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METHODOLOGICAL CROSSROADS – ECONOMICS BETWEEN FORMALISM AND CONTEXTUALISM
Abstract
The recent economic financial crisis has raised questions regarding the predictive capacity of economic theory, of macroeconomic models and the methodology of Economics, respectively. The present paper explores the objective/subjective, explanation/understanding or quantitative/qualitative dichotomy within the methodological dispute between mainstream and more recent trends in Economics. The methodological differentiation towards mainstream economics and Austrians, Institutionalists and others, consists in the awareness of what might and might not be known in economic reality and which is the best way to express this knowledge, by mathematical precision or metaphorical contextual explanations. The main conclusion of the paper is that standard pattern predictions in which a particular circumstance may occur, as well as contextual explanations, the understanding of human action in dynamics, are as exact and scientific as those theories expressed using mathematical language. Scientific progress would be a consequence of recognizing such a fact, since the approach to the human being as an integral piece does not represent a threat to the scientific character of Economics, but on the contrary, it highlights the premise of heightened credibility.
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