Page 40 - Azerbaijan State University of Economics

Nalin Ranjan: Understanding Epistemology and Methodology in Adolph Lowe’s Political Economics

In the phase of modern organized capitalism, with the advent of welfare state, obstacles
to resource mobility are multiplying and decision making has increasingly become
highly decentralised, interfering with the motivational and behaviour patterns. Lowe’s
political economics draws our attention to the need of a new economic theory in
commensurate with the new economic realities with all its intra and extra-systemic
intricacies and individuals’ cognitive power.

MODERN CAPITALISM AND THE METHOD IN ECONOMICS
The classical theoretical framework had integrated environmental, institutional,
political, and socio-psychological constants into one comprehensive framework. From
the middle of 19th century, the classical system of theorizing got abandoned gradually
and was replaced by a formal framework in which prediction was conditional upon
some assumptions about initial conditions and behaviour. This formal framework was
neoclassical economics which was characterised by marginalism and abstractions.
Focus of analysis in the new framework was individual, not social. The dominant
method of neoclassical theory emerged as hypothetico-deductive or falsificationism.
Hypothetico-deductive method was propounded by Karl Popper. In Popperian view,
theories are free creations of human mind and the test of scientific theory is its
falsifiability. This method gave impression of economics as an autonomous discipline
which was purely scientific and gradually economics as a social science was separated
from larger social fabric (Blaug 1992, p. 94-125).

Economic theory based on deductive reasoning alone is not sufficient for the purpose
of achieving a macro-goal. Economics is a science of man and society, the human
dimension necessitates taking individuals’ autonomous cognition, history, goals
sought and motivational aspects into consideration while making an explanatory
attempt. Explanation in social science demands specifying the specific motivations
and behaviours as antecedent, as opposed to strict scientific explanation.

Lowe as an economist was the admirer of classical style comprehensive theorizing. In modern
capitalism when decentralised decision making is the norm and economic agents have
different motivational and behavioural factors at different times, it is imperative to design and
implement a policy in a controlled environment with dynamic feedback mechanism to achieve
a macro-goal in an economy. Thus, the main goal of political economics is not the prediction
but the goal is to steer the society on a chosen path which can lead us to the coveted goal and
it can be achieved through the method of instrumental inference.

Task of new political economics is the act of goal-setting along with designing
appropriate policies to achieve the goal. The task consists of recapturing the formal
determinacy of classical analysis and to design a public policy capable of achieving
the macro-goal by shaping the preferences.

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