In the last two chapters, we saw that a controversy developed between the writers who were more interested in qualitative and descriptive research and those who stressed quantitative and analytic work. The methodological basis for the controversy has been discussed in some detail. I now turn to economics proper. In economics, a similar controversy occurred between the "literary" and the "mathematical" economists. During the nineteenth century, a mathematized form of theory developed which became known as the "new" economics. The principal names connected with this development were Cournot, Walras, Edgeworth, Fisher, and Pareto. To say the least, a great deal of confusion existed regarding the role of mathematics in economics during Pareto's time. In this chapter I shall analyze the basis for Pareto's defense of mathematical methods in economics. In his defense of the "new" economics Pareto was the first economist to clarify the issues involved in the controversy.
The nineteenth century also witnessed the application of statistical methods and testing in economics. Pareto's researches in this field were a pioneering achievement in what later became known as econometrics. He attempted the numerical determination of certain functions, based on observation of factual data, although he did not include an indication of the confidence intervals to certain numbers. Statistical researches were also attacked by the "literary" economists. I shall show in this chapter that Pareto's contribution consisted in a better understanding of the interplay of theory and empirical work.
Finally, some attention will be given to the criterion for accepting or rejecting theories, namely, the "verification problem" in economics. The "verification problem" focuses attention on the veri