[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v5y2017i1p1280983.html
   My bibliography  Save this article

Causal theories, models and evidence in economics—some reflections from the natural sciences

Author

Listed:
  • Michael Joffe
Abstract
Models have been extensively analysed in economic methodology, notably their degree of ability to provide explanations. This paper takes a complementary, comparative approach, examining theory development in the natural sciences. Examples show how diverse types of evidence combine with causal hypotheses to generate empirically based causal theories—a cumulative process occurring over a long timescale. Models are typically nested within this broader theory. This could be a good model for research in economics, providing a methodology that ensures good correspondence with the target system—especially as economics research is largely empirical, and has effective methods for causal inference. This paper analyses the key features of three successful theories in the natural sciences, and draws out some lessons that may be useful to economists. Some examples of good practice in economics are noted, e.g. involving money and banking, and the growth of the state. On the other hand, the widespread pre-crisis use of dynamic stochastic general equilibrium (DSGE) models that ignored the financial sector raises the question, how to realise what has been omitted? Nesting models in an empirically based causal theory could solve this. Furthermore, some phenomena have clear explanations, but mainstream theory obscures them, as with the Lucas puzzle about the direction of international capital flows. And, the prevailing theories about capitalist growth do not explain the basic evidence on its temporal and spatial distribution. Economics could beneficially learn from the natural sciences.

Suggested Citation

  • Michael Joffe, 2017. "Causal theories, models and evidence in economics—some reflections from the natural sciences," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1280983-128, January.
    • Handle: RePEc:taf:oaefxx:v:5:y:2017:i:1:p:1280983
    DOI: 10.1080/23322039.2017.1280983
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2017.1280983
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/23322039.2017.1280983?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    2. Robert Sugden, 2013. "How fictional accounts can explain," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(3), pages 237-243, September.
    3. Gigerenzer, Gerd & Todd, Peter M. & ABC Research Group,, 2000. "Simple Heuristics That Make Us Smart," OUP Catalogue, Oxford University Press, number 9780195143812.
    4. Julian Reiss, 2011. "Theory, generalisations from cases and methodological maxims in evidence-based economics: Responses to the reviews by DiNardo, Guala and Kincaid," Journal of Economic Methodology, Taylor & Francis Journals, vol. 18(1), pages 93-96.
    5. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
    6. Pierre-Olivier Gourinchas & Olivier Jeanne, 2013. "Capital Flows to Developing Countries: The Allocation Puzzle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1484-1515.
    7. Julian Reiss, 2012. "The explanation paradox," Journal of Economic Methodology, Taylor & Francis Journals, vol. 19(1), pages 43-62, March.
    8. Gabriel Chodorow-Reich & Loukas Karabarbounis, 2016. "The Cyclicality of the Opportunity Cost of Employment," Journal of Political Economy, University of Chicago Press, vol. 124(6), pages 1563-1618.
    9. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, Taylor & Francis Journals, vol. 47(4), pages 6-16.
    10. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
    11. Francisco J. Buera & Yongseok Shin, 2017. "Productivity Growth and Capital Flows: The Dynamics of Reforms," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 147-185, July.
    12. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    13. Johannes Abeler & Daniele Nosenzo & Collin Raymond, 2019. "Preferences for Truth‐Telling," Econometrica, Econometric Society, vol. 87(4), pages 1115-1153, July.
    14. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    15. Hahn, Frank, 1991. "The Next Hundred Years," Economic Journal, Royal Economic Society, vol. 101(404), pages 47-50, January.
    16. Julian Reiss, 2013. "The explanation paradox redux," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(3), pages 280-292, September.
    17. Daniel M. Hausman, 2013. "Paradox postponed," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(3), pages 250-254, September.
    18. Michael Joffe, 2011. "The root cause of economic growth under capitalism," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(5), pages 873-896.
    19. Ernst FEHR & Simon GÄCHTER & Georg KIRCHSTEIGER, 1994. "Reciprocal Fairness and Noncompensating Wage Differentials," Vienna Economics Papers vie9401, University of Vienna, Department of Economics.
    20. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    21. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, December.
    22. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    23. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895.
    24. Alessio Moneta & Federica Russo, 2014. "Causal models and evidential pluralism in econometrics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 21(1), pages 54-76, March.
    25. Hodgson, Geoffrey M, 1993. "The Mecca of Alfred Marshall," Economic Journal, Royal Economic Society, vol. 103(417), pages 406-415, March.
    26. Damiano Sandri, 2014. "Growth and Capital Flows with Risky Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 102-123, July.
    27. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money in the modern economy: an introduction," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 4-13.
    28. D. Wade Hands, 2013. "Introduction to symposium on the explanation paradox," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(3), pages 235-236, September.
    29. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    30. Anna Alexandrova & Robert Northcott, 2013. "It's just a feeling: why economic models do not explain," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(3), pages 262-267, September.
    31. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, December.
    32. Katarina Juselius, 2011. "Time to reject the privileging of economic theory over empirical evidence? A reply to Lawson," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(2), pages 423-436.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. María Caamaño-Alegre & José Caamaño-Alegre, 2019. "Economic experiments versus physical science experiments: an ontology-based approach," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 12(2), pages 1-30, May.
    2. Kashif Zia & Umar Farooq & Sakeena Al Ajmi, 2023. "Finding the Impact of Market Visibility and Monopoly on Wealth Distribution and Poverty Using Computational Economics," Computational Economics, Springer;Society for Computational Economics, vol. 61(1), pages 113-137, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gourinchas, Pierre-Olivier & Rey, Hélène, 2014. "External Adjustment, Global Imbalances, Valuation Effects," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 585-645, Elsevier.
    2. Herrmann, Sabine & Winkler, Adalbert, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 100-123, August.
    3. Clemens, Christiane & Heinemann, Maik, 2019. "The Effects Of International Financial Integration In A Model With Heterogeneous Firms And Credit Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 23(7), pages 2815-2844, October.
    4. Bárány, Zsófia L. & Coeurdacier, Nicolas & Guibaud, Stéphane, 2023. "Capital flows in an aging world," Journal of International Economics, Elsevier, vol. 140(C).
    5. Reinhardt, Dennis & Ricci, Luca Antonio & Tressel, Thierry, 2013. "International capital flows and development: Financial openness matters," Journal of International Economics, Elsevier, vol. 91(2), pages 235-251.
    6. repec:spo:wpmain:info:hdl:2441/1evugr7cvq8naonad7623t1rbv is not listed on IDEAS
    7. Margaux MacDonald, 2015. "Patterns of International Capital Flows and Productivity Growth: New Evidence," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 846-872, November.
    8. George-Marios Angeletos & Vasia Panousi, 2011. "Financial Integration, Entrepreneurial Risk and Global Imbalances," NBER Working Papers 16761, National Bureau of Economic Research, Inc.
    9. Dennis Reinhardt, 2010. "Into the Allocation Puzzle - A sectoral analysis," IHEID Working Papers 14-2010, Economics Section, The Graduate Institute of International Studies.
    10. Zsofia Barany & Nicolas Coeurdacier & Stéphane Guibaud, 2018. "Capital Flows in an Aging World," SciencePo Working papers hal-03393116, HAL.
    11. Jacek Rothert & Jacob Short, 2014. "Non-Traded Goods and Capital Flows to Developing Countries," Departmental Working Papers 47, United States Naval Academy Department of Economics.
    12. repec:hal:spmain:info:hdl:2441/1evugr7cvq8naonad7623t1rbv is not listed on IDEAS
    13. Gente, Karine & León-Ledesma, Miguel A. & Nourry, Carine, 2015. "External constraints and endogenous growth: Why didn't some countries benefit from capital flows?," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 223-249.
    14. Yun Jung Kim & Jing Zhang, 2023. "International Capital Flows: Private Versus Public Flows In Developing And Developed Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 225-260, February.
    15. Heathcote, Jonathan & Perri, Fabrizio, 2014. "Assessing International Efficiency," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 523-584, Elsevier.
    16. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2014. "Sovereigns, Upstream Capital Flows, And Global Imbalances," Journal of the European Economic Association, European Economic Association, vol. 12(5), pages 1240-1284, October.
    17. Pengfei Wang & Yi Wen & Zhiwei Xu, 2012. "Two-way capital flows and global imbalances: a neoclassical approach," Working Papers 2012-016, Federal Reserve Bank of St. Louis.
    18. Francisco J. Buera & Yongseok Shin, 2017. "Productivity Growth and Capital Flows: The Dynamics of Reforms," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 147-185, July.
    19. Hoffmann, Mathias & Krause, Michael & Tillmann, Peter, 2019. "International capital flows, external assets and output volatility," Journal of International Economics, Elsevier, vol. 117(C), pages 242-255.
    20. Jurgen von Hagen & Haiping Zhang, 2011. "International Capital Flows with Limited Commitment and Incomplete Markets," Working Papers 17-2011, Singapore Management University, School of Economics.
    21. Wulff, Alexander & Heinemann, Maik, 2015. "Idiosyncratic Risk, Borrowing Constraints and Financial Integration - A Discussion of Ambiguous Results," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113165, Verein für Socialpolitik / German Economic Association.
    22. Maik Heinemann & Alexander Wulff, 2015. "Idiosyncratic Risk, Borrowing Constraints and Financial Integration - A Discussion of Ambiguous Results," Working Papers 2015019, Berlin Doctoral Program in Economics and Management Science (BDPEMS).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:5:y:2017:i:1:p:1280983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.