IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/8866.html
   My bibliography  Save this paper

In Quest of Truth: The War of Methods in Economics

Author

Listed:
  • Pillai N., Vijayamohanan

Abstract

The present paper discusses the ‘battle of methods’ in economics in its epistemic pursuit in the framework of a dialectics between science and art. The traditional distinction between deduction and induction has come to be characterized as a ‘theory-data confrontation’; while the former a priori approach has flourished in terms of mathematical economics, the inductive approach has fulfilled its mission through econometrics and experimental economics. The paper outlines the recent trends in econometrics and experimental economics in the context of empirical pursuit. We conclude the study, reiterating the contemporary consensus on the complementary roles of the two approaches: a theory-data confluence, not in a static, but in a dialectical framework.

Suggested Citation

  • Pillai N., Vijayamohanan, 2008. "In Quest of Truth: The War of Methods in Economics," MPRA Paper 8866, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:8866
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/8866/1/MPRA_paper_8866.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Kevin D. Hoover & Stephen J. Perez, 1999. "Data mining reconsidered: encompassing and the general-to-specific approach to specification search," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 167-191.
    3. Richard M. Todd, 1984. "Improving economic forecasting with Bayesian vector autoregression," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 8(Fall).
    4. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing and the General Equilibrium Dynamics of Money and Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 655-690.
    5. Hartley, James E & Hoover, Kevin D & Salyer, Kevin D, 1997. "The Limits of Business Cycle Research: Assessing the Real Business Cycle Model," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(3), pages 34-54, Autumn.
    6. repec:bla:scandj:v:93:y:1991:i:2:p:161-78 is not listed on IDEAS
    7. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
    8. Krolzig, Hans-Martin & Hendry, David F., 2001. "Computer automation of general-to-specific model selection procedures," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 831-866, June.
    9. Baumol, William J & Benhabib, Jess, 1989. "Chaos: Significance, Mechanism, and Economic Applications," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 77-105, Winter.
    10. Kevin D. Hoover & Stephen J. Perez, 2004. "Truth and Robustness in Cross‐country Growth Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 765-798, December.
    11. Robert B. Litterman, 1984. "Above-average national growth in 1985 and 1986," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 8(Fall).
    12. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, November.
    13. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    14. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    15. Ben S. Bernanke & Julio J. Rotemberg (ed.), 1997. "NBER Macroeconomics Annual 1997," MIT Press Books, The MIT Press, edition 1, volume 1, number 026252242x, December.
    16. Hendry, D.F. & Mizon, G.E., 1990. "Evaluating Dynamic Econometric Models By Encompassing The Var," Economics Series Working Papers 99102, University of Oxford, Department of Economics.
    17. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    18. Hatanaka, Michio, 1975. "On the Global Identification of the Dynamic Simultaneous Equations Model with Stationary Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 545-554, October.
    19. LeBaron, Blake, 1992. "Some Relations between Volatility and Serial Correlations in Stock Market Returns," The Journal of Business, University of Chicago Press, vol. 65(2), pages 199-219, April.
    20. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-450, June.
    21. Luis Arango & Andres Gonzalez, 2001. "Some evidence of smooth transition nonlinearity in Colombian inflation," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 155-162.
    22. Hendry,David F. & Morgan,Mary S., 1997. "The Foundations of Econometric Analysis," Cambridge Books, Cambridge University Press, number 9780521588706, November.
    23. Canova, Fabio, 1993. "Modelling and forecasting exchange rates with a Bayesian time-varying coefficient model," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 233-261.
    24. Lovell, Michael C, 1983. "Data Mining," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 1-12, February.
    25. Minford, Patrick & Marwaha, Satwant & Matthews, Kent & Sprague, Alison, 1984. "The Liverpool macroeconomic model of the United Kingdom," Economic Modelling, Elsevier, vol. 1(1), pages 24-62, January.
    26. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    27. Salemi, Michael K & Sargent, Thomas J, 1979. "The Demand for Money during Hyperinflation under Rational Expectations: II," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 741-758, October.
    28. Zellner, Arnold, 1979. "Causality and econometrics," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 9-54, January.
    29. Dawkins, Christina & Srinivasan, T.N. & Whalley, John, 2001. "Calibration," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 58, pages 3653-3703, Elsevier.
    30. Altug, Sumru, 1989. "Time-to-Build and Aggregate Fluctuations: Some New Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November.
    31. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    32. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    33. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
    34. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    35. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
    36. Frederick Mosteller & Philip Nogee, 1951. "An Experimental Measurement of Utility," Journal of Political Economy, University of Chicago Press, vol. 59(5), pages 371-371.
    37. Allan W. Gregory & Gregor W. Smith, 1991. "Calibration in Macroeconomics," Working Paper 826, Economics Department, Queen's University.
    38. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
    39. Hands,D. Wade, 2001. "Reflection without Rules," Cambridge Books, Cambridge University Press, number 9780521797962, January.
    40. Henry L. Moore, 1908. "The Statistical Complement of Pure Economics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 23(1), pages 1-33.
    41. Merrill M. Flood, 1958. "Some Experimental Games," Management Science, INFORMS, vol. 5(1), pages 5-26, October.
    42. Gregory, Allan W & Smith, Gregor W, 1991. "Calibration as Testing: Inference in Simulated Macroeconomic Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 297-303, July.
    43. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November.
    44. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
    45. Brock, W.A. & Dechert, W.D. & LeBaron, B. & Scheinkman, J.A., 1995. "A Test for Independence Based on the Correlation Dimension," Working papers 9520, Wisconsin Madison - Social Systems.
    46. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-283, April.
    47. Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, vol. 34(1-2), pages 23-47, February.
    48. Sargent, Thomas J., 1979. "A note on maximum likelihood estimation of the rational expectations model of the term structure," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 133-143, January.
    49. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
    50. Julio J. Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361, National Bureau of Economic Research, Inc.
    51. Susanto Basu & John Fernald, 2001. "Why Is Productivity Procyclical? Why Do We Care?," NBER Chapters, in: New Developments in Productivity Analysis, pages 225-302, National Bureau of Economic Research, Inc.
    52. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    53. Brunner, Karl & Meltzer, Allan H., 1986. "Real business cycles, real exchange rates, and actual policies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 1-10, January.
    54. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-1044, December.
    55. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    56. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, December.
    57. Robert B. Litterman, 1984. "Specifying vector autoregressions for macroeconomic forecasting," Staff Report 92, Federal Reserve Bank of Minneapolis.
    58. Clements, Michael P. & Mizon, Grayham E., 1991. "Empirical analysis of macroeconomic time series : VAR and structural models," European Economic Review, Elsevier, vol. 35(4), pages 887-917, May.
    59. Backhouse, Roger E, 1998. "If Mathematics Is Informal, Then Perhaps We Should Accept That Economics Must Be Informal Too," Economic Journal, Royal Economic Society, vol. 108(451), pages 1848-1858, November.
    60. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    61. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, December.
    62. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    63. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bekiros, Stelios D. & Paccagnini, Alessia, 2014. "Bayesian forecasting with small and medium scale factor-augmented vector autoregressive DSGE models," Computational Statistics & Data Analysis, Elsevier, vol. 71(C), pages 298-323.
    2. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    3. Marc P. Giannoni & Jean Boivin, 2005. "DSGE Models in a Data-Rich Environment," Computing in Economics and Finance 2005 431, Society for Computational Economics.
    4. Bekiros Stelios & Paccagnini Alessia, 2015. "Estimating point and density forecasts for the US economy with a factor-augmented vector autoregressive DSGE model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(2), pages 107-136, April.
    5. Committee, Nobel Prize, 2004. "Finn Kydland and Edward Prescott's Contribution to Dynamic Macroeconomics: The Time Consistency of Economic Policy and the Driving Forces Behind Business Cycles," Nobel Prize in Economics documents 2004-1, Nobel Prize Committee.
    6. Faust, Jon & Whiteman, Charles H., 1997. "General-to-specific procedures for fitting a data-admissible, theory-inspired, congruent, parsimonious, encompassing, weakly-exogenous, identified, structural model to the DGP: A translation and criti," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 121-161, December.
    7. Guangling 'Dave' Liu & Rangan Gupta & Eric Schaling, 2009. "A New-Keynesian DSGE model for forecasting the South African economy," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(5), pages 387-404.
    8. Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present, and Future," NBER Working Papers 11401, National Bureau of Economic Research, Inc.
    9. Julia Campos & Neil R. Ericsson & David F. Hendry, 2005. "General-to-specific modeling: an overview and selected bibliography," International Finance Discussion Papers 838, Board of Governors of the Federal Reserve System (U.S.).
    10. Kuikeu, Oscar, 2011. "Comment la dernière crise financière a relancé le débat relatif à l'arrimage du fcfa à l'euro [How the recent financial crisis have revived the debate on the parity between fcfa and euro]," MPRA Paper 32077, University Library of Munich, Germany.
    11. Lawrence Christiano & Mathias Trabandt & Karl Walentin, 2021. "Involuntary Unemployment and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 26-54, January.
    12. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2012. "Monetary Policy, Informality and Business Cycle Fluctuations in a Developing Economy Vulnerable to External Shocks," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 609-681.
    13. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118.
    14. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 113-172.
    15. Özer Karagedikli & Troy Matheson & Christie Smith & Shaun P. Vahey, 2010. "RBCs AND DSGEs: THE COMPUTATIONAL APPROACH TO BUSINESS CYCLE THEORY AND EVIDENCE," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 113-136, February.
    16. Huang, Kevin X.D. & Meng, Qinglai & Xue, Jianpo, 2009. "Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 409-430, February.
    17. Louis Phaneuf & Nooman Rebei, 2008. "Production Stages and the Transmission of Technological Progress," Cahiers de recherche 0802, CIRPEE.
    18. Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
    19. Ruge-Murcia, Francisco J., 2007. "Methods to estimate dynamic stochastic general equilibrium models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2599-2636, August.
    20. Charles G. Renfro, 2009. "The Practice of Econometric Theory," Advanced Studies in Theoretical and Applied Econometrics, Springer, number 978-3-540-75571-5.

    More about this item

    Keywords

    Economic Methodology; Deduction; Induction; Dialectics; Mathematics; Econometrics;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:8866. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.