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From realism to instrumentalism - and back? Methodological implications of changes in the epistemology of development economics

Gräbner, Claudius (2016): From realism to instrumentalism - and back? Methodological implications of changes in the epistemology of development economics.

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Abstract

The paper highlights the importance of epistemological reasoning in economics by stressing the practical implications of different epistemological starting points. Most importantly, these epistemological starting points determine how one chooses among competing explanations and determine accepted research methods.

The argument gets illustrated by identifying recent epistemological shifts in the development economics literature and by highlighting their methodological implications: After the realist research program of the Cowles Commission, a shift towards less theory-dependent instrumentalism took place. Recently, this movement has come under critique and a return to a realist program focusing on the identification of economic mechanisms is discussed. We present and discuss two potential methodological answers to such an epistemological reorientation that can be found in the literature: the New Keynesian program with its focus on DSGE models, and the complexity approach with its agent-based models.

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