IDEOLOGY AND METHOD IN ECONOMICS

IDEOLOGY AND METHOD IN ECONOMICS

MACMILLAN NEW STUDIES IN ECONOMICS Published Brian Burkitt and David Bowers Trade Unions and the Economy Keith Cuthbertson Macroeconomic Policy: The New Cambridge, Keynesian and Monetarist Controversies M. C. Howard Modern Theories of Income Distribution Homa Katouzian Ideology and Method in Economics In preparation Sanjaya Lall Transnationals and the Less Developed Countries

Ideology and Method in Economics Homa Katouzian M

M. A. H. Katouzian 1980 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published 1980 by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in Delhi Dublin Hong Kong Johannesburg Lagos Melbourne New York Singapore and Tokyo British Library Cataloguing in Publication Data Katouzian, Homa Ideology and method in economics (Macmillan new studies in economics). 1. Economics- Methodology I. Title 330'.01'8 HB131 ISBN 978-0-333-25990-0 DOI 10.1007/978-1-349-16256-7 ISBN 978-1-349-16256-7 (ebook) This book is sold subject to the standard conditions of the Net Book Agreement The paperback edition of this book is sold subject to the condition that it shall not, by way trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher's prior consent, in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

TO THE MEMORY OF KHALIL MALEKI, who was never 'led into temptation'

ACKNOWLEDGEMENTS The author and publishers wish to thank the following, who have kindly given permission for the use of copyright material: Journal of Economic Theory, for extracts from 'Optimal Economic Growth and Uncertainty: the discounted case', by W. A. Brock and L. T. Mirman. Review of Economic Studies, for extracts from 'Incentives and share Cropping', by J. E. Stiglitz.

CONTENTS PREFACE 1 ECONOMICS AND PHILOSOPHY OF SOCIAL SCIENCE: THE TASK AND ITS SCOPE 1 Of the Tasks of the Social Sciences and their Philosophy 1 Of the Scope and Relevance of this Essay 4 2 HISTORICAL PERSPECTIVES: FROM POLITICAL ECONOMY TO POSITIVE ECONOMICS 10 The Progress of Economic Ideas 10 The Evolution of Economic Method 18 The Debate on Method 30 Concluding Remarks 43 3 POSITIVE ECONOMICS: THE LOGIC OF NEO-CLASSICAL ECONOMIC THEORY 45 The Advent of Positive Economics 45 The Origins and Status of Logical Positivism 47 The Methodology of Positive Economics in Theory 53 The Methodology of Positive Economics in Practice: I. The Case of Basic Tautologies 55 The Methodology of Positive Economics in Practice: II. The Case of the Neo-Classical Consumer Theory 59 The Methodology of Positive Economics in Practice: III. The Fate of Testable Hypotheses 67

viii CONTENTS Popper, Positive Economics and the Logic of Social-Scientific Discovery 71 Instrumentalism and Positive Economics 76 Concluding Remarks 83 APPENDIX A CRITICAL NOTE ON POPPER'S CRITIQUE OF HISTORICISM 84 Popper on Historicism 84 Marx and Historicism 86 Orthodox Economics and Science 89 4 PARADIGMS, PROGRAMMES AND THE DEVELOPMENT OF ECONOMIC KNOWLEDGE Piecemeal Changes and Total Transformations 91 The Structure of Scientific Revolutions 93 Of Paradigms and Revolutions in the History of Economics 100 The Lakatosian 'Synthesis' 106 Of Research Programmes in the History and Method of Economics 109 Concluding Remarks 112 91 5 6 BIG SCIENCE VERSUS GREAT SCIENCE: A CONTRIBUTION TO THE SOCIOLOGY OF THE ACADEMIC PROFESSION The Influence of Extra-logical Factors Logic and Sociology The Sociology of the Academic Profession: The Basic Statement of a Model The Scope and Limits of the Model: Arguments and Evidence Conclusion VALUEJUDGEMENTSANDIDEOLOGY: MORALITY AND PREJUDICE IN ECONOMIC SCIENCE The Problem 114 114 116 119 123 132 135 135

CONTENTS IX Of Value Judgements 136 Of Value Judgements in Economic Science 142 Of Ideology 147 Of Ideology in Economic Science 153 7 ECONOMIC THEORY AND MATHEMATICAL ECONOMICS: ABSTRACTION AND GENERALISATION IN ECONOMIC SCIENCE 157 The Significance of Economic Theory 157 Economic Theory and Mathematical Economics 1: The Background 160 Economic Theory and Mathematical Economics II: A Rational Appraisal 166 APPENDIX A NOTE ON THE FORM AND CONTENT OF THE TERM 'POLITICAL ECONOMY' 178 Introduction 178 Origins of the Term 179 Etymological Implications of the Term 179 Methodological and Ideological Implications of the Term 180 The Contemporary Implications of the Term 181 8 UNTO THIS LAST: SOME EVIDENCE FROM CURRENT RESEARCH 184 Some Substantial Articles by Reputable Theorists on Important Subjects 184 A Brief Review of Some Other Articles 200 Unto This Last: A General Theory of P.I.S.S. 203 Analysis of the Evidence 204 Concluding Notes: A Requiem for Science? 207 9 CONCLUDING NOTES 209 Notes and References 212 Index 231

... carrying a few books like a beast. SA'ADI One knows so much and comprehends so little. EINSTEIN

PREFACE This book is a product of many years of reading and reflection on methods of understanding social and economic questions; on efforts to find intellectual solutions to these questions; and on practical attempts to resolve the problems whence they arise - that is, on philosophy, the social sciences and history. For this reason it may appear to be 'too philosophical' to some economists, even though I have never had - and I would repudiate - any interest in 'philosophising' about social and economic problems: in general, it is the problem itself which gives rise to the philosophy - not the other way around; in particular, a serious inquiry into the relevance and significance of our methods of understanding and solving economic and social problems would be incomplete (and often worthless) in total oblivion of their historical and philosophical contexts. It has been necessary both to present and discuss relevant philosophical concepts and theories, and to compare them with methods of socio-economic discovery by means of illustrative examples from the theories and methods of economic science, past and present. In Chapters 1 to 7 I have given examples from the theory and practice of economics (and, sometimes, other social sciences); and in Chapter 8 I have presented a sample of modem theories and approaches to our subject, as a summary illustration for the critical remarks of the preceding chapters. Yet I have kept down the number of such examples, and the space devoted to each, to a minimum which in my judgement has been compatible both with economy and with clarity. And I have left the reader to supply countless other examples which are available from textbooks - not to mention the innumerable current publications which threaten to bury us all under their dead weight. I have intended to solve problems not to sell products. Whether or not my arguments are judged to be 'too philosophical', 'too economic', 'too radical', 'too moderate'- all of which appellations, and others besides, can be conceivably attached to this essay, by readers of different persuasions or specialisations - I would happily agree that my

xii PREFACE general approach is unprofessional in a sociological sense of this term which I have discussed in Chapter 5 of this work. It is a product of many years and, indeed, its origins are shrouded in unclear memories from my childhood. It therefore owes a great deal to many who - either by their wisdom or by their follies - have made indispensable contributions to my intellectual development. If I cannot name them all here it is not because the value of their teachings have been overlooked or forgotten. Some of them are among us no longer: for example my father, who - apart from his generous and unselfish material support -taught me (both in conversation and in conduct) the value of a love for truth; the ethic of a regard for the freedom and welfare of others; and the excellence of a restless, but dignified, life over a peaceful, but servile, existence. I cherish their memories dead or alive, and I acknowledge my debt to them wherever they may be. Happily the number of those who have had a direct and immediate share in this piece of work is not too large to forbid explicit acknowledgements. Professor T. W. Hutchison - to whose learned lectures I owe my introduction to the history of economic thought - read the entire manuscript in draft and offered valuable comments and criticisms. Likewise, Professor Joan Robinson (who is not in need of witnesses for her analytical powers) read and criticised the whole of the material with characteristic generosity, efficiency and candour. Professor Syed Ahmad's and Professor Peter Victor's selfless encouragements as well as their suggestions, and reassurances, on certain important points, were very helpful. Professor Sir Karl Popper, though not directly involved in this particular project, has made an important (indirect) contribution to it, both by what I have learned from the spirit (in spite of my occasional disagreement with the letter) of his ideas, and by his distant encouragements, including his frequent gifts of offprints from his (relevant) publications. I have also benefited from suggestions for improvement by two anonymous readers, the standard of whose scholarship is reflected in their acute observations on form and content, and in the generous spirit of their assessments. None of these, known and unknown, critics would necessarily agree with all my descriptions, analyses or prescriptions. And, on occasion, I have retained my own views or style of presentation, in spite of their contrary, and no less reasonable, suggestions. They all share in the credit (if any), and none in the blame.

PREFACE The work was completed in the academic year 1977--8 when I had the pleasure of living in Canada, and the privilege of serving McMaster University. In the same year I was libelled in England, and I lost a brother in Persia. Yet the openness of space and society in Canada, the amiable environment of the Department of Economics at McMaster, and the moral and material generosities of my colleagues were such as to mitigate the grief caused by those catastrophes, and generate enthusiasm for life and work, none the less. It is difficult to know whether the delightful combination of efficiency and humanity with which the departmental secretaries fulfil their tasks is a cause or a consequence of this congenial social and intellectual atmosphere. However that may be, Mrs Ruth Nicholson's general supervision of my works and duties, and Ms Debbie Sanche's highly skilful and conscientious typing of the manuscript had a significant share in the outcome. The contributions of Miss Monique Raitchey, Mrs Sharon Ciraolo and Miss Elvia Horvath may have been less direct, but no less valuable... I thank them all for a debt which can never be fully repaid. Finally - and in spite of all its limitations - this work may not have been realised without the moral support of my wife and the wonderful gift of our children. Efforts of this kind may not justify their costs, and especially those which are inflicted on others. Yet this imbalance between their real costs and their hypothetical benefits may be rendered less drastic when we remember that men die but ideas remain. M. A. Homayoun Katouzian University of Kent at Canterbury September 1978 xiii