Popper, Kuhn, and Lakatos in the methodology of economics

The main ideas of Popper, Kuhn, and Lakatos in economic methodology reflect their broader philosophies of science, each offering a unique perspective on how economic theories should be developed, tested, and evaluated. The differences in their concepts have sparked discussion among other economists. This essay will provide a critical review on these readings.

Popper (1976) argued that for a theory to be considered scientific, it must be falsifiable. This means that economic theories should be structured in a way that allows them to be tested against empirical data and potentially proven false. Popper illustrates with “all swans are white” is disproved by the discovery of black swan, demonstrating that a single counter example can disprove a general claim. 

Hands (1985) attempts to explain that Popper himself did not recommend falsification to be strictly applied to social sciences, such as economics, as it is to natural sciences. Economics is a special case, where it is more suitable to use “situational analysis” or “situational logic” approach. Popper’s situational analysis emphasizes that explanations of social behavior should be explored within the context of the “situation” in which agents or individuals operate, based on the rationality principle. But then, when it comes to the falsification test on rationality principle, Popper acknowledges that there are agents who violate this rationality principle (i.e., agents who do not act rationally). Popper claims that “the principle is approximately true, that is, most but not all agents obey the principle.”^[i] Hands argues that Popper is inconsistent on this matter; the famous black swan disproof example does not apply to irrational agents in economic studies. 

Nevertheless, I believe that most of Popper’s statements are valid, particularly the idea that falsification is useful for determining whether a theory is scientific. However, when it comes to complex social phenomena, such as the principle of rationality, falsification alone is not sufficient to establish the scientific validity of theories. It is too simplistic to decide if a theory is truly scientific.

Kuhn (1996) introduces the role of paradigms and revolutionary shifts. Kuhn argues that “paradigms could determine normal science without the intervention of discoverable rules”. Paradigms are used as an approach to analyze problems. However, when the problems encountered are complex and too difficult to solve, this can lead to scientific revolutions. Although many of Kuhn arguments are valid, yet I (humbly) find that Kuhn’s approach difficult to apply in most cases. Coats (1969) argues that there is no evidence of a scientific revolution structure in economics, as economic theories tend to evolve gradually rather than undergoing sudden revolutions. Coats suggests that this paradigm shift is not merely the result of new discoveries or evidence, but rather involves a fundamental rethinking of the essence of economic theory and its relationship with the world.

Lastly, Lakatos (1968) offers scientific research programs (SRPs) to be applied to economics. An SRP is a long-term research program that has a set of core assumptions protected from criticism. He argues that science progresses not through isolated theories, but through these structured programs, which consist of a series of theories sharing a common core of assumptions. Economic theories can be viewed as research programs, and Lakatos’s theory can be used to evaluate and compare them. In conclusion, it seems that Lakatos’s is more acceptable to most academics since it offers a more realistic view of the development of scientific methods.

References

1. Popper, K. (1976). “The Logic of the Social Sciences,” in T.W. Adorno, The Positivist Dispute in German Sociology. London: Heinemann, pp. 87-104. 
2. Caldwell, B. (1991). “Clarifying Popper,” Journal of Economic Literature 29(1), March, pp. 1-33. 
3. Hands, D. W. (1985). “Karl Popper and Economic Methodology,” Economics and Philosophy 1(1), pp. 83-99. 
4. Blaug, M. (1985). “Comment on D. Wade Hands, ‘Karl Popper and Economic Methodology: A New Look,” Economics and Philosophy 1(2), pp. 286-288.
5. Kuhn, T. (1996). “The Structure of Scientific Revolutions,” 3rd ed. Chicago: University of Chicago Press, Chapter V (“The Priority of Paradigms”) and Chapter IX (“The Nature and Necessity of Scientific Revolutions”). 
6. Coats, A.W. (1969). “Is there a ‘Structure of Scientific Revolutions’ in Economics?” Kyklos 22(2), pp. 289-296. 
7. Lakatos, I. (1968). “Criticism and the Methodology of Scientific Research Programmes,” Proceedings of the Aristotelian Society, vol. 69, pp. 149-186.

^[i] Karl Popper and Economic Methodology, page 87