not tried to improve their body of knowledge beyond the level of common-sense knowledge and intuitions, economics would have little claim to being a discipline offering significant authority over and above lay knowledge or common-sense. For example, Richard Jenkins (2002) has taken up this issue in sociology, and noted that the ability of the field (of sociology) to differentiate itself from raw common-sense is pivotal to the existence of the field:

If any kind of sociology is to be worth having, it must offer something other than common sense, and it must be able to justify what it offers as valuable, if not preferable. (Jenkins 2002: 28)

The situation is hardly different in economics. The body of theory, once started, must be refined and improved, and as noted by Popper, the instrument of progress is critical engagement. It is not considered necessary here to go into an exhaustive listing of critical engagement after critical engagement by theorist after theorist in the history of political economy (and, later, economic science) to establish the point that economists do actually critically engage with each other, and that on one level or other some refinement of the theory ensues as a result2. Examples abound in the literature and such critical engagement is readily apparent from even a casual reading of the history of economic thought. Any number of examples could be given: to pick a couple of historical examples at random, the methodenstreit or the social calculation debate could be mentioned. One would naturally expect that an economist trained and ‘socialised’ into the sophisticated body of theory and the general perspectives and core commitments of the modern economic science profession might begin to see the real world differently from the layman. The point that the body of theoretical understanding in economics has in the course of time diverged substantially from a common-sense understanding of economic reality may be brought home forcefully by an observation made by economist David Henderson (1986), who commented on his time serving on committees in Whitehall:

. . . the use of conventional economic ideas often set me apart from other committee members, who revealed themselves as having quite different ways of viewing economic aspects of the issues under discussion . . . I asked myself where these committee table ideas had originated. They did not come from past university economics courses, which in any case few of the officials concerned had attended. Nor were they derived from the present-day writings of economists outside the official machine . . . Finally, there were very few cases in which these ideas could have been picked up from economists within the departments

2 It is of course more contentious whether, after the neoclassical ascendency, orthodox economics has meaningfully responded to and significantly adapted to forceful critical engagement, but that is a separate issue beyond the scope of the present concerns.


13

concerned . . . It was apparent that economists, whether past or present, inside or outside, were simply not involved. The doctrines that I was now encountering were intuitive and self-generated: those who held them thought that they were saying plain common sense, which needed no prompting or authority . . . What I had identified, and perceived as being widespread and influential in Whitehall, was do-it-yourself economics (DIYE for short). (Henderson 1986: 9-10, italics added)

Henderson thereby highlights both the existence of a kind of evolved ‘common-sense’ understanding of economic issues in contemporary society and, contrasted with it, an entirely different ‘economic’ way of viewing and understanding economic issues, through the lens of a formal economic training. The modern economics profession quite clearly and deliberately attempts to cultivate in economics students – through the media of theoretical and explicitly mathematical models and through consideration of case examples - a specifically ‘economic’ sense or intuition for how economic systems will behave that may well be different from lay common sense. For example, Stanley Fischer comments that:

We teach our incoming graduate students the IS-LM model and I don’t think there is a better model for getting the intuition of the short-run adjustment of the economy right. (Fischer 1994: 35)

Fischer suggests that formal mathematical models are necessary for most students to develop a good economic intuition:

I think that the way the profession works is that there is a small group at the top, who have fantastic intuition and after their initial training can operate without formal models. Then you have the great bulk of the profession who have to be taught to think within a formal model. The Phillips curve was very important in formalizing price adjustments, but the intuition was around. (Fischer 1994: 35)

Paul Samuelson articulated a similar point of view. Samuelson reflected on the role of common sense for economists (see for example Samuelson 1959/1966; 1962/1966), and suggested that:

Economists use terribly complicated jargon: long words, fine definitions, cabalistic mathematical symbols and graphs, and complicated statistical techniques. Yet, if they have done their job well, they end up with what is simple common sense. (Samuelson 1959/1966: 185)

so that “common-sense economics may indeed be all that anyone must use in the end” (1962/1966: 15). Samuelson however immediately qualified his position to quite some extent :

The non-economist must naturally ask: Was that trip really necessary? Apparently yes. Nothing is so rare as common sense – i.e., the relevant common sense. (Samuelson 1959/1966: 185, italics added)

Similarly,


14

But it takes the most uncommon sense and wisdom to know just which part of the filing case of the muddled notions that men call common sense is relevant to a particular problem. (Samuelson 1962/1966: 15-16, italics added).

Samuelson therefore advocated an economist’s evolved economic sense over lay common sense in making sense of economic phenomena. Samuelson went on to elaborate his viewpoint:

While it is true that few with advanced training in economics can be trusted to use common-sense economics, fewer still, and maybe no one, without advanced training in economics, can be trusted to use common-sense economics. Don’t ask me why this is so. I have puzzled over the phenomenon for years and years and never been able to satisfy myself as to the reason . . . Though I can’t explain why, experience does show that the best economic policy-makers have spent years studying economics and doing scientific research. The alleged exceptions almost invariably turn out to be flukes. (Samuelson 1962/1966: 16, italics added)

Samuelson does however point very clearly to an answer to his conundrum, in suggesting that “Common sense, and folklore generally, lack empirical content.” If the “best economic policy-makers have spent years studying economics and doing scientific research,” it stands to reason that it is exactly such economists who have been immersed in the data pertaining to real world systems and furthermore maintained an interest in the dynamics and behaviour of the real system over an extended period of time begin to develop and refine a useful ‘economic sense.’ That is, such economists are in a position to and do begin to develop and evolve their economic sense about the behaviour and dynamics of the economic system. The economic theories that such an economist will frame and see the economic issues through may or may not be ‘correct,’ but either way will give the economist a ‘lens’ to study the complex and evolving economic world through and the experience required to begin to develop and evolve their understanding and views. In the ‘Hume-Popper position,’ such a device - whether it is common sense theory or the lens of existing theory - is useful as a starting point to focus theoretical inquiry, which is then further progressed through means such as critical interaction, empirical research, and practical experience. The economist’s evolved ‘economic sense’ - which in turn can filter which theories, policies and so on that are relevant to the presenting real world economic policy situations – becomes as or more important to the ability of the economist to put forward useful practical advice as the economist’s mastery of a range of particular technical theories and models. In his Nobel prize acceptance speech, Paul Samuelson (1970) related mathematical and theoretical formalism to economic intuition:

. . . Although my intuition is poor enough in three dimensional space, I can assert with confidence on the basis of the above that raising any input’s price while holding all remaining inputs’ prices constant will definitely reduce the amount demanded of that input by the firm - i.e. dvi/dpi < 0. Such a commonsense result might be expected by anyone who performed an act of empathetic introspection, “Suppose I were a jack-ass of an entrepreneur, what would I do to adjust to the dearness of an input in order to conserve as much profit as possible?” Here the commonsense and advanced mathematics happen to agree. But we all know the Giffen pathology according to which an increase in the price of potatoes to Irish


15

peasants, who must depend heavily on potatoes when they are poor, may itself impoverish them so as to force them into buying more rather than less potatoes. In this case common sense recognizes itself only under the search-light of mathematics. With the assistance of mathematics, I can see a property of the ninety-nine dimensional surfaces hidden from the naked eye. If an increase in the price of fertilizer alone always increases the amount the firm buys of caviar, from that fact alone I can predict the answer to the following experiment which I have never seen performed and upon which I have no observations: an increase in the price of caviar alone will increase the amount the firm buys of fertilizer. (Samuelson 1970)

As noted above, Hendersen (1986) had observed during his time in Whitehall that individuals without any economic training had formed ‘do it yourself’ economic theories, which Hendersen termed ‘Do It Yourself Economics’ (DIYE). It is pertinent therefore to ask what other individuals in the economic system may have formulated their own DIYE theories? For example, do businessmen and CEOs in the course of their business activities, consultants in the course of their work, and perhaps even the factory floor worker formulate their own DIYE economic theories based on their experience? One answer comes from Walter Heller (1975), during his AEA presidential address. Heller suggested that the public had “put economists in bad repute” and “thwarted” good economics, because economic ideas and prescriptions go against lay common sense:

. . . much of our economic analysis and the uncommon sense growing out of it fly in the face of “common sense,” for example, that budget deficits need not spell inflation, nor national debt a burden to our grandchildren; that thriftiness can be a mixed virtue; that while exploding oil prices inflate costs, they deflate demand; that in an overheated economy, greater taxes can be the lesser evil; and so on. (Heller 1975: 5)

Heller accounted for this by suggesting that individual real-world economic actors each possess a lay ‘common sense’ economic theory:

Behind every false dictate of common sense lies a primitive and misbegotten economic theory – and for all our pains to correct it, we can expect to get the back of everyman’s hand. (Heller 1975: 5-6, italics added)

Heller’s account is clearly biased: there is no plausible reason to suspect that all common sense dictates must be “false” and “misbegotten. ” Naturally the possibility exists that a common sense lay economic theory may indeed have a greater or lesser degree of merit. Putting this aside however for the moment, it is pertinent to note that that Heller has identified in the general public the existence of lay economic theories of the sort identified in civil servants and business representatives by Hendersen during meetings in Whitehall. Such lay theories have been taken very seriously academically in the psychological and sociological literature. A pertinent example of the development of lay theories in psychology is found with the work of Adrian Furnham. Furnham (1988) presents an exploration of lay theories not only in psychology, but also in other fields such as medicine, law, education – and economics. With regard to economics, Furnham suggests that:


16

Although economists appear to hold views about how individuals and more particularly groups of individuals behave in the economic world, they appear to have little interest in lay people’s views of the economic world. Psychologists have been more interested in lay people’s economic beliefs and behaviours . . . These methods have been employed to investigate lay “theories” in economics. (Fu rnham 1988: 128)

Furnham identifies three streams of thought in the in the literature on lay theories in the psychology of economics:

The first is to look at statistics on buying, saving, consumption, etc., and to attempt to infer belief patterns or assumptions from them. The second is to investigate, through large scale surveys, attitudes and expectations and to attempt to assess consumer sentiment. The third method is, through smaller scale studies, to look at the structure and determinants of lay people’s beliefs or theories about the economy. (Furnham 1988: 128)

Furnham (1988, Ch. 6) surveys that literature, and it is both beyond the scope of the present discussion and un-necessary to detail the results here. The key point for the present discussion is that not only is it intuitively reasonable to expect that lay individuals have such ‘DIYE’ lay theories of economics, but that this expectation is in fact supported by a substantive academic literature.

Habitus and Hayek: the contextually located economic agent, well adapted to his or her environment In considering that agents have their own understanding of the economic system that they are located in, it is important to note that the issue is not the extent to which agents may have directly or indirectly and tacitly or explicitly acquired some knowledge of ‘proper’ economic theory (for example, from reading newspapers or other media that publish economic analysis) or something that approximates it. The present question is rather: What kind of know-how does the individual located in a specific context within the economic system in the conduct of his or her ‘business of every day life’ (Marshall 1890) possess a ‘sense’ regarding the behaviour of the system the agent is participating in, and how does that ‘practical sense’ relate to common sense? A convenient way to cast the issues of present concern is through Pierre Bourdieu’s concept of habitus3 and Friedreich Hayek’s (1945) arguments regarding the importance of local and contextual knowledge, available to the individual agent but not to any central planner. 3 It is beyond the scope of the present discussion to give a serious introduction to or critical analysis of Bourdieu’s theory: see Jenkins (1992), Swartz (1997), and Bourdieu and Wacquant (1992) for an introduction and overview, and Bourdieu (1977; 1990) for the key works in the original (translated into English). Essentially the ‘field’ is a dynamically evolving social system containing a number of actors in structured relationship to each other and a greater or lesser degree of institutional structure, while each individual’s relationship with the field is internalised into the agent’s ‘habitus’ or – putting it roughly – their habitualised know-how and dispositions for interacting with that social world. The concepts of habitus and field will therefore be used in the present discussion in the sense suggested in this brief summary: the key concept is that the agent’s patterns of interaction and experience are internalised into his or her habitus.


17

Bourdieu’s framework entails conscious or tacit lay theories on the part of the economic individual:

As good a place as any to start thinking about Bourdieu’s development of a theorised model of social practice is with the notion of theory itself. Every society, every culture, every group of people who recognise themselves as a collectivity, has theories about the world and their place in it: models of how the world is, of how the world ought to be, of human nature, of cosmology. (Jenkins 1992: 69)

In Pierre Bourdieu’s articulation of the theory of the field and the habitus (Bourdieu 1977; 1990), the agent is well adjusted to and has an internalised working knowledge of and effective relationship to his or her environment. The habitus is “an acquired system of generative schemes objectively adjusted to the particular conditions” in which the agent operates (Bourdieu 1977: 95) so that the individual, located in a “field,” will accommodate and adjust to that field. The habitus entails a “practical sense” of how to operate in the world. Similarly, Hayek (1945) made it very clear that he intended to emphasise that an economic individual is located in a local institutional and historical context and that such individuals are typically well adjusted to those circumstances by virtue of possession of practical contextual knowledge and know-how. Hayek wrote that:

. . . there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made . . . We need to remember only how much we have to learn in any occupation after we have completed our theoretical training, how big a part of our working life we spend learning particular jobs, and how valuable an asset in all walks of life is knowledge of people, of local conditions, and of special circumstances. To know of and put to use a machine not fully employed, or somebody's skill which could be better utilized, or to be aware of a surplus stock which can be drawn upon during an interruption of supplies, is socially quite as useful as the knowledge of better alternative techniques. And the shipper who earns his living from using otherwise empty or half-filled journeys of tramp -steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices, are all performing eminently useful functions based on special knowledge of circumstances. (Hayek 1945, italics added)

For Hayek therefore, the economic individual adapts to his or her specific contextual environment and has detailed explicit and tacit knowledge of its how to interact with it. The individual has adjusted to the environment that the individual works in, both by developing a conscious conceptual model of that world which may have a greater or lesser degree of merit, and by developing habitualised and internalised patterns of interaction and practical sense, knowledge and intuition for understanding the events and relationship in that world.


18

Common sense, practical sense, and economic sense It is pertinent to now distinguish between common sense, practical sense, and economic sense. Clearly, ‘common sense’ is a term with no precise technical meaning (unless, of course, one is explicitly ascribed to it). The word itself may mean many things to many people, and certainly has done so in the past. The issue naturally arises therefore of what exactly is meant by common sense. Is there a single ‘common sense’ of an epoch and a culture, reflecting what is familiar and taken for granted by the people in it? Is common sense timeless and unchanging, or does it evolve? Does every individual in society possess their own individual and unique common sense, that is (if only slightly) different to what is common sense for any other person? Or is it possible to steer some kind of middle course, and find that there is a common sense set of understandings for society, yet still room to allow for individual variation of what is taken as common sense and obvious? It is not the place of the present discussion to offer any definitive resolution to these questions. Clearly, if there is such a thing as ‘common sense’ then there must be something ‘common’ about it – the tenets of common sense must be ‘obvious’ to any reasonably intelligent and well adjusted person in society. Equally clearly, common sense is not the same for everyone. What one person finds to be ‘obvious’ and ‘common sense’ may not appear at all so to another person. An attempt might be made however at clarifying these issues to some degree using Bourdieu’s framework of habitus and field 4. The agent, through his or her socialisation, education and experience develops a habitus and practical sense regarding the social, physical and biological world that he or she lives in. Presumably, since we are all living in the same physical world and experience much of social reality in similar ways, in the formation of our individual habiti5, we are subject to many of the same conditioning constraints, and it is therefore not unreasonable to expect that we share many aspects of our ‘practical sense’ with others. It is possible to suggest that ‘common sense’ constitutes those common and shared elements of our practical sense that any reasonable and well adjusted person would ascribe to by virtue of the common conditioning and experience that leads to our functional adjustment to the physical, social and biological world. ‘Common sense’ is thereby directly related to individuals’ ‘practical sense.’ This viewpoint not only allows for commonalities in the development of the habiti in any given group in society or epoch, and therefore to a shared component of ‘practical sense’ which to any well adjusted and functional member of society or the world becomes simply ‘obvious’ – the development of common sense – but also allows or any given 4 The arguments presented here concerning common sense in relation to assimilated experience and consequent development of ‘practical sense’ could be developed located in terms of other scholarly frameworks, such as for example Oakley’s (2002) reconstruction of the economic agent along ontological lines with reference to Schutz’s ‘life world.’ Bourdieu’s fra mework however is richly evocative, and presents a convenient framework for developing the notion of common sense in terms of practical sense. 5 Being unsure of the plural of ‘habitus’ and being forced to choose between habituses and habiti, I made a somewhat arbitrary choice for the latter.


19

individual the development of a related flexible, individual and unique ‘practical sense’ as any given individual’s habitus develops and accommodates to the particular circumstances and challenges the individual faces. The individual may of course continue to further develop his or her practical sense, through experience and reflection or other means. In particular, the agent may be socialised into a highly sophisticated intellectual environment, such as in the physical sciences or indeed into economics, and may engage in critical debate and focused research within the context of that field. The individual is firstly socialised into the existing state of the field through their education (thus shaping a significant component of the individual’s ‘economic habitus’), but the individual continues to learn and evolve and shape his or her thinking, beliefs and knowledge in critical reflection and interaction and through research and policy work in the field. That is, the individual may begin to develop a highly specific ‘technical sense’ that may perhaps radically differ from lay understanding in the field and constitute a technically refined ‘specialist sense.’ For economists, of course, this may be readily referred to as an ‘economic sense.’ It should be noted that exactly the same devices may be applied as for the ‘lay’ man to articulate a difference between a shared ‘economic sense’ in the field of economics in general, and the particular evolving economic senses of particular economists as they develop their understanding and intuition through ongoing work in the field. It has been noted above that ordinary individuals in the ‘business of every day life’, as well as trained economists, develop some kind of economic sense. In the former case this lay ‘Do It Yourself Economics’ theory arises from practical real world experience and information, in the latter case by immersion in a sophisticated and evolving intellectual field and experience of the economic system through some kind of focused research. In either case, the result is a refined and evolving economic sense.

Common sense and intuition Clearly, the notion of ‘practical sense’ as conceived above may be readily related to the ‘intuition’ of individuals working in a given field. The mathematician, scientist and philosopher Henri Poincaré perhaps offered the classic example, writing (1908/1952) of an ‘aesthetic sense’ guiding the development of mathematics: a

. . .feeling of mathematical beauty, of the harmony of numbers and forms, of geometrical elegance. This is a true esthetic feeling that all real mathematicians know, and surely it belongs to emotional sensibility . . . This harmony is at once a satisfaction of our esthetic needs and an aid to the mind, sustaining and guiding. And at the same time, in putting under our eyes a well-ordered whole, it makes us foresee a mathematical law . . . this special sensibility . . . all mathematicians know, but . . . the profane are so ignorant as often to be tempted to smile at it. (Poincaré 1908/1952)

Wilder identifies such a sense as an ‘intuition’ guiding the direction of research in mathematics:


20

The role of intuition in research is to provide the “educated guess” which may prove to be true or false; but in either case, progress cannot be made without it and even a false guess may lead to progress. Thus intuition plays a major role in the evolution of mathematical concepts. The advance of mathematical knowledge periodically reveals flaws in cultural intuition; these result in “crises,” the solution of which results in a more mature intuition.

Clearly, it is but a short step from an evolving ‘practical sense’ to an evolving ‘intuition’ about the system or subject matter under consideration. In the case of economists, this leads naturally to an evolving intuition about the behaviour of the economy.

‘Economic sense’ or intuition as a link between economic theory and economic reality Economic theory is well known - and indeed has been widely criticised - for theory or models starting from unrealistic assumptions 6. Roger Backhouse (1999) and Robert Sugden (2000) each consider the relationship of formal and abstract economic models to economic reality7, and have each in their own way forcefully advocated that intuition is the link between an unrealistic model and what happens in the real world. Backhouse begins by discussing

. . . a way of constructing an argument that is very common in economics. The central arguments are based on theoretical models, but conclusions relating to the real world are drawn without any intervening ‘empirical’ model. (Backhouse 1999: 283)

In such models, Backhouse suggests that

. . . the role played by the model is to guide or train the reader’s intuition . . . The bridge between models and the real world is the economist’s intuition (Backhouse 1999: 296, italics added)

Sugden (2000: 1) takes the “starting point . . . that model-building in economics has serious intent only if it is ultimately directed towards telling us something about the real world.” Sugden considers two explicitly “abstract and unrealistic” models, George Akerlof’s ‘market for lemons’ and Thomas Schelling’s ‘checkerboard city,’ and inquires how it is that each of these abstract and unrealistic models tell us something about the real world. Sugden (2000: 27) notes that neither of the models makes an explicit connection between the model world and the real world. Sugden ultimately suggests that

. . . Akerlof and Schelling are engaged in a kind of theorizing the usefulness of which depends on inductive inferences from the world of models to the real world . . . it should not be surprising if economists leave gaps in their explicit reasoning at those places where

6 for a small sample of views on the realism of assumptions, see the comments by various eminent economists in Klamer (1984), by Krugman (1999), or the paper by Rappaport (1996) 7 There is a range of literature exploring the theme of the relationship of the model world to the real world such as for example through the model world acting as a metaphor (McCloskey 1990) or a caricature (Gibbard and Varian 1978).


21

inductive inferences are required, and rely on their readers using their own intuitions to cross those gaps. (Sugden 2000: 28, italics added)

The motivation for the reader making such inferences is that the model worlds are intuitively plausible, they are credible worlds:

On this account, models are not internally consistent sets of uninterpreted theorems; but neither are they simplified or abstracted or exaggerated descriptions of the real world. They describe credible counterfactual worlds. This credibility gives us some warrant for making inductive inferences from model to real world. (Sugden 2000: 28)

Alex Viskovatoff (2003) identifies a potential vicious cycle in this process of abstraction, where

Economists’ intuition guides the assumptions that economists build into their models, while the models in turn form economists’ intuition. Given that intuition can point economists in a different direction than empirical evidence, this can lead to a self-reinforcing, self-referential dynamic in which intuition becomes further and further removed from reality, potentially without limit (Viskovatoff 2003: 407)

This cycle may be represented graphically:

Figure 1 – existing theory and intuition frames what is considered important for framing

the next generation of models Viskovatoff finds support for the notion that sometimes “intuition ends up trumping experience” in Dennis O’Brien’s notion (1998) of a “detour” in the literature, by which O’Brien means a case when “economists have been led astray by a theoretical model that not only lacks empirical support but makes assumptions that are directly contradicted by empirical experience that has been available for many years” (Backhouse 1999: 281). As Viskovatoff notes, O’Brien provides four examples: the neoclassical literature on


22

research and development initiated by Kenneth Arrow; the colonization of industrial economics by game theory; Pigou’s welfare economics and its lack of interest in actual legal institutions; and the treatment of the Great Depression by Hayek and Robbins. Viskovatoff’s argument is particularly interesting for the present discussion. Firstly, it highlights the evolution of an economic intuition that may become rather far removed from the intuition and common sense of people in the field familiar with the system being modelled. Secondly, and even more importantly, if Viskovatoff and O’Brien are correct in their portrayal of the possibility of economic intuition progressively removing itself from concern with empirical reality then the appropriate ‘circuit breaker’ for the vicious cycle identified by Viskovatoff is clearly exactly that proposed in the fifth tenet of our ‘Hume-Popper position,’ namely that:

common sense, and the real world context, is a guide to when theory begins to lose real-world relevance, for example due to errors in the assumptions used as premises, or due to subtle errors in the reasoning

Common-sense observations highlighting that the assumptions or intuitions of the model world are beginning to diverge from empirical reality would play a useful role in bringing the model world back into usefully modelling and empirically real and significant issues.

‘Against’ common sense Common-sense, or at least a lay understanding of economic issues, has been criticised by economists. For example, Charles Bean, chief economist at the Bank of England, made some remarks (2003) commemorating a century of economics teaching at the London School of Economics. Bean first noted that

. . . the subject matter of economics is probably of more immediate relevance to the man in the street than that of almost any other social science . . . But it has to be said that many non-economists, including many politicians, take a somewhat jaundiced view of the potential contribution of economics. In part that is because the conclusions of economic reasoning often seem to offend common sense. And in part it reflects the supposed tendency of economists to disagree . . . (Bean 2003: 106, italics added)

Bean continued however, to argue:

But ‘common sense’ is frequently a poor guide to the right answer in economics. While sometimes sufficient for assessing the immediate effect of some change in the economic environment, ‘common sense’ is often not so helpful at tracing through all the consequential adjustments and interactions in a coherent fashion. As a consequence, many ‘common sense’ nostrums are often fallacious. (Bean 2003: 106, italics added)

David Henderson (1986) argued along similar lines:

Two advantages of an economics training are the readiness and ability to think in terms of interdependence and system effects, and a concern with quantitative evidence and ways of interpreting it. In both these respects . . . [common-sense economics] is typically and unknowingly deficient. (Henderson 1986: 108)


23

In considering this argument, it is pertinent to consider to what extent the ontologies and relationships in the model correspond to the ontologies and relationships in the real world. Very often in economic models, as has been noted in the previous section, they do not: the assumptions and premises of an economic model may be explicitly abstract and unrealistic and may be made for the sake of analytic convenience and tractability rather than realism. This begs the question, as identified by Backhouse and Sugden, of to what extent one should take the intuition generated by the abstract and unrealistic model as being in any way indicative of what may happen in the real world. The intuition of the model may be inapplicable or wrong in the real world, and furthermore by shaping the lens in which the economist sees real world issues through, may be misleading and blind the economist to significant real economic dynamics. A false intuition may retard the development of a valid and useful one. In any case, the objection raised by Bean and by Henderson to common-sense understandings of economic situations are easily accommodated by the ‘Hume-Popper position.’ That “‘common sense’ is often not so helpful at tracing through all the consequential adjustments and interactions in a coherent fashion” or that the lay person may not “think in terms of interdependence and system effects” is neither here nor there as far as the ‘Hume-Popper position’ is concerned. The ‘Hume-Popper position’ takes common-sense as a starting point, a position from which to improve our existing knowledge. If common-sense knowledge or existing theory can be improved it should be, and if interdependence or system effects in the real world can be better understood in terms of a model highlighting their dynamical relationships and consequences in a relevant manner, then they should be. Such criticisms of common-sense knowledge by economists are not damaging to the ‘Hume-Popper position,’ because the ‘Hume-Popper position’ only insists that the body of economic knowledge started from common-sense, not that any particular common-sense understanding or expectation must be correct. An additional argument against common sense knowledge might be made, that economic methodology tends to place great value on theories that make novel or interesting predictions, predictions which run against what uneducated common-sense or existing economic theory might predict, but which nevertheless may be confirmed empirically. This orientation might be related to at least two significant streams of thought in economic methodology. Firstly, Milton Friedman in his methodological contribution (1953) suggested that the

. . . ultimate goal of a positive science is the development of a theory or ‘hypothesis’ that yields valid and meaningful . . . predictions about phenomena not yet observed. (Friedman 1953: 7)

As D. Wade Hands (2001) phrases it, for Friedman:

Predicting a novel fact – evidence not yet observed – is the key determinant of a successful economic theory. (Hands 2001: 55, italics added)


24

The second strand of methodological thought in the philosophy of economics placing value on theories making novel or interesting predictions is due to Imre Lakatos (1970) and the assimilation of his views on the philosophy of science into the methodology of economics. Lakatos (1970: 116-118) introduces a notion of a scientific research program progressing when new theories have more theoretical content and at least some of the new content is corroborated empirically, so that the new theory contains something novel in relation to the old body of knowledge. It is beyond the scope of the present discussion to critically engage with Friedman’s methodological position or the assimilation of Lakatos’s position into the methodology of economics. The appeal of this argument against common sense is that a useful theory should be able to offer something more, something above and beyond what might be inferred from plain common sense. This argument however is not problematic for the ‘Hume-Popper position,’ which simply takes common sense as a starting point. According to the ‘Hume-Popper position,’ if the present theory may be improved through critical or empirical engagement, it should be. If novel and interesting predictions can be made that reliably receive some level of empirical support and are not accounted for in terms of the existing theory, then from the point of view of the ‘Hume-Popper position,’ then critical and empirical engagement with the current theoretical starting point has taken place, and the body of theoretical understanding can and should be improved and, if necessary, the ‘economic sense’ of the discipline evolved further accordingly.

Common-sense integrates and processes a diverse range of real-world experiences An additional point might be made regarding objections to common-sense knowledge such as those raised by Bean and Henderson, above. While it may be the case that a formal theory may be of help in understanding and working through interdependencies and system effects in a complicated system, such models by their nature are typically, if not always, an extremely simplified ‘version’ of reality. In addition, they may or may not be well abstracted, and may or may not correspond with economic reality. They typically do not and cannot take into account all real world factors and contingencies. It is by no means a ‘given’ that the intuitions generated by such models will be ‘correct’ intuitions in relation to economic reality – and may even potentially mask or blind economists to identifying features and dynamics of real economic systems. On the other hand, an educated and experienced practical sense may well be able however to assimilate and process vast amounts of information and arrive at useful intuitions about systems’ behaviours. Consider for example the following anecdote regarding the installation of a forecasting system at the Reserve Bank of England8. At the time [1980’s?] the Reserve Bank of

This anecdote was told to me by Professor John Foster of the University of Queensland, Australia. I am not sure I have recorded the details as told to me correctly, and I have not been able to independently check the facts. The story should therefore be taken in the present context entirely purely as anecdotal. Before final inclusion of this anecdote in this chapter in the thesis or as a paper I intend to ask Professor Foster for his


25

England had invested substantial amounts of money [millions of pounds?] in the hardware, software, and personnel to run a sophisticated financial modelling system to make predictions regarding [movements in the currency markets?]. After installing and fine-tuning the system however, the results from the system were less than remarkable. It emerged that an elderly gentleman who worked in another floor of the building, over a lifetime of taking an interest in the financial markets and reading the Financial Review each morning on the train on the way to work, had developed a sophisticated intuition into the behaviour of the financial markets that in fact significantly outperformed the multi-million dollar forecasting system. A pragmatic solution was eventually found, by modifying the multi-million pound forecasting system to take the intuitive predictions of this gentleman each morning as he arrived from work as an additional input, and the predictions of the system improved remarkably. I think that the message behind this anecdote would be acceptable to many economists. Familiarity and experience with a system breeds an intuition that may be broader, more flexible, deeper and more integrative of various complexities than a formal model may be, and the more complicated the system the more valuable a well developed intuition based on real experience is likely to be. This does not preclude of course the possibility that an economist with sophisticated models and extens ive experience with the real world system, might develop the best intuition of all regarding the behaviour of the real world systems. The value of the economist is not due to only the theories and models of economists, but also to the insights and intuitions they acquire while working with real world systems and data.

Assessing the support for the ‘Hume-Popper position’ In the preceding discussion, the first tenet of the proposed ‘Hume-Popper position’ has been considered and reinforced with reference to the history of economic thought. Turning now to the second and third tenets,


(iii) that what constitutes ‘common sense’ with regard to the domain of economics may itself evolve as economic discussion, debate and investigation proceeds

the second tenet is fairly clearly supported with even a casual glance through the history of economic ideas. With regard to the third tenet, it is also clear that economists deliberately try to develop an ‘economic intuition’ or ‘economic sense’ in their students, a sense or intuition regarding real economic phenomena that is different to (and hopefully an improvement on) the layman’s common-sense intuitions and understandings. It is fairly clear that with theory development, ‘economic sense’ began to diverge from common-sense, and in the teaching of economics some care is taken to instil this

permission to recount his story, to check that I have substantially remembered the details correctly, and as far as possible check and further articulate the facts from external sources.


26

economic sense in students. It seems clear therefore that the third tenet also receives substantial support by means of reference to the literature of economics. This leaves only the fourth and fifth tenets:

(iv) that economic theory should consist essentially of “enlightened” or articulated, refined, developed and tested common sense

(v) that common sense, and the real world context, is (or at least should be) a guide to when economic theory begins to lose real-world relevance, for example due to errors in the assumptions used as premises, or due to subtle errors in the reasoning.

Clearly, the first three tenets are the more ‘positive’ ones, describing how economics is (according to the ‘Hume-Popper position’s’ model), while the fourth and particularly the fifth begin to take on a more ‘normative’ and methodological tone, describing how the discipline of economics should be (according to the ‘Hume-Popper position’). As has already been seen, the fourth tenet has received explicit support from Alfred Marshall in his Principles. In addition, if one accepts that that the useful intuitions about the real world may be ‘stored up’ in explicitly abstract and unrealistic – but sufficiently theoretically ‘credible’ - model worlds, then much of the economics profession would agree that modern economics consists of developing an enlightened intuition, stored up in explorations of such unrealistic but ‘credible’ model worlds, that is relevant for understanding the way that the real world will behave. While the fourth tenet of the Hume-Popper position is unlikely to find universal support in the economics discipline (Debreu for example insists that his explorations in pure economics have no relationship at all to the real world but nevertheless are useful intellectual explorations), there are certainly several currents of thinking that can be mustered in its support. Perhaps Henri Poincaré’s summation captures the situation in this regard:

. . . the majority of witnesses confirm my conclusions; I do not say all, for when the appeal is to universal suffrage, unanimity is not to be hoped. (Poincaré 1908/1952)

Turning to the fifth tenet of the Hume-Popper position, Samuelson expressed support in suggesting that “If economics does not agree with common sense, then it is not good economics” (in Samuelson's Economics, 16th edition, quoted in Isa 2003). In addition, if the arguments put forward by O’Brien (1998), Backhouse (1999), Sugden (2000), and Viskovatoff (2003) are correct, then common-sense arising from practical engagement with and experience of the real-world systems being examined clearly plays a potentially pivotal role in bringing the constructions of the model world and the resulting intuitions arising from the model worlds back into greater relevance with regard to empirical reality.

Three methodological principles suggested by the ‘Hume-Popper position’


27

The major purpose of the body of this chapter so far has been to attempt to establish that the ‘Hume-Popper tradition’ is a reasonable framework from which to view the history and current state of economic theorising. From the considerations in this chapter and the literature reviewed, I hope that the reader will agree that the proposed ‘Hume-Popper position’ is a reasonable and interesting framework through which to view the history and current state of economic science. In particular, I hope that readers will be inclined to agree that economics did indeed start in the eighteenth and nineteenth centuries as a development from common-sense observations about the socio-economic system and human nature; that economists did indeed critically engage with and refine and reconstruct those initial works to produce a systematically worked out and sophisticated body of knowledge; and that as this work of theory construction and reconstruction proceeded, economists developed an ‘economic sense’ that progressively diverged from a lay common-sense set of understand ings and expectations concerning economic phenomena to the extent that modern economic theory and models incorporates just such an ‘economic sense’ that is forcefully taught to incoming economics students. In addition I hope that the reader will find it a reasonable proposition that if ‘economic sense’ or intuition arising from an immersion in economic theory and models begins to diverge to any significant extent from empirical reality, then common-sense and empirical observations regarding that reality are a useful tool to highlight the divergence and to begin the process of reconstructing the model worlds to bring their intuitions back into greater empirical relevance. It has been noted that the majority of ‘tenets’ proposed for the ‘Hume-Popper position’ are more positive than normative in character. They do not proscribe to any great extent any normative recommendations on how economics should be done. In the concluding sections of this chapter, the aim is to motivate three normative methodological principles that might be suggested arising from a consideration of the ‘Hume-Popper position.’ While it would be quite possible and fruitful to further explore these suggested principles in relation to existing economic literature, unfortunately such a detailed exploration is beyond the scope of the present discussion and the present discussion will confine itself to only a brief discussion of each suggested principle and a few selected examples.

The first methodological principle: common-sense acts as a guide The first methodological principle arising from the ‘Hume-Popper position’ is, of course, exactly the fifth tenet of the ‘Hume-Popper position,’ the suggestion that common sense acts as a guide to when a theory might be going off track or losing empirical relevance. Clearly there are a few senses in which this can be interpreted. Firstly, following Lewis (quoted above) in philosophy, this first methodological principle may be interpreted as a call for “theoretical conservatism” on the part of economic theorists, suggesting that a theory that flies in the face of lay common-sense understandings of empirical reality should trigger warning bells and critical concern, and call for an extensive critical consideration of whether the theory is actually articulating


28

and offering a deeper and better understanding of the empirical reality through a refined economic sense, or whether instead the theories and models the economic sense is developed in and through have themselves diverged somewhat from empirical reality and relevance and need reconsideration, reworking, and redirection. The economist Hal Varian (1999) illustrates this lines of thought in discussing the process of choosing ideas to model in economic model construction:

So let’s assume (a favorite word of economists) that you have an idea. How do you know it’s any good? The first test is to try to phrase your idea in a way that a non-economist can understand. If you can’t do this, it’s probably not a very good idea. If you can phrase it in a way that a non-economist can understand, it still may be a lousy idea, but at least there’s hope. (Varian 1999: 258, italics added)

In other words, an idea that diverges radically from making ‘common-sense’ sense is less likely to be a ‘good’ idea than one that makes some sort of sense or is intelligible in some manner in common-sense terms. Roger Backhouse (1988) implicitly makes this argument for mainstream economic theory in general:

To a certain extent economics deserves the criticism heaped upon it. Economists have clung on to out-of-date theories, claimed more than they were justified in claiming and have become carried away with abstract arguments to the detriment of common sense. (Backhouse 1988: 194)

A second sense in which to understand and operationalise this methodological principle is in terms of the economist’s own evolving sense of economic reality. An economist working in a field is very likely to be exposed to the empirical reality through an immersion in it (for example through reading relevant background material and literature, contact with significant participants in the field, amassing and analysing relevant statistics and data, etc.). With this real world experience and exposure, the economist will develop his or her economic sense beyond the intuitions available in the models, and this developed economic sense will be able to take into account a diverse range of institutional factors and inter-related variables and externalities that may not be explicitly accounted for in the model. The second manner, therefore, in which this methodological principle may be taken into account is in a call for the economist to develop his or her economic sense in a given field of endeavour and, on occasions where the individual economist’s (or a group of economists’) economic sense jars with the received theory and models, to take the recognition of that divergence seriously as grounds for further inquiry and, where necessary refinement, improvement or reconstruction of the model or theory. This principle may of course find eminent support in the economics literature, notably from Marshall, as considered above. Kohn (2004) takes the mathematical economic theory ensuing from Hicks’s and Samuelson’s (let alone Arrow and Debreu’s!) contributions to have led to very little


29

concrete advancement in relation to practical issues, and suggests that substantive areas of economics such as economic policy and economic development are led by, in practice, not theory but largely or primarily by an evolving economic sense on the part of the economists involved:

Most disappointingly, the Hicks-Samuelson program has done virtually nothing to assist in the formulation of economic policy. On the great issues of the day, it has been virtually silent. The major improvement in the management of the domestic monetary system that occurred in the 1980s was the result of trial and error on the part of practitioners: economic theory had contributed virtually nothing. On transition and economic development, modern economic theory has again had nothing useful to say . . . This is not to suggest that economis ts as individuals have made no contribution. However, their advice has relied more on economic common sense than on high theory. It is difficult to see how a 19th century economist, or even one from the 18th century, would have made a less useful policy advisor than a tooled-up modern economist. (Kohn 2004: 306)

While Kohn’s assessment of the merits and contributions of economic theory is of course open to debate, it does however frame a highly pertinent question: what role should an evolving practical economic sense play in relation to both economic theory and policy? A third dimension to this methodological principle may be identified in noting that economic advice is received by economic policy makers, business men, and others who, while they may have had some training in economics, are not professional economists. Nevertheless, they may have gained extensive specific contextual experience in the field and may have evolved a ‘sense’ of how the system works in the areas they are familiar with. The first methodological principle in this case would therefore be a call for people to filter the claims and proclamations of economic scientists relative to their contextual needs and situations, through the filter of their own evolved and evolving experiential practical sense.

The second methodological principle: the more the premises or conclusions of an argument diverge from common-sense, the greater the burden of proof required A second methodological premise that might be proposed arising from the ‘Hume-Popper position’ that may be pursued would be to suggest that an argument, premise or theoretical position that diverges from and clashes with common-sense should entail a greater burden of justification than an argument , premise or proposition that does not. For example, if one was to take as axiomatic the proposition or premise that ‘people act,’ which is a self-evident common-sense proposition, there would be a lower onus of responsibility for proving it than for asserting the premise that ‘people are always and everywhere rational utility maximisers.’ The more unrealistic and against common-sense the premise, the greater should be the burden of proof and indeed the greater should be the scepticism regarding conclusions based on the use of that premise.


30

Clearly, the more patently unrealistic or absurd the premise or conclusion, the greater should be the burden of responsibility on the person proposing it to justify his or her audience accepting it. This methodological premise has, of course, eminent antecedents in economics. Keynes for example suggested that:

It is for those who make highly special assumption to justify it rather than for those who dispense with it to prove a general negative. (Keynes, quoted in Davidson 2003)

It should be noted of course that the ‘Hume-Popper position’ does not claim that all common-sense premises or theoretical positions are correct, or that a seemingly absurd premise or theory may not in fact be correct (in which case, it is common-sense itself that must adapt and evolve). Indeed, Popper explicitly argues that common-sense positions are to be taken only as a starting point, to be refined and developed through the engine of critical or empirical enquiry, while on the other hand occasionally such refinement and development does overturn existing common sense (such as for example in finding that the world is round or re-evaluating the nature of space-time in Einstein’s relativity). Adopting this methodological premise might appear to have the ‘downside’ of invalidating the process of creating models of the sort discussed by Sugden (2000) that are based on deliberately abstract and unrealistic assumptions and attempt to transfer their relevance to the real-world via intuition. According to this interpretation, flagrantly unrealistic assumptions should not be allowed, and should be rejected in favour of ‘sufficiently’ realistic assumptions used in building the model. The adoption of this premise in this context would significantly restrict the freedom of model makers in constructing thought-experiments in model worlds, or at least in inferring that results arising in model worlds should (without an additional level of explicit argumentation) transfer to real worlds. This is not exactly the case however. Such a stricture is not forced upon model builders by this methodological premise. Rather, it would suggest that model builders can create whatever imaginary worlds they like, subject to the constraint that if they want someone to take the conclusions of the model – including the intuitions generated by the model – as being of significance for the real world, then there is a greater burden of justification on the modeller to justify the relevance of the model to the real world. That is, there is no constraint on the activities of the modeller as engaging in essentially an exercise in economic ‘pure mathematics’ or a ‘thought experiment’: the onus of justification should however apply when the modeller wants anybody else to take the model seriously as having any sort of relationship to the real world.

The third methodological principle: any common-sense observation about the real world should be theoretically ‘admissible’ A third and final methodological premise that should be suggested that arises naturally from consideration of the ‘Hume-Popper model’ is that any common-sense observation


31

about the real world system should be ‘admissible’ in the sense that it should be taken seriously, investigated and, where the common-sense observation is found to be of some substance, it should call for an explanation from either the existing body of theory. Where existing theory cannot account for it, theory should be extended or reworked and reconstructed to account for – or at least be made consistent with - real world observations arising from empirically supported common-sense. While it is may be the case that economic theory has provided frameworks to quite deeply explain economic phenomena, it has unfortunately also often been the case that quite common-sense observations have been marginalised and ignored by the majority of the profession for extended and significant periods of time. Examples include the significance of institutions in understanding economic systems, which was highlighted by the German historical school and the old institutionalists in the nineteenth and early twentieth centuries (but for a significant period of time marginalised by the neoclassical school before these issues began to be reconsidered seriously in a manner compatible with the neoclassical tradition by new institutional economists); the role of true uncertainty (as opposed to risk) as highlighted by John Maynard Keynes, G.L.S. Shackle, and the Post-Keynesians; or the limits to rational maximizing as the central intellectual apparatus to economics as highlighted by numerous contributors including Herbert Simons and Kahneman and Tversky. The road from a common-sense observation to fully developed theory taking the common-sense observation into account may be a long one in economics. Transaction costs provide an illustrative example. The fact that transaction costs exist is common-sense. Anyone involved with arranging transactions must be aware of a range of explicit and implicit transaction costs. The theoretical consequences of transaction cost concepts to neoclassical economics are however significant, for example:

It gives a serious blow to the neo–classical continuous optimisation hypothesis, both for producers and consumers. They may stick to an inefficient input mix or consumer basket because it costs too much to alter the combination. (Martens 1996: 15)

In particular, transaction costs have significant implications for the operation of markets and the relationship of firms and their governance structures to markets. It was not enough however to make a common-sense observation: it took explicit arguments by Coase (1937/1993) and further development and articulation by Williamson to bring transaction cost considerations into the mainstream. Williamson (1993) commented:

That the state of transaction cost economics in 1972 was approximately where Coase had left it in 1937 is largely attributable to the failure, for thirty-five years, to operationalise this important concept. That this flat trajectory has been supplanted by exponential growth during the past fifteen years is because recent students of transaction cost economics have


32

insisted that this approach meet the test of refutable implications . . . this literature is broadly corroborative. (Williamson 1993: 90)

Clearly it would have been useful to the progress of the discipline of economics if this common-sense observation could have been assimilated by and processed by economics simply on its common-sense value. The final proposition arising from the ‘Hume-Popper position’ therefore is that common-sense propositions regarding economic systems should be admissible and taken seriously by the economics profession. If a common-sense proposition or observation cannot be dealt with by the existing body of theory, then perhaps this should be considered as a call for reconsidering and reconstructing that body of theory.

Conclusions

Out-takes


33

References Allen, R. J. (2001). 'Common sense, rationality, and the legal process', Cardozo Law

Review, 22, pp. 1417-1431. Backhouse, R. (1988), Economists and the Economy: The Evolution of Economic Ideas

1600 to the Present Day, Basil Blackwell, Oxford and New York. Backhouse, R. (1999). 'Modeling invention: the use of models in the neoclassical

literature on R&D' in From Classical Economics to the Theory of the Firm: Essays in Honour of D. P. O'Brien, ed. R. Backhouse and J. Creedy, Edward Elgar, Cheltenham, UK.

Bean, C. (2003), Economists and the Real World, speech given commemorating 100 years of economics teaching at the London School of Economics 2003, Bank of England, London.

Bourdieu, P. (1977), Outline of a Theory of Practice, Cambridge University Press, London.

Bourdieu, P. (1990), The Logic of Practice, Polity Press, Cambridge. Bourdieu, P. and L. J. D. Wacquant (1992), An Invitation to Reflexive Sociology,

University of Chicago Press, Chicago. Coase, R. (1937/1993). 'The nature of the firm' in The Nature of the Firm, ed. O. E.

Williamson and S. G. Winter, Oxford University Press, Oxford, pp. 18-33. Coates, J. (1996), The Claims of Common Sense: Moore, Wittgenstein, Keynes and the

Social Sciences, Cambridge University Press, Cambridge and Melbourne. Comim, F. (2002). 'The Scottish tradition in economics and the role of common sense in

Adam Smiths thought', Review of Political Economy, 14 (1), pp. 91-114. Davidson, P. (2003). 'Is "mathematical science" an oxymoron when used to describe

economics?' Journal of Post Keynesian Economics, 25 (4). Davie, G. (1976). 'Berkeley, Hume, and the central problem of Scottish philosophy' in

McGill Hume Studies, ed. D. Norton, N. Capaldi and W. Robinson, Austin Hill Press, San Diego.

Fischer, S. (1994). 'Stanley Fischer' in A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought, ed. B. Snowdon, H. Vane and P. Wynarczyk, Edward Elgar.

Friedman, M. (1953). 'The methodology of positive economics' in Essays on Positive Economics, University of Chicago Press, Chicago, pp. 3-43.

Furnham, A. F. (1988), Lay Theories: Everyday Understanding of Problems in the Social Sciences, Pergamom Press, Oxford.

George, H. (1897), The Science of Political Economy, 2nd, K. Paul, Trench, Trubner, London.

Hands, D. W. (2001), Reflections Without Rules: Economic Methodology and Contemporary Science Theory, Cambridge University Press, Cambridge.

Hayek, F. A. (1945). 'The use of knowledge in society', American Economic Review, XXXV (4), pp. 519-530.

Heller, W. W. (1975). 'What's right with economics?' The American Economic Review, 65 (1), pp. 1-26.


34

Henderson, D. (1986), Innocence and Design: The Influence of Economic Ideas on Policy (1985 Reith Lectures), Basil Blackwell, Oxford, UK.

Hoover, K. D. (1994). 'Pragmatism, pragmaticism, and economic method' in New Directions in Economic Methodology, ed. R. E. Backhouse, Routledge, London and New York.

Hume, D. (1748/1988), An Inquiry Concerning Human Understanding, Prometheus Books, New York.

Isa, J. (2003). 'Paul Anthony Samuelson', BIATEC (National Bank of Slovakia), XI (2), pp. 25-30.

Jenkins, R. (1992), Pierre Bourdieu, Routledge, London. Jenkins, R. (2002), Foundations of Sociology, Palgrave Macmillan, New York. Jevons, W. S. (1871/1888), The Theory of Political Economy, 5th edn., Macmillan,

London. Klamer, A. (1984), Conversations with Economists, Rowman & Allenheld, Totowa, NJ. Kohn, M. (2004). 'Value and exchange', Cato Journal, 24 (3), pp. 303-339. Körner, S. (1971), Abstraction in Science and Morals: the Twenty-Fourth Arthur Stanley

Eddington Memorial Lecture Delivered at Cambridge University 2nd February 1971, Cambridge, Cambridge University Press.

Krugman, P. (1999). 'How I work' in Passion and Craft: Economists at Work, ed. M. Szenberg, The University of Michigan Press, Ann Arbor, pp. 143-154.

Lakatos, I. (1970). 'Falsification and the methodology of scientific research programmes' in Criticism and the Growth of Knowledge: Proceedings of the International Colloquium in the Philosophy of Science, London, 1965, volume 4, ed. I. Lakatos and A. Musgrave, Cambridge University Press, Cambridge.

Lewis, D. (1986), On the Plurality of Worlds, Blackwell, Oxford. Marshall, A. (1890), Principles of Economics. Martens, B. (1996). Complex Adaptive Human Behaviour in a Boundedly Rational

Environment: Towards a Generalised Coase Theorem, Commerce, Complexity and Evolution Conference, University of New South Wales.

Oakley, A. (2002), Restructuring Economic Theory, Edward Elgar Publishing, Cheltenham, UK.

O'Brien, D. P. (1998). 'Four detours', Journal of Economic Methodology, 5 (1), pp. 23-41. Poincaré, H. (1908/1952). 'Mathematical creation' in The Creative Process: A

Symposium, ed. B. Ghiselin, Mentor, New York, pp. 33-42. Popper, K. R. (1972), Objective Knowledge: An Evolutionary Approach, Clarendon

Press, Oxford. Rappaport, S. (1996). 'Abstraction and unrealistic assumptions in economics', Journal of

Economic Methodology, 3 (2), pp. 215-236. Reid, T. (1764/1983). 'An inquiry into the human mind on the principles of common

sense' in Inquiry and Essays, ed. R. E. Beanblossom and K. Lehrer, Hackett, Indianapolis.

Reid, T. (1785/1983). 'Essays on the intellectual powers of man' in Inquiry and Essays, ed. R. E. Beanblossom and K. Lehrer, Hackett, Indianapolis.

Samuelson, P. A. (1959/1966). 'What economists know' in The Collected Scientific Papers of Paul A. Samuelson, Vol. 2, ed. J. E. Stiglitz, M.I.T. Press, Cambridge, pp. 1619-1649.


35

Samuelson, P. A. (1962/1966). 'Problems of the American economy: an economist's view' in The Collected Scientific Papers of Paul A. Samuelson, Vol. 2, ed. J. E. Stiglitz, M.I.T. Press, Cambridge, pp. 1656-1681.

Samuelson, P. A. (1970). Maximum principles in analytic economics, Nobel Memorial Lecture.

Say, J.-B. (1803/1964), A Treatise on Political Economy, or, The Production Distribution and Consumption of Wealth, Sentry Press, New York.

Schumpeter, J. A. (1954), History of Economic Analysis, George Allen & Unwin Ltd., London.

Senior, N. W. (1836), An Outline of the Science of Political Economy. Sidgwick, H. (1905). 'The philosophy of common sense' in Lectures on the Philosophy of

Kant, Macmillan, London. Siegfried, J. (1994), The Status of Common Sense in Psychology, Ablex Publishing

Corporation, Norwood, NJ. Sugden, R. (2000). 'Credible worlds: the status of theoretical models in economics',

Journal of Economic Methodology, 7 (1), pp. 1-31. Swartz, D. (1997), Culture and Power: The Sociology of Pierre Bourdieu, University of

Chicago Press, Chicago. Varian, H. (1999). 'How to build an economic model in your spare time' in Passion and

Craft: Economists at Work, ed. M. Szenberg, The University of Michigan Press, Ann Arbor.

Viskovatoff, A. (2003). 'Rationalism and mainstream economics', Journal of Economic Methodology, 10 (3), pp. 397-415.

Walras, L. (1877/1954), Éléments D'Économie Politique Pure ou Théorie de la Richesse Sociale, 4th edn., George Allen and Unwin Ltd, London, translated by W. Jaffé.

Williamson, O. E. (1993). 'The logic of economic organisation' in The Nature of the Firm, ed. O. E. Williamson and S. G. Winter, Oxford University Press, Oxford.

Documents

PDF: 0.17 MB / 35 pages - DoE