A Realist Perspective on Contemporary "Economic Theory."

By Lawson, Tony | Journal of Economic Issues, March 1995 | Go to article overview
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A Realist Perspective on Contemporary "Economic Theory."

Lawson, Tony, Journal of Economic Issues

that the transcendental realist perspective throws up. The essential point here is that while the traditional constant conjunction view of science entails the goal of control along with the amelioration of events and states of affairs, the transcendental realist perspective offers instead the goal of human emancipation. For while on the former account the point is to fix certain event(s) x in order to determine/control other event(s) y, on the transcendental realist understanding the aim must be to transform structures in order to enhance the scope for realizing human potential and to broaden opportunities generally. In the latter case, in other words, the aim must (or can) be to replace structures that are unwanted, unneeded, and restrictive by those that are wanted, needed, and empowering. Of course, the emphasis on policy as concerned with structural transformation is hardly Critics of traditional economic theory have always denied the closed character of economic systems. They have stressed instead the open character of economic processes and have challenged above all the belief in their self-regulatory tendencies.

- K. William Kapp, 1976

The branch of contemporary economics that its orthodox or mainstream proponents refer to as "pure theory," "economic theory," or just plain "theory" appears currently to be in a state of some disarray. In recent years, in particular, various problems have come to light with the project that has led even its proponents to question its capacity for accounting for real-world events or for assisting in policy formulation. Needless to say, in response to the diagnoses made, various solutions have been put forward, and certain transformations in aspects of the project have been proposed. I want to argue, however, that the remedies suggested, if in the context sometimes remarkable, are not going to make things sufficiently better. And the reason for this is simply that the problems identified do not represent the real nature of the relevant disorder. The aim here, then, is to attempt to identify the project's essential problem and to point the way to its transcendence.

It should perhaps be emphasized at the outset that although the assessment that follows rests upon critical analysis - one that is essentially an elaboration of the quotation by Kapp reproduced above - the perspective that is argued for is found to be not only not debilitating for, but actually empowering of, an economic theory contribution to science and policy analysis.

The Changing Features of Orthodox "Pure Theory"

If it is commonplace to find references to something called "economic theory" or "pure theory," etc., in modern economic literature, there appears to be some disagreement about what precisely it is or entails. In the assessments of critics (and some proponents too), the project has tended to be characterized according to various nominal features that reoccur in prominent contributions. Specifically, "economic theory" is widely interpreted as a body of substantive thought that, among other things, focuses upon individuals rather than collectivities; upon exchange activities rather than production or distribution; upon optimizing (maximizing or minimizing) behavior rather than satisficing or habit following; upon conditions of perfect competition rather than oligopoly or monopoly; upon structures facilitating constant (or decreasing) returns to scale rather than increasing returns; upon presumptions of perfect knowledge and foresight or "rational expectations" rather than uncertainty or ignorance; upon end-states, fixed points, or equilibria rather than processes in time; upon functions (utility, cost, preference, profit, etc.,) that are well behaved (where appropriate: convex, differentiable, fixed, well ordered over all the arguments, etc.,) rather than otherwise, and so on.

Now if these are the sorts of nominal characteristics that have often been associated with "economic theory," it is equally noteworthy that, at least among the apparently more reflective "theorists," most of these features, though acknowledged as prominent, have not been considered to be in any way essential or fundamental.

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