Page 48 - Azerbaijan State University of Economics

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

LOWE’S POLITICAL ECONOMICS AND ECONOMIC POLICY
Various strands of economic theory have informed economic policy differently. One
of the early pioneering works in the area of economic policy has been done by Jan
Tinbergen and Ragnar Firsch. They essentially brought mathematical modelling into
the practice of economic policy. Tinbergen’s theory does give primacy to model
building as a major step in policy making and thus less importance goes to relations
which are non-quantifiable or non-discoverable through mathematical models.
Tinbergen’s theory is apt for a closed system approach while Lowe’s instrumental
approach follows an open system approach.
Theories are broader than the models, they may also encompass several models.
Theories when defined by models are closed, but closed models can well be embedded
into open theoretical systems (Chick and Dow, 2005). Open theoretical systems can
accommodate different economic situations and problems. Systemic openness
involves multiplicity of actors and variables whose interaction is subject to evolving
circumstances (Ramazzotti 2021). Lowe’s instrumental analysis as an open theoretical
system, is open to a trial-and-error process through which we can discover an
appropriate policy for specific goals in different economic situations. Non-quantifiable
aspects like goal-adequate behaviour, motivations are also well integrated into the
logical framework of instrumental inference.

There are two major approaches to look at theory for economic policy, a mainstream
approach which is price centred and other non-mainstream approaches which are
institution-centred (Ramazzotti, 2022). Price-centred mainstream approach while not
refuting the role of institutions gives importance to prices as tool to assess and
coordinate in the economy and on the other hand institution centred approach while
not refuting the role of prices give importance to institutions. Institution-centred
approach cannot be fit tightly into a deterministic model as institutions are
interdependent and their change entails change in relative prices.

Lowe’s political economics with its open theoretical structure gives closed models
while doing structural analysis in the light of macro-goal to be achieved while
simultaneously establishing an ontological openness with dynamic feedback
mechanism to revise and adapt structural analysis and establishing controls as per
behaviours and motivations of economic agents. Thus, instrumental inference of Lowe
is an ongoing phenomenon where feedback loops keep on revising and adapting
structural analysis, goal-adequate paths, and suitable controls as per the macro-goal.
Mainstream neoclassical theories and models start from equilibrium and assume
equilibrating tendencies in an economy while disturbances are exogeneous (Ansperger
and Varoufakis 2006; Kuehnlenz et al. 2022).

48