A Pragmatist Philosophy of Economics

Since the publication of my book Error in Economics, I have defended a pragmatist approach to economic methodology and the philosophy of economics. This pragmatist approach can be characterized by three tenets: (A) Action Orientation: The goal of economic theorizing is not truth but usefulness. Good concepts, models, and theories are ones that support economists in their endeavours to forecast economic quantities of interest and prepare successful policies. (B) Fact/Value Entanglement: There is no strict separation of positive and normative economics. In particular, there are no purely positive ‘economic facts’. Establishing economic facts such as the value of a quantity, such as the inflation rate, or a causal hypothesis proceeds against a backdrop of norms and value judgements. Ethical reflection should be part and parcel of positive economics. (C) Relativism: Economic ‘truths’ are relative to worldviews, i.e., constellations of beliefs that comprise fundamental background assumptions, the nature and purpose of the inquiry, as well as methodological and other norms. The goal of this chapter is to review these three central tenets of the pragmatist approach to the philosophy of economics and defend them against the alternatives: realism, the value-free ideal, and foundationalist epistemology.