Ceteris paribus conditions: materiality and the application of economic theories

Abstract

Listen

Translate article

The apparent gulf between the pronouncements of the methodology of economics literature and the work of economists in their applied and empirical domains has created a position in which economic methodologists can blithely use the phrase: ‘testing theories by confronting them with data’ and then give little attention to the detailed problems which economists face in making claims about the practical applicability of their theories. In saying this, of course we set up a straw methodologist, for particularly those concerned with econometrics have thought long and deep about this in relation to econometric research. Yet, in our experience, there is still little attention paid to two rapidly growing forms of research, namely laboratory experiments and simulations, and even less literature which analyses the methodological diierences between these newer methods and the older research methods used to apply theories, and compares the potential benefits and pitfalls of one approach versus another. We argue here that one useful direction for methodological work in the next years would be to provide an analytical comparison of the standard research activities of current economics. Comparative analysis has the power to provide insights and prevent oversights, and thus deepen our understanding of how the specific methodological assumptions and preconceptions used in each research activity work out in practise. We choose to argue this point by considering the functioning in this context of a well-known, but perhaps relatively underappreciated, rule: the ceteris paribus clause, in four different current environments: namely in mathematical modelling, econometrics, simulations and experiments.