Keynes, Uncertainty and the Global Economy

Keynes, Uncertainty and the Global Economy

Beyond Keynes, Volume Two

Edited by Shelia C. Dow

The revival of interest in Keynesian economics since the late 1980s reinstates the importance of Keynes’s contribution to economic theory and policy. This is the second of two volumes in which authoritative contributions are presented by an outstanding group of international experts to celebrate Keynesian economics, and to review and further the developments of post Keynesian economics of recent years.

Chapter 8: The role of econometrics in a radical methodology

Bill Gerrard

Subjects: economics and finance, post-keynesian economics


Bill Gerrard1 I INTRODUCTION: WHAT ARE THE ISSUES? There has always been a methodological debate in economics. But only periodically has the debate been deemed significant enough to be taken seriously by economists themselves. Most of the debate has been about economists but not by economists. However, there have been at least two major exceptions, the Methodenstreit between the early neoclassical economists and the historical school in the 1880s and the marginalist controversy in the late 1940s and early 1950s. The current phase of the methodological debate in economics, from 1970 onwards, also has claim to major significance. The origins of the current phase of the methodological debate lie in the crisis following the breakdown of the Keynesian–neoclassical consensus in the 1960s and an increasing concern about the ‘technological’ failure of economics to produce practical tools for policy makers. The crisis led some distinguished economists such as Leontief (1971), Phelps Brown (1972) and Worswick (1972) to question the credentials of economics as a science on two main grounds: (a) large parts of abstract economic theory had little or no empirical relevance, and (b) economics showed a lack of cumulative progress compared to other (natural) sciences. Thus the current phase of the methodology debate in economics initially sought to answer the question: is economics a science? As I have argued elsewhere (Gerrard, 1995), it is useful to characterize the current methodological debate in economics as dealing with both ‘traditional’ and ‘new-view’ issues. The traditional methodological issues concern the...

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