This makes the statement untestable, and its informational content decreases to zero. The law of demand … is usually tagged with a clause that entails numerous interpretation problems: the ceteris paribus clause … The ceteris paribus clause is not a relatively insignificant addition, which might be ignored … The clause produces something of an absolute alibi, since, for every apparently deviating behavior, some altered factors can be made responsible. It’s a ceteris paribus thing, just like supply and demand.īut that is actually just another major problem with the Hicksian construction!Īs Hans Albert noticed more than fifty years ago: When people like me use something like IS-LM, we’re not imagining that the IS curve is fixed in position for ever after. Hyman Minsky and yours truly, Paul Krugman writes: IS-LM and DSGE models - simply don’t hold.ĭefending his IS-LMism from the critique put forward by e. When addressing real economies, the idealizations necessary for the deductivist machinery to work - as e. The snag is that if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. The beauty of this procedure is of course that if the axiomatic premises are true, the conclusions necessarily follow. When applying deductivist thinking to economics, mainstream economists usually set up ‘as if’ models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. Ceteris paribus - an alibi fairy 6 Mar, 2016 at 15:37 | Posted in Theory of Science & Methodology | 2 Comments
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