Critical realism, econometrics, and heterodox economics

In this chapter I address the critical realist critique of mainstream econometrics, and its implications for heterodox economics. Mainstream econometrics uses a methodology that presupposes constant conjunctions of the form ‘if event X then event Y’ and, unlike the classical economics and heterodox economics, isolates those constant conjunctions from the overall process of reproduction of socio-economic activity. The classical political economists, in contrast, were concerned with the reproduction and distribution of the surplus as a whole, and tried to describe this activity by focusing on objective and observable quantities. In so doing, the classical economists used a very different approach to measurement, following a realist method and theory, which has also been developed more recently by heterodox economists, and is consistent with the critical realist methodology too. I conclude that heterodox economists, rather than mainstream economists, are the true heirs of the social surplus approach initiated by the classical economists, who developed a perspective focused on the reproduction of socio-economic activity (as the classical authors also did), which is the central aspect to be addressed within economic and social theory according to the critical realist framework.