ECON 109
History of Economic
Thought
WF 10 11:30
Laarni Escresa
Why study the history
of economic thought?
Why study the history of economic
thought?
Why study the wrong opinions of dead men?
attributed to Anthony Pigou
1. Parallel with natural sciences.
- There is no need to read the classical theories of the past in order to
understand economic problems and theories.
- The more perfect the science, the shorter the history (Whitehead)
2. Darwinian logic: the current work will preserve whatever is useful and
discard those that are not
3. Practical aspect: HET not vocationally useful
Why study the history of economic
thought?
1. Economics is a social science
- Ideas are shot through the heritage of the past and has a link intrinsically to the
subject and extrinsically outside of it. (Robbins)
- Not involved in the discovery of an objective reality, such as the discovery of a star.
2. Pedagogical advantages (Schumpeter)
- Difficult to understand contemporary developments without understanding of how
they developed
- Knowledge would lack direction and meaning if no minimum historical aspects no
matter how correct, original, rigorous and elegant
Why study the history of economic
thought?
3. To make well rounded economists: math, policy, theory
(The economist) must be a mathematician, historian, statesman, philosopher in
some degree. He must understand symbols and speak in words He must study the
present in the light of the past for the purposes of the future. No part of mans nature
or his institutions must lie entirely outside of his regard. Keynes
- Consequences: The ideas of economists and political philosophers, both when they
are right and when they are wrong are more powerful than is commonly understood...
Practical men, who believe themselves to be quite exempt from any intellectual
influences, are usually slaves of some defunct economist.
4. Source of new ideas, new thought experiments (Schumpeter, Robbins)
5. Insights into the ways of the human mind (Schumpeter)
How to study the history of economic
thought?
Philosophy of science without history of science is empty;
history of science without philosophy of science is blind Kant
How to study the history of economic
thought?
1. Absolutists (vs relativists)
- For the absolutists, economic science progresses in a linear fashion (Zamagni, Blaug)
- possible to separate the idea or theory from the social and historical context, slow and
continual growth in knowledge
- Economic theory: perpetual inventory of analytical tools.
- Basic tenet of mainstream economics is whether a particular piece of analysis is being
found useful in practical application.
- For Niehans, history will then have to be rewritten by each generation
- Building analogy
- looking back at science with what we are equipped today
- HET is a history of truths or history of mistakes
- Blaug, Knight, Stigler
What is science and nonscience?
Science
19th century answer
Use of induction
Observation and experiments universal laws
But what is the problem? Compare two statements
The sun rises every day.
All swans Ive seen are white.
No amount of observation can allow inference that a swan is white. But a single observation of
black swan is enough to refute that conclusion.
One can never prove or demonstrate that anything is materially true but one can
demonstrate that some things are materially false.
Karl Popper
Science is body of propositions about the real world that can be falsified by empirical
observations
Science is characterized by its method of formulating and testing propositions
Not defined by subject matter
Claim to certainty
Observation generalization: Induction is a myth
Selection of observation, among the infinite number of possible ones, entails possession of a point of
view which is in itself is a theory
No brute facts, all are theory laden
All theories are provisionally true until we falsify them
Pierre Durhem
No individual scientific hypothesis is falsifiable
Testing of hypothesis is conducted based on auxiliary statements
If auxiliary statements are falsified, did we falsify the theory?
No conclusive disproof of a theory can ever be produced
Ex. Galileo freely falling bodies
Popper: Methodological rules
normative
How to study the history of economic
thought?
2. Relativists
Scientific analysis is not simply a logically consistent process that starts with primitive
notions and adds to stock in a straight line fashion It is not simply the discovery of
an objective reality. Rather, it is an incessant struggle with creations of your own and
predecessors minds and if it progresses at all, in a criss-cross fashion. Schumpeter
- Methods, problems and results are historically conditioned requires reference to
historical background
- Relationship between economic theory and real socioeconomic structure
How to study the history of economic
thought?
Kuhns theory of scientific revolution
- evolution of knowledge pass through periods of revolution from one scientific
paradigm to another
- Scientific paradigm
General metaphysical world outlook
entire constellation of beliefs, values, techniques and so on shared by the members of a given
community
Choice of problems and techniques
Sharp breaks in development of science
- accumulation of anomalies that can not be reconciled with the prevailing
dominant paradigm
Normal science problem solving in context of an orthodox theoretical framework rule
Form a community where individuals agree on problems that require solution and general
form of the solution
Only judgment of colleagues is regarded as relevant in defining problems and solutions
Cumulative process of puzzle solving within a common analytical framework
Revolutionary science overthrow of framework by another as a consequence of repeated
refutation and mounting anomalies
exception
Proliferation of theories and appearance of methodological controversy
New framework offers a decisive solution to neglected puzzles
Long recognized but previously ignored
Conversion to the new approach takes on a nature of religious experience Gestalt
Is it a revolution?
Ptolemy
Copernicus
How to study the history of economic
thought?
4. Political demand of economic ideas
- events stimulate creation of political solution and demand for theories that scientifically justify these
solutions
- Myrdal: evolution of scientific communities, younger generation replace old because politically
important and more responsive to societys needs
5. Role of society (Zamagni)
- Theory as a means to self-understanding and self representation of a subject
- society as a whole determines cultural climate and limit choices available to scientists and scientific
community
- society as a whole establish importance and hierarchy of problems and eventually decides which
choices are correct
- No problem if society is homogenous but it is not
How do we proceed?
1. Historical reconstruction
- Historical context
- Biography, individuals
- Theory
2. Rational reconstruction
- Models
