Economics and Reality

Douglas Strachan (University of Strathclyde)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 1 June 2000




Strachan, D. (2000), "Economics and Reality", Journal of Economic Studies, Vol. 27 No. 3, pp. 222-229.



Emerald Group Publishing Limited

Copyright © 2000, MCB UP Limited

Should we ignore methodology? (Backhouse, 1992, as quoted in Hoover, 1995, p. 733).

Answer to Backhouse: Yes (Hahn, 1992, as quoted in Hoover, 1995, p. 734).

Practical economists, who believe themselves to be quite exempt from any methodological influences, are usually the slaves of some defunct methodologist (Hoover, 1995, p. 733).

This paraphrasing of Keynes’ General Theory … (1936, p. 383), sums the stance of the present review.

In Lawson’s view, economics is a social discipline which consistently fails to yield worthwhile answers to current, dominant, policy issues. His aims are to identify limitations of economics, to work towards overcoming these and, especially, to bring reality, or more of it, to the fore. Two interwoven issues dominate the book: contemporary economics is shot through with methodological deficiencies; and the author delivers his conception, “critical realism”, of what economics should be about. Over‐reliance on axiomatic modelling with its inherent shortcomings, in particular the rarefied reality and hence inappropriateness of a deductivist approach in shedding light on economic issues, is a mainstay of Lawson’s critique of mainstream economics. Such methods do not purvey legitimate economic knowledge. The economist’s current toolkit is used, modified and re‐used without explicit consideration of social phenomena. Hence headings in the serious press of the ilk,

No reality, please. We’re economists (The Times Higher Education Supplement, 25 March 1994, as quoted in Lawson, p. xii).

From the irrelevance of theory per se, the criticism is extended to include econometric forecasts that do not forecast well. This is down to a, naive almost, faith in regularly occurring events. The upshot is that there is little in economics that is scientific. Radical transformation is required. This is not only possible but possible to an extent whereby economics can be a science, via transcendental realism, in exactly the sense of a natural science. This,

will inevitably involve a grealer sensitivity to context and a rather more reflective and critical orientation than are currently in evidence (Lawson, p. xviii).

Transcendental realism is the philosophy of science which, according to the author, offers the best account of scientific practice. It lies somewhere between the extremes of empiricism and relativism. Its transcendental aspect comes from “intransitive structures” – arrangements, actions, even inclinations of agents – by which a result is engendered and which can occur whether or not we can identify these causal, intransitive structures.

Such structures, as well as governing “actual events”, are irreducible. An account of their essences or substances is denied since they are “out of phase” with the events they hold sway over. Or they have become coalesced, not observable in their naked states, vis‐à‐vis the events they have precipitated. The relationship, then, between intransitive structures and their event(s)‐manifestation is unclear.

This is distinctly Kantian, something known to exist independently of experience. Human causation, or constant conjunction, is attacked with impunity by Lawson:

The ultimate source of all the problems is the epistemic fallacy, the belief that questions of ontology can be reduced to questions of epistemology. In the writings of Hume this leads to reality being reduced to the course of events given in experience (Lawson, p. 282).

Transcendental realism is allied with the author’s attempt to produce a social ontology, an appraisal of the scope of economics, to yield “critical realism”. Lawson examines the substance of human agency and social structures, emphasising their mutual interaction – they condition and shape each other but neither can be totally explained by the other. This contrasts with a mainstream economics which is grounded in rigid cause/effect regularities.

Explanation as opposed to prediction in economics is advocated. Prediction, simply, is not a feature of other than closed systems. The possibility of closed systems in economics is not denied by Lawson. Where they do occur, however, they are likely to be of limited duration/applicability.

For the author, the lack of critical realism, with its irreducible structures and pure ontology, explains why the economics discipline is in such a dire state. Its current positivist approach is floundering against an ontological lacunae. It is engaged on a search for constant conjunction, building up sets after sets of spurious correlations, instead of sussing out the nature of the irreducibles by working back to these from their empirical phase. Lawson advocates a backwards‐ or retro‐ deductive approach, which is also labelled “abduction”.

Many practising economists would take issue with this. Three problems are mentioned here: first, “anything goes” – a multitude of hypotheses could be generated on the back of this retrodeduction to the unobservable. Lawson’s structures may be irreducible. They are also, phenomenologically, non‐exhaustive. The danger is that we just shift focus from the search for the holy grail of constant conjunction to the holy grail of retrodeduction; Lawson assumes the role of stablekeeper Hobson – accept critical realism or perish in the clutch of constant conjunction. There are other horses in the stable; and, third, we may regard an economic realist as one who takes a practical view in economic problems. Many economists who are, or are not, Popperian positivists, moral philosophers, Marxists, or who adopt, or who are pigeon‐holed in, some other label‐category, are all realists, fundamentally concerned with day‐to‐day problems. The author’s underscored emphasis on the lack of realism in economics detracts from his mission – the provision of a cogent methodology.

This book provides a specific, embracive methodology. It is to be commended for being constructive as well as critical. Painstaking effort to present competing claims is evident. Many will accept his criticism of an “if this then that” set of laws. It is scholarly and demanding of the reader. Lawson joins many others in his emphasis on the failure of prediction in economics. Perhaps his critical realism will gain adherents. If this serves to reduce the number of competing and often confusing factions in economics, fine. If it works in the opposite direction …


Hoover, K.D. (1995), “Why does methodology matter for economics?”, The Economic Journal, Vol. 105 No. 430.

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