How Economics Forgot History: The Problem of Historical Specificity in Social Science (Economics as Social Theory)
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In arguably his most important book to date, Hodgson calls into question the tendency of economic method to try and explain all economic phenomena by using the same catch-all theories and dealing in universal truths. He argues that you need different theories to analyze different economic phenomena and systems and that historical context must be taken into account.
Hodgson argues that the German Historical School was key in laying the foundations for the work of the pioneer institutional economists, who themselves are gaining currency today; and that the growing interest in this school of thought is contributing to a more complete understanding of socio-economic theory.
theorising vary in each case. The limits of general theorising by derivational uniﬁcation result from the lack of ontological grounding to its claims. These limits concern neither the boundaries of uniﬁcation, nor the number of items that can be uniﬁed, but the adequacy of the explanation. A derivational uniﬁcation may be achieved, but on its own it cannot constitute a causal explanation of real phenomena. On the other hand, the limits of ontological explanatory uniﬁcation depend upon existence
discursive tolerance of any method and proposition. Any failure of social science to erect an adequate and coherent general theory is not rectiﬁed by applauding incoherence. In recent years, some heterodox economists have been attracted by postmodernism. In particular, some post-modernists have found a refuge in institutionalism. Yet post-modernist statements such as ‘everyone creates his or her reality, there being no possibility of adjudicating among the different realities’ 6 Nevertheless, the
partly responsible for the bonding of society and the prevention of its dissolution into atomistic units by the corroding action of market relations. Accordingly, Karl Polanyi (1944) showed that even in ‘laissez-faire’ Victorian Britain the state was necessarily intimately involved in the formation and subsequent regulation of markets. All markets are themselves socially and culturally embedded. As a result, depending on the differences of social system into which they are embedded, there are
ontological, and relate to the recognition of fundamentally different types of structure and causal relationship. But the epistemological method of induction itself offers no means of divination of these underlying structures and causal powers. Having failed to establish a method of discerning causal relationships, some members of the older historical school abandoned the search for historical principles or laws. The Swedish institutional economist Johan Åkerman (1932, p. 80) saw this clearly:
addition, Commons did not have the enthusiasm for Darwin’s ideas that was shared by Veblen, Morgan, Peirce and James. Commons’s discussions of social evolution are typically more Spencerian in nature. He also rejected the Darwinian ‘natural selection’ metaphor on the grounds that what is involved in socio-economic evolution is ‘artiﬁcial selection’.2 On the other hand, Commons’s overall contribution to the discourse on the historical speciﬁcity of socio-economic systems was much more signiﬁcant