Realism in Economics: The New Classical Case

Péter Galbács ()
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Péter Galbács: Institute of Economics and Methodology, Budapest Business School

Acta Oeconomica, 2017, vol. 67, issue 2, 257-279

Abstract: For the last few decades, considerable attention has been paid to the methodology of mainstream economics. It is not mere chance that economics is surrounded by methodological debates. If its relevance is at stake, this can be either refuted or proven most efficiently at a methodological level. Arguments for and against mainstream economics underline the methodological homogeneity of mainstream economics, while serious, though almost neglected, arguments can be found for a view according to which the long history of mainstream economics can be described as a sequence of methodological breaks. I argue, firstly, for a sharp demarcation by new classical macroeconomics from the Friedmanian instrumentalism and, secondly, for the realism of new classicals. I strive to identify the epistemological principles underlying Lucas’ models and to highlight the signs of that demarcation as well. I concentrate on the techniques by which new classicals could set their models into an indirect relationship with reality. It is also highlighted that the common terminology, according to which the assumptions of abstract economic models are uniformly regarded as “unrealistic”, actually refers to two different techniques. From these approaches, there is only one which can be justifiably labelled as realist.

Keywords: new classical macroeconomics; unrealistic assumptions; instrumentalism; realism; empirical observations (search for similar items in EconPapers)
JEL-codes: B13 B22 B23 B41 (search for similar items in EconPapers)
Date: 2017
Note: Studying the Lucas fragments as a visiting scholar at Duke University HOPE, the paper was prepared with the financial support of Budapest Business School. I am grateful to Endre Nagy and Michel De Vroey for their detailed comments on the first draft of this paper and to the anonymous referees for their invaluable comments. Special thanks are due to librarians Elizabeth Dunn and Kate Collins (David M. Rubenstein Rare Book & Manuscript Library, Duke University) for their kind assistance, reaching far beyond their responsibilities. Any errors that remain are entirely my own.
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