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Why did mainstream economics miss the crisis? The role of epistemological and methodological blinkers

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Disciplines
  • Economics
  • Philosophy

Abstract

abstractPurpose - In this paper, we show how the translation of a logical positivist epistemology into neoclassical economics has had profound methodological consequences which over-determine an inability to predict cusps and their associated crises. Design/methodology/approach - Based on a review of epistemological and methodological literature, we argue that the financial crises of the past 20 years ought to initiate a questioning of the epistemological foundations of the discipline. Findings - As an alternative, we suggest that an economics methodology informed by critical realism would increase the probability of a timely prediction of crises. Originality/value - It de-emphasises falsification as a key criterion for assessing the quality of knowledge, provides more space for non-quantified reflections on relationships, a thicker model of human agency, a well-specified model of collective human economic behaviour as well as an endogenous possibility of dramatic change within the economic domain.text

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