A conceptual overview of economic sciences

Abstract

Nineteenth-century economics postulated that scientific investigations began with an observation of facts, free and devoid of prejudice; followed by the formulation of universal laws about those facts through inductive inference, and finally arriving, again through induction, at even broader general statements known as theories. (The characteristic of this method was that it employed rules of logical inference, much like deduction).

Classical economists believed that economic laws could only be refuted if it was shown either that the assumed principles and conditions did not exist, or that the tendencies deduced by the law did not necessarily follow as a consequence of those assumptions.

In contrast, the main characteristics of economic methodology in the twentieth century focus on the idea that economic propositions should be susceptible to empirical testing and that economic research should be based on explicitly formulated theories to propose hypotheses that can be accepted or refuted.

We cite the example of the disagreement between P. Samuelson and M. Friedman regarding the methodology of economics; while for the former the assumptions must be realistic and theoretical propositions must be verifiable, that is, operational and therefore falsifiable. For the latter, assumptions in economics are "to a large extent" irrelevant concerning the validation of theories. Theories should be judged by their explanatory and predictive power.