An Essay On The Philosophy And Methodology Of Economics

An Essay on the Philosophy and Methodology
of Economics
By
Abdul-Ganiyu Garba
Department of Economics
Ahmadu Bello University
Zaria
Paper Prepared for Presentation at the Special Sessions on Teaching
of Economics during the 43rd
Annual Conference of the Nigerian
Economic Society, at Sheraton Hotel and Towers, Ikeja, August 7-8,
2002

Abdul-Ganiyu Garba An Essay on the Philosophy and Methodology of Economics
2
An Essay on the Philosophy and Methodology of
Economics
Introduction
A person does not have to possess knowledge of mechanics or internal-combustion engines to
successfully drive an automobile. However, car makers have to have knowledge of mechanics
and internal-combustion engines as elements of a set of knowledge they have to have to be
successful. Indirectly therefore, the driver depends on those to whom knowledge of
mechanics and of internal-combustion engines is a necessity. It is reasonable to expect that
the car and, the act of driving it are contingent on knowledge of mechanics and, of internal
combustion engines that car makers have; without the knowledge the car could not exist and
the person could not be driving the car.
The typical economic policy maker in Nigeria is like the driver of the automobile,
policy predictions of economic doctrine the analogy of the car while the economic doctrine is
the analogy of the knowledge required to make a car. It follows therefore, that economic
policy action and economic policy success –in terms of stated goals- are contingent on the
knowledge embodied in the economic doctrines from which policy predictions derive. The
cost of knowledge failure is grave to a society just as a brake failure is to a car driver.
The typical student of economics in a typical Nigerian University learns and
assimilates doctrines of economics and at best, acquires some know how (practical skills).1
Unlike the policy maker who tries to drive the car, the typical graduate of economics hardly
attempts to drive the car. Rather, the typical student uses the proof of ownership of the car –
the B.Sc Economics certificate – to acquire a job that often, does not require the use of the
type of car the student has acquired.2
The situations of economic policy making in Nigeria directly raise epistemological
and ethical questions and indirectly, types of questions speculated by philosophers of science
and metaphysics. Perhaps the most important epistemological question is; is the belief of the
policy maker that the policies predicted by received economic doctrines justified true beliefs?
This in turn raises four related questions that have occupied philosophers of science, social
science and economics. The most fundamental question is; what is a science? The other three
questions are its derivatives. The first is; is economics a science? Second, can economics be a
science? Three, should economics be a science? The situation also raises at least three ethical
questions. The first is, is it prudent to maintain a belief in the policy predictions of economic
doctrines, regardless of experience? Second, is such a belief morally justified?
The situation of the student of economics in the Nigerian University system also
raises epistemological, methodological, ethical and metaphysical questions. The
epistemological questions are the same as that raised by the situation of policy making in
Nigeria although, two additional questions could be posed. First, does the graduate of
economics know how the economy works? Two, can the student practice good economics in
Nigeria? The last question begs four related methodological questions. First, what does good
economic practice consist of? Second, is good economic practice possible? Three, are
students being trained to practice good economics? Four, do graduates of economics do good
economics?
1
The set includes data collection, data analysis, computer skills, writing skills, etc.
2
In most cases, the student packs the car acquired in the university and uses that which the employer believes is
more useful. Sooner than later, the university acquired car fall into disuse.

3
Several metaphysical questions underlie the dominant economic doctrines
(equilibrium theory and general equilibrium theory). The general equilibrium research
program is clearly an example of formal ontology. Similarly, Cartesian dualism has great
influence on equilibrium theory; neutral monism on logical positivism and materialism has
considerable influence on Marxism and its derivatives. Four metaphysical questions are of
critical importance here. The first is, does causal determinism break down at the
microeconomic level? Second, are human choices real or illusory? Third, is economics more
independent of psychology, sociology and political science? Four, if economics is related to
psychology, sociology and political science then, which is most basic?
What is the point of raising all of these questions? The first reason is that several
philosophers have contemplated similar questions and we could learn a great deal from the
products of their speculations. Posing the questions thus allows one to review some of the
philosophical and methodological speculations that have had and continue to have profound
effects on the practice of economics (theorizing, testing, deducing, modeling, sampling, etc)
and on the theories that students learn and assimilate. A review of relevant speculations of
philosophers especially on epistemology, metaphysics, methodology and ethics could make
students desire a deeper understanding of their discipline and by so doing, appreciate its
capacities as well as its limits, the unanswered questions covered up by dominant theories
and, the options open to them. Posing the questions from the situations of Nigerians students
and of Nigerian policy making could make both students and policy makers become
interested in the way the questions are answered. It must be emphasized however that this
essay cannot be a substitute for a course or courses on philosophy and methodology as an
integral part of undergraduate and graduate economic courses; it is an objective of the essay
to make just such a case.
A second reason is rather personal. I was in the situation most students of
economics are and have spent several years being disillusioned with the teaching, practice
and theories of economics. From discussions at several fora, I believe I have company in
many trained economists like I as well as among non-economists. I do not blame my teachers
because of course, they would have to blame their teachers an exercise that could only lead to
an infinite regress. It is obvious that the problem transcends individuals and lies at the core
of the dominant practice of economics. In conducting the research required to write this
paper, I have become more convinced that there is considerable room for improvement in the
training and practice of economics and, in the products of economic practice. I am also
convinced that a greater understanding of philosophical questions is necessary to avoid
ambiguities and circular movements in economic thinking and practice.3
A third reason is that the incentive system embedded in the practice of economics
globally tends to bias against the search for knowledge on how real economies work. Since
the 1950s, following Walras’ Elements of Pure Economics (1874), formal ontology has come
to have a dominating influence on how to do economics and the type of doing economics that
counts. One of the consequences is that students are led to believe that excellence in
mathematics is a key to success in graduate school and winning a Nobel Prize. A survey of
major US Universities by Colander and Kramer (1987) found that more than half believed
3
Keynesian revolution supplanted classical orthodoxy after the Great Depression. However, the loss of
confidence in government in the 1970s, created the conditions for a neoclassical counter-revolution. The
ongoing crisis of governance in corporate America and its adverse effects on investor confidence could lead to
diminish the dominance of the neoclassical counter revolution. While one does not expect that a particular set
of economic theories should maintain dominance in perpetuity, however a situation in which progress appear to
be circular is clearly at variance with progress in the sciences. For instance, it is most unlikely that universal
gravitation of Sir Newton would supplant celestial mechanics. Economics is distinct from physics but, that is
unlikely to be a valid justification for circular movements in economic thinking and practice.

4
that excellence in mathematics is important to success in graduate school while only 3%
believed that “having a thorough knowledge of the economy” was important (quoted in
Hausman, 1994:262). Colander (?) also reported that young faculty staff of leading US
Universities believed that their academic career would be irreparable damaged should they
publish policy oriented papers or books. In Nigeria, similar beliefs express themselves in the
distinction between “pure economics” and “non-pure economics” and, rather dogmatic
beliefs that a pure economist is a more economist than the non-pure economist is. Clearly,
a review of the questions could produce useful insights and lessons that could induce re-
examinations of the foundations of such beliefs. At the least, they could provoke some
economists sufficiently enough to engage in debate and at the very least, could compel at
least a few economists to re-examine the foundations and justifications for their beliefs.
I begin by showing how dominant economic theories (equilibrium and general
equilibrium) are linked to philosophy and methodology. This is important because some
influential economists defend economics against philosophical appraisal of economics
especially, against the epistemological and methodological standards that philosophers of
science demand of economics and from its practitioners.4
I believe this is important because
pure or mathematical economics (equilibrium and general equilibrium theories) has no
independent existence from epistemology, philosophy of science and metaphysics. I believe
Hausman (1994: 263) was right when he asserted that an
“appraisal of economics that draw on epistemological theses are inevitable. For the
very terms in which one describes the practices of economics – theorizing, testing,
deducing, modeling, sampling, and so forth – carry philosophical baggage”
My view is that a theory about deliberative actions of the human being, the
deliberation takes place in the mind, and the being is a part of a society that limits his actions
by moral obligations and law, makes implicit or explicit commitments to views on the
psychological, ethics and social and political philosophy. Therefore, a claim by economic
theorists of deliberative actions that the theory is more basic than psychology, sociology and
political science is a false one. If I am right, then economists can not justifiably make claims
about human behavior that are incompatible with those made by psychology, sociology and
political science.5
For instance, if sociology claims that humans are social animals or
cognitive psychology claim cognitive failures, counterclaims by economics that humans are
individuated or are omniscient could not be validly sustained unless economists justify a
complete isolation of the economic phenomena from psychology, sociology and political
science.6
A clarification of implicit links between economics on one hand and, major
philosophical areas, their questions and the products of philosophic speculations on the other;
is also relevant to the extant policy-making situations in Nigeria and similar countries.
Critical evaluation of the technical, prudence and moral questions with respect to
conventional policy making in developing countries such as Nigeria is relevant because the
experience of Nigeria and similar countries raise ethical questions. I am of course, referring
to the practice where the so called development policies that dominate the policy space in
Nigeria are those deduced from predictions of axiomatic (formal ontological) analysis of
economic phenomena. The ethical questions become more obvious when the links between
4
Hausman (1994:263-269) holds McClowsky as a leading critique.
5 In the physical sciences, the chemistry can not make claims that are incompatible with the claims of physics;
the most basic science.
6
This could have profound methodological implications for how to do good economics.

5
equilibrium and general equilibrium theories, formal ontology, epistemology and philosophy
of science are known.
II. Philosophical Insights and Economics
What is Philosophy?
Philosophers I observe attach great value to etymology that is; the origin of words and Earle’s
Introduction to Philosophy (Mc-Graw Hill, 1992) which I have relied on considerably
actually begins with the etymology of philosophy. According to him, “the word philosophy
two Greek words: philia, love or friendship and sophia, wisdom” such that philosophy is
etymologically speaking means “love of wisdom” where wisdom “is used inclusively to
cover sustained intellectual inquiry in any area.” Earle (1992:3-4) explained that philosophy
is a conceptual and philosophers seek to replace partial with complete conceptual mastery by
means of conceptual analysis.7
Economics concepts like consumer, production, distribution,
exchange, value, scarcity, economic problem, choice, free will, price, market, information,
perfect market and homo economicus or economic man are clear candidates for conceptual
analysis. Conceptual analysis of each of these concepts could be made either in (1) terms of
necessary and sufficient conditions or (2) in terms of criteria.8
Betrand Russell’s A History of Western Philosophy (first published in 1945) provides
insights into philosophy by way of contrast to science and to theology. According to him,
philosophy “is something intermediate between theology and science.” He contended that all
definite knowledge belongs to science and all dogmas belong to theology and that philosophy
occupies the No Man’s Land between science and theology. In effect therefore, philosophic
questions are questions that science cannot answer and those to which the confident answers
of theology have become less convincing. Bertrand Russell’s list of philosophic questions
includes - Is the world divided into mind and matter? What is the mind and what is matter?
Are there really laws of nature? Is there such thing as wisdom, or is what seems so an
ultimate refinement of folly? But as Fig 1 and our discussion of major areas of philosophy
below shows, the philosophic questions cover a broad spectrum of life and the world.
Is Philosophy useful?
The question (is philosophy useful?), is a philosophic question in the sense that “no answer
can be found in the laboratory” and a dogmatic answer may not suffice. Earle does not
provide a general answer to the question. Rather, he discussed the usefulness of some of the
major areas of philosophy. However, it follows from his notion of philosophy as conceptual
rather than factual, that philosophy leads to a complete conceptual mastery. One who
acquires complete conceptual mastery of economic concepts would think with greater clarify
about the economic phenomena the concepts refer to. Take a concept like economic man or
7
Before I read Earle, I overestimated the capacity of a Standard English dictionary as a tool for warding off the
dangers that Philip Dick (U.S. science fiction writer) alluded to when he wrote the following words in the
Introduction to his novel I Hope I Shall Arrive Soon. “The basic tool for the manipulation of reality is the
manipulation of words. If you can control the meaning of words, you can control the people who must use the
words.”
8
Each conceptual analysis is divided into two parts; what is to be analyzed (analysandum e.g. X is a bachelor)
and what does the analyzing (analysans – conditions of necessary and jointly sufficient conditions). Successful
analysis must satisfy three requirements: (1) Its analysandum and its analysans must must mean the same thing,
(2) Its analysandum and its analysans must must be alike in truth-value and (3) The analysans must be clearer
or less misleading than the analysandum.

6
homo economicus. The following is a standard conceptual analysis of economic man in terms
of necessary and sufficient conditions
X is an economic man IFF
(a) X has free will
(b) X has perfect knowledge
(c) X is selfish
(d) X prefers pleasure to pain
(e) X chooses independently
(f) X would choose the most preferred option if that option is available9
X is a name variable: any person’s name can be substituted for X and one could then
test the hypothesis that the individual is an economic man. The conceptual analysis claims
that (1) points (a) – (f) are all necessary conditions for being an economic man and (2) that
they are jointly, sufficient. If this conceptual analysis is valid, one can claim to have a more
complete conceptual mastery of the concept of economic man compared to the analytic, an
economic man is a rational man.10
The conceptual clarification reveals underlying
metaphysical question about the ontology (existence of X) in the concept of economic man:
“does X exist?” Even if X exists, other metaphysical questions arise: “can X choose?” and
“does X suffer from subjective illusions?” It also raises ethical questions – “is selfishness
good?” and “is it right for X to be an isolated ego, calculating his own advantage”? It is
obvious that the analytic X is an economic man which is true by definition, does not offer the
clarity that the conceptual analysis does and I believe, deduction of the range of metaphysical
and ethical implications are clearer from the conceptual analysis than from the analytic.
Should one then argue that a theory that results from the premise X is an economic man is
free of implicit answers on definite metaphysical and ethical questions, one would be wrong.
This is more so, if one constructs the theory axiomatically.
The example of the concept of economic man shows that it is worthwhile to engage in
conceptual analysis of basic economic concepts if one is to think clearly about existing
economic theories, assess the theories or engage in theorizing. Bertrand Russell provides two
justifications for his contention that the time philosophers spend speculating on insoluble
questions are not wasted. The first is what he called the answer of the historian and it goes
like this
“Ever since men became capable of free speculation, their actions, in innumerable
important respects, have depended on theories as to the world and human life, as to
what is good and what is evil. This is as true in the present day as at any former time.
To understand an age or a nation, we must understand its philosophy, and to
understand its philosophy we must ourselves be in some degree philosophers.” (p.xiv)
The second reason was personal to him
“Science tells us what we can know, but what we can know is little, and if we forget
how much we cannot know we become insensitive to many things of great
importance. Theology, on the other hand, induces a dogmatic belief that we have
knowledge where in fact, we have ignorance, and by doing so generates a kind of
impertinent insolence towards the universe. Uncertainty, in the presence of vivid
9
The last two necessary conditions are equivalent to saying that “an isolated ego, calculating his own
advantage” which is a conception of X as a moral agent in an exaggeratedly individualistic way (Earle,
1992:196).
10
Clearly, this begs the question what is rationality?

7
hopes and fears, is painful, but must be endured if we wish to live without the support
of comforting fairy tales. It is not good to forget the questions that philosophy asks, or
to persuade ourselves that we have found indubitable answers to them. To teach how
to live without certainty, and yet without being paralyzed by hesitation, is perhaps the
chief thing that philosophy, in our age, can still do for those who study it. ” (p.xiv)
One could infer two important points that may be relevant to those learning how to do
and those doing economics. The first the possibility exists that economists like other humans
can overestimate what they know about the human behavior. In other words, economic
knowledge is fallible. Second, if what economists can know about human behavior is little, it
makes sense to be on guard against the dangers of insensitivity, dogmatism and insolence.
Furthermore, it would be reasonable to be wary of making knowledge claims prematurely
and, especially to any claim of possessing indubitable knowledge. Other methods of
philosophy such as Methods of Doubt (Cartesian Doubt; Indubitable Belief) and the
Phenomenological Method could be very useful in caging egos which distort assessment of
what can be known, what is known and what is not known.
Major Areas of Philosophy and their Influence on Economics
The types of questions it tries to answer distinguish each major area of philosophy. From
Earle (1992) reveal the following ten major areas
(a) Epistemology: theory of knowledge
(b) Logic: systematic study of all types of arguments
(c) Philosophy of Science
(d) Metaphysics or Ontology
(e) Philosophy of the Mind
(f) Philosophy of Languages
(g) Ethics
(h) Social and Political Philosophy
(i) Philosophy of Religion
(j) Aesthetics
Fig 1 shows some of the key questions each major area (excluding logic) tries to answer.
In metaphysical terms, logic is topic-neutral in the sense that the arguments studied by logic
can be used in all the other areas of philosophy. We have not tried in fig 1 to provide a
general ordering of the major areas of philosophy. However, we have shown that
epistemology is basic relative to philosophy of science and that philosophy of science is basic
relative to its sub-category philosophy of social sciences. In addition, fig 1 shows two very
important relationships:
(a) relations between philosophy of science and metaphysics; and
(b) relations between philosophy of the social sciences on the one hand, and Philosophy
of the Mind, Philosophy of Languages, Ethics, Social and Political Philosophy,
Philosophy of Religion and Aesthetics.

9 8
Epistemology [Theory of Knowledge]
(a) What is knowledge?
(b) How do human beings acquire knowledge?
(Involves analysis of beliefs, truth and justifications)
(a) What explains the success
of natural sciences (physics,
chemistry and biology) in
producing (a) accurate
picture of reality (b)
intellectually satisfying
explanation of a broad range
of natural phenomena?
(b) Why have social sciences
not achieved the success of
the natural sciences?
i. Do social sciences
help us to understand
human behavior?
ii. Is individual human
behavior predictable?
iii. Is statistical
prediction of
aggregate human
behavior possible?
1. Metaphysics or Ontology [ (1) what is there? → contrast between appearance and reality; (2) Does God exist? (3) Do I have a
Soul? Are Angels real? (4) Do abstract objects (numbers, sets, concepts, propositions etc., have existence independent of
human thinking?]
2. Philosophy of the Mind [ (1) what is the nature of the mental? (2) How should we understand terms like intention, desire,
belief, emotion, pleasure and pain? (3) How do intention, desire, belief, emotion, pleasure and pain enter the explanation of
human action?]
3. Philosophy of Languages [(1) How are thought and language related? (2) What makes the sentences we use meaningful? (3)
How many kinds of meanings are there? (4) How do we manage to use bits of reality to refer to the extra-linguistic world? (5)
How much, if any, is our ability to use language innate?]
4. Ethics [(1) What is morality? (2) What is the basis of our classification of actions into morally acceptable, unacceptable and
obligatory? (3) How does morality relate to religion? (4) How does morality relate to legality?]
5. Social and Political Philosophy [(1) How are questions of our personal morality tied to existence in social aggregations – families,
nations? (2) What difference does being a citizen of a state makes? (3) Where do states come from and what is the source of their
authority? (4) Do we – and, if we do, have to obey the laws of the land? (5) When should the laws of the land be changed? (6) what is
the relationship –competition? Cooperation? Indifference? – between a desirable life for an individual and for those around that
person?]
6. Philosophy of Religion [(1) Is religious language meaningful? (2) How do we decide between theism, atheism, and agnosticism? (3)
Can God’s existence be proven or dis-proven? (4) Is religious faith unreasobale? (5) Does the religious picture of the world make
sense? (6) If the religious picture is false is there some other basis of finding human life meaningful? (7) Is the religious picture
compatible with the existence of evil?
7. Aesthetics –includes philosophy of Art – [(1) What is beauty? (2) What makes an object a work of Art? (3) Why are art works so
important? (4) Are judgements about works of art objective or subjective?

Metaphysics commitments of Economics
Consider the following argument
Economic theories embody metaphysical commitments of theoreticians;
11
Therefore, metaphysics is basic to economics
Neoclassical Economics qualifies as a paradigm as conceived by Thomas Khun
(1970). The first two of the four main components of “disciplinary matrices”12
of Thomas
Kuhn (1970) are (1) “symbolic generalizations” and (2) the “metaphysical and heuristic
commitments”. Are the “symbolic generalizations” and the “metaphysical and heuristic
commitments” of neoclassical economics independent of metaphysical speculations? Would
they exist were metaphysical speculations non-existent?
The answer in the case of “metaphysical and heuristic commitments” is obviously no.
As Table 1 shows, the metaphysical and heuristic commitments to homo economicus,
subjective valuation, perfect competition, formal ontology etc. find roots in the products of
metaphysical speculations. It is worth noting that the heuristic commitment of the
neoclassical economics against differentiation of agents reflects emphasis on essential as
opposed to accidental properties of human beings. Such an emphasis is, consistent with the
notion of basicness (distinction between general and specific) and it finds expression in
neoclassical economics in a preference for generalizations from the representative basic
categories of consumer, producer and market.13
It follows therefore, that symbolic
generalizations” of neoclassical economics which results from application of formal ontology
to basic categories and already committed metaphysics and heuristics is not genealogically
independent of metaphysical inquiries (analysis of basic categories and inventory of basic
kinds of things).
It is possible to trace the essential properties of any body of economic thought to
either dualism (the mind/matter problem) or monism (the view that every thing is made of
one fundamental stuff) the two main views in metaphysics. Table 2 shows that the dialectical
materialism of Marx is rooted in the view that everything is made of matter (materialism).
Similarly, Physicalism - view that everything is made of energy, fields, forces, etc, - has very
strong influence on equilibrium and general equilibrium theories and neoclassical growth
theories. Hausman (1994) asserts that equilibrium theory is the fundamental theory of
neoclassical economics. If the assertion is valid, the essential property of neoclassical
economics (equilibrium and stability) is a commitment to the metaphysical “picture of reality
in terms of discrete substances with their static properties”. It is important to mention
however, that we are suggesting that metaphysics is the only influence. It is worth noting that
utilitarianism which came to provide the ethical foundations of neoclassical theory reflected
Jeremy Bentham’s commitment to determinism in psychology as a means to his desire, “a
code of laws – and more generally, a social system – which would automatically make men
virtuous” (Bertrand Russell, 1945:774-5). We will return to this point when we investigate
11
The line represents the deductive inference (Hausman, 1994:289).
12
By disciplinary matrices he meant “the constellation of beliefs, presumptions, heuristics, and basic values that
tie together the theoretical efforts of practitioners of some discipline.”
13
The consumer, producer and market are basic categories in neo-classical theory; particular as well as general
equilibrium theories classify economic agents into consumers and producers and markets into consumer goods
and producer goods markets.

12
the links between Economics and ethics. The main point in the discussion up to this point is
that, each category of economic theory embody identifiable metaphysical commitments.
Table 1: Metaphysical Inquiries, Concepts and Influences on Neo-classical Economics
Metaphysics Key Concepts Relevance to Economics
Analysis of basic
categories
1. Classification: assigning objects to a category or class with
other things of the same kind with other things of the same
kind or type.
2. Basicness as (1) generality refers to fundamental or
primary) and (2) topic neutrality are concepts used in many
subject areas e.g., logic, space, time, cause and effects
• Categories (consumer,
producer, market, etc) are
used in the construction and
evaluation of economic
theories
• Generalization
Inventory of basic
kinds of things
(provides general
answer to questions
like, what exist?
What basic things
exist? Why is one
inventory superior
to others? )
3. Substance (that which can be conceived of as existing by
itself and independent of all else: take a red ball, the ball
substance, red is not))
4. Accident (property, adjective): red is an accident, it can not
exist independently
5. Essence: or nature of X are properties X must have to be
classified as X. It is part of the essence of a human being
(X) to be a mammal but being disabled (an accident) is not
part of the essence of being human being.14
6. Spatiotemporal particulars: entities that occupy certain
location in space and has own history (associated with
materialism and nominalism)
7. Abstract particulars: accidents assumed to occupy space
without qualifying substances
8. Concrete particulars: substances that are a set of abstract
particulars
9. Necessary Being: things that could not not exist [God,
numbers, mathematical items]
10. Contingent Beings: beings that could fail to exist [people,
and all ordinary objects in existence)15
• Metaphysical and Heuristic
commitments to homo
economicus, subjective
valuation, perfect
competition, formal ontology
etc.
• Heuristic commitment against
emotions, irrationality,
mistakes, time, space and
gender differences
Source: Organized from information from Earle (1992) and Hausman (1994)
Table 2: The Influence of Monism on Economic Schools
Monism What is the fundamental stuff? Influences on Economics
Pansychism (idealism,
objective idealism)
• Mind/spirit/psyche (everything that
exists has the character of
mind/spirit/psyche)
• Implies that a rock might be a kind of
mind
• Not influential
Pantheism • God (everything that exist is part of
the being of God
• Not influential
Neutral monism • Neither mind or matter but capable of
being either
• Not influential
Materialism • Body or matter is the fundamental
stuff
• Major influence on Marxism
Physicalism • Sorts of things studied by the physical
sciences (energy, fields, forces, etc)
• Major influence on
equilibrium and general
equilibrium theories
Second, the metaphysical commitment embodied in the theory is one of its essential
characteristics. Three, understanding the metaphysical commitments of a theory is important
to understanding and evaluating the theory. Four, if economic theories embody the
metaphysical commitments of their constructors and if the metaphysical commitments are
essential properties of the theory, it follows logically that an assessment of the underlying
metaphysical view is an integral aspect of the assessment of the theory. This is so, especially
14
A human being (X) is necessarily a mammal but necessarily disabled.
15
Continent beings need metaphysical luck (large-scale factors in the history of the universe)

13
given that the views of philosophers on metaphysical questions as in other major areas of
philosophy are divided. Five, if metaphysical commitments are essential properties of
economic theory and if different schools of economics have divergent metaphysical
commitments economic theory would not be convergent. By implication, the set of economic
theories would contain multiple elements raising the question, which theory is the best? To
help the investigation of the question, turn first to epistemology (theory of knowledge).
Epistemology and Economics Knowledge
The relevant argument is
Epistemology is the theory of knowledge;
Economics claims to produce knowledge;
Therefore, epistemology is basic to economics
If the premises are true, the deductive inference suggests that epistemological insights
could be useful in the assessment of competing economic theories. Earle (1992: 44) shows
that the concept of knowledge has three different considerations:
(a) the knower (X ) and what he believes (p);
(b) what is actually true (truth of p); and
(c) justifications for belief of knower (or would be knower).
The three considerations imply that X (knower) has knowledge when X believes that p (say
consumers choose the most preferred option if it is available) is true, p is actually true, and X is
justified in believing that p is true. This is stated formally in Earle (p.22) as:
X knows that p (consumers choose the most preferred option if it is available) IFF
(a) X believes that p;
(b) it is true that p; and
(c) X is justified in believing that p.
Three clarifications are justified. First, each of (a) – (c) is a necessary condition. Second,
together, they constitute sufficient condition for knowledge that consumers choose the most
preferred option if it is available. Thus, knowledge is justified true belief. Three, knowing that
is, propositional knowledge and p is the propositional variable. In principle, a formal
ontological economic theory would comprise a set of propositional variables connected by
logical inference. The truth of the propositional variables and, the logical consistency are
necessary for knowing that.
X could be a typical student in a Nigerian University or a policy maker. The student and
the policy maker desire knowledge although, their reasons may differ. The student may desire
knowledge to be an effective professional economist while the policy maker may desire
knowledge for planning and action. The conceptual analysis of knowledge indicates that
neither the student nor policy maker would know that p if p is false, X is not justified in
believing that p, or both (see Table 3). The conceptual analysis of knowledge shows that the
Nigerian student, teacher or policy maker who believes that p (economic theory) would not
have “economic knowledge” regardless of the intensity of belief unless p is true and the
Nigerian student, teacher and policy maker is justified in believing that p. If X (the Nigerian

14
student, teacher or policy maker) says “I know that p” and p is false, X makes two mistakes:
(1) that p is true when it is false and (2) overestimates his knowledge. If X has confidence in
p, X could become dogmatic about p and adopt a defensive posture towards evidence
indicating that p is false. As we shall show, believers in neoclassical theories tend to resist
sometimes “violently”, assessment that the set of core p of their theories is false logically or
factually.16
Therefore, the Nigerian student, teacher and policy makers who think they know
how the Nigerian economy works because they believe in neoclassical theory or any other
theory open themselves to three mutually re-enforcing errors:
(a) confusion of believe in (confidence) for know that,
(b) the theory is false, and
(c) overestimation of their inventory of knowledge.
Table 3: When X has knowledge and when X does not have knowledge
When X knows that p When X does not know that p
X believes that p; it is
true that p; and X is
justified in believing that
p.
X believes that p; p is false; and X is not justified in believing that p.
X believes that p; p is true; but X is not justified in believing that p.
X believes that p; p is false; but X is justified in believing that
p.
Since the 17th
Century, the physical sciences (physics, chemistry and biology) have
been very successful producing (a) accurate picture of reality (b) intellectually satisfying
explanation of a broad range of natural phenomena? Economics does not have the record of
the sciences and neither has it advanced progressively as the physical sciences have done.
The record of economics is probably worse in the area of development economics and
“failures” indicated in Table 4 do not help the case of economics when placed along side the
success of the physical sciences. At the very least, economic practice is not as generally
beneficial as the successes of science. That dominant views on development are changing
while the source of knowledge and, the class of bearers of the burden of failures remains
relatively fixed raises some of the scientific and ethical questions we posed in the
introduction. Our first concern here, is about the science and our judgement on the question
requires further insights from philosophy of science, philosophy of the social sciences,
philosophy of the mind, ethics and social and political philosophy.
Table 4: Record of Development Economics
Period Dominant
Development View
Source of Knowledge who paid or pays the cost?
1950s and
1960s
Correcting market
failure and
engineering growth
Neoclassical theory, welfare economics,
Harrod Domar growth model, Vicious cycle
of poverty models, etc and mistrust of
markets
• Population in
developing countries
1970s Getting prices right Neoclassical theory and mistrust of the state • Population in
1980s Getting policies
right
Neoclassical theory and mistrust of state • Population in
1990s Getting institutions
right
New Political Economy, Neoclassical theory
and mistrust of state
• Population in
16
Richard Lester in the early 1940s conducted sample studies of firms to test a core neoclassical proposition that
firms maximize profits. His results contradicted the proposition eliciting “angry responses (esp. from Machlup
1946, 1947; Stigler 1947), partly because everybody knew he was right” (Hausman, 1994:159).

15
Philosophy of Science
Epistemological questions
Philosophy of science explores two main questions. First, can humans possess knowledge?
Second, what is the source of knowledge? If one agrees with the global skeptics, then one
would hold the view that humans lack knowledge and reject all economic theories. But then,
this would raise the obvious question, how did one know that humans lack knowledge?
However, if one holds the view that human lack knowledge in particular areas, then
economics is a likely candidate considering doubts about the social sciences.
Some students, teachers and policy makers in Nigeria believe that western economists are
the source of knowledge on how economies work. The first major problem with this type of
belief is that assessment of competing theories constructed by western economists cannot be
objective; all have equal claim of being true. Consequently, the choice of a western theory to
believe in would be subjective or depend on which theory happens to be the dominant in the
west. A second problem has to do with the logical implications of the belief; non-westerners
can not be the source of knowledge on how any economy works. To use the analogy of the
car, the students, teachers and policy maker could only aspire to be drivers; they can not be
makers of cars.
Insights from philosophy of science indicate that the belief that western economists are
the source of knowledge on how economies work is not a justified true belief. The contention
among philosophers who speculated on the question what is the source of knowledge is not
which nationalities, races or civilizations can acquire knowledge. Rather the debate is
whether the mind, the senses or both are the source of knowledge.17
If one commits to the
metaphysics of dualism, then one must hold that every human being has a mind and a body.
Similarly, if one commits to monism especially materialism, then one must hold that every
human being is a body. If all knowledge or all important knowledge comes from reason or
intellect as the rationalist hold, then every human being can acquire knowledge. Similarly, if
sense experience is the only (or at least the most important) source of knowledge as
empiricists hold, every human being can acquire knowledge. Finally, if as Earle (1994) holds,
“any realistic account of human knowledge shows reason and sense experience in intimate
cooperation”, then every human being can acquire knowledge through an intimate
cooperation between reason and sense experience. It is obvious that a belief that some
accidental attributes of human beings are the source of knowledge is inconsistent with the
views of philosophers.
The notion of “pure economics” is not original; scientists had distinguished “pure
science” from “applied science”. According to Earle (1994), pure science aim to create new
knowledge for its sake while applied science aims at “practical/technical and engineering
uses of knowledge.” The adjective pure is not original to science but to mathematics which
rationalists such as Plato and Descartes hold mathematics to be the best form of human
knowledge. It is therefore, not surprising that great rationalists were mathematicians. It is also
not accidental that leading pure economists (Cournot, Jevons, Walras, Barone, Marshalls,
Pareto, Edgeworth, etc) were also, mathematicians.
Science and Scientific Theories
We asked the question what is a science? The word science derives from the Latin word
scienta meaning knowledge. Its history indicates that science had been used “to cover every
sort of knowledge.” In contemporary times however, it is “regarded as a family-resemblance
concept – a concept that applies by virtue of many overlapping areas of similarity” (Earle,
17
The debate itself is linked directly to ontological questions about an autonomous existence of the mind.

16
1994:59). It is in this sense that we have the physical sciences and the human sciences.
Science is also currently viewed as a changing body of human practice (the things that
scientists do), a practice that has become more institutionalized and which has not a scientific
method but, “many methods, procedures and techniques existing at every level of specificity
and detail.”
The essential property of science however, is the construction of scientific theories. This
begs the question what is a scientific theory? Views of what constitute a scientific theory are
divided and concepts such as explanation, causation, prediction, confirmation, verification
and falsification are at the core of the contest of ideas.
The traditional view of science dating back to Aristotle is that science inquires into the
causes of phenomena. In effect therefore, a scientific theory explains the causes of a physical
phenomena. Although, theories vary, the dominant view is that a theory contains a specified
set of general principles from which derives an explanation of a range of phenomena. An
explanation removes the “why” question, puzzlement and provides understanding (Hausman,
1994, Achinstein, 1983, van Fraassen, 1980 and Bromberger, 1966). As Salmon (1985)
asserted, explanations (a) show that the phenomenon to be explained was to have been
expected, (b) show that the phenomenon explained was necessary and (c) reveal the causes
of the explanation to be explained.18
The phrase causal determinism captures the view that a
scientific theory should be able to show that given initial conditions, all the laws of nature,
there is only one possible outcome.
Hempel (1965) developed two models of explanation: (1) deductive-nomological and (2)
inductive-statistical. The deductive-nomological model is an extension of the traditional
view of scientific explanations as involving causal determinism. The schematic form of
deductive-nomological model is as follows
True statements of initial conditions
Laws
Statement of what is to be explained
The schema illustrates the position that the statement of what is to be explained in a
deductive-nomological model is deduced from true statements of initial condition and laws
(nominal necessities). To have truly explained phenomena from the viewpoint of deductive-
nomological model, one must be able to deduce it from a set of true statements. The
implication as Hausman (1994:289) points out is that one cannot give a good explanation if
the statements are not true regardless of one’s belief that the statements are true and the
other conditions are satisfied. It is important to note that deductive-nomological model meet
epistemic standard but it is limited to non-statistical explanations.
In contrast to the deductive-nomological model, an inductive-statistical explanation is
not epistemic: evidence not truth is the basis for belief that an explanation has been offered.
As the following case illustrates, its not being epistemic is not the only weakness; it requires
a leap of faith as the following inductive argument illustrates
All observed Northern Nigerians are Hausa
Therefore, all Northern Nigerians are Hausa
18
Quoted from Hausman (1994:288).

17
The statement all Northerners are Hausa is false because the inductive inference is
based on the belief that the evidence (all observed Northerners are Hausa) is generally true. It
is this type of weaknesses that rationalist use to distrust the senses as a source of substantial
knowledge. Two remedies have been suggested. First, is ensuring a fair or representative
sample. A fair and representative sample of Northern Nigerian would show that all Northern
Nigerians are not Hausa. The second remedy is to discover a nomic regularity (law) that
supports empirical observations.
Earlier empiricists such as Hume, hold a view of science that emphasizes empirical
causation or empirical correlation and the belief that explanation has no place in scientific
theory.19
The earlier positivists reject causation because as they argued, evidence cannot
support statements of the form A caused B; therefore, causation is not needed in science.
Therefore, instead of A caused B, it should be Property A and property B are empirically
correlated.
Early logical empiricist attempt to explain “even the necessary truths of logic and
mathematics as generalizations from experience.” However, the more contemporary logical
positivism consist of
(a) precise formulation of central philosophical notions such as criterion of cognitive
significance or the distinction between analytic and synthetic statements20
;
(b) precise interpretation of scientific notions of theory, explanation, confirmation21
, etc.;
and
(c) attempts to show that significant scientific work was consistent with positivist
conceptual analysis or to reveal the needs for changes in these conceptual analysis.22
Assessment of Theories and Scientific Progress
It is “generally regarded as a criterion of good science” to be predictive.” In all the major
views of science, prediction is the second element (to explanation or empirical correlation).
Predictive success however, varies from science to science. A theory that claims to be
scientific but lacks testable predictions hence, can’t be tested is worthless (Earle, 1994:65). It
was first believed that theories could be confirmed or not confirmed by observation and
experiments. When the evidence from observation and experiments confirms a theory, it only
means that the evidence has not falsified the theory. However, that the evidence has not
falsified a theory does not mean that the theory has been verified. Confirmation also
generates the confirmation or ravens paradox.23
Karl Popper offered simple criteria for identifying a science and, a pseudo-science that
avoids the confirmation or raven paradox. According to Popper, scientific theories cannot are
not subject to empirical verification or confirmation but, they are subject to falsification.
According to Popper, any theory that eventuates in fasifiable predictions is a scientific theory
while any theories whose predictions are not falsifiable are pseudo sciences. He advanced
the following argument to support his view that Marxism and Freudian psychoanalysis are
pseudo sciences.
19
The is consistent with the view of empiricists that sense experience is the only source of substantial
knowledge.
20
Hausman quotes (Carnap 1936, 1937, Hempel 1965, p.101-2).
21
Hausman quotes (Hempel 1965, p.3-46, 173-228, 245-90, 331-496).
22
Hausman quotes (Hempel 1965, p.231-44, 297-496).
23
Earle’s (1994) account of the raven paradox indicates that the logical paradox of the same evidence not
supporting two logically equivalent generalizations: “all ravens are black” and “all nonblack things are non
ravens”. A white cow is both a non-black thing and a non-raven; a white cow thus supports the statement “all
nonblack things are noravens. However, the existence of white cow does not confirm that all ravens are black.
The appearance of a white raven would falsify the statement all ravens are black.

18
Karl Popper identified “critical attitude” of scientists are critical to scientific progress. By
critical attitude he meant scientists advance bold conjectures, subject the conjectures to harsh
tests, reject and abandon those that fail the tests without excuses and advance and test new
ones. The implications of Popper for rejection of any theory that is falsified was challenged
by several philosophers. Thomas Kuhn (1970) for instance argued that
“no theory ever solves all the puzzles that it confronts at any given time; nor are the solutions
already achieved often perfect. On the contrary, it is just the incompleteness and imperfection
of the existing data-theory fit that, at any time, define many of the puzzles that characterize
normal science. If any and every failure to fit were grounds for theory rejection, all theories
ought to be rejected at all times” (Kuhn, 1970, 146 quoted in Hausman, 1994:85).
Similarly, Earle (1992:61) asserted that
“At any given time in a given science, there are likely to be promising approaches, reasonable
conjectures, experiments likely to produce interesting result: none of these however, can
provide a failure proof recipe for successful work.”
Kuhn (1970) and Lakatos shifted focus from relations between theory and observation
to relations between theories. Kuhn (1970) challenged the extant view that scientist test
theories a view generally accepted by positivist, logical positivists and Karl Popper. In
contrast, Kuhn argues that in a “normal science”, scientists do not test theories; they solve
puzzles. Kuhn used the concepts paradigm and disciplinary matrices to distinguish classes of
theoretical activities. Each paradigm is distinguishable by its “symbolic generalizations,
metaphysical and heuristic commitments., values and exemplars. We have shown how the
“symbolic generalizations, metaphysical and heuristic commitments of economists connect
their theories to metaphysics. In Kuhn’s system, symbolic generalizations are the core of a
theory because they are its fundamental laws while the metaphysical and heuristic
commitments “set the standard for acceptable answers to questions.” Unlike, Popper who
argued that falsifiers or anomalies should cause theories to be rejected, in Kuhn’s system,
symbolic generalizations are not malleable paradigms. They also, explain why theories are
not rejected until a scientific revolution occurs. The values represent the rules of the
cognitive game and includes commitment to honesty, consistency, respect for data,
simplicity, plausibility, precision, problem solving” etc while exemplars indicates strong
influence of successful or dominant practices on practitioners.
Lakatos (1970, 1974, 1976, 1978, etc) introduced the concept of research program
which refers to a set of theories connected by heuristics and a common theoretical core. The
hard core of Lakatos is actually, some combination of the symbolic generalization and
metaphysical commitment and heuristic of Kuhn. For instance, the hard core consists of
fundamental laws and metaphysical presupposition. Heuristics in Lakatos scheme are
negative (rules that forbid those in research program from tinkering with the core) and
positive (instructions about how to use the hard core). The latter guides the formation of
initial testable empirical model, and directs the improvement of theories to deal with
anomalies.
Both Kuhn and Lakatos express the increasingly institutional character of science and
many cognitive enterprises. The idea of negative heuristics, which instructs scientists not to
question hard core of their research programs, is more likely to promote dogmatism than
scientific progress. Similarly, the notion of values and exemplars may be in conflict in an
institutionalized research program especially when the personal desires of leading economies
is tied the hard core and the predictions of their theories. Lakatos in playing down the role of
what Kuhn termed values while emphasizing negative heuristics may promote subjectivity
more than objectivity.

19
Philosophy of the Social Sciences
Philosophers have contemplated two questions. First, can humans study themselves? Second,
are economics, sociology, anthropology, psychology sciences or pseudo-sciences? Doubts
about the possibility of social science and whether social sciences are pseudo sciences rests
on the free will problem which is essentially a metaphysical problem. The idea of free will or
choice (suggests that an alternative was available) is in conflict with the idea of a causal
explanation (which shows why something had to happen). As could be recalled, the
requirements of science in terms theory – observation relations is first, the construction of a
theory that explain some domain of reality and second, has testable predictions. If humans
have free will, they have real alternatives at any given point (t). Therefore, action at time t+1,
t+2 or later is not determinate. There are two views on how to resolve the conflict. One,
accept the idea that free will is an illusion (that is, a real alternative did not exist).
Alternatively, admit choice but deny that choice requires alternatives in any way that would
violate causal determinism. However, Earle (1992) suggests that
“There seems to be no well-established consensus among philosophers about how to reconcile
explanation and choice, or ––if irreconcilable–– about which one should be given up.” P.74
Philosophy of the mind
Consideration of ethics and political philosophy is important because the object of economics
is the human being, a spatiotemoral particular – an entity that occupies certain location in
space and has own history. Philosophy of the mind speculates on several questions: can
physical sciences study the mind and can physical science provide complete knowledge about
the mind. Philosophers of the mind hold that the mind is autonomous. Therefore, even if one
believes that the mind can be studied by the physical science, “subjectivity have its own laws
and that we do better predicting behavior on the basis of beliefs and desires than on the basis
of brain states or anything else we may learn from neurophysiology.”
Psychoanalytic theorizing have considered topics like the unconscious, self-deception,
motivation, rationality (which philosophers consider to be the essence of the mind, cognitive
psychology. The human being is the object of study in economics. It is hard to see how one
can fully explain the choices of human beings if one were to shut-out insights provided by
say the notion of intentionality which has to do with the ability of human mind to form
representation and misrepresentations of the world. If economic theorizing involves the use
of the mind, its ability to represent or misrepresent reality would be a key determinant of the
truth-value in economic theory and, in the empirical testing of economic theories. Cognitive
psychology – study of individuals as information processing systems – in recent years have
provided some insights into the choosing behaviors that seemed anomalous from the
viewpoint of rational choice models.24
The human mind is central to epistemology,
metaphysics, science and all other aspect of human activity. Therefore, if on going work in
cognitive psychology succeeds in developing a true model of the mind, it is hard to see how
any social science would have symbolic generalizations ala Kuhn or a hard core ala Lakatos
that are not compatible with the claims of cognitive psychology. The argument being made
presumes that the science of the mind precedes the science of choice because most human
action are results of deliberation.
24
Studies by Kerneman and Tversky have been particularly influential.

20
Ethics and social and political philosophy
Each living human being is a citizen of a state, lives in a state and associates with
other human beings on the basis of love, affection, and loyalty. Moral questions arise from
human actions; theories of morality help to clarify moral statements while deontological and
consequential approaches investigate moral obligations and the consequences of human
actions respectively. A hard core of an economic theory may embody commitments against
all forms of ethical insights as important to knowledge of understanding human behavior
however, the commitment does not amount to solid science if ethical issues in reality have
significant effects on the actions of human beings. Ethics and social and political philosophy
indicates that “human behavior is motivated by both short term and long term needs and
desires, and by a great variety of projects, plans and goals.” Further, that human behavior is
constrained by “two imperfectly overlapping rules: morality and rule of law.”
Insights from ethics lead to the conclusion that notwithstanding the commitment of
neoclassical theory against regarding aspects of human social life such as emotion,
intentionality, mistakes, moral obligation, obligations to the state and so on, neoclassical
economics is not independent of ethics. In Table 5, it is observable that utility derives from
utilitarianism. Utilitarianism is of course, the main form of consequentialism - the view that
“the only satisfactory way to think of morality is to think of the consequences of moral acts
and moral rules.”
It is important to point out that in ruling out social aspects of an agents life,
neoclassical economics has not avoided moral questions; it has only chosen to focus only on
one type of moral questions: the technical. As can be observed from Table 6, the technical
question “what is the best or most efficient way to do X?” excludes the prudence question
(how would X affect long-term, all round self-interest or wellbeing of agent Y?) and the
moral question “is X right or wrong?”. The danger for the Nigerian student, policy maker or
even teacher that believes that adequate knowledge is embodied in neoclassical theory is not
recognizing that what is efficient at time t, need not be prudent or moral. This may partly
explain why, the failures of development economics in terms of (a) development outcomes in
developing countries and (b) errors in knowledge has not generated learning from consumers
of the “knowledge products”.
Table 5 shows other influences of ethics on economics. The concept of agent applied
to the two basic categories of the model - consumers and producers - derives from ethics.
Agent is “the preferred term in ethics for the person acting.” The person of course, does not
act without prior thinking through that is, without deliberation. Although, the assumption that
the agent is an economic man seem to rule out the need for deliberation or side tracks
intentionality even though, ironically, the choice of hard core like economic man, is a product
of intentionality.25
The Greatest Happiness Principle (an ethical principle) is fundamental to the premise
that agents optimize pleasure (utility and profit) and minimization of pains (losses). The idea
that humans consider each action one by one is also inked to the additivity of utility as rule
utilitarianism is to market. Insights from ethics indicate that consequentialism involves
prediction. This is because thinking about acts and rules come before the consequences.
Further that consequences of certain rules can be complex and mixed and simple
representations could actually be misrepresentations.
25
Intentionality in philosophy of the mind refers to ability of the mind to form representations or
misrepresentation of the world. The idea of an economic man, is a product of mental activity that is, subject to
representational error because the intentional content and reality may diverge. The issue is not that the thinker
does not have liberty to conceive abstract particulars as a device for theorizing but, the epistemic consequences.

21
The act utilitarianism – belief than mankind judge each action independently – accounts for
the demarcation of boundaries of political economics by J. S. Mills in “On the Definition of
Political Economy and the Methods of Investigation Appropriate to it”, published in 1836. If
act utilitarianism and rule utilitarianism were not the foundation of J. S. Mill’s heuristic
commitment, it is unlikely that he would have limited the domain of political economy to a
study of mankind as spatiotemporal beings solely concerned with acquiring and consuming
wealth.
Table 5: Influence of Consequentialism on Economics
Type of Consequentialism Elucidation Influence on Economic
Utilitarianism
(Jeremy Bentham)
• To decide the moral status of an
action, we predict its future
consequences
• Actions that produce/reduce pleasure
or pain are relevant
• An action is morally permissible if
estimated weighted average of
pleasure and pain reduction exceed
pain and pleasure-reduction
• Bentham called the calculation
felicific calculus; from Latin felix
meaning happy.
• The concept of utility derives
from utilitarianism
• Focus of neoclassical theory
on actions of agents and the
implicit notion that
praiseworthiness or
blameworthiness of agents is a
less fundamental matter
The Greatest Happiness
Principle
• what counts is the greatest happiness
of the greatest number of people;
ownership of pleasure and pains is
morally irrelevant
• View of agents as optimizers
or and as representative: from
view that human beings are
equal
• Representativeness is
fundamental to additivity
Act Utilitarianism • Humans think of actions one by one
and considers the consequences of
each action
• Additivity of utility functions
Rule Utilitarianism • Considers questions dealing with the
consequences of adopting certain rules
like are rules worth having? Should we
obey them, encourage others to do the
same and teach children to obey them?
Would human life be improved by
adopting new laws?
• Contentions include:
Absolute/Defeasible rules;
defeasibility/Act Utilitarianism; Fact
and values
• Principle of free market
Utilitarian Puzzle • Without a common measure of desire,
utilitarian calculation is non-
operational
• A’s desires are stronger than B’s.
Should A get more of what satisfies
his desires than B gets what satisfies
his?
• if every man always pursues his
pleasure, how are we to secure that the
legislator shall pursue the pleasure of
mankind in general?
• Inter-personal comparisons of
utility
Neoclassical economies (equilibrium theory and general equilibrium theory) provide
no knowledge about government behavior; the state is totally outside its domain. Attempts

22
have been made to extend neoclassical thinking to government. Arrows Impossibility
Theorem showed that the view of the state as an optimizer of social welfare was not
compatible with competitive equilibrium. The more elegant public choice theories and the
new political economy all simply try to extend theories of atomistic behavior to the public
space. However, science has shown that “we can rarely deduce the properties of more
complex items from the property of their constituents. For example, the properties of water –
fluidity, liquidity- are nothing like the properties of hydrogen and oxygen.” The Hessenberg
Uncertainty principle - “causal necessity does not apply to the very minute structure of the
physical world (the level of reality studied by quantum physics)” imply that attempts to
understand the whole from its components are not fruitful in several cases. For instance, no
knowledge would be gained by trying to understand the properties of water from those of
hydrogen and oxygen. Besides, the state and the individual are distinct spatiotemporal
particulars and understanding one is not sufficient to understand the other. In countries like
Nigeria, where the state is dominant, not understanding the state leads to a common view that
the policy design is good but the problem is implementation.
Table 6: Moral Questions and Economics
Type of Question Example Relation to Economics
Technical What is the best or most
efficient way to do X?
• This is the basic question of consumer theory and
theory of the firm where X is the desire or motive of
the agent and the way is the relevant optimal choice
Prudential How would X affect long-
term, all round self-interest
or wellbeing of agent Y?
• These types of questions are not asked because
growth models that deal with the long term do not
concern itself with interest of agents
Moral Is X right or wrong? • Pure Economics does not ask moral questions
III. Methodology of Economics
In a review of the methodology of economics one must be clear about the object of
the study, the essence of the study, the aims of economics, how economists approach their
problematic and the domain they have set for themselves. In a general overview, we deal with
the object of economic study, the aims of economics, how economists approach their
problematic and the domain they have set for themselves. In addition, we highlight the
evolution in economics. In the second part we review the key methodological shifts in
economics from its days as political economy to its transition to economics and, pure
economics.
Overview of Economics
Economics is a dynamic area of study and has evolved from its beginning in Aristotles
thinking through the era of the scholastics, the mercantilist era, industrial revolution, Great
Depression era, the Stagflation of the 1970s, the debt crisis of the 1980s and the currency
crisis of the 1990s. Therefore, the overview would simply attempt through review of
influential publications of some era to derive a picture of the object, goals and domain of
economics.
Classical Era
Until the marginalist revolution triggered by William Stanley Jenvons, Carl Menger and
Leone Walras between 1871-4, economics or political economics as it was then known was
considered by John Stuart Mills as a branch of the science of speculative politics. In “On the

23
Definition of Political Economy and the Methods of Investigation Appropriate to it”,
published in 1836, John Stuart Mills outlined the boundaries of political economics
“What is now commonly understood by the term “Political Economy” is not the science of
speculative politics, but a branch of that science. It does not treat of the whole of man’s nature
as modified by the social state, nor of the whole conduct of man in society. It is concerned
with him solely as a being who desires to possess wealth, and who is capable of judging of the
comparative efficacy of means for obtaining that end.”
Although, John S. Mills limited the domain of political economy to the human being whose
sole preoccupation was acquiring and using wealth, he recognized that human activities
involved more than acquiring and using wealth.
“Not that any political economist was ever so absurd as to suppose that mankind are really
thus constituted, but because this is the mode in which science must necessarily proceed.”
John Mills stated very clearly that his demarcation of political economics was predetermined
by the demands of science. It seems therefore, that ensuring that political economics was
scientific was more relevant to making it useful for policy purposes. We might add that his
commitment to specific ethical and social and political philosophical views were fundamental
and is implicit in his “supposition that man is a being who is determined, by necessity of his
nature, to prefer greater portions of wealth to a smaller in all cases without exception” than
“his version to labour, and desire of the present enjoyment of costly indulgences.” The ethical
commitment of Mills is also implicit in the setting for accumulation and use of wealth
“Political economy considers mankind as occupied solely in acquiring and consuming wealth;
and aims at showing what is the course of action into which mankind, living in a state of
society, would be impelled, if that motive, except in the degree in which it is checked by the
two perpetual counter-motives above adverted to, were absolute ruler of all their actions.
Under the influence of this desire, it shows mankind accumulating wealth, and employing that
wealth in production of other wealth; sanctioning by mutual agreement the institution of
property; establishing laws to prevent individuals from encroaching upon the property of
others by force or fraud; adopting various contrivances for increasing the productiveness of
labour; settling the division of the product by agreement, under the influence of competition
(competition itself being governed by certain laws, which laws are therefore the ultimate
regulators of the division of the produce); and employing certain expedients (as money, credit
etc) to facilitate the distribution.”
Post-Classical Era
William Stanley Jevons’ The Theory of Political Economy was the only one of the
three books that launched the marginalist revolution which had the word political as adjective
of economics. Menger titled his book Principles of Economics and Walras titled his
Elements of Pure Economics. The era of pure economics that Augustin Cournot
unsuccessfully attempted to launched in 1838 with Researches into the Mathematical
Principles of the Theory of Wealth was by the time Lord Robbins wrote his classic The
Nature and Significance of Economic Science (1932) was well under way. Obviously, the
domain of economics is a subset of that of political economics. This is because political
economics as conceived by Classicals such as Mills include all what is currently within the
domain of economics and much more.
Probably the most quoted statement in Lord Robbins’s classic The Nature and
Significance of Economic Science (1932) is his definition of economics as “the science which
studies human behavior as a relationship between ends and scarce means which have
alternative uses.” In Lord Robbins’ definition, human behavior is the object of study.

24
However, he specified the boundary that interests economists that is, where human behavior
has an economic aspect. In the book, Lord Robbins specified clearly when an economic
phenomena arises and its conceptual analysis is as follows
A situation X is an economic phenomena IFF
(a) resources are scarce relative to needs/wants
(b) the resources have alternative uses
(c) the alternative uses of resources are of different degrees of importance
Each occurrence is a necessary condition and as a package, the three constitute
sufficient conditions. The significance of the last condition is often over looked. However, an
economic problem in Lord Robbin’s view would not arise if alternatives were equally valued;
equal valuation makes choice unnecessary
“But when time and the means for achieving the ends are limited and capable of alternative
application, and the ends are capable of being distinguished in order of importance, then
behavior necessarily assumes the form of choice. Every act, which involves time and scarce
means for the achievement of one end and involves the relinquishment of their use for the
achievement of another. It has an economic aspect.” (Robbins, 1935, reprinted in Hausman,
1994:84).
Contemporary
At the beginning of the 21th
Century, the boundaries of economics are not hard edged
and several specialized and overlapping bodies of studies have developed in the last fifty
years. New Classical Macroeconomics, New Political Economy, New-Keynesian Economics,
Development Economics, Institutional Economics, Evolutionary Economics, Mathematical
Economics, Econometrics, Game Theory, etc are a few of the many branches of economics
that are thriving with different degrees of success. The frontier of economics is not only softt-
edged, it is also, a moving target as the New Keynesians N. Gregory Mankiw and David
Romer rightly observed in New Keynesian Economics, Vol. 1 (1995).
The best-known and most influential economic theories however, are “contemporary
microeconomics and general equilibrium theory” (Hausman, 1994:1) and their set of
problematic and methodology has remained largely stable. What is more, after the set back of
the Great Depression era, neoclassical economics has become even more influential
especially from the 1980s. In fact, New Classical Macroeconomics, New Political Economy,
New-Keynesian Economics, Development Economics, Institutional Economics are either
inspired by or reactions against resurgent neoclassical economics. Much of the discourse on
methodology will center therefore, on the methodology of neoclassical economics.
Methodology of Economics
Conceptual Analysis
A clear idea about what methodology of economics is, is a useful starting point. This
is because readers can know exactly what one means and the context in which one is using
methodology of economics in the rest of the section. Instead of a definition, the idea of
methodology of economics could be better conveyed by identifying the range of questions
that fall within the rubric of methodology of economics. The range of questions include:
“what are the goals of economic?”, “How do economics theorize?”, “Is economics a

25
science?” and so on. The following issues an key elements of a methodological investigation
of economics: (a) appraisal of economic theorizing and theories; (b) distinguishing good
theorizing and good theories from bad theorizing and bad theories, (c) investigation of the
structure of microeconomics and general equilibrium theory, strategy and heuristics that
guide contemporary work, and (d) goals of economic theorizing and relations between
economic theory and policy (Huasman, 1994).
Goals of Economics
The distinction made between pure (formal) economics and non-formal economics is not
simply the usual distinction between pure science and applied where the former is aimed at
creation of new knowledge while the latter is biased towards knowledge that has practical
applications. This is because the distinction in economics is mainly in terms of degree of
formal ontology. Therefore, economics could be grouped into three: pure, applied and others
where others refer to all other research programs that are not as formal as neoclassical
economics.
Gerard Debreu is one of the exponents of pure economics and in “Axiomtization of
Economic Theory” the goals of pure economics are deducible from the following
“Among the many consequences of the transformation in methodology that the field of
economic theory underwent in the recent past, the clarity of expression that it made possible is
perhaps one of the greatest gains that it has yielded. The very definition of an economic
concept is usually subject to substantial margins of ambiguity. An axiomatized theory
substitutes for an economic concept a mathematical object that is subject to entirely definite
rules of reasoning. No doubt the economic interpretation of the primitive mathematical objects
of the theory is free, and this is indeed one of the sources of the powers of the axiomatic
method. As an illustration of this freedom of interpretation, consider the concept of an
economic commodity which was at first understood to be a good or service with well defined
physical characteristics, such as steel of a certain type. It was later perceived that by including
in the definition of a commodity the date and the location at which it is available, one could
introduce time and space in economic theory without any change in its formal structure by a
simple reinterpretation of a primitive concept. A still richer interpretation was proposed in
1953 by Kenneth Arrow in his study of any economy whose agents are faced with uncertainty
about their future environment. In the language of the statistician, we say that this uncertainty
is due to unknown choice that nature would make from the set of possible states of the world.
The definition of economic commodity now specifies in addition to its physical
characteristics, its date and its location, the state of the world in which it will be available.
Here again the unaltered formal theory is extended to cover a wide new range of economic
phenomena by a novel interpretation of the same primitive concept.
The axiomatization of a certain part of economic theory also requires a full specification of the
assumptions under which any one of its conclusions is asserted. Thereby it protects its
practitioners against one of the common dangers of informal economic theory where
conclusions that are valid under a set of assumptions that is not made entirely explicit, are
sometimes applied to situations in which some of those assumptions are violated. More
positively, the complete specification of assumptions, the exact statements of conclusions, and
the rigor of the deductions of an axiomatized study provide a secure foundation on which the
construction of economic theory can proceed. Moreover the possibility for research workers to
be able to use directly the results of their predecessors is a decisive factor in the rapid
development of a scientific field. . . The recent effort towards the axiomatization of economic
theory therefore, seems to fully support Francis Bacon assertion . . . truth emerges sooner from
errors than from confusion”.

26
It would thus appear that the main aim of pure economics is to provide a secure
foundation for the development of economics as a science. John Stuart Mills (1836) had
argued that reasoning from assumed hypothesis “is the only method by which truth can
possibly be attained in any department of the social science” and by truth he meant both
logical and concrete truths.26
The essence of pure economics is securing the reputation of
economics as a science by ensuring that economic theories are general (“universal in contrast
to ad hoc specific or particular”) and simple (“pure in contrast to compound or complex”). It
is assumed that progress of economics as a science is assured because (a) succeeding
generations can use results of earlier efforts and (b) it is easy to detect logical errors within
the model and conceptual errors in formulation and in interpretations. The third aim, is to
make economic practice honest and this resonates with Thomas Kuhn’s fourth component of
a paradigm that is, values.
The aim of making economic a science carries with it the built-in aims of pure
science: creating new knowledge, explanation and prediction. However, most pure
economists still want to be relevant. In fact, Agustin Cournot ignored economics for 25 years
when Researches into the Mathematical Principles of the Theory of Wealth was ignored.
Economists such as Keynes in contrast succeeded by focusing on a practical problem and
reconstructing the foundations of classical economics to obtain policy implications that were
directly applicable to practical problems. Considerable parts of macroeconomic research and
development economics are policy-oriented research.
The class of other economics has multiple and overlapping objectives. However, most
have scientific aims, practical aims or both.
Review of key methodological shifts in economics
A methodological investigation is partly normative. Evaluation of the goals of economics can
not be purely objective because it has implications of good or bad, appropriate or
inappropriate. In discussing the goals above, one I simply reviewed the goals deducible from
the literature. However, it is important at this point to appreciate the subject-object relations
in economics that I alluded to earlier. As I indicated, in economics, the subject-object divide
is not discontinuous as it is between the physical scientist and the object of physical science.
Frank Knight (1935) pointed out this fact and we have summarized in Table 7 the options
open to the economist, associated interests and analytical possibilities. The economist could
be a passive observer in which case, the primary interest is seeing, thinking and
understanding. The likely result, is an objective or factual treatment of economic phenomena
at least proportionate to the intellectual capacity of the economists and philosophical
commitments. It is also, likely that the economists views self as member of society and, a
participant in social phenomena. At best, such an economist could state a case for a policy,
with more or less attention to both sides. At its worse, the economist could be an advocate.27
Needless to mention, the methodological investigator faces similar possibilities.
A methodological investigation is also partly objective in the sense that any body of
theory could be evaluated by the goals it set for itself. For instance, those bodies of economic
thought that claim to be purely devoted to making economics a science could be evaluated on
how much success they have accomplished using scientific standards. Similarly, those that
26
Mills claimed that “what is true in the abstract is always true in the concrete with proper allowances.”
27
One of the strongest criticisms against classical and, neoclassical economics is that their philosophical
commitments embodied in the hard core of classical economics were reactions against systems of controls
hence, the theories served “advocative” rather than scientific purposes.

27
claim to be applied such as development economics could be evaluated on how much
development they have engineered.
Table 7: The Economist, Interests and Analytical possibilities
Options Interests Analytical possibilities
Spectator seeing, thinking and
understanding
objective and factual treatment
of social relations to a limited
extent
Member of society and participant in
social phenomena
action and change stating a case for a case for a
policy, with more or less
attention to both sides
The rest of the section is devoted to a review of the shifts in economic methodology. The
review is presented historically to relate the shifts to the “social” circumstances that
generated them. It may seem ironical that social circumstances would causes changes in a
science devoted to natural laws. It is important to bear in mind however, the subject-object
relations of a social sciences like economics and the fact that both the subject and objects and
spatio-temporal particulars with history and interdependent.
A general overview of the shifts in economic methodology
At a general level it could be claimed the schism between rationalist and empiricism is one of
the essence of methodological differences in economics. In fact, all the methodologies fall
into the three groups shown in Table 8: radical a priorism (rationalist), ultra-empiricism
(empiricism) and the middle-ground (logical positivism, historical school, Marxian political
economics etc). It is worth noting that the schism is itself a direct consequence of that in
metaphysics between dualism and monism. That is why the middle ground could consist of
obviously strange bedfellows. However, all share similar fundamental metaphysical belief
and on sources of episteme.
Table 8: Approaches to Economic Analysis
Characterization Defining Methodological Propositions
1. Radical aprioism Economic theories are a system of logical deductions from a series of postulates
derived from introspection, which are not themselves testable
2. Ultra-empiricism Postulates or assumptions that cannot be empirically varied are not acceptable;
axioms must be facts
3. Middle ground Abstractions and analytic statements have useful roles in economics
Facts also have roles in scientific work
Table 9 captures major turning points in the evolution of economics from the period
of the classical to the current practice in econometrics. As I indicted in the introduction to
this section, this review is organized around the mainstream. Consequently, a part from
Keynesian revolution, we have not treated many of the other categories of economic theory.
However, many of developments are either off shoots of the mainstream (e.g., development
economics) or reactions against it (e.g.,) institutional school. Four distinct eras could be
distinguished: Classical era, Neoclassical era, Keynesian era, era of Logical Positivism and
the counter-revolutionary era.
However, I will discuss the Classical and Neoclassical Era together. The Classical era
and the Neo-classical eras were similar as is obvious from Table 9 and in the sense that they
shared similar hard core to use the terms of Lakatos or “symbolic generalisations” and
metaphysical and heuristic commitments. However, although John Stuart Mills provided the

28
justifications for shift from informal to formal economics, he himself had not stripped
economics of all obvious social and ethical influences. John Stuart Mills in “On the
Definition of Political Economy and the Methods of Investigation Appropriate to it”,
advanced arguments to support a shift from what Debreu called informal theorizing towards a
more formal theorizing. Mills (1836, reprinted in Hausman, 1994:52-68) made three main
claims in the following sentences
“In the definition which have attempted to frame of the science of Political Economy, we have
characterized it as essentially an Abstract science, and its method as the method of a priori.
Such is undoubtedly its character as it had been understood and taught by all its most
distinguished teachers. It reasons, and, as we contend, must necessarily reason, from
assumptions, not from facts. It is built upon hypothesis, strictly analogous to those which,
under the name of definitions, are the foundation of the other abstract science. Geometry
presupposes an arbitrary definition of a line, “that which has length but not breadth.” Just in
the same manner does Political Economy presupposes an arbitrary definition of man, as a
being who invariably does that by which he may obtain the greatest amount of necessaries,
conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with
which they can be obtained in the existing state of knowledge.
Political Economy, therefore, reasons from assumed premises – from premises which might be
totally without foundation in fact, and which are not pretended to be universally in accordance
with it. The conclusions of Political Economy, consequently, like those of geometry, are only
true, as the common phrase is, in the abstract; that is, they only true under certain
suppositions, in which none but general causes – causes common to the whole class of cases
under consideration-are taken into account.
This ought not to be denied by the political economist. If he deny it, then, and then only, he
places himself in the wrong. The a priori method which is laid to his charge, as if his
employment of it proved his whole science to be worthless, is, as we shall presently, show the
only method by which truth can possibly be attained in any department of the social science. .
. true in the abstract, is always true in the concrete with proper allowances. ”
Mills explanations of the a priori method – reasoning from assumed premises or hypothesis –
is consistent with the metaphysical views of a priori that a priori knowledge is prior to
experience hence independent of sense perception. This point is very important to evaluating
Lionel Robbin’s defense of the a priori method. In the Nature and Significance of Economic
Science (1935) he wrote
“The propositions of economic theory, like all scientific theory, are obviously deductions
from a series of postulates. And the chief postulates are all assumptions involving in some
way simple and indisputable facts of experience relating to the way in which the scarcity of
goods which is the subject-matter of our science actually shows itself in the world of reality.
The main postulate of the theory of value is the fact that individuals can arrange their
preferences in an order, and in fact do so. The main postulate of the theory of production is the
fact that there are more than one factor of production. The main postulate of the theory of
dynamics is that we are not certain regarding future scarcities. These are not postulates the
existence of whose counterpart in reality admits of extensive dispute once their nature is fully
realised.
Indeed, the danger is that they (axioms) may be thought to be so obvious that nothing
significant can be derived from their further examination. Yet, in fact, it is on postulates of
this sort that the complicated theorems of advanced analysis ultimately depend. And it is from
the existence of the conditions they assume that the general applicability of the broader
propositions of economic science is derived.” P.89

29
Table 9: Overview of Shifts in Economic Methodology
School Defining Issues
1. Classical Deductive method
No effort at empirical verifications
Treatment of exogenous variables [ceteris paribus –alibi against counteracting
tendencies and measure of ignorance –not clear if exogenous variables enter as
additional parameters or enter the structure of equations]
2. Neoclassical Analytically rigorous
Explaining the direction of small changes in a few continuos variables
Population growth, technology, time are exogenous
Comparative statics bye-passed problems of existence, uniqueness and stability
Endogenous variables are not observable
No effort at empirical verifications
3. Keynes (1939) Economics is a science of thinking in terms of models joined to the art of choosing
models which are relevant to the contemporary world.
The object of a model is to segregate the semi-permanent or relatively constant factors
from those which are transitory or fluctuating so as to develop a logical way of thinking
about the latter, and of understanding the time sequences to which they give rise in
particular cases.
But it is of the essence of a model that one does not fill in real values for the variable
functions. For to do so would make it useless . . . the model loses its generality as a
mode of thought.”
Tinbergen endeavors to work out the variable quantities in a particular case, or perhaps
in the average of several particular case, and he suggests that the quantitative formula so
obtained has general validity. Yet in fact, by filling in figures, which one can be quite
sure will not apply next time, so far from increasing the value of his instrument, he has
destroyed it.
The pseudo-analogy with physical sciences leads directly counter to the habit of mind
which is most important for an economist proper to acquire
4. Hutchison’s
Challenge
In very simple terms, economics (neoclassical) which rely on claims qualified by ceteris
paribus and theories relying on extreme simplifications are untestable and empirically
empty.
Therefore, economic theorists should free themselves from abstract, tautologous,
contentless theorizing and concentrate on inductive development of empirical laws that
permit genuine prognoses (1938, p.166).
5. Lester (1946,
1947)
Testing postulates of neoclassical school using sample surveys sent to various
businesses
Results show that firms did not behave as predicted by theory of the firm. Therefore,
economics makes false predictions concerning the behavior of firms.
6. Samuelson
(1963)
Let B represent theory and C be the set of all its empirical consequences; then B if and
only if C. If all elements of C are correct, then B is a good or perfect theory. However, if
only C* is true then, only B* is correct and other parts of B ought to be discarded since
they are false.
7. Machlup
Response
(1946, 47, 55,
56, 60)
Rejects “ultra-empiricist” on the grounds that the truth or falsity of the basic postulates
of economics is not open to direct observation or test; postulates of theories can not
(should not) be tested.
Only indirect assessment of theories is possible via testing the observable consequences
that one can derive with their help. Up to date “philosophy of science support the view
that fundamental theory need do no more than demonstrate its fruitfulness in deriving
correct observational consequences.” P.161
Hutchinson is mistaken in criteria that pure theory must satisfy; Lester mistaken about
what to test and in identifying theories with their consequences while Samuelson was
wrong about the role of theory in systematizing data.
8. Logical
Positivism of
Friedman
(1953)
Economics seeks significant and useable predictions, not understanding or explanation.
Test predictions not assumptions
Predictive accuracy is the sole criteria for validity of theories
Contradictions are never absolute
Conclusive once and for all testing is out of the question because predictions are
probabilistic

30
9. Conventional
Econometrics
(1930s – mid
1970s)
Estimate, test, predict or forecasts (ex post or ex ante)
Consist of estimation techniques, inference procedures and diagnostic procedures
Involves formulation of model, estimation of parameters, inspect results ad associated
statistics and arrive at judgement on acceptability of model.
10. London School
of Econometrics
(from mid
1970s)
Test all specifications in all possible ways
Accept only those specifications that survive and correspond to a reasonable economic
model.
Therefore, Lionel Robbin’s view is not strictly speaking, the a priori method but some
compromise between rationalism and empiricism. It is worth noting that Lionel Robbin’s
defense occurred at the time that classical and neoclassical economics confronted a major
anomaly – the Great Depression- that they could neither understand nor could explain.
However, before the crisis, the works of the troika (Jevons, Menger and Walras) built on the
foundations of Mills. Other great representatives such as Barone (an admirer of Walras),
Marshall (1890), Wilfredo Pareto, Francis Y. Edgeworth, Fisher, Gustav, Slutsky, Pigou,
developed the works of their predecessors by extending formal ontology to theory of
socialism, international trade, welfare analysis, distribution and so. Appendix 1 provides a
panoramic view of the contributions of the leading representatives of Classical and
Neoclassical Economics. It is worth noting that all came to economics with sound
mathematical knowledge. It is also, worth pointing out that the works of the reformist Henry
Sidgwick which recognized externality as a source of market failure and a laid the foundation
for a general theory of government was not as influential. Also, that just as the classicals
created a dichotomy between real and financial variables, the neoclassicals created one
between between competitive equilibrium and welfare analysis.
The neoclassical dichotomy Marx argued was a consequence of the conceptualization
embodied in classical and neoclassical thought about the organic links between consumption,
production, distribution and exchange. In Ideology and Method (translated in 1973 by Martin
Nicolas), Marx argued that the orthodox system is coherent but shallow. First, the agent is
not individuated because even the desires of the individual have social origins. According to
Marx,
“the more deeply we go back into history, the more the individual and hence also the
producing individual, appear as dependent, as belonging to a greater whole: in still quite
natural way the family expanded into a clan (Stamm); then later in the various form of
communal society arising out of the antithesis and fusions of the clans.”
Marx view of the idea of an individual detached from social bonds is rare occurrence and
ethics and social and political philosophical is on the side of Marx on this point. A second
problem according to Marx is conceptual; production and distribution viewed, as autonomous
neighbors in classical thought are moments of a historical process. Relatedly, consumption is
not the end of the production process; consumption is immediately production and production
immediately consumption and in fact, a three-hold identity: immediate identity, mutual
dependence and each supplies the other with its object.28
It was inevitable therefore, that the
fundamental differences in the view of the economic process, in conceptualization of
production, consumption, distribution and exchange and in view about relations between
production, exchange, distribution and consumption that the method of political economy
28
Consumption produces production in two ways. First, a product becomes a real product by its being consumed
(the product is production not as objectified reality but rather only as object for an active subject). Second,
consumption creates the need for new production; i.e., consumption creates the motive for production
. No production without a need and consumption reproduces the need. Production produces consumption in
three ways: (a) by creating the material for production, (b) determining the manner of consumption, and (c)
creating the motive of consumption.

An Essay On The Philosophy And Methodology Of Economics

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