Theory Construction And Empirical Meaning In Economics

Abstract

The article focuses on empirical meaning in economics. For some time now, it has been the prevalent view of economists that universal, nonanalytic statements can be formulated in economics, which can be shown to be refutable, in principle, by reference to empirical data, and such statements typically express propositions concerning the signs of rates of change of "endogenous" variables with respect to "exogenous" variables. The economist's practice is characterized by the construction of taxonomic models which, when anchored to some particular space-time segment and thus become descriptions of that segment, may be tested by reference to data drawn from that segment. If tested and confirmed, they constitute an explanation. If untested, they constitute a prediction. Furthermore, the proposed structure for a particular space-time segment is selected, as it were, from a card file of structures on the basis of observations on that segment. Since the argument is rather involved, the author intends to make some necessary simplifications. Thus no distinction will be made between qualitative and quantitative economics or between static and dynamic structures or models.