NEOCLASSICAL ECONOMICS FROM A HERMENEUTICAL PERSPECTIVE: A METHODOLOGICAL APPRAISAL

Scope and Method of Study. This study is a methodological appraisal of neoclassical economics, carried out in the spirit of Bruce Caldwell's program for methodological pluralism. The methodological characteristics chosen for evaluation were those which most clearly delineate neoclassical economics from other research programmes in economics. The point of view which informs the appraisal is philosophical hermeneutics as developed by the German philosopher Hans-Georg Gadamer. The hermeneutical perspective emphasizes the role of preconceptual and preanalytical knowledge in human affairs. Throughout this appraisal the views of other economic methodologists are incorporated for purposes of clarification, contrast and comparison.;Findings and Conclusions. The appraisal found that neoclassical economists tend to behave as Kuhnian-type normal scientists concerned with extending the explanatory power of the foundational paradigm formulated by Adam Smith--the self-adjusting market mechanism. From the perspective of Gadamer's model of conversation this finding calls into question the effectiveness of neoclassical economics in dealing with issues raised by the contemporary social situation. Methodological individualism was found to be ineffective for dealing with issues involving social control over the forces of science and technology. Unrealistic assumptions were found to have a negative impact on the explanatory power of economic theory, and the basic assumptions of neoclassical economics were found to be unrealistic from a hermeneutical perspective. The conclusion was reached that the explanatory power of economic theory would be enhanced by "opening up" the scope of inquiry to include approaches that are possibly less rigorous than the formal model of neoclassical economics, but are potentially more useful and relevant for understanding the scope and complexity of economic reality.