Please use this identifier to cite or link to this item: http://hdl.handle.net/1946/4523
The sudden financial crash of 2008 and the failure of economists to adequately predict the crisis has raised the question of whether economics, as it is practiced today is capable of fulfilling its objectives of providing economic stability and growth. The basic premises of economic science, as well as the models used to describe macroeconomics and international trade have been called into question.
This essay aims to demonstrate, through an application of rationalist philosophy , that the persistent failure of economics to anticipate sudden economic collapses stems from a tendency to over-aggregate complex, heterogeneous phenomena in the name of mathematical tractability. This tendancy to over-aggregate is inherent in the empiricist methodology that currently enjoys a near-exclusive monopoly in the discipline. An alternative methodology, the causal-realist approach of the Austrian school of economic will then be outlined. This methodology allows for a more in-depth treatment of heterogeneous phenomena that eludes mathematical tractability, and results in policy recommendations that are radically different from those given by mainstream economists.
At the end the question will be raised of whether boom/bust cycles can be more easily diagnosed and prevented were the economics mainstream to employ this methodology to a greater degree, instead of rejecting it as unscientific as the case is today.