Pure theory and realism

For me, it is something to scrutinize whether new classical macroeconomics can be regarded as a pure theory and a realist movement at the same time. I tended to emphasize the character of a pure theory, while, earlier, I paid little attention to the new classical efforts to describe the socio-economic reality we are directly living in. It was not a conflict for me and it is still not so. Theories can be realist while being pure. By calling attention to the technical details of the new classical methodology I made efforts to point out: new classical macroeconomics has had an indirect connection to our socio-economic environment. I am using the word ‘indirect’, because new classicals, through abstraction and idealization (or isolation, as you like), were not able to grab the totality of our realm of social life but only the very essence of it. For me, the theory of the neoclassical founding masters and that of the new classicals are very similar to one another in methodological terms.

So far, I somehow did not see the difference between the efforts of pure theories to get linked to reality in terms of goals and ambitions. In these terms, however, neoclassicals and new classicals are not alike. Neoclassicals clearly emphasized the consequences of being a pure theory: it has been a common intellectual heritage of economics to pay attention to the gaps between theoretical results and the outcomes of actual social processes. Before the new classical era, pure economic theory being used as an analytical device to generate estimations performed rather badly. These estimations could be hardly regarded as exact and precise predictions. Now, for me, it is the very essence of the new classical breakthrough: Lucas and his group could overcome the gaps mentioned above. New classicals set a new goal: they considered the possibility of build up a realist pure theory which was able to perform well in terms of predictions. When the new classicals declared the ambition to give a description of how actual socio-economic systems work and to provide numerical results that can mimic the actual outcomes of macro-economies, they did not undertake to set up, say, a phenomenological theory let alone an instrumentalist system. I strongly believe that they insisted on the concept of pure theory while being lucky to exploit the improvements in the statistical and econometric methods. In this way, new classical macroeconomics could remain a realist pure theory (similar to neoclassical theory), while becoming able to considerably improve its numerical accuracy.

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