This book defends the old-fashioned view that the basic axioms of economics are “inexact” and that economics proceeds by deducing the consequences of these axioms in particular circumstances. The method of economics is deductive, and confidence in the implications of economics derives from confidence in its axioms rather than from testing their implications. In looking back two generations to this traditional methodological wisdom, I shall be defending economics and economists from common but unwarranted criticisms. I shall also be taking issue with the views defended in other recent monographs. In my view many of the basic principles of economics can be regarded as inexact laws, and the methods of theory appraisal that economists employ in practice are scientifically acceptable.

But there is another aspect of economic methodology I shall not defend: the commitment to economics as a “separate science.” To insist that any acceptable economic theory must, like current theory, aspire to capture the entire economic “realm” has no justification and leads, I shall argue, to stagnation. The keys to the methodological peculiarities of economics lie in its structure and strategy.

What is economics?

This book will be concerned only with contemporary microeconomic theory and general equilibrium theory. These theories are the best known of economic theories, the theories that have most influenced work in the other social sciences, and the theories which have been most discussed by philosophers, economists, and other social theorists.