Chapter 10: Conceptual analysis, fieldwork and the methodology of model building
At the outset we complained that neoclassical economic theory provided the ontological basis (the rational individual) and the corresponding individualistic methodology of the modern econometrics that has come to replace the Cowles Project. The result is that neo classically-based econometrics fails to develop any insight into deep structures – it interprets whatever it sees as individuals choosing with some degree of (perhaps bounded) rationality. It simply relates observables to one another, putting choices and actions together into equilibrium patterns. We have proposed a new vision that puts methodological institutionalism in place of methodological individualism. We argued in Chapter 1that Hollis and Nell (1975) had already both exposed and explained the methodological deficiencies of modern econometrics before they had become widely realized. Moreover, Hollis and Nell, and later Nell (1998a), suggested a way of fixing the problems. The founders of econometrics, Haavelmo and the Cowles econometricians, held a vision of the real world– expressed in the initial stages of the Cowles Project that laid the foundations for the beginnings of econometrics in the 1940s. This vision provided a perspective that was ontologically incompatible with contemporary econometrics as it developed in the 1970s and 1980s.
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