The Foundations of Economic Method

My argument in this book is rather straightforward. I shall argue that every neoclassical research program is designed (1) to be consistent with acceptable ways of dealing with the Problem of Induction, and (2) to provide a methodological individualist explanation of economic behavior of the economy, that is, one which is based on the methodological prescription that allows only individuals to be posited as the locus of decision-making. With this in mind, I shall argue that neoclassical economists have thereby made their research program an impossible task because the Problem of Induction cannot, and need not, be solved. They compound this difficulty with psychologism, that is, by erroneously identifying individuals with psychological states. I will not press the additional point that the Conventionalist view of methodology (viz., that an individual’s view of methodology does not matter) is inconsistent with a neoclassical theory which is supposed to see the individual as the center of everything – but this point does show that usual reluctance to discuss methodology might lead to certain inconsistencies. If my argument concerning the design of neoclassical economics and its reliance on psychologism is correct, then it will be seen that most of the leading theoretical problems are impossible to solve. However, I shall also attempt to show that the essential individualist spirit of neoclassical economics can be preserved if the Problem of Induction is rejected and the concept of individualism is freed of its usual psychologism. All of this is a matter of fundamental methodology and thus for theoretical reasons we need to examine the foundations ofeconomic method.