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Nalin Ranjan: Understanding Epistemology and Methodology in Adolph Lowe’s Political Economics

Over the time a larger consensus emerged that the macroeconomists perhaps did not
grasp the consequences of complex interconnectivities in global financial markets and
the regulators could not catch up with the emerging scenario in financial markets (See,
Taylor, 2009; Coffee Jr, 2009). Economists often blame a crisis in economic
methodology for the failure (Baker, 2016; Hoover, 2016; Syed and Yilmaz, 2019).

Economics is essentially a social science and its method cannot resemble the method
of hard sciences. It is often argued that modern economics has not been able to form a
social orientation as it considers an economic system as closed system unlike some
heterodox economic streams which attempt to establish a social ontology and consider
economic system as an open system e.g., Institutional Economics school (Soylu,
2022). The frailties of modern economics can be traced to its methodological
foundation which is rooted in unsound epistemology as far as modern capitalism is
concerned. The methodological foundations of mainstream economics have been cited
as one of the main reasons for its failure to account for the economic crisis of 2008
and the same is due to the persistent aversion towards methodological discourse by
most mainstream economists (Drakopoulos, 2016). The mainstream economic theory
failed to re-invent itself with the developments in the world of economics and finance
as it did after 1930’s great depression (Palma, 2022). One of the central questions in
economics is prediction (Papaandreou 1959, Sen et al. 1986, Gonzalez 2011),
however, it is not easy to predict and prediction often fails (Desai, 2015, p 165-201).
Keeping in view the idea that past intellectual ideas must be acknowledged as a
lighthouse for the future (Bogenhold, 2021), This article adds to the methodological
discourse in economics by aiming to delineate Adolph Lowe’s political economics and
the novel method of instrumental inference which gives a goal-seeking orientation to
economics as a science of public policy as opposed to science of prediction.

Adolph Lowe’s political economics lays down a sound epistemological foundation for
economics and propounds the method of instrumental inference for public policy.
Ideas enshrined in Lowe’ political economics come from his three major works
spanning over almost four decades. First major work of Adolph Lowe was Economics
and Sociology (1935) in which Adolph Lowe gave a clarion call for collaboration of
social sciences while pointing out the failures in traditional economic theorizing
focused on equilibrium and marginalism. The second major work, On Economic
Knowledge (1965), brings out the epistemological foundations of political economics
and advocates an instrumental approach towards public policy (instrumentalism). The
third major work, Path of Economic Growth (1976) focuses on structural and force
analysis aspect of political economics. Structural analysis is concerned with the
elements of an economic system e.g., input, output, employment, savings, investments
and so on and their arrangement to achieve the final goal.

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