by Economic methodology — a critical realist perspective The field of economics has long been hailed as a bastion of rationality and objectivity, offering insights into the workings of present-day complex economic systems. However, questions about the foundations of economics and its prevailing methodological approach have to be raised. My own critique challenges traditional assumptions and argues for a more pluralistic and realistic understanding of economic phenomena. • The problem of formalism One of my key criticisms centres around the excessive reliance on formal models and mathematical abstractions within mainstream economics. The discipline’s preoccupation with mathematical rigour often leads to a detachment from real-world complexities, rendering
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Economic methodology — a critical realist perspective
The field of economics has long been hailed as a bastion of rationality and objectivity, offering insights into the workings of present-day complex economic systems. However, questions about the foundations of economics and its prevailing methodological approach have to be raised. My own critique challenges traditional assumptions and argues for a more pluralistic and realistic understanding of economic phenomena.
• The problem of formalism
One of my key criticisms centres around the excessive reliance on formal models and mathematical abstractions within mainstream economics. The discipline’s preoccupation with mathematical rigour often leads to a detachment from real-world complexities, rendering economic models divorced from actual human behaviour. Economists should embrace a more open-ended approach that acknowledges the limitations of formalism and places a greater emphasis on empirical observations and qualitative analysis.
• Assumptions and simplifying idealizations
Many of the assumptions and simplifying idealizations that underpin mainstream economic models — perfect rationality, market efficiency, and equilibrium — do not accurately reflect the messy realities of human decision-making and market dynamics. Economists have to have a more nuanced understanding of human behaviour that acknowledges the presence of bounded rationality, social norms, and institutional constraints. By incorporating these factors, economic models can better capture the complexities of economic systems.
• Pluralism and interdisciplinarity
Economics should embrace a more pluralistic approach, drawing insights from various disciplines such as sociology, psychology, history, and ecology. By integrating diverse perspectives, economists can develop a richer understanding of economic phenomena and avoid the pitfalls of narrow and reductionist thinking. Complex problems require holistic and multidimensional approaches.
• Policy implications
Overlooking real-world complexities and relying on overly simplified models — typical of mainstream economics — can lead to seriously misguided policy prescriptions. A more context-sensitive and pragmatic approach to policy-making — taking into account the specific institutional, cultural, and historical factors at play — is needed. This shift in policy orientation can lead to more effective interventions and address the concerns of more or less marginalized communities that are often excluded from mainstream economic discourse.
• Advancing the discipline
While mainly posing challenges to the foundations of mainstream economics and the severe real-world limitations of its methodology, my critique also provides an opportunity for the discipline to evolve and grow. By embracing a more pluralistic and realistic framework, economics can address the criticisms and broaden its analytical toolkit. This would involve reevaluating many standard approaches, fostering interdisciplinary collaborations, and promoting critical engagement with alternative heterodox economic theories. Challenging the dominance of deductive-axiomatic formalism and advocating for a pluralistic approach also create space for a more realistic and nuanced understanding of economic phenomena. This is necessary if we want to be able to reimagine economics as a discipline that is more in tune with the complexities of the real world and better equipped to tackle the pressing social and economic challenges we face today.