Economics as an Inductive Science

Abstract

All who have taught macroeconomics at any time during the past forty years will know this feeling well; for macroeconomic has been riddled with Kuhnian anomalies [32, 202 ff.] since its inception. Strangely, few teachers of microeconomics seem embarrassed by the purely theoretical material they teach and which their students are required to read and regurgitate, although microtheory is at least as objectionable as macroeconomic theory. That we who teach any kind of ought to be as embarrassed with microeconomics' as with macroeconomics is the position I propose to argue here. Before I proceed, let me emphasize that by I do not mean what most working economists, including, I imagine, our most recent Nobel Laureates, Douglas North and Robert Fogel, mean when they use the word theory without further qualification. Generally speaking, we mean by theory the fact-oriented creative mixture of intuition, casual empirical knowledge, and seat-of-the pants logic that is found in virtually all applied and, indeed, in virtually everything called economics before 1950 [20, 284]. By pure I mean the axiomatically-based neowalrasian analysis of Arrow-Debreu [3], Debreu [15], Arrow and Hahn [4] and closely related offshoots that serve as a standard of economic correctness in all modern