These months I am working on my new book project. There is a lot to do since I would like to complete all the chapters that I can finish here at home to have only a minor part of the project to be completed in Chicago, at Duke and at Arizona State University. In the meatime the title of the forthcoming book seems to have got a final form: it is
The Friedman-Lucas transition in macroeconomics. A structuralist approach.
In this post I would like to provide a bird-eye view of the contents as planned in the current stage.
Chapter 1. The introduction of the book is devoted to demonstrating the idea that methodology plays a crucial role in forming our ideas in economics. The discussion of this basic tenet in this chapter is twofold. First, I will review some methodological aspects of the neoclassical–institutional controversy. Their special theoretical problems directed both institutionalism and mainstream economics to unique methodological ways. Consequently, it has become impossible for the camps to mutually cultivate their approaches. Due to the special interests and the accompanying methodologies, these schools have been unable to pay attention to certain mechanisms of socio-economic reality.
Second, as the realism of theories or models can be doubted on multiple grounds, in this chapter I will characterize realism as a purpose, desire or ambition. This is the only thing we have for sure: a realist wants to be realist. The most we have about realism is our ambition to be realists. This is the purpose along which we can distinguish realists and instrumentalists. Accordingly, I will underlie that any methodological analysis of theories in the realism-instrumentalism context cannot be complete without scrutinizing the purpose of the theorists. Here understanding (i.e. providing causal knowledge as a purpose) stands in the focus as a feature of realists—in contrast to instrumentalists’ emphasis on mere predictive purposes (or to have knowledge only of the observable phenomena while denying the possibility of knowing the unobservable: e.g. causes).
Chapter 2. This chapter is devoted to a historical overview, as the reviewers wanted to read more about the THEORIES and the changes in econometric practice and the empirical performance of these models. Here I can talk about RBC and new Keynesian models as alternatives to Lucas’ line. I think this is going to be a very interesting chapter since a lot of details will be included about Chicago economics, the transition from Friedman to Lucas, etc. The line of reasoning can be summarized along the line from Hume’s thesis to the rethinking of the role of the government.
Chapter 3. This is the core of the book: here I will introduce the methodological framework to be used for evaluating the Friedman-Lucas transition. This is hard core philosophy of science, but customized for economists – so it is going to be an easy read hopefully. In this chapter, the chosen framework for a structuralist analysis of modern business-cycle theory is considered. In order to respond to the debates around the realist and instrumentalist interpretations of the works of Friedman I will provide a framework in which the tension between the opposite standpoints can be overcome. Based on epistemic structural realism, first, I will identify Friedman’s stance as a mix of agent-level instrumentalism and macro-level causal realism and, second, I will scrutinize the consistency of this epistemic strategy. I will argue that causal realism requires one to be realist regarding the assumptions defining agents as well.
Within the framework of ESR the problem I can solve is whether the representation of relations can be separated from the representation of entities. I will argue that structural realism cannot do without entity realism. In other words, a structuralism detached from the representation of entities (i.e. from the approximately true descriptions of agents) is not a viable option in economics. Structure and causality are of primary importance in creating scientific knowledge. In these terms, the only problem is that knowledge of a structure cannot be separated from the knowledge of entities. Their causal properties and dispositions for behaviour are of crucial importance in forming their (causal) relations. Entities having other properties stand in other relations, thus properties of entities are not neutral in terms of relations. This is the reason why the micro-foundations are so important in establishing the macro-level causal connections.
Chapter 4. This chapter is devoted to an assessment. One strength is the extensive reading of Lucas’ unpublished manuscripts with lots of word-to-word citations. Here I will provide an interpretation based on Max Weber’s traditional neoclassical methodology that can help us to find the adequate territory of abstract-idealized mainstream models. Special attention is paid to the intellectual connection between Weber and the subsequent business-cycle theorists. It is argued here that scrutinizing the relationship between models and reality should reach beyond the oversimplifying approach of empirical tests. Simultaneously, this assessment gives us a refined set of aspects by the application of which to contemporary macroeconomics some methodological breaks can also be highlighted. These breaks would not have been revealed by a linear narrative.
Here Max Weber’s social scientific methodology is introduced as an adequate strategy to establish the macro-level causal connections on realistic agent-level properties.
Chapter 5. In this concluding chapter I will consider the chances of a new theoretical consensus placed upon methodological grounds. I will argue that the complementarity of the approaches applied in macroeconomics and the related fields makes it possible to reconcile the competing approaches with one another without modifying the research traditions.