Posted by
jillian on Mar 30, 2005 in
Issue no.2, March 2005,
Volume 04 |
Comments Off on Grounded Theory and Heterodox Economics
By Frederic S. Lee, Ph.D. Abstract The dominant theory in the discipline of economics, known as neoclassical economics, is being challenged by an upstart, known as heterodox economics. The challengers face many obstacles, the most significant of which is the actual creation of an alternative economic theory. However heterodox economists have not settled on what the methodology of theory creation should be. The aim of this paper is to advocate that the method of grounded theory is the best set of guidelines for theory creation. In addition, I shall argue that the grounded theory method results in the creation of heterodox economic theories that are historical in structure, content and explanation. Grounded Theory and Heterodox Economics The dominant theory in the discipline of economics, known as neoclassical economics, is being challenged by an upstart, known as heterodox economics. Heterodox economics can be understood in two ways. The first is as a collective term of many different approaches to economic analysis, such as radical and Marxian economics, Post Keynesian economics, institutional economics, feminist economics, and social economics. Each of these approaches rejects various methodological and theoretical aspects of mainstream economics, including supply and demand curves, equilibrium, marginal products, deductivist approach to theory creation, methodological individualism and the optimality of markets. Because the different approaches utilize somewhat different theoretical arguments and methods of theory creation, there has been little progress over the last forty years towards developing an encompassing theoretical alternative to mainstream theory. But in recent years, this fragmentation among the heterodox approaches has declined as heterodox economists have taken positive steps towards developing a coherent synthesis. This activity has generated the second meaning for heterodox economics; that of referring to the development of a coherent theory that is an alternative to and replacement for mainstream theory. This alternative theory is based on the view that the discipline of economics should be concerned with explaining the process that provides the flow of goods and services required by society to meet the needs of those who participate in its activities. Heterodox economists believe that any explanation or theory of the social provisioning process must be grounded in the real world of actual historical events, must incorporate radical uncertainty and social individuals, and must tell a causal analytical story. Consequently, they reject the method of theory creation and development utilized by mainstream economists which is based on positivism, empirical realism, and deductivism. Numerous suggestions for an alternative method of theory creation have been raised by heterodox economists, but none have been widely accepted; and without a widely accepted method, progress towards developing an alternative heterodox theory will be slow indeed. The aim of this paper is to overcome this roadblock by advocating the method of grounded theory as the best set of guidelines for the creation of heterodox economic theory. In addition, I shall argue that the grounded theory method results in the creation of heterodox economic theories that are historical in structure, content and explanation. Thus, the first section of this paper will delineate the method of grounded theory. This is followed, in the second section, by a discussion of three methodological issues–the nature of data, the role of case studies, and mathematics and models–as they relate to the grounded theory method. The final section concludes the paper with a brief discussion of the historical nature of grounded economic theories. The Method of Grounded Theory To develop a theory that analytically explains causally related, historically contingent economic events, the critical realist...