RULES FOR SCIENTIFIC RESEARCH IN ECONOMICS The Alpha-Beta Method Adolfo Figueroa Rules for Scientific Research in Economics Adolfo Figueroa Rules for Scientific Research in Economics The Alpha-Beta Method Adolfo Figueroa Pontifical Catholic University of Peru Lima, Peru ISBN 978-3-319-30541-7 ISBN 978-3-319-30542-4 DOI 10.1007/978-3-319-30542-4 (eBook) Library of Congress Control Number: 2016944657 © The Editor(s) (if applicable) and The Author(s) 2016 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG Switzerland To Nicholas Georgescu-Roegen, my teacher, in memoriam PREFACE Why has the growth of scientific knowledge in the social sciences proceeded at a rate that is slower than that of the natural sciences? The basic reason seems to rest upon the differences in the complexity of the reality they study Compared to the natural sciences, the social sciences seek to explain the functioning of the social world, which is a much more complex world than the physical world As biologist Edward Wilson pointed out: Everyone knows that the social sciences are hypercomplex They are inherently far more difficult than physics and chemistry, and as a result they, not physics and chemistry, should be called the hard sciences (1998, p. 183) Methodology deals with the problem of how to construct scientific knowledge Is the understanding of the social world more demanding on methodology than understanding the physical world? Economist Paul Samuelson argued in his classic book Foundations of Economic Analysis that indeed this is the case: [This] book may hold some interest for the reader who is curious about the methodology of the social sciences…[I]n a hard, exact science [as physics] a practitioner does not really have to know much about methodology Indeed, even if he is a definitely misguided methodologist, the subject itself has a self-cleansing property which renders harmless his aberrations By contrast, a scholar in economics who is fundamentally confused concerning [methodology] may spend a lifetime shadow-boxing with reality vii viii PREFACE In a sense, therefore, in order to earn his daily bread as a fruitful contributor to knowledge, the practitioner of an intermediately hard science like economics must come to terms with methodological problems (1947, pp viii–ix) Paraphrasing both Wilson and Samuelson, the researcher’s good command of methodology is more critical for producing scientific knowledge on the highly complex sciences (social sciences) than in the less complex sciences (natural sciences) Therefore, the answer to the question posed above seems to be that the difference lies in methodology Social sciences development needs to use better methodology and more intensively This book intends to contribute to that development Methodology is also called epistemology (from the Greek episteme, knowledge) Epistemology or methodology is usually presented as part of philosophy of science In this view, epistemology is a branch of philosophy that seeks to scrutinize the philosophical problems that arise in the practice of science, such as epistemological, metaphysical, and ethical problems Philosophy of economics is the particular field that deals with philosophical problems in economics, as economists practice it To be sure, this book is not about philosophy of economics There are good recent books that show the state of this discipline (e.g Reiss 2013) The approach followed in this book will be different It will correspond to the view of epistemology as the theory of knowledge—the logic of scientific knowledge Then epistemology will be seen as part of the formal science of logic, not of philosophy Indeed, some textbooks of logic now deal with the logic of scientific knowledge (e.g Hurley 2008) The book will show practical rules for the construction and growth of scientific knowledge in economics, which will be derived logically from a particular theory of knowledge or epistemology No such rules exist currently in economics; that is, economists follow a diversity of rules, derived from a diversity of epistemologies or having no epistemological justification The intended contribution of the book is then normative: what rules of scientific research ought economists to follow This view of epistemology is more natural for working scientists, who are epistemology users rather than makers The epistemology proposed by Karl Popper (1968) will be adopted in this book This is one of the most popular epistemologies in the literature It essentially says that theory is required for scientific knowledge, but this theory must be empirically falsifiable or refutable; thus, good theories will PREFACE ix prevail and bad theories will be eliminated, as in a Darwinian competition Scientific progress will result from this competition However, Popperian falsification epistemology is also the most debated Many authors have argued that Popperian epistemology is not applicable in economics The arguments are clearly summarized in the Stanford Encyclopedia of Philosophy by Daniel Hausman (2013), a leading philosopher of economics They are Economic theories are rarely falsifiable When they are, they are rarely submitted to testing When they fail the test, they are rarely repudiated Consequently, we can understand why in economics we observe that no theory is ever eliminated and that progress in scientific knowledge is relatively limited, in spite of large amounts of research work Problems (2) and (3) refer to what economists and why These are not within the scope of this book Problem (1) is the subject of this book The challenge is how to make Popperian epistemology applicable and operational in economics Can we logically derive from Popperian epistemology a set of practical rules for scientific research in economics? As the book will show, this derivation is subject to the transformation of a complex social world into a simple abstract world Popperian epistemology might be suitable for physics, but whether it is so for economics, a science dealing with a complex world, is another question In fact, problem (1) has to with the complexity of the social world How to make knowable a complex reality, such as the social world? The late Vanderbilt University professor of economics, Nicholas GeorgescuRoegen (1971) proposed a solution to this problem, and developed the process epistemology Georgescu-Roegen is mostly known as the founder of bio-economics, an economic school different from standard economics, but his contribution to epistemology is less known Consider now combining the epistemologies of Popper and GeorgescuRoegen into a single one, as they not contradict each other Call this combination the composite epistemology Then, as will be shown in this book, a set of rules for scientific research in economics can be derived from the composite epistemology This set of rules will thus constitute a scientific research method, as it will have epistemological justification or logical foundations This will be called the alpha-beta method This method intends to solve the falsification problem in economics, the problem that Comparing Economics and Natural Sciences 143 As said before, economics relies on natural experiments for empirical data, rather than on controlled experiments On this problem, economics is like astronomy However, no telescopes have been invented to observe the economic process of production and distribution Hence, in economics, and contrary to physics, economic theories have not been challenged by innovations in measurement instruments Problems of measurement explain, at least in part, why economic theories tend to be immortal If production and distribution of societies could be measured through satellite instruments, for example, economics would be able to make more rapid progress in scientific knowledge This conclusion also applies to the social sciences in general Statistical analysis techniques in economics (econometrics) have gone through significant progress, but those sophisticated techniques are still applied to very imperfectly constructed databases Sophisticated econometrics cannot substitute poor quality data As the saying goes in statistical testing “garbage in, garbage out.” Scientific progress in economics will thus depend to a large extent upon the innovations in the instruments of measurement of the economic process In sum, if the growth of scientific knowledge in economics and the social sciences not appear as great as in physics or biology, it is due, in part, to the complex nature of the social world This complexity implies greater epistemological challenges, including here the problem of falsification of scientific theories using imperfect measurement instruments The alpha-beta method is a contribution to ensure falsification of scientific theories in economics, but economics must still deal with the problem of measurement Notes Another example: According to gravity theory, if the sun exploded, the earth would instantaneously suffer a departure from its usual elliptic orbit However, according to special relativity theory this effect would not happen, for no information can be transmitted faster than the light speed; hence, this effect would not be felt in the earth instantaneously It would take eight minutes, which is the time light takes to travel from the sun to the earth (Greene 2003, p. 354) Space-time is the four dimensional description of the universe, uniting the three space dimensions and the single time dimension CHAPTER 10 Conclusions Abstract The social sciences are more complex than physics, the exemplar of sciences Therefore, economics and the other social sciences require a more sophisticated epistemology than physics The book proposes a composite epistemology, the combination of the epistemologies of Karl Popper and Nicholas Georgescu-Roegen, to provide economics with such epistemological need Then, the alpha-beta method is logically derived from the composite epistemology and contains operational rules for scientific research, the use of which will lead to a Darwinian competition of economic theories By construction, economics can now be seen as a critical science The use of the alpha-beta method will lead to enhancing the quality of learning, teaching, and research in economics This is the expected contribution of the book The social world is much more complex than the physical world Therefore, economics requires more sophisticated epistemology than physics This book has proposed the alpha-beta method, which contains a set of rules for scientific research in economics The method is constructed in such a way that economic theories are necessarily falsifiable Therefore, the usual claim that economic theories are rarely falsifiable, which has led to the coexistence of many economic theories, can now be ruled out The scientific progress of economics is now viable through the Darwinian evolutionary process, in which selection of good theories and elimination of bad theories can be practiced © The Editor(s) (if applicable) and The Author(s) 2016 A Figueroa, Rules for Scientific Research in Economics, DOI 10.1007/978-3-319-30542-4_10 145 146 A FIGUEROA The alpha-beta method has been derived from the composite epistemology, the combination of the epistemologies of Nicholas Georgescu-Roegen and Karl Popper The Popperian epistemology alone could rarely lead to falsification in economics It was necessary to solve the problem of transforming a complex real world into an abstract and simpler world by means of a scientific theory, which generates at the same time causality relations The process epistemology of Georgescu-Rogen has been used to solve this problem Therefore, the alpha-beta method has epistemological justification and now under this method economic theory will be, by construction, always falsifiable The development of the alpha-beta method is presented as the main contribution of this book Scientific knowledge seeks to explain and understand reality and it seeks to be error-free knowledge The aim of economics is to establish causality relations—what causes what The alpha-beta method allows us to reach this objective in economics Alpha propositions constitute the assumptions of the scientific theory, the construction of the abstract world, which intends to be a good approximation of the complex real world Beta propositions are derived from alpha proposition, show causality relations, and are, by construction, empirically falsifiable Therefore, we have an epistemological criterion to accept or reject economic theories Science is epistemology Hence, the alpha-beta is a scientific research method The rules of the alpha-beta method can be summarized as follows: (A) The complex real world must be transformed into a simpler abstract world by means of a scientific theory A scientific theory is a set of assumptions, which are called the alpha propositions; thus, a scientific theory is a set of alpha propositions The alpha propositions are unobservable, as they refer to the underlying factors operating in the workings of the real world Thus, a scientific theory seeks to uncover the underlying factors in the social facts that we observe (B) The alpha propositions must be able to generate, by logical deduction, observable propositions, which are called beta propositions Beta propositions are, by logical construction, empirically falsifiable or refutable Moreover, beta propositions contain the causality relations between the exogenous and endogenous variables established by the scientific theory (C) Beta propositions are tested statistically against facts of the reality under study If facts refute the beta propositions, then the scientific theory is rejected as a good approximation of this reality If facts can- CONCLUSIONS 147 not refute the beta propositions, the scientific theory is accepted as a good approximation of reality; therefore, the theory explains this reality and the causality relations of the theory have been empirically corroborated (D) The alpha-beta method applies to economics An economic theory is a set of alpha propositions Beta propositions are tested statistically against empirical data and thus make economic theories always falsifiable Accepting or rejecting economic theories constitute a complex endeavor, as the testing involves not only the assumptions of the economic theory, but also includes assumptions about both statistical instruments and measurement of facts In economics, when the economic theory is accepted for a given reality, it is so only for this reality The theory may fail in explaining another reality The statement “If an economic theory explains a single reality, then it explains every reality” is a fallacy Ontological universalism does not apply to human societies Even in the case that the economic theory explains reality, it is accepted only provisionally, until new facts, new testing instruments, or new superior theories appear The reason is that, through falsification, scientific theories can be proven to be false, but not to be true, only to be consistent with facts According to the alpha-beta method, scientific theories are constructed to be destroyed, not to be protected This is consistent with the principle of falsification Those theories that survive the falsification process are the good ones and are accepted, whereas the bad ones are eliminated Scientific theories operate under the Darwinian evolutionary type of competition, which leads to the progress of science The use of the alpha-beta method should lead to the progress of economics The alpha-beta method makes economics a critical science, for the criteria to accept or reject theories have epistemological justification The idea that explanation, understanding, and causality of the real world can be obtained without scientific theory, by using statistical or econometric analysis alone is a logical impossibility The statement “the existence of statistical correlation implies causality” is a fallacy This is so no matter how sophisticated the statistical or econometric analysis is or how large the sample size is The underlying reason is that there is no logical route from facts to scientific theory and causality The only logical route is the one from scientific theory to causality, which constitute the logical justification of the alpha-beta method It is in this sense that we 148 A FIGUEROA can speak about the logic of scientific knowledge; that is, science is the logic way, the rational way, to establish causality The statement “Science is measurement” is incomplete, for measurements alone, facts alone, are not conducive to causality The alpha-beta method is conducive to scientific knowledge because it is a scientific research method; however, its application requires the availability of both theory and data set When theory or data is not available, other empirical research methods can be applied, which are conducive to pre-scientific knowledge The research strategies to go from pre-scientific knowledge to scientific knowledge are also presented in the book Although the book has dealt with economics, it has also shown that the application of the alpha-beta method can be extended to the other social sciences The basic reason is epistemological: Any research question about the complex social world can be answered by reducing it to an abstract and simpler social world, which leads to the use of the alphabeta method Regarding the comparison of economics with the natural sciences, the alpha-beta method is not applicable to physics However, it is applicable to evolutionary biology This is so because human societies, seen as human species, are instances of biological species The social world and the biological world are thus similar—complex realities This is not the case of physics and thus it uses other rules for the falsification of scientific theories Hence, the book concludes that economics is, like physics, a science, but economics is not a science like physics Economics is more like evolutionary biology For one thing, the principle of ontological universalism is valid in physics, but it is not in economics and biology As to the question posed at the beginning of the book—why the growth of scientific knowledge in the social sciences has proceeded at a lower rate than in physics—the book has shown that the answer lies in the nature of these sciences The social world is much more complex than the physical world; hence, the social sciences are more complex than physics, the exemplar of sciences For one thing, the atom is homogeneous, but people are diverse Scientific knowledge in the social sciences is therefore more demanding on epistemology, more epistemology-intensive, than in physics The implication is that a more complex reality would require a more complex epistemology The alpha-beta method is constructed to provide such epistemological need The book has shown that although the principle of falsification is applicable to economics, it is a very involved task First, facts in economics CONCLUSIONS 149 include physical categories and socially constructed categories, which are not easy to measure Second, the measurement instruments are imperfect Falsification in economics refers to observed facts about the behavior of people However, most economic data are collected using surveys, interviewing people Economic data so collected refer to opinions of people, in which they say what they do, which need not be what in fact they Instruments similar to telescopes or microscopes not exist in economics Finally, the way economic data are generated not necessarily conform to the assumptions of parametric statistics Therefore, the use of parametric statics in the falsification process of scientific theories may lead to the rejection of scientific theories mistakenly The use of non-parametric statics is safer in the falsification process, but its domain of testing is more limited The alpha-beta method thus provides ways to deal with the problems of accepting or rejecting economic theories The problems on factual data quality and measurement instruments not appear in physics On the contrary, the discovery of new measurement instruments seems to underlie the observed progress of physics If the growth of scientific knowledge in economics and the social sciences in general not appear as great as in physics, it is, in part, due to the complex nature of the social world, and in part due to the problem of testing scientific theories using imperfect statistical and measurement instruments Therefore, progress in economics will come from the introduction of innovations in the epistemology, such as using more intensively the alpha-beta method or developing new superior methods, developing new non-parametric statistical testing instruments, and new measurement instruments It is a fact that much of the research work in economics and the social sciences in general not follow the scientific research rules developed in this book If economists had followed these rules, we would not have ended up with the current coexistence of all possible economic theories developed over time Economic theories have not been subject to the Darwinian evolutionary competition This fact is certainly unfortunate and may indeed explain the relatively low growth of scientific knowledge in economics and the social sciences in general; however, and precisely because of this fact, the potentials for a more rapid progress of scientific knowledge in economics are very high The use of the alpha-beta method will lead to enhancing the quality of learning, teaching, and research in economics This is the expected contribution of the book BIBLIOGRAPHY Casti, J (2001) Paradigms regained: A further exploration in the mysteries of modern science New York: Perennial Figueroa, A (2015) Growth, employment, inequality, and the environment: Unity of knowledge in economics New York: Palgrave Macmillan Freund, J., & Simon, G (1992) Modern elementary statistics Englewood Cliffs: Prentice Hall Georgescu-Roegen, N (1971) The entropy law and the economic process Cambridge, MA: Harvard University Press Greene, B (2003) The elegant universe New York: Vintage Books Haack, S (2003) Defending science-within reason: Between scientism and cynicism Amherst: Prometheus Books Hausman, D (2013) Philosophy of economics The Stanford Encyclopedia of Philosophy http://plato.stanford.edu/archives/win2013/entries/economics/ Hawking, S (1996) A brief history of time: Updated and expanded edition New York: Bantam Books Hurley, P (2008) A concise introduction to logic Boston: Cengage Learning Kuhn, T (1970) The structure of scientific revolutions (2nd ed.) Chicago: Chicago University Press Li, Q., & Racine, J. S (2006) Nonparametric econometrics: Theory and practice Princeton: Princeton University Press Mayr, E (1997) This is biology Cambridge, MA: Harvard University Press Neuman, L (2003) Social research methods (5th ed.) Boston: Pearson Education North, D (1990) Institutions, institutional change, and economic performance Cambridge, UK: Cambridge University Press Pagan, A., & Ullah, A (1999) Nonparametric econometrics Cambridge, UK: Cambridge University Press © The Editor(s) (if applicable) and The Author(s) 2016 A Figueroa, Rules for Scientific Research in Economics, DOI 10.1007/978-3-319-30542-4 151 152 BIBLIOGRAPHY Pasternak, C (2003) Quest: The essence of humanity Chichester: Wiley Popper, K (1968) The logic of scientific discovery London: Routledge Popper, K (1976) The logic of the social sciences In T. W Adorno et al (Eds.), The positivist dispute in German sociology (pp. 87–104) New York: Harper & Row Popper, K (1985) The rationality principle In D. Miller (Ed.), Popper selections (pp. 357–365) Princeton: Princeton University Press Popper, K (1993) Evolutionary epistemology In M. Goodman & R. Snyder (Eds.), Contemporary readings in epistemology (pp. 338–350) Englewood Cliffs: Prentice Hall Reiss, J (2013) Philosophy of economics: A contemporary introduction New York: Routledge Rosenberg, A (2008) Philosophy of social science (3rd ed.) Boulder: Westview Press Samuelson, P (1947) Foundations of economic analysis (p. 1983) Cambridge, MA: Harvard University Press Searle, J (1995) The construction of social reality New York: The Free Press Smith, J. M (2002) Equations of life In F. Graham (Ed.), It must be beautiful: Great equations of modern science (pp. 193–211) London: Granta Books Wilson, E (1998) Consilience: The unity of knowledge New York: Alfred Knopf Ziliak, S., & McCloskey, D. N (2008) The cult of statistical significance: How standard error costs us jobs, justice, and lives Ann Arbor: University of Michigan Press INDEX A abstract economic process, construction of, 57, 59 abstraction method in alpha-beta method, 54 in process epistemology, 10 accepting or rejecting economic theories and the alpha betamethod, 147, 149 alpha-beta method concept, 23–5, 34, 107, 111, 112, 117, 122–3, 125, 139, 143, 146–9 derived from composite epistemology, 14, 22–3, 28, 99, 117, 138, 146 in economics; economic theory falsifiable by construction, 47; falsification through beta propositions, 56; identification problem, 96; method for accepting or rejecting economic theories, 147, 149; resolves Popperian epistemology limitations, 138 falsification in economics under; includes three sets of assumptions, 95–6; justified by composite epistemology, 28; and measurement instruments, 149; more complex than in physics, 139; and Popper epistemology, 139, 146; and problem of identification, 64; and realities without theory, 54–5 set of rules for scientific research, 13, 15, 145 alpha propositions concept, 16 non-tautological and unobservable, 17, 18, 25 primary assumptions of scientific theory, 16 assumptions of scientific theory See alpha propositions auxiliary assumptions and model construction, 55–7, 61 B beta-hypothesis, 72, 74, 76, 79, 80, 82–4, 88, 93, 94, 105–7, 113 © The Editor(s) (if applicable) and The Author(s) 2016 A Figueroa, Rules for Scientific Research in Economics, DOI 10.1007/978-3-319-30542-4 153 154 INDEX beta propositions causality relations, 20, 27, 37, 40, 45, 52, 73, 76, 78, 88, 94, 100, 101, 119, 138, 146 empirically falsifiable or refutable, 45, 146 empirical predictions of scientific theory, 19–20 logically derived from alpha propositions, 19, 22, 24 relations between exogenous and endogenous variables, 26, 27 bio-economics, 52 biology and economics See economics and biology biophysical environment in biology, 136, 140, 141 biophysical environment in economic process degradation of (by human activity), 33 ecological niche of human species, 33 and evolutionary process, 38–41, 45, 136 and mechanical process, 37, 38, 40, 59 C capitalism definition, 21, 51 economic theory of, 30, 34 fundamental institutions of, 31, 33, 52 cardinal variable, 92–3 Casti, J., 135 causality causality matrix, 27 different from statistical correlation, 119–20 fallacy of, 119 matrix of beta propositions, 26, 27 needs scientific theory, 12, 27, 28, 88, 106, 107, 147 relations, 2, 11, 12, 15, 20, 27, 35, 37, 40, 43, 45, 52, 73–88, 94, 100, 101, 104, 107, 109, 110, 119, 124, 138, 146, 147 statistical correlation, 119–20 See also beta propositions chronological time, 59, 92 composite epistemology applicable to highly complex realities, 14 assumptions, 13, 14, 146 combining epistemologies of Popper and Georgescu-Roegen, 13–14, 28, 99, 117–18 consistent with meta-assumptions of theory of knowledge, 6, 77 operational via alpha-beta method, 14, 15, 28 composition, fallacy of, 118 correlation coefficient derived from the regression line, 80 as random variable, 81 and regression coefficient, 81, 82 in Spearman test, 86, 87 corroborated vs verified theories, 27 critical science and Popperian epistemology, 9, 145 critical science, economics as, 147 and alpha-beta method, 147 D Darwinian competition for scarce resources in biology, 137 Darwinian competition of scientific theories and alpha-beta method, 149 in economics and social sciences, 97 and evolutionary epistemology, 8, 145, 147, 149 INDEX deductive logic in composite epistemology, 9, 100, 101 in falsification epistemology, deductivism, 100, 101, 112, 122–3 deterministic economics process, 41 dynamic economic process, 35, 37, 43 dynamic equilibrium concept of, 36–37 temporal in evolutionary process, 38–40, 84, 126 and time t, 39, 82 dynamic model, 73, 82–3 dynamic process, 35, 37–9, 43, 52, 53, 59, 65, 84, 126, 136 E econometrics, 63, 87, 107, 121, 143, 147 economic process, concept, 30 economic process, equilibrium of not normative concept, 44 social equilibrium concept, 44 stability, 37, 53 economic process, structure of reduced-form relations, 56 structural relations, 12 economic process, types of deterministic/stochastic, 41–3 evolutionary, 37, 38, 43 mechanical; dynamic, 82–4; static, 74–80 economics and biology epistemological differences/ similarities, 135–7 ontological universalism, 49–52, 140–1 economics and physics differences in measurement instruments, 91, 92, 95, 141–3, 149 155 epistemological differences/ similarities, 9, 138 the need of unified theory, 61, 123, 135, 140, 141 economics as critical science and alpha-beta method, 47–61 economics is a social science, 43–5 economics, the science of epistemology-intensive science, 115, 148 factual science, 1, 85, 100 non-experimental science, 48 social science, 14, 28, 30, 44–45, 47, 49, 54, 58, 66, 96, 97, 111, 115, 118, 123, 125, 129, 135, 149 theoretical science, 47 economic theory empirical predictions as beta propositions, 53, 57, 95 as family of models, 55–7 as set of alpha propositions, 21, 22, 34, 47, 51, 56, 146, 147 Einstein against inductivism (for theory invention from data), 107 Einstein and letter to Popper, 104 Einstein’s theories in physics, 139, 140 empirical hypotheses, types of beta-hypothesis, derived from scientific theory, 130 H-hypothesis, not derived from scientific theory, 130 empirical predictions of scientific theory See beta propositions empirical research methods interpretive research method, 108–12 statistical inference method, 104–8 epistemology as logic of scientific knowledge, 2–7, 107 as rules of scientific research, 7, 8, 12, 138 as theory of knowledge, 3–7, 101 156 INDEX equilibrium definition, 34, 35, 44, 45 fundamental for falsification, 52–3 error vs failure of scientific theory, 24 evolutionary economic process, 37, 38, 43 evolutionary epistemology See Darwinian competition of scientific theories evolutionary model, 40, 57, 73, 83, 84, 127 evolutionary process, 8, 38–41, 45, 52, 55, 59, 60, 83, 126, 136, 145 expanded reproduction process, 33 Heisenberg’s uncertainty principle in economics (data collection), 142 in physics, 109, 142 hermeneutics See interpretive epistemology H-hypothesis no relation with causality, 106 not derived from theory, 105 (see also beta-hypothesis) testable using parametric of non-parametric statistics, 105 historical time (T), 38, 84 historical vs mechanical time, 38, 84 Hurley, P., 102 F failure vs error of scientific theory, 24 falsification in economics applicable only under alpha-beta method, 64 justified by composite epistemology, 146 See also Popperian epistemology not applicable in economics Figueroa, A., 61, 141 forecasting, the fallacy of, 125–7 Freund, J., 85 I identification problem/problem of identification in rejecting beta-hypothesis, 72 in rejecting H-hypothesis, 106 immortal theory (pseudo theory), 53, 92, 95, 143 inductive logic, 7, 27, 101–4, 110 inductivism, 101, 103, 104, 110, 112, 122–3 initial conditions as initial structure of society, 31, 33, 50, 51 initial inequality postulate, 51 initial resource endowment postulate, 51 institutional postulate, 50 interpretive epistemology assumptions, 108 and exploratory research, 110 limitations, 108 intepretive research method, 108–113 G general equilibrium model, 57–9, 61 Georgescu-Roegen, N., 10, 16, 28, 31, 92, 99, 118, 138, 146 Georgescu-Roegen’s process epistemology See process epistemology Greene, B., 140, 143n2 H Haack, S., 103 Hawking, S., 4, 130, 131 K Kuhn, T., 92, 142 INDEX L labor market, 31, 51, 58, 61 laws of thermodynamics and economic process Entropy Law, 33 Law Of Conservation Of Matter and Energy, 33 Li, Q., 87 logical time, 59 logic, science of and epistemology, 16 formal science, 1, 4, 117 and theory of knowledge, long run model, 59–61 M markets and democracy, 31, 33, 34, 52 as fundamental institutions of capitalism, 31, 33, 52 Mayr, E., 135, 136 McCloskey, D.N., 78 measurement of social facts Georgescu-Roegen criterion, 92–3 science is measurement, 88–93 Searle’s criterion, 89–92 mechanical processes, 37, 38, 40 mechanical time (t), 38, 84 mechanical vs historical time, 38, 84 methodology See epistemology microeconomic equilibrium model, 58 misplaced concreteness, fallacy of, 123–5 models concept, 34, 56 economic theory as family of models, 55–7 make theories falsifiable, 53 need of auxiliary assumptions, 56 types of; partial vs general equilibrium, 57–9; short run vs long run, 59–60; static vs 157 dynamic vs evolutionary, 74–80, 82–84 multiple correlation coefficient, 81 N natural resources in economic process, 31–3 Newton’s theory in physics, 140 Neuman, L., 108, 109 non-parametric statics, 84–8, 149 assumptions, 85, 96 North, D., 49 O ontological universalism, the fallacy of, 123 ontological universalism, the problem of in economics, 48–52 in physics, 48–52 ordinal variable as dummy variable in regression analysis, 93, 113 qualitative, 92, 93, 113 P Pagan, A., 87 parametric statistics or statistical theory, 64, 65, 74, 84, 95, 96, 105 assumptions, 64, 65, 74, 95, 96, 149 partial correlation coefficient, 81–2 partial equilibrium model, 58, 61 Pasternak, C., 135 physics and economics See economics and physics Popper, K., 7–9, 28, 50, 55, 99, 102–4, 111, 117–18, 138, 146 158 INDEX Popperian epistemology assumptions, 7–9 consistency with meta-assumptions of theory of knowledge, 5, in economics, 15–16, 138, 146 scientific research rules or principles, 7, 8, 28, 138 Popper’s falsification epistemology See Popperian epistemology power structure in economic process, 33, 44 primary assumptions of scientific theory See alpha propositions principle of increasing endogenization, 58 principle of insufficient reason, 88 problem of induction, 102–3 process epistemology assumptions, 10, 11, 13 consistency with meta-assumptions of theory of knowledge, 5, rules or principles, 13 use of abstraction in studying complex realities, 9–10 proximate factors and structural equations, 12, 53 R Racine, J S., 87 rationality postulate, 50 rationality, the assumption of, 3, 50 realities without theory, 54–5, 114 reduced form relations as beta propositions, 19–20, 56, 74 as causality relations, 12, 20, 74 regime switching, 37–9, 41, 43, 83, 84, 126 regression analysis assumptions, 75, 79, 105 in dynamic models, 82–3 in evolutionary models, 83–84 in static models, 74–80 regression coefficient, 76–9, 81, 82, 105, 106 research methods pre-scientific; interpretive method, 108–112; statistical inference method, 104–8 scientific (alpha-beta), 112–116 Rosenberg, A., 108 S sample and population relationships, 66–71 Samuelson, P., 100 scarcity postulate, 50 sciences, types of complex vs hypercomplex, 139 formal vs factual, 1–2, 4, social sciences vs natural sciences, 108, 115, 137–143 scientific knowledge error-free knowledge, 2, 6, 146 need of epistemology, 1–14, 107 vs non-scientific knowledge, 6, 104, 110 scientific theory definition, 3, 17 need of epistemology, 7, 8, 10–13, 16, 64, 146 Searle, J., 89 Searle’s criterion of measuring reality, 89–92 self-regulated economic process, 35 short run model, 59–60 Simon, G., 85 simple reproduction process, 31, 33, 34 Smith, J. M., 135–7 social group equilibrium model, 44 socially constructed variables, 89–94, 113 concept, 89 INDEX See also Searle’s criterion social sciences epistemology-intensive, 115, 148 hypercomplex sciences, 139 social situation or social context, 50, 55–7 static economic process, 34, 41 static equilibrium, 34, 35, 39 static model, 74–80, 83 static process, 35, 38, 39, 52, 59, 65, 125 statistical association of variables as correlation coefficient, 80–82 different from causality, 27, 106, 120 statistical correlation and causality, 82, 106, 107, 119, 120, 122, 130, 147 statistical inference research method, 104–8 statistics, science of and econometrics, 143, 147 and epistemology, 64 formal science, 64, 84, 93, 96 stochastic economic process, 41, 43 structural relations, 12 T testing economic theories See alpha-beta method, falsification in economics under theory of everything, fallacy of, 123 theory of evolution by natural selection, 136 theory of knowledge definition, 3, 6, as formal science (logic), meta-assumptions, 5, 6, 77 159 as normative science, vs “science is what scientists do”, time, concepts of chronological vs logical (short and long run), 59 mechanical (t) vs historical (T), 38, 84 transition dynamics, 37 U Ullah, A., 87 ultimate factors and reduced form equations, 12, 20, 27, 53, 82, 136 unified theory in biology, 140 of capitalism, 51, 61, 141 in economics, 49, 61, 123 and partial theories, 49, 141 in physics, 135 of plant behavior, 140 and theory of everything, 123, 135 unity of knowledge as epistemological requirement of science, 60–1 V verified vs corroborated theories, 27 W weak-cardinal variable, 92–3 wealth inequality See power structure Wilson, E., 139 Z Ziliak, S., 78 ... Epistemology Alpha- Beta: A Scientific Research Method 15 The Economic Process 29 The Alpha- Beta Method in Economics 47 Falsifying Economic Theories (I) 63 Falsifying Economic Theories (II) 73 The Alpha- Beta. .. presents the conclusions of the book In sum, the objective of this book is to present a set of rules for scientific research in economics, which are contained in the alpha- beta method PREFACE xi These.. .Rules for Scientific Research in Economics Adolfo Figueroa Rules for Scientific Research in Economics The Alpha- Beta Method Adolfo Figueroa Pontifical Catholic