Methodology of Economics: Key Words and Concepts Flashcards
Demarcation Criteria
Definition:
Criteria used to distinguish scientific theories from non-scientific ones.
Thinkers:
Popper: Science must be falsifiable.
Kuhn: Science is defined by adherence to paradigms.
Lakatos: Science progresses through research programmes with a “hard core.”
Example:
“All swans are white” is scientific because it can be disproven by observing a black swan.
Falsification
Definition: The process of testing a theory by attempting to prove it wrong.
Thinker: Karl Popper.
Example: A hypothesis like “all markets are efficient” can be falsified by finding market anomalies.
Induction
Definition: The process of deriving general laws from specific observations.
Critique: Popper argued that induction cannot provide universal truths since it relies on limited observations.
Example: Observing that 100 swans are white and concluding “all swans are white.”
Hypothetical-Deductive Method
Definition: A scientific method where hypotheses are tested by deriving predictions and verifying them through observation.
Example: Developing a demand curve based on a hypothesis about consumer behavior and testing it with market data.
Paradigm
Definition: A framework of assumptions, practices, and methods guiding “normal science.”
Thinker: Thomas Kuhn.
Example: Neoclassical economics is a dominant paradigm in economic thought.
Paradigm Shift
Definition: A revolutionary change in scientific thinking that replaces an old paradigm with a new one.
Thinker: Kuhn.
Example: The shift from Keynesian economics to Neoclassical economics during the 1970s.
Research Programme
Definition: A framework of scientific inquiry with a “hard core” of unchanging assumptions and a “protective belt” of auxiliary hypotheses.
Thinker: Imre Lakatos.
Example: Post-Keynesian economics adapts its auxiliary assumptions to address financial instability.
Hard Core
Definition: The foundational, unchangeable assumptions of a research programme.
Thinker: Lakatos.
Example: Rational behavior in Neoclassical economics.
Protective Belt
Definition: Auxiliary hypotheses that shield the hard core from falsification and adapt to new findings.
Thinker: Lakatos.
Example: Modifying assumptions about market efficiency to account for behavioral anomalies.
Symmetry Problem
Definition: The issue that prediction and explanation are not equivalent, challenging the Hypothetical-Deductive Method.
Example: Correlation between inflation and unemployment may explain historical trends but cannot reliably predict future outcomes.
Duhem-Quine Thesis
Definition: A hypothesis cannot be tested in isolation; testing depends on auxiliary assumptions.
Thinker: Pierre Duhem and Willard Quine.
Example: If a prediction fails, is it the theory or the tools used to test it that are flawed?
Verification
Definition: The process of confirming a hypothesis by finding supporting evidence.
Critique: Popper argues it is weaker than falsification as it cannot definitively prove a theory.
Example: Observing many white swans does not confirm the statement “all swans are white.”
Pre-scientific Biases
Definition: Assumptions and frameworks that shape observation and interpretation before scientific inquiry begins.
Thinker: Popper and Kuhn.
Example: Assumptions about rationality in economic models shape what is observed and studied.
Normal Science
Definition: Scientific work conducted within the boundaries of an existing paradigm.
Thinker: Kuhn.
Example: Neoclassical economists solving problems within equilibrium models.
Progressive Programme
Definition: A research programme that generates new predictions and solves emerging problems.
Thinker: Lakatos.
Example: Behavioral economics integrates insights from psychology to address anomalies in classical models.
