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September 1, 2011

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If economic theories should be "judged by their internal logic", what is the value of these theories? Why do we need macroeconomic theories at all if the "evidence doesn't cut it"? And how do you prevent that the macroeconomic theories become nothing more than the economist's ideological preference articulated in an elaborate mathematical model? For if the evidence doesn't count, it becomes impossible to decide between the Keynesian approach and the free-market approach. If economy is all pragmatics, we can abandon macroeconomics, and replace it with a more pragmatic approach. (And I think this is not a bad idea at all, but I am only a humble philosopher of history.)

Thanks, Jeroen--theories are still useful insofar as they allow us to conceptualize how the economy works and what we should do with regard to it. In that sense, sure, theories are ideologies, but how can they not be--every economic theory starts with some basic axioms (even a pragmatic one), which inform the ultimate disagreement between the theories themselves.

In my mind, the debate over free markets versus statism (or Keynesianism) is primarily one of basic principles (both economic and ethical), and I think very fruitful discussion over their merits can be conducted at that level. (And the value of pragmatic considerations must be assessed the same way.)

Thank you for the (very quick) reply Mark, though I am sill not quite convinced of the usefulness of such theories besides heuristic devices. (Perhaps a bit like Kant's Principle of Purposiveness.)

We need a model to help conceptualize a problem and its possible solutions. At the same time, good old pragmatism is sometimes more effective than a bad model. That is, sometimes something turns out to work (by accident), even though it wasn't planned or intended. So keeping an open mind is critical--but unfortunately, many people do become professionally wedded to their pet theories. Hence the phrase, "Funeral by funeral, the discipline progresses...."

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