Why did mainstream economics miss the crisis? The role of epistemological and methodological blinkers

Abstract

Purpose

In this paper the aim is to show how the translation of a logical positivist epistemology into neoclassical economics has had profound methodological consequences which over‐determine an inability to predict cusps and their associated crises.

Design/methodology/approach

Based on a review of epistemological and methodological literature, it is argued that the financial crises of the past 20 years ought to initiate a questioning of the epistemological foundations of the discipline.

Findings

As an alternative, it is suggested that an economics methodology informed by critical realism would increase the probability of a timely prediction of crises.

Originality/value

The paper de‐emphasises falsification as a key criterion for assessing the quality of knowledge, provides more space for non‐quantified reflections on relationships, a thicker model of human agency, a well‐specified model of collective human economic behaviour as well as an endogenous possibility of dramatic change within the economic domain.

Citation

Cameron, J. and Astrid Siegmann, K. (2012), "Why did mainstream economics miss the crisis? The role of epistemological and methodological blinkers", On the Horizon, Vol. 20 No. 3, pp. 164-171. https://doi.org/10.1108/10748121211256766