Over the years many voices of dissent have been raised against economics and the earlier political economy for seemingly failing to pay due attention to the institutions of specific societies and hence to the actualities of economic life. When critics, from Richard Jones to J.K. Galbraith, have produced works of their own which in their estimation have been free of this defect, they have never made more than a very modest impression on the mainstream of economic theory. Sometimes, as in the case of the German historical economists and to a lesser extent in that of the American institutionalists, these...

In this chapter I shall deal with an epistemological distinction which will form the basis of the later analysis. In order to make it easier for the reader to grasp this distinction, I shall begin with an illustration drawn from familiar material.

Let us consider what rising price indices tell us about inflation. Do they tell us why prices are rising or do they tell us that prices have risen? Do they convey the sort of information we would need to devise a policy to counter inflation, that is, do they provide us with a guide to action in the...

In the remaining chapters I shall try to use the conceptual framework outlined in Chapter 2 to investigate certain aspects of the method of comparative statics in micro-economic theory. I hope that this will serve the dual purpose of casting some new light on micro-economic theory and of illustrating and enlarging upon what I have said in Chapter 2. This chapter will prepare the ground for the further analysis.

The applicability of the ex post ex ante, genetic structural, distinction is in no way restricted to micro-economic comparative statics. I think it could be very usefully applied to macro-economics but...

In The Theory of Political Economy, Jevons made the following remark on the logical method of economics:

I think that John Stuart Mill is substantially correct considering our science to be a case of what he calls the Physical or Concrete Deductive Method; he considers that we may start from some obvious psychological law, as for instance, that a greater gain is preferred to a smaller one, and we may then reason downwards, and predict the phenomena which will be produced in society by such law.¹

Let us take this ‘obvious psychological law’ as one way of expressing the assumption...

It is always interesting to consider the works of those who pioneered a new conception. In a study which scrutinizes the presuppositions on which paradigms are built, such works are especially important because their authors naturally felt obliged to justify their ideas and their criticisms of older ideas by an appeal to what they considered common sense. Once a paradigm has been set there is less need for this because there is then a circle of people to whom the esoteric idiom is meaningful. An economist can speak of a price change accompanied by a compensating variation in income which...

At the end of Chapter 3 I suggested that an equilibrium model in which the preferences of individuals were forever changing has some considerable advantages and I therefore proposed an enquiry into the variability of preference orderings. This enquiry has now been completed. We may draw the following conclusions from it. The notion of consistent choice that finds expression in everyday terms such as a disposition, taste, habit, fashion or custom has the form of an ex ante fact. Provided the notion is not illusory, dispositions, tastes, and so on are therefore independent of particular situations and have a certain...