Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21
Ultimate Gaming and Home Working PC System Build 2021 - 5950X, RTX 3080, Asus MB - Scan Computers UK - 7th Jan 21
Inflation the bug-bear looking forward through 2021 - 7th Jan 21
ESG ETF Investing Flows Drive Clean Energy to Fresh Highs - 7th Jan 21
5 Financial Market Surprises in 2021 - 7th Jan 21
Time to ‘Reset’ Your Investment Portfolio in 2021? - 7th Jan 21
Bitcoin Price Collapses almost 20% at the start 2021 - 7th Jan 21
Fed Taper Nervous Breakdown - 6th Jan 21
What Will the U.S. Dollar Ring in for 2021? - 6th Jan 21
Stock market frenzy- Ride the bandwagon but be sure to take along some gold coins - 6th Jan 21
Overclockers UK Custom Build Gaming System Review Heat Test and Final Conclusion - 6th Jan 21
Precious Metals Resuming Bull Market, Gold, Silver, GDX Trend Forecasts 2021 - 5th Jan 21
Trump’s Iran-COVID-Gate Anniversary  - 5th Jan 21
2021 May Be A Good Year For The Cannabis / Marijuana Sector - 5th Jan 21
Stock Market Approaching an Important Target - 5th Jan 21
Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB - 5th Jan 21
NEW UK Coronavirus PANIC FULL Lockdown Imminent, All Schools to Close! GCSE Exams Cancelled! - 4th Jan 21
The Year the World Fell Down the Rabbit Hole - 4th Jan 21
A Year Like No Other for Precious Metals… and Everything Else - 4th Jan 21
The Stocks Bull Market is Only Half Completed - 4th Jan 21
An In- Depth Look At Gold Price Trend - 4th Jan 21
Building America Back After a Dark Covid Winter - 4th Jan 21
America's Dark Covid Winter Ahead - 4th Jan 21
Buy a Landrover Discovery Sport in 2021? 3 Year Driving Review - 3rd Jan 21
Stock Market Major Peak in Early April 2021 - 3rd Jan 21
Travel and Holidays 2021 - Flight Knight Cabin Bag Review - 3rd Jan 21
�� Happy New Year 2021 Fireworks and Drone Light Show from London and Sheffied - BBC�� - 2nd Jan 2
The Next IMMINENT Global Catastrophe After Coronavirus - 1st Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Academic Economics Profession in Crisis

Economics / Economic Theory Mar 30, 2010 - 09:42 AM GMT



Best Financial Markets Analysis ArticleDear economics department chairman,

In all the formal economic study I have sat through, I have developed a growing concern for the direction of the economics profession in general, and economic education in particular. Let me explain — and challenge you.

What is knowledge? How is knowledge acquired? What do we know? How do we know what we know? These questions seem most fitting for a philosophy class in epistemology — however, they are also essential in the world of economics.

The discovery of knowledge can be broken down into two main approaches (excluding the category of divine revelation): inductive reasoning and deductive reasoning. Simply put, inductive reasoning is the discovery of knowledge through observation (as in the scientific method). Conversely, deductive reasoning is the discovery of knowledge done through logic. Or, said differently, deductive knowledge is gained in an a priori (knowledge before experience) fashion that follows naturally from stated axioms.

Importantly, knowledge gained through deductive means is no less valid than knowledge gained through inductive means.

The issue is that in the realm of mainstream economics today this is not recognized to be true. Deductive reasoning is sneered at, especially when it is not presented in the formality of Greek letters. Most economists label those that use deduction as "unscientific" and "imprecise." The emphasis on induction is so strong in economics PhD programs today that a grad student with a background in math or statistics can finish his or her PhD with superb grades and know literally nothing about cause-and-effect economics.

Let me be clear, having induction as the mainstream of economic thought is not the issue that I wish to bring up: the issue is having inductive analysis as the mainstream of economic discovery while deductive discovery is not only looked down upon — it is not even taught. Innovation in economic thought requires a dynamic debate by all. It must be a process that includes healthy academic discussion by those who favor inductive and those who favor deductive discovery.

At one time in economics' relatively short history, it was not so one-sided. The period from 1870 to 1920 saw the deductive-favoring Austrian School of economics and the inductive-favoring German School of economics in a pointed exchange of academic ideas. As the marginalist revolution in economics had just exploded, healthy economic debate was alive and well.

"Knowledge gained through deductive means is no less valid than knowledge gained through inductive means."

Carl Menger introduced marginalism in his 1871 book, Principles of Economics, which also refuted work done by both Adam Smith and David Ricardo. Next, Karl Marx, working on the labor theory of value, was challenged heavily by Eugen von Böhm-Bawerk. Finally, the likes of Ludwig von Mises, Joseph Schumpeter, Friedrich von Hayek, John Maynard Keynes, and Alfred Marshall spent a generation at variance, debating ideas about the progress of economic theory and the basis upon which it began. The point is that both deductive- and inductive-favoring economists contributed and offered analysis in healthy academic debate.

Sadly, World War II broke up the primarily European dialogue. When the dust of war had settled, the result was that the deductive-favoring Austrian School was less prominent and the inductive-favoring German School was now the mainstream.[1]

As induction took root, the use of deduction was more and more looked down upon, until "acceptable" economic inquiry became the one-sided view that it is today: Use the scientific method on a dataset. Quantify. Infer.

Switching gears a bit, there are essentially three ways (in a free market) in which a business can get ahead of its competitors:

  1. make a better product at a cheaper price;
  2. for the same price, make a better product; or
  3. differentiate yourself from your competitors.

In some ways, graduate education can be looked at in the same light.

There are X number of schools offering schooling in a particular program and Y number of students in any given year, choosing among available schools. Parameters that can play a part in the student's decision include the following: What school leaves me the least in debt? What schools have a better reputation? What schools have strong programs in what I want to study? And most importantly, What schools do I have the grades to get into?

From the perspective of the school, however, the goal is to attract as many applications as possible. The more students that apply, the more a given department can be more selective in admitting students, as they are now drawing from a larger pool.

By offering one or two undergraduate or graduate courses in this vein, your school can pride itself on being one of the few programs in the nation that offer students an additional perspective to round out their education. It is even better if you oversee an agricultural- and applied-economics program. Then you may boast that you are the only school in

Marketed in the right light, this could be a simple and effective way to differentiate your school in the minds of prospective students — particularly graduate students. And most importantly, from the point of view of academic honesty and freedom, adding an economics class or two based in deductive or "Austrian" analysis is the right thing to do. The discovery of knowledge is the literal foundation of the academic process, and dogmatically relegating one form of inquiry to obscurity is not only a bit academically dishonest — it's wrong.

I hope you will make the right decision.


Sterling T. Terrell

Sterling T. Terrell is an economist and writer living outside of San Antonio, TX. Send him mail. See Sterling T. Terrell's article archives.

© 2010 Copyright Sterling T. Terrell - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules