Epistemological reasoning is an important part of economic research. This fact is not yet adequately reflected in the typical structure of economic research papers which usually do not discuss epistemological issues explicitly. Given the important practical implications of epistemological orientations, this is a very unfortunate state of affairs.
To illustrate this practical relevance of epistemology we have looked at significant changes of the epistemological orientation in development economics in the recent past. The changes from realism to instrumentalism and back that have taken place created the need for methodological innovations since different epistemologies fit to different methodologies.
Given the current tendency towards mechanism-based explanations, we have discussed two different methodological reactions that could accompany this epistemological shift, at least for macroeconomics: on the one side, New Keynesian economists argue for the use of more sophisticated DSGE models, while many complexity economists favour the use of agent-based models.
Both approaches represent a movement towards a more realist assessment of the economy, but they differ in the extent of this movement: The New Keynesian approach remains much more in the realm of neoclassical economics than the complexity approach.
As in this case, where members of the respective research community are very critical of the methods used by the others, we believe that many methodological debates in economics are at the core about epistemology: researchers prefer different methods because they differ in they way they compare the quality of theories and in their strategy to make their models meaningful.
Therefore, a more explicit epistemological debate could advance many of the deadlocked dialogues among competing research communities. Such a dialogue could also help identi-fying differences in ideology that may also explain the difficult relationship among various research communities. Such hidden ideologies can be identified through an epistemological
debate and their influence could - hopefully - be reduced. 18
Beyond this clarification the paper highlighted a number of meta-theoretical concepts that are useful for economic theorizing: we explained why an excessive focus on Occam’s razor as a mean to discriminate between competing explanations can be misleading if mechanismic explanations are sought for. Economists that aim for mechanismic explanations, and there seem to be ever more of them, should rather strive for deep explanations.
Furthermore, a more open and critical assessment of the methodological toolkit available to economists is desirable. Contrary claims that, for example, proclaim the end of methodological debate in macroeconomics and see the New Keynesian way of modeling as only viable way of doing macroeconomics (e.g. Goodfriend (2007)), are not helpful for the progress of economics. This relates to another, more abstract, implication of taking epistemological debates seriously: tolerance for different research approaches in economics is very important. Since disputes about epistemological orientations usually cannot be finally resolved within a reasonable timespan, and the example of development economics discussed above showed that there is often a back and forth between different dominant epistemologies, different epistemological orientations and their methodological implications should be tolerated within the profession (see also Dobusch and Kapeller (2012)).
Our elaborations above indicated that there is not only no ‘one correct model’, but probably not ‘one correct epistemology’. Rather, a pluralism of different epistemological (and consequently methodological) approaches must be not only tolerated but actively supported. For such a pluralism to be productive, however, it is important that epistemo-logical considerations are made more explicitly such that a productive exchange among the different approaches becomes feasible. Otherwise, an unproductive pluralism of many different, isolated communities, all with their own accepted set of models and unable to understand what is going on in other communities, will be the inevitable result.
18Of course, the set of accepted complexity reductions within a scientific community are also determined partly not only by ideology, but also by the institutions and power relations within the scientific community. Particular players have an interest that certain methodologies are considered as ‘standard’
and others are not accepted methods of research. And certain positions in the scientific system (e.g.
journal editors of heads of scientific associations) give such players the influence needed to safeguard their interests by affecting the dominant epistemology and the set of accepted research methods. Such sociological aspects of the problem were not part of the present article, but would be a most fruitful element for future research.
It is the important task of economic methodologists to support a productive pluralism by identifying the different epistemologies and to relate different research approaches to each other (see already Elsner (1986)). Arguments against such a productive pluralism, such the statement of Goodfriend (2007), not only increase the danger of theoretical and methodological lock-ins - they also make the economics profession less innovative, and in the end less successful in explaining reality - regardless of how ‘explanation’ is to be understood.
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