The Duhem-Quine Thesis, Lakatos and the Appraisal of Theories in Macroeconomics

Abstract

The point of this paper is to outline the implications of the Duhem-Quine thesis for the task of appraising theories in economics. The Duhem-Quine thesis (DQfrom now on) states that it is not possible to falsify single hypotheses because it is invariably conjunctions of hypotheses which are being tested. Thus if a particular hypothesis is found to be in conflict with some piece of empirical evidence all that we can say is that the conjunction of the particular hypothesis with a set of auxiliary hypotheses is false. We can never be sure that it is not one or more of the auxiliary hypotheses which is responsible for the anomalous empirical evidence, rather than the particular hypothesis in which we are most interested. Expressed in symbols, this means that arguments of the form [Ho -* 0. 0] --* Ho are not justified, where Ho is a particular hypothesis, O is the observational evidence and the symbols -*, . and mean 'imply', 'conjoined with', and 'not'. Instead our arguments can only justifiably be phrased in the form [G1 -* 0. 0] -* G1, where G1 is a conjunction of hypotheses which contains Ho: there could well be some different conjunction of hypotheses GN which contains Ho which is consistent with the empirical evidence. The contention of this paper is that many of the debates in macroeconomics have been misguided in that the jointness of hypothesis testing has been ignored by participants in the debates. Instead the focus of attention has been on the appraisal of single target hypotheses considered in isolation from supportive auxiliary hypotheses, the implicit assumption being that it is possible to falsify single target hypotheses. The latter assumption is wrong. Following the logic of the DQ thesis we are obliged to conduct our appraisal at the level of groupings of hypotheses, that is to appraise any target hypothesis in conjunction with its supportive auxiliary hypotheses. The implications of this line of reasoning are perhaps best unravelled in the context of concrete examples from debates in macroeconomics over the last two decades. Before moving to this task we will, in Section I, provide a brief outline of the history of the DQ thesis. Section II will then illustrate the misguidedness of appraising target hypotheses in isolation from their supportive auxiliary hypotheses with reference to the often heated and continuing debate regarding the stability of the demand for money function. The question of how to appraise groupings of hypotheses is considered in Section III. Here we will centre the