Considering Weber’s social scientific realism

I spent the last couple of days reading. I am making efforts to reword Weber’s methodological stance through concepts I am familiar with. Here I would love to refer to entity realism and structural/causal realism. I tried to concieve what Weber would think and say in these terms.

Entity realism: this comes from the philosophy of physics, currently applied to social sciences. At the bottom line this idea is very simple: our scientific terms refer to entities that are real. There are electrons in reality and they have the properties we attribute to them. This problematic, I know. No theoretical description is full, so when an entity realist characterize electrons, he can portray only ’a slice of reality’ at best. An entity realist is unable to seize all the features of electron, but – and this is important – he attributes features to the electron that it really has. I think Weber would be an entity realist. I found a very interesting paragraph in Ringer’s Max Weber’s methodology. Referring to Mommsen, on page 118 the author writes: ideal types cannot be constructed without regard for realities. So, and this is very essential to me, Weberian abstract-theoretical ideal types are constructed (and should be constructed) so that the researcher examines reality and seize those features of the entities that are important to him as for his research interest. As I concieve ideal types, an ideal type is constructed from real features. Rationality of the homo oeconomicus is the rationality of everyday human beings – but in reality this rationality is corrupted or disturbed by a lot of mental, psychological and social (and so forth) factors. But rationality is ’out there’, it is a part of our complex picture. Following Weber we are interested in partial truths, but the elements we exaggerate in ideal types are real features of our fellow agents.

Structural/causal realism: this also comes from the philosophy of physics. To simply put, the causal/structural connections we depict in theories are real. If I tried to conceive neoclassical economics in a Weberian fashion and according to structural/causal realism, I would say: Weber is a structural realist. In these terms, however, we have only partial truths again: treading Weber’s footsteps, we seize some causal mechanisms of the complex real causal structure – but these mechanisms are real and effective causal mechanisms. I think Weber would say: in the Marshallian cross, an increase in the price would really reduce demand. That is, the mechanism underlying this basic model of market exchange is about an effectice cause-and-effect connection – much more than an empirical regularity. When I read Whimster and Bruun’s brilliant foreword to the collected methodological writings, I found a passage that seems to support my idea: on page xxvi they trace Weber’s causal notion back to Radbruch and place Weber’s causality in the context of legal responsibility. So, I think, Weber is interested in real and objective causal connections.

As far as the realism-instrumentalism debate is considered, I believe Weber is important part of the context. Let’s have Friedman’s instrumentalism: with his parable in F53 on the leaves acting as if they were able to rationally consider their positions, Friedman gives up entity realism. He argues for assumptions that can be set up neglecting the real features of entities he ’portrays’. Thus, Friedman abandons the idea of entity realism (even as partial truths). It is questionable whether Friedman was a causal realist. Accordig to Kevin Hoover, he was, but I don’t think so (I think entity realism and causal realism is a package, causall realism cannot be achieved without entity realism). To simply put, with his emphasis on predictive performance of theories, he pays no attention to the causal connections behind macro-social phenomena. I think the whole F53 paper is devoted to the idea that researchers should be uninterested in the causal connections, and it is only predictive performance that matters. In these terms, Hausman rightly debates Friedman’s methodological stance.

To have an example: there is a widely cited anecdote in statics about a ’model’ in which the number of storks is the independent and the number of newborn babies is the dependent variable. For Friedman, such a model is a useful model as long as it provides good predictions. For Weber, such a model, I think, would be unacceptable for such a model would say nothing about the real causal connections.

Is this hairrising…?

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Weber and Lucas: a different narrative?

Weber and Friedman’s story featured Knight as the most probable mediator of ideas. However, if we turn to the post-Friedmanian developments in Chicago business-cycle theories, the emergence of Weberianism seems to be implausible for Knight’s effacement at Chicago’s Department of Economics. Hence, the stage for both Knight and Weberian ideas fundamentally changed after WWII (Van Horn & Mirowski, 2009). There exists a narrative according to which modern Chicago economics as an educational and scientific conception is strongly reliant upon Knight (Reder, 1982). The present consensus, however, underplays his influence. As Emmett (2011) underlines, the modern school has been working with such an institutional structure that has little to do with Knight. In the years after WWII Knight had problems finding his position in the specialized economic theorizing (Emmett, 2010; 2013).

It is dubious whether Knight’s presence in the curriculum of modern Chicago economics is enough for us to talk about institutionalized Weberianism in these years. Emmett (2009) draws attention to the fact that chapter one of Knight’s The economic organization (Knight, 1933) is still on the reading lists of Econ 301―even in Kevin Murphy’s time. This text echoes a multitude of well-known Knightian thoughts (the limited relevance of neoclassical theory, problems around dynamic economics) some of which stem from Weber (Clarke, 1991, p. 262). With neither explicit reference to Weber nor using the term ‘ideal type’, Knight briefly mentions Weber’s methodology of ideal types (footnote 5 on p. 21 and p. 28). Therefore, the text itself is a far cry from a comprehensive introduction to Weberian tenets.

Thus, the post-Friedmanian emergence of Weberianism is highly doubtful. Accordingly, studies inquisitive about the connection between Weber and Chicago economics missed extending Weberianism beyond Friedman. Focusing on Knight’s role as a mediator is a possible cause, whilst paying attention to changes in the curricula of the Department of Economics may be another one. However, in the dissemination of Weber’s ideas in the U.S. the years after WWII were significant. An expansion of Weberianism in new directions and in new scientific centres occurred in these years (Scaff, 2011, p. 273).

In Lucas’ case, however, Friedman is a possible mediator, bearing in mind F53’s Weberian reminiscences. Further possible channels might have worked during his undergraduate studies. It must be noted that in his Nobel bio Lucas (1995) places a great emphasis on his B.A. in history. History, together with anthropology, sociology, economics, psychology and political science, belongs to social scientific education. The B.A. level education of these subjects was an assignment of the College of the University of Chicago working as an autonomous administrative unit. The College established a three-year sequence of subjects in the social sciences, paralleled with similar three-year sequences in the natural sciences and humanities. This three-year sequence in the social sciences consisted of three subjects, each with a different focus (Singer, 1948). In this subject matrix the course ‘Soc 2’ (Social Sciences 2) has the most importance as far as Weberianism is considered. Under this label students studied Weber’s Protestant ethic (Weber, 1930) as a part of the theories necessary for understanding society.

A careful reading of the Protestant ethic has been an accentuated constituent of the curriculum for decades (Levine, 1992, p. 110; Schudson, 1992, p. 137), so it was in Lucas’ time, and not only in Chicago (Mims, 1952, p. 29). The reading lists featured the 1930 English edition of the Protestant ethic, translated by Parsons, to which economic historian Richard Tawney wrote a foreword (the foreword itself was also a compulsory reading). This work of Weber is a masterpiece of the application of the methodology of ideal types. In the foreword, accordingly, Tawney underlines how significant Weber’s social scientific methodology is for economics. For him, moreover, the method of the essay is as important as its conclusions (p. I(b)).

Protestant ethic is a not a systematic introduction to Weber’s methodology. The text, however, provides an effective summary of the methodology of ideal types. In the first two pages of chapter two Weber puts forward his idea about the purpose of social scientific conceptualization. It is to highlight some individual parts of historical reality and to unite them into a consistent conceptual whole―which is the ideal type. Here Weber also underlines the requirement that we ought to properly adjust our theories to the facets of reality we are interested in, though our current point of view is by no means the only possible aspect from which we can approach a social phenomenon (Weber, 1930, pp. 47-48). In a lengthy note (p. 192) Parsons also drew attention to both the significance of these principles and Weber’s revaluation of the methodology of the social sciences.

The translation history of Weber’s works is also worth attention. In the 1950s the texts indispensable to a methodological study of the Protestant ethic were all available in English. In 1927 Knight translated Weber’s General economic history (Weber, 1927), a mature form of Weber’s comparative historical sociology. The other magnum opus was the Protestant ethic. In 1934-35 Edward Shils teamed up with Henry A. Finch in Chicago translated three methodological essays (Objectivity in social science and social policy; The meaning of ethical neutrality; Critical studies in the logic of the cultural sciences), published in a single volume in 1949 (Weber, 1949). The English edition of the complete text of Economy and society providing a detailed description of the ideal type methodology came out only in 1968 (Weber, 1968/1978), though the methodological introduction (Basic sociological terms, including the famous Methodological foundations) became available as early as in 1937-38. Thanks to Shils, the text circulated among the students and the academic staff. Even though sociologists showed a more intense interest in Weber (Scaff, 2011, pp. 201-6; Sica, 2004; Derman, 2012, pp. 39-9), Weber as we have seen was an accentuated constituent of the general social scientific education in Chicago.

It is also Lucas’ Nobel bio where he mentions Belgian historian Henri Pirenne as a major influence on him. Reading Pirenne may be an additional source of Weberianism. In methodological terms, Pirenne applied the same comparative historical method as Weber advocated. Comparative method was a cultivated approach in scientific historiography, regarded as the best way of elevating history to glorious prestige. For Pirenne, comparative method served as a reality check in order to conform social scientific generalizations. In this framework, social science lead to generalizations through a process where empirical justification of the causes is a high-ranked aspect (Lorenz, 2009, pp. 399-401). As with Friedman, however, we ought to avoid overemphasizing Lucas’ exposure to Weberianism. The attitude of Chicago academics towards Weber has always been rather ambivalent, especially after political philosopher Leo Strauss’ arrival at Chicago (1949). Strauss had a very negative judgement about Weber and due to his scholarly power he could profoundly bias convictions on Weber. This likely means that when Lucas received his history degree, he might have been rather negatively affected by Strauss’ viewpoint which was widely known in those years. Such distortions might also have contributed to Weber’s turning into an implicitly cited authority in social sciences.

References

Clarke, S. (1991). Marx, marginalism and modern sociology. London: Macmillan.

Derman, J. (2012). Max Weber in politics and social thought. Cambridge: Cambridge University Press.

Emmett, R. B. (2009). Did the Chicago school reject Frank Knight? In R. B. Emmett, Frank Knight and the Chicago school in American economics (pp. 145-155). London: Routledge.

Emmett, R. B. (2010). Specializing in interdisciplinarity. History of Political Economy, 42(S1), 261-287.

Emmett, R. B. (2011). Sharpening tools in the workshop. In R. Van Horn, P. Mirowski, & T. A. Stapleford (Eds.), Building Chicago economics (pp. 93-115). Cambridge: Cambridge University Press.

Emmett, R. B. (2013). Frank H. Knight and the Committee on Social Thought. Retrieved from http://dx.doi.org/10.2139/ssrn.2307185

Knight, F. H. (1933). The economic organization. New York: Harper.

Levine, D. N. (1992). Classics and conversations. In J. J. MacAloon (Ed.), General education in the social sciences (pp. 103-114). Chicago: University of Chicago Press.

Lorenz, C. (2009). Scientific historiography. In A. Tucker (Ed.), A companion to the philosophy of history and historiography (pp. 393-403). Chichester: Wiley-Blackwell.

Lucas, R. E. (1995). Biographical. Letöltés dátuma: 2018. January 24, forrás: Nobelprize.org: https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1995/lucas-bio.html

Mims, H. S. (1952). On general education in social science at Harvard. The Journal of General Education, 7(1), 25-31.

Reder, M. W. (1982). Chicago economics. Permanence and change. Journal of Economic Literature, 20(1), 1-38.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Schudson, M. (1992). A ruminating retrospect on the liberal arts, the social sciences and Soc 2. In J. J. MacAloon (Ed.), General education in the social sciences (pp. 126-147). Chicago: University of Chicago Press.

Sica, A. (2004). Max Weber. A comprehensive bibliography. New Brunswick: Transaction Publishers.

Singer, M. B. (1948). The social sciences program in the College of the University of Chicago. In Social science in general education (pp. 37-74). Dubuque: WM. C. Brown Company.

Van Horn, R., & Mirowski, P. (2009). The rise of the Chicago school of economics and the birth of neoliberalism. In P. Mirowski, & D. Plehwe (Eds.), The road from Mont Pèlerin (pp. 139-180). Cambridge: Harvard University Press.

Weber, M. (1927). General economic history. New York: Greenberg.

Weber, M. (1930). The protestant ethic and the spirit of capitalism. New York: Charles Scribner’s Sons.

Weber, M. (1949). The methodology of the social sciences. Glencoe: The Free Press.

Weber, M. (1968/1978). Economy and society. Berkeley: University of California Press.

Reconstructing Friedman’s exposure to Weberianism

Knight’s intellectual power and his influence on Friedman are highly difficult to characterize. Consequently, it is also difficult if not impossible to reconstruct the channels through which Friedman might have been exposed to Weberian effects. A possible channel was Knight’s formal and informal environment, for example Knight’s dinners on Sunday evenings―Friedman is reported to have been a member of this eminent intellectual circle (Emmett, 2015). One would need to engage in dubious speculations to highlight the significance of the Knight circle. However, it is Knight’s personal impact that Reder (1982, p. 6) underlines as the main channel of his influence.

From the middle of the 1930s Stigler (1985, p. 2) reports even a Weber seminar he himself attended. According to Edward Shils’ commentaries, the seminar was in 1936, built on the close reading of the original German edition of Weber’s Wirtschaft und Gesellschaft (Economy and society), a highly important text in methodological terms (Scaff, 2011, p. 209). Friedman also attended the seminar, however, Shils (1981, p. 184) reports him to have lost his interest in Weber and started to show up only sporadically. This episode makes the intellectual connection between Weber and Friedman doubtful and implausible. In this context, Hoyningen-Huene draws attention to Knight’s compilation published in 1935 (The ethics of competition), co-edited by Friedman. From this fact and the editorial Hoyningen-Huene (2017, p. 12) infers that Friedman was likely to thoroughly know Knight’s Economic theory and nationalism and hence to be exposed to some Weberian effects.

This paper of Knight is commonly regarded as his most famous methodological work (Emmett, 2006, p. 113). For Knight, applying ideal types in economics is an explicit requirement. By meeting this requisite, theory gets far from reality, though acquires universal validity where mechanical analogy is justified to apply. However, for real economic actors and economic actions differ from their theoretical counterparts, caveats about the limited applicability of the theory still hold. Even though Knight gives no explicit references to Weber, it is Weber Knight echoes when describing neoclassical theory as a framework built from ideal types. Despite all the restrictions, Knight believed theory to be instrumental in understanding real societies (Knight, 1935, pp. 277-284).

Being highly brief and complex, not only is the text difficult to analyse, but a careful reconstruction also requires us to be cognizant of both Knight’s oeuvre and Weber’s related ideas. Even though it results from Knight’s reasoning that making the theory similar to reality is a methodological fault (Emmett, 2006, p. 114; Emmett, 2015), we ought to bear in mind the fact that Knight identified real behavioural patterns in economic laws (Knight, 1924/1999, p. 29). This is the reason why Knight is implausible to have abandoned elements of reality as the building blocks of theory. However, this is unnecessary as Knight, treading Weber’s footsteps, underlined how economists can be realists by constructing unrealistic assumptions. There is no need to introduce the current debates in which Knight’s argument is still relevant (Mäki, 2009a). For Knight, through its ideal types neoclassical economics describes not real behaviour but patterns deduced under ideal-utopian conditions. This is unavoidable in order that economics, first, could focus on the forms of actions and, second, could preserve its practical relevance.

Thus, the conditions of the connection between Weber and Friedman are fraught with ambiguity. In this context it proves useful to analyse Friedman’s methodological principles. If I succeeded in highlighting some of Friedman’s tenets that can be directly or indirectly traced back to Weber, ambiguities around the exact nature of the connection would be of secondary importance. It must be noted that Eric Schliesser (2011) identifies some Weberian effects in Friedman’s theory without the intention of demonstrating Friedman’s direct Weberian erudition. Schliesser traces Friedman’s Weberian reminiscences back to Parsons, to whom there exists an explicit reference in Friedman’s personal notes to Viner’s Econ 303. Through Friedman, moreover, Schliesser extends these Weberian effects even to Stigler. Assuming a multitude of possible sources is unharmful to the idea of the (direct or indirect) connection between Weber and Friedman.

Friedman’s famous F53 is an epigrammatic and widely debated summary of his methodological doctrines. In the text Friedman uses the very Weberian term ‘ideal type’ for seven times. Of these instances, there are six clear cases, whilst in one case he mentions ideal and real entities, which bears resemblance to the rather informal fashion as Knight (1935, pp. 277-278) discusses ideal concepts or ideal behaviour. Besides the Weberian terminology the circumstance is also worth attention that Friedman characterizes the relationship between economic models and reality in a Weberian fashion―that is, his explication is in accordance with Weber’s notions. For Friedman economic models built upon ideal types ‘are designed to abstract essential features (i.e. ‘only the forces that the hypothesis asserts to be important’) of complex reality’ (p. 9) some elements and mechanisms of which are omitted from models―elements and mechanisms that can disturb the functioning of the ideal-typical core. Ideal-typical models are by no means designed for description. By contrast, hypotheses underlying significant theories ‘will be found to have “assumptions” that are widely inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense)’. ’A theory or its “assumptions” cannot possibly be thoroughly “realistic” in the immediate descriptive sense so often assigned, to this term’. ’Any attempt to move very far in achieving this [highly descriptive] kind of “realism” is certain to render a theory utterly useless.’ Friedman rewords Weber (1904/1949, p. 80) when explaining: ’A hypothesis is important if it “explains” much by little, that is, if it abstracts the common and crucial elements from the mass of complex and detailed circumstances surrounding the phenomena to be explained […]. To be important, therefore, a hypothesis must be descriptively false in its assumptions’. Consequently, descriptive accuracy is unnecessary for ‘a simpler theory’ to work ‘well enough’ (pp. 14-32).

Along these lines, Friedman provides an analysis of the modelling strategy of Marshallian neoclassical economics (pp. 35-7). Neoclassical economics assumes perfect competition without regarding that as a manifest characteristic of reality. If we give credit to the suggestion that models are not designed to describe reality, abstract economic theory becomes uncriticizable on such grounds. General equilibrium is only an ‘engine’ in the Weberian sense (Clarke, 1991, p. 252), constructed to analyse the world―a statement Lucas also echoed later (Snowdon & Vane, 2005, p. 281). By designing ideal types to highlight some relevant facets of reality we make it possible to analyse a chosen mechanism as an element of the complex causal structure. Here lies the most striking puzzle of this model-building strategy for we are to bring facets of reality to the fore so that our model could be adequate about the problem under scrutiny (p. 42) (Weber, 1904/1949, p. 78). Applying this strategy, we can answer the question whether a postulated causal mechanism contributes to the emergence of some social phenomena―this is exactly the reason why we carry out empirical tests. Socio-economic actuality is full of entities differing in a multitude of aspects, though we have ideal types to accentuate characteristics and mechanisms that real entities share.

Besides the Weberian parallelisms we can find some passages in F53 where Friedman echoes Knight’s critique on neoclassical economics. In such a statement, Friedman suggests as an obstacle to objective economics ‘the fact that economics deals with the interrelations of human beings, and that the investigator is himself part of the subject matter being investigated in a more intimate sense than in the physical sciences’ (p. 4). Here Friedman directly reflects Knight’s parable on a drawer drawing a picture on himself in the act of drawing, which would apply a troublesome and infinite regress (Knight, 1935, p. 280). It is also Knight whom Friedman resounds in his short discussion on the shortcomings of dynamic monetary macroeconomics. Here Friedman refers to the problems in analysing ‘the process of adaptation of the economy as a whole to changes in conditions’ (p. 42). It is exactly the line along which Knight (1935/1999, p. 154), drawing attention to the limits of the physicalist conceptual matrix, circumscribed the territory of neoclassical economics.

References

Clarke, S. (1991). Marx, marginalism and modern sociology. London: Macmillan.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 6(1), 101-119.

Emmett, R. B. (2015). Frank H. Knight and the Chicago school. Conference presentation, ‘The legacy of Chicago economics’, 5 October 2015. Chicago: The University of Chicago.

Hoyningen-Huene, P. (2017). Revisiting Friedman’s F53. Popper, Knight, and Weber. Unpublished manuscript. Retrieved July 23, 2017, from http://philsci-archive.pitt.edu/12910/1/Friedmans%20F53.pdf

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Mäki, U. (2009a). Unrealistic assumptions and unnecessary confusions. In U. Mäki (Ed.), The methodology of positive economics (pp. 90-116). Cambridge: Cambridge University Press.

Reder, M. W. (1982). Chicago economics. Permanence and change. Journal of Economic Literature, 20(1), 1-38.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Schliesser, E. (2011). “Every system of scientific theory involves philosophical assumptions” (Talcott Parsons). The surprising Weberian roots to Milton Friedman’s methodology. In D. Dieks, W. J. Gonzalez, S. Hartmann, T. Uebel, & M. Weber (Eds.), Explanation, prediction, and confirmation (pp. 533-543). Dordrecht: Springer.

Shils, E. (1981). Some academics, mainly in Chicago. The American Scholar, 50(2), 179-196.

Snowdon, B., & Vane, H. R. (2005). Modern macroeconomics. Its origins, development and current state. Cheltenham: Edward Elgar.

Stigler, G. J. (1985). Frank Hyneman Knight. Center for the Study of the Economy and the State working paper No. 37. Chicago: The University of Chicago.

Weber, M. (1904/1949). “Objectivity” in social science and social policy. In M. Weber, E. A. Shils, & H. A. Finch (Eds.), The methodology of social sciences (pp. 50-112). Glencoe: The Free Press.

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Knight, conveying Weberian tenets

Frank H. Knight played a significant role in Weber’s American reception. Due to his contribution the University of Chicago grew one of the American centres of Weberianism (Scaff, 2011, p. 199). Even though the birth of his interest in Weber is shrouded in mystery, by the time he arrived at Chicago (1928) he had certainly nurtured an in-depth knowledge of Weber’s social scientific methodology and comparative historical sociology (Emmett, 2006, p. 107). Knight’s attraction to Weber remained intense even up to the 1940s. In these years he applied Weber’s tenets as a fundament upon which he could build his complex social scientific approach. Even though his explicit references to Weber were rather scarce (Noppeney, 1997, p. 328), and they were so especially from the 1930s, for Knight Weber remained the most influential intellectual authority throughout his career. Knight was reliant upon Weber in understanding the formation of capitalism, in rethinking economic methodology and in the economic interpretation of history (Emmett, 1999, pp. xiii-xv).

Knight’s most interesting methodological tenets regard the relationship between neoclassical economics and the broadly interpreted social scientific disciplines. He exerted his methodological considerations in a series of publications one of the recurrent thoughts of which is that physics-based neoclassical orthodoxy has only highly limited relevance―however, on its carefully circumscribed territory it meets the standards of modern science (Noppeney, 1997, p. 334). It is interesting to realize that Knight in these texts, while arguing for the irrelevance of neoclassical economics outside its territory, identifies its genuine scope. Here, he regards orthodoxy as a useful and relevant system.

The possibility of extending physical concepts to economics is qualified. Thus, the most acute methodological problem of the development of economics for Knight was to carefully demarcate the scope of neoclassical economics. Even though Knight stinted this territory, he was ready to admit neoclassical theory conveying true knowledge of reality (Knight, 1935, p. 286). Because of abstraction we can have partial truths only. Neoclassical tendency laws have universal validity without providing comprehensive causal descriptions of the phenomena on their territory. The circumstances under which formally deduced economic laws can perfectly emerge in reality are unlikely to set in―which would be undesirable in social-political terms (Knight, 1956, p. 270). Knight, however, regarded the fundamental laws of neoclassical economics and the assumptions underlying the ideal type of homo oeconomicus (Knight, 1944, pp. 293-305) as the obviously existing characteristics of reality (Knight, 1924/1999). As something that as behavioural tendencies are hidden behind the complex and chaotic socio-economic reality (Knight, 1921, pp. 4-5).

In order to understand economic and life he was determined to set up a framework that is sensitive to the fact that social reality is never like the abstract ideal types of neoclassical orthodoxy. Thus, Knight drew attention to a complex causal analysis in which the nature of the processes under scrutiny is a concern. From the content and the form of economic actions he considered economic laws to be able to describe the static form only. Instrumentally rational individual behaviour accessible to mathematical description (Knight, 1972, p. 7) emerges in a framework the elements of which (views, beliefs, attitudes and institutions) are subjected to continuous development. The very nature of the process itself makes the physicalist approach unable to describe this comprehensive evolution. For him, the extensive usage of the ceteris paribus clause was justified only when the abstracted changes were negligible (Knight, 1935/1999). In his view, there exists only a limited possibility to resolve the tension between statics and dynamics within the theory (Knight, 1922/1935, p. 20). Even though we can identify the static laws and the key variables of the economic sphere of life, however, analysing the evolution of the dynamic framework is well beyond the territory of neoclassical economics. To this end, neoclassical theory needs historical analysis in understanding real social processes (Noppeney, 1997, pp. 322-323; Knight, 1972, p. 6) for this is the only way to scrutinize the differences between the theoretical outcomes and reality (Knight, 1944, pp. 308-310).

Knight took the stance of methodological pluralism, in which the interpretation of economic actions exhorts us to utilize all the social scientific disciplines. In this context neoclassical economics is only one of the suggested approaches (Knight, 1972, p. 10). His ultimate purpose was to establish an interpretative complex social science in which theoretical economics is complemented by other approaches including both the humanities and the entire field of social disciplines. In such a framework we can analyse human actions in the broader context of social reality (Fu-Lai Yu, 2002, p. 4). Knight expected the involvement of these approaches to enhance both the complexity of causal understanding and the predictive success beyond the possibilities of neoclassical theory (Knight, 1940/1999).

References

Emmett, R. B. (1999). Introduction. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. vii-xxiv). Chicago: The University of Chicago Press.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 7(1), 101-119.

Fu-Lai Yu, T. (2002). The economics of Frank H. Knight. An Austrian interpretation. Forum for Social Economics, 31(2), 1-23.

Knight, F. H. (1921). Risk, uncertainty and profit. Boston: Houghton Mifflin Company.

Knight, F. H. (1922/1935). Ethics and the economic interpretation. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 19-40). Freeport: Books for Libraries Press.

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Knight, F. H. (1940/1999). “What is truth” in economics? In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 372-399). Chicago: The University of Chicago Press.

Knight, F. H. (1944). Realism and relevance in the theory of demand. Journal of Political Economy, 52(4), 289-318.

Knight, F. H. (1956). The role of principles in economics and politics. In F. H. Knight, W. L. Letwin, & A. J. Morin (Eds.), On the history and method of economics. Selected essays (pp. 251-281). Chicago: The University of Chicago Press.

Knight, F. H. (1972). Social science. Ethics, 83(1), 1-12.

Noppeney, C. (1997). Frank Knight and the historical school. In P. Koslowski (Ed.), Methodology of the social sciences, ethics , and economics in the newer historical school (pp. 319-339). Heidelberg: Springer.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Chicago business-cycle models: from Weber through Friedman to Lucas. A selected bibliography

The most important methodological works of Weber:

Weber, M. (1949). The methodology of the social sciences. Glencoe: The Free Press. Translated by: Shils, E. & Finch, H.

Weber, M. (1968). Economy and society. New York: Bedminster Press. Translated by: Wittich, C.

Weber, M. (2012). Collected methodological writings. London: Routledge. Translated by: Bruun, H.H.

Weber’s reception in the United States:

Derman, J. (2012). Max Weber in politics and social thought. Cambridge: Cambridge University Press.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Scaff, L. A. (2014). Max Weber in the United States. SocietàMutamentoPolitica, 5(9), 271-291.

Knight’s major Weberian works:

Knight, F. H. (1921). Risk, uncertainty and profit. Boston: Houghton Mifflin Company.

Knight, F. H. (1922/1935). Ethics and the economic interpretation. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 19-40). Freeport: Books for Libraries Press.

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1933). The economic organization. New York: Harper.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. Some queries regarding the mechanical analogy in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Knight, F. H. (1940/1999). “What is truth” in economics? In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 372-399). Chicago: The University of Chicago Press.

Knight, F. H. (1944). Realism and relevance in the theory of demand. Journal of Political Economy, 52(4), 289-318.

Knight, F. H. (1956). The role of principles in economics and politics. In F. H. Knight, W. L. Letwin, & A. J. Morin (Eds.), On the history and method of economics. Selected essays (pp. 251-281). Chicago: The University of Chicago Press.

Knight, F. H. (1972). Social science. Ethics, 83(1), 1-12.

Works on the Weber-Knight connection:

Emmett, R. B. (1999). Introduction. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. vii-xxiv). Chicago: The University of Chicago Press.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 7(1), 101-119.

Noppeney, C. (1997). Frank Knight and the historical school. In P. Koslowski (Ed.), Methodology of the social sciences, ethics , and economics in the newer historical school (pp. 319-339). Heidelberg: Springer.

 

Works on Knight’s relationship to Chicago economics:

Emmett, R. B. (2009). Did the Chicago school reject Frank Knight? Assessing Frank Knight’s place in the Chicago economics tradition. In R. B. Emmett, Frank Knight and the Chicago school in American economics (pp. 145-155). London: Routledge.

Emmett, R. B. (2010). Specializing in interdisciplinarity. The Committee on Social Thought as the University of Chicago’s antidote to compartmentalization in the social sciences. History of Political Economy, 42(S1), 261-287.

Emmett, R. B. (2011). Sharpening tools in the workshop. The workshop system and the Chicago School’s success. In R. Van Horn, P. Mirowski, & T. A. Stapleford (Eds.), Building Chicago economics (pp. 93-115). Cambridge: Cambridge University Press.

Emmett, R. B. (2013). Frank H. Knight and the Committee on Social Thought. Contrasting visions of interdisciplinarity in the 1950s. Retrieved from http://dx.doi.org/10.2139/ssrn.2307185

Emmett, R. B. (2015). Frank H. Knight and the Chicago school. Conference presentation, ‘The legacy of Chicago economics’, 5 October 2015. Chicago: The University of Chicago.

Reder, M. W. (1982). Chicago economics. Permanence and change. Journal of Economic Literature, 20(1), 1-38.

Van Horn, R., & Mirowski, P. (2009). The rise of the Chicago school of economics and the birth of neoliberalism. In P. Mirowski, & D. Plehwe (Eds.), The Road from Mont Pèlerin (pp. 139-180). Cambridge: Harvard University Press.

Milton Friedman’s Weberianism:

Hoyningen-Huene, P. (2017). Revisiting Friedman’s F53. Popper, Knight, and Weber. Unpublished manuscript.

Schliesser, E. (2011). “Every system of scientific theory involves philosophical assumptions” (Talcott Parsons). The surprising Weberian roots to Milton Friedman’s methodology. In D. Dieks, W. J. Gonzalez, S. Hartmann, T. Uebel, & M. Weber (Eds.), Explanation, prediction, and confirmation (pp. 533-543). Dordrecht: Springer.

 

Fulbright chronicle #1

“Dear Dr. Péter Galbács,

Congratulations! On behalf of the Fulbright Board of Directors in Hungary, I am pleased to inform you that you have been selected for a Fulbright Research Award for 4 months during the 2018-2019 academic year in the United States. We hope there will not be any obstructions in executing your grant. We will be pleased to welcome you among our Fulbright grantees and truly believe that your time in the United States will prove to be a successful and productive experience.”

I cannot tell you how happy and proud I am. From time to time I stop for a minute to tell myself that it feels as if it was a dream that has come true. But then I realize it IS a dream that has come true. The planning process has just started. There are a lot of details to consider since an important part of my project is to do extended library research at Duke and Chicago libraries. I am excited, admittedly.

Soon I will try to tell you more about both the process and my project, but today I would like to take pride in my award and to be simply happy.

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Realism vs. instrumentalism along the Friedman-Lucas-RBC line

Providing methodological analyses is a possible (and required) contribution to the historiography of modern business-cycle theories. As far as the Friedman-Lucas-RBC line of evolution is considered, it seems to be clear that as we approach the end of this story there is instrumentalism and nothing else in the commentaries. Today the only question is Friedman’s instrumentalism: there have been some intellectual efforts devoted to arguing for Friedman’s realism. Uskali Mäki’s ‘Unrealistic assumptions and unnecessary confusions‘ and Kevin Hoover’s ‘Milton Friedman’s stance. The methodology of causal realism‘ published in ‘The methodology of positive economics‘ are perhaps the most powerful initiations towards this direction. However, it is still the instrumentalist approach that seems to be the standard interpretation (see Paul Hoyningen-Huene’s very recent draft). Whether one focuses only on F53 or scrutinizes the text within Friedman oeuvre makes the difference. In the former case, Friedman can more easily be regarded as instrumentalist, whilst in the latter case there is a tendency for Friedman to be considered as a realist. This generalization, however, is problematic for it is not that difficult for us to find some works of Friedman in which it is instrumentalism that provides the principle of theorizing. Elsewhere I pointed out that Friedman’s Phillips curves are the manifestations of pure instrumentalism. In these models all the assumptions are designed in order that Friedman could achieve the desired theoretical outcomes.

As for Lucas, his instrumentalism seems to be unquestionable. As far as I can consider, the arguments for his instrumentalism are built upon some statements made by Lucas. Here are some examples:

Insistence on the ‘realism’ of an economic model subverts its potential usefulness in thinking about reality. […] On this general view of the nature of economic theory then a ‘theory’ is not a collection of assertions about the behavior of the actual economy but rather an explicit set of instructions for building a parallel or analogue system – a mechanical, imitation economy. A ‘good’ model, from this point of view, will not be exactly more ‘real’ than a poor one, but will provide better imitations. (Lucas 1980: Methods and problems in business cycle theory)

Or:

One can ask, for example, whether expectations are rational in the Klein-Goldberger model of the United States economy; one cannot ask whether people in the United States have rational expectations. (the Lucas papers, Box 13, Robert Barro folder)

The message common in these quotations is simple: features of the agents or environment designed in the models should not be looked for in reality. These are features of the model but not that of reality.

When Uskali Mäki started arguing for the realism in economics, he placed his arguments on the fact that it is possible for us to seize some aspects of reality via highly unrealistic models (Realistic realism about unrealistic models). Isolation leads to models which are not like reality, however, in some important aspects they can still bear resemblance to the depicted part of reality. To be perfectly honest, I am a bit confused when reading some analyses about Friedman, Lucas and modern macro. The realist interpretation of F53 seems to be rather weird. When Friedman is talking about the leaves of a tree modelled as if they were rational utility-maximizers, it is very difficult for us to argue for his realism, in spite of the abundance of technical details in his F53 that can easily be reconciled with a realist stance. But the real question is how far we can go along the argumantation for the realism of unrealistic models…? What does Lucas’ instrumentalism stand in? I think emphasizing his insistance on unrealisticness will not do in this respect – or if it will, then Friedman must be an instrumentalist too. All in all, focusing on the unrealistic features of economic models is not decisive in terms of the realist-instrumentalist debate. As Elay Shech emphasizes it in his ‘Scientific Misrepresentation and Guides to Ontology: The Need for Representational Code and Contents‘, misrepresentation is an endeavour when the modeller tries to distort some elements of reality whilst insisting on conveying some reliable information about the modelled system. Shech’s example is the political caricature.

So, I think, it is not enough to underline the distinction between models and reality. Both realist and instrumentalist models in the highly abstract neoclassical mainstream are not like reality. The decisive features of models must be found somewhere else. Now I am inclined to think that it is the purposes of the modellers that we need to study first and foremost. We cannot reach decisions about the realism and instrumentalism of models on the sole basis of the models themselves. Whilst they are important in this respect, we need to consider the modellrs’ intentions.