Dealing with the Duhem-Quine thesis in financial economics: can causal holism help?

Acceptance of the Duhem–Quine thesis implies a recognitionthat empirical tests of individual hypotheses are in fact testsof individual hypotheses in conjunction with the networks fromwhich those hypotheses are derived. This leads to a problemin the evaluation of disconfirming evidence: is it the individualhypothesis or the network that is refuted? This paper examineshow financial economists deal with this ‘joint-testing’problem in their empirical evaluation of the efficient marketshypothesis. Causal holists argue that the holistic testing theyespouse circumvents the difficulties surrounding joint-testingproblems. This paper assesses whether a causal holist approachcan resolve the ambiguity surrounding the evidence against theefficient markets hypothesis. It concludes that, without a resolutionof the ontological–epistemological tension in causal holismidentified by Fleetwood (Cambridge Journal of Economics, 2002,vol. 26, 27–45) and a clearer outline of the nature ofholistic testing, causal holism cannot help financial economistsdeal with the implications of the Duhem–Quine thesis forempirical testing.     

Hodgson on Hayek: a critique

In his book Economics and Evolution, Geoffrey Hodgson offersa detailed critique of F. A. Hayek's writings on cultural evolution.Certain aspects of Hodgson's treatment appear to be inaccurate.This paper criticises Hodgson's critique.     

Price rigidity and market-clearing: a conceptual clarification

This article tests the view (derived from Hicks and Patinkin)that non-market clearance may be caused by slow adjustment (‘processrigidity’). There are models where market-rationing ispresent and derives from some form of rigidity, but this rigiditycannot be considered as process rigidity. It is similarly possibleto accommodate the idea of process rigidity within the Marshallianresearch programme. What is missing is that market-rationingmight be its corollary. The reason such a causal link is oftenbelieved to exist lies in a generic use of the concept of rigidity,used to designate alternative and incompatible phenomena: ‘exogenousend-state rigidity’ and ‘equilibrium end-state rigidity’,as well as process rigidity. It is true that these first twoforms of rigidity create market rationing. The belief that slowadjustment also generates market rationing results from theunwarranted extension to process rigidity of conclusions whichare only valid for the first two.     

Environmental terrorism: a critique

As terrorism once again makes news headlines and attracts renewed attention from scholars, the usage of terms related to terrorism may well outpace the development of sound conceptualization of these themes. A case in point is environmental terrorism about which a small body of literature has already been written. The objective of this paper is to examine the theme of environmental terrorism by applying critiques of the more developed but similarly problematic area of environmental security. Three critiques of environmental security literature argue that there is insufficient clarity on how natural resources are linked to conflict, that the term ‘environment’ is not sufficiently clear as a guide to or boundary of a research area, and that the term ‘security’ prioritizes a realist, state-centric perspective that provides a limited perspective on relationships between natural resources and conflict. In this paper, the theme of environmental terrorism is subjected to parallel critiques as a way to examine the usefulness of this concept. Environmental terrorism, as a label, may be only partially helpful as a guide to future research that would also be aided by context-specific examinations of vulnerable natural resource and energy systems.     

Use diffusion: An extension and critique

This study demonstrates that exponential modeling applies to the diffusion of foods. By using per capita data rather than gross consumption data, we show that this exponential process is not an artifact of a simultaneous population increase. However, whereas previous researchers predict that use diffusion continues indefinitely though at decreasing rates from one time period to the next, the present study demonstrates that it can end or even reverse, as well as attenuate. The extension of reinforcement theory in psychology to “social learning” theory is rejected as an explanation of this change, and the alternative “technological substitution” model is discussed.     

Rothbardian demand: A critique

This paper refutes Rothbard??s claim that the law of diminishing marginal utility implies a non-increasing demand curve. It is argued that the law under Rothbard??s interpretation is, in fact, irrelevant for demand theory. An example of increasing demand is provided.     

Sheila Dow's concept of dualism: clarification, criticism and development

This paper analyses Dow's concept of dualism and decomposesit into eight categories, one not explicitly identified by Dow.It is argued that Dow's original definition is underdevelopedand thereby lacking practical relevance. The paper presentsa development of Dow's definition, which allows her to attackthe splitting of polar categories. This significantly increasesthe relevance of Dow's definition of dualism and buttressesher criticisms of the mainstream. The paper also identifies‘heuristic dualism’ in Dow's work. A distinctioncan be made between Dow's ‘heuristic dualism’, whichis strictly an intermediate step in an argument, and the mainstreamuse of fixed dualistic categories.     

Passive learning: a critique by example

In models of learning by experimentation that exhibit signal dependence, a benchmark using a passive learner has been proposed. The use of this benchmark is flawed – first, passive learning does not disentangle the effects of knowing that beliefs, as well as other state variables, might change, and we address this issue directly by introducing a naïve learner. Secondly, and more tellingly, passive learning does not do what it is supposed to do, namely help measure the gains from active experimentation; the naïve learner enables us to illustrate this point in the context of a particular example.     

Development and distribution: A critique of the cross-country U-hypothesis

This paper questions the validity of a modern paradigm, viz., the U-Hypothesis. It argues that notwithstanding contrary claims, the recent cross-country econometric studies by Ahluwalia and others have little in common from a methodological point of view with Kuznets' earlier intertemporal national studies. Ahluwalia's cross-country U-Curve is found to be based on defective statistics and questionable methodological premises. In specific, the estimation of one U-Curve from observations on both LDCs and DCs is criticised. A sample restricted to the LDC group considerably weakens support for the U-Hypothesis. Further, even marginal variations in the data set lead to the virtual disappearance of Ahluwalia's empirical relationship. The paper concludes that the cross-country U-Hypothesis is more of a hindrance than an aid to our comprehension of the relationship between economic growth and income distribution.     

Economics and Reality: A philosophical critique of transcendental realism

In Economics and Reality Tony Lawson seeks to criticise and offer an alternative to mainstream economic theorising. The book draws upon the work of Bhaskar, advocating a form of realism termed transcendental realism, in opposition to the empirical realism taken to underpin mainstream theorising. However, the specific objections advanced by Lawson against empirical realism are frequently confused and confusing. Lawson's own appeal to structures suffers from lack of definition, and empirical realism seems more applicable to Keynesian, not mainstream, economics. The claim that the social sciences can be modelled on the natural sciences is not particularly illuminating.     

Self-confirming equilibrium and the Lucas critique

We examine the role of off-path “superstitions” in macro-economics, and show how a false belief about off-path play is the key element underlying both the Lucas Critique and the game-theoretic concept of self-confirming equilibrium. However, the impact of false beliefs in these two cases is different: In the Lucas case, a policy maker's incorrect beliefs about off-path play can lead to the adoption of mistaken policy innovation. However, the consequences of such an innovation provide evidence that the belief that motivated them was wrong. In contrast, play may never escape an undesirable self-confirming equilibrium, as the action implied by the mistaken belief does not generate data that contradicts it; escape from the self-confirming equilibrium requires that players do a sufficient amount of experimentation with off-path actions.     

FDI, services trade and economic growth in India: empirical evidence on causal links

This article examines the linkages between inward FDI, services trade (export and import) and economic output using co-integration and VECM causality test. These linkages have been explored both at the aggregate and at the sectoral levels (manufacturing and services). The empirical findings confirm the long-run relationship among these variables. Causality results indicate the presence of bi-directional causal relationship between FDI and economic output as well as between services exports and economic output. The results also bring out feedback relationship between services export and FDI, reconfirming the presence of complementary relationship between the two. At the sectoral level, we find at least a unidirectional causality from FDI and services exports to both manufacturing and services output and also cross-sectoral spillover effects from manufacturing output to services output and vice versa.     

Legal positivism and property rights: a critique of Hayek and Peczenik

Scholars such as Friedrich Hayek and Aleksander Peczenik have criticized legal positivism for undermining constitutionalism and the rule of law, an implication of which is weakened private property rights. This conclusion is far from evident. First, I contend that legal positivism is compatible with a strong support for property rights. Second, the causal relationship between legal positivism and the degree to which property rights are applied and protected is analyzed. The main arguments for a negative relationship—that legal positivism centralizes and politicizes legislation and that it makes the legal culture servile in relation to the political sphere—are considered unconvincing.