Introduction

For a domain of inquiry to live up to standards of scientific objectivity it is generally required that its theories be tested against empirical data. The central philosophical and methodological problems of economics may be traced to the unique character of both economic theory and its nonexperimental (observational) data. Alternative ways of dealing with these problems are reflected in rival methodologies of economics. My goal here is not to promote any one such methodology at the expense of its rivals so much as to set the stage for understanding and making progress on certain crucial conundrums in the methodology and philosophy of economics. This goal, I maintain, requires an understanding of the changing roles of theory and data in the development of economic thought alongside the shifting philosophies of science, which explicitly or implicitly find their way into economic theorizing and econometric practice. Given that this requires both economists and philosophers of science to stand outside their usual practice and reflect on their own assumptions, it is not surprising that this goal has been rather elusive.

The Preeminence of Theory in Economic Modeling

Historically, theory has generally held the preeminent role in economics, and data have been given the subordinate role of “quantifying theories” presumed to be true. In this conception, whether in the classical (nineteenth-century) or neoclassical (twentieth-century) historical period or even in contemporary textbook econometrics, data do not so much test as allow instantiating theories: sophisticated econometric methods enable elaborate ways “to beat data into line” (as Kuhn would say) to accord with an assumed theory.