Measurement in Economics and Social Science
AbstractThe paper discusses measurement, primarily in economics, from both analytical and historical perspectives. The historical section traces the commitment to ordinalism on the part of economic theorists from the doctrinal disputes between classical economics and marginalism, through the struggle of orthodox economics against socialism down to the cold-war alliance between mathematical social science and anti-communist ideology. In economics the commitment to ordinalism led to the separation of theory from the quantitative measures that are computed in practice: price and quantity indexes, consumer surplus and real national product. The commitment to ordinality entered political science, via Arrow’s ‘impossibility theorem’, effectively merging it with economics, and ensuring its sterility. How can a field that has as its central result the impossibility of democracy contribute to the design of democratic institutions? The analytical part of the paper deals with the quantitative measures mentioned above. I begin with the conceptual clarification that what these measures try to achieve is a restoration of the money metric that is lost when prices are variable. I conclude that there is only one measure that can be embedded in a satisfactory economic theory, free from unreasonable restrictions. It is the Törnqvist index as an approximation to its theoretical counterpart the Divisia index. The statistical agencies have at various times produced different measures for real national product and its components, as well as related concepts. I argue that all of these are flawed and that a single deflator should be used for the aggregate and the components. Ideally this should be a chained Törnqvist price index defined on aggregate consumption. The social sciences are split. The economic approach is abstract, focused on the assumption of rational and informed behavior, and tends to the political right. The sociological approach is empirical, stresses the non-rational aspects of human behavior and tends to the political left. I argue that the split is due to the fact that the empirical and theoretical traditions were never joined in the social sciences as they were in the natural sciences. I also argue that measurement can potentially help in healing this split.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1928.
Date of creation: May 2007
Date of revision:
collective choice; consumer surplus; money metric; price and quantity indexes; welfare measurement;
Find related papers by JEL classification:
- B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-11 (All new papers)
- NEP-CDM-2007-06-11 (Collective Decision-Making)
- NEP-HPE-2007-06-11 (History & Philosophy of Economics)
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- Hillinger, Claude, 2008.
"Measuring Real Value and Inflation,"
Economics Discussion Papers
2008-5, Kiel Institute for the World Economy.
- Hillinger, Claude, 2008. "Measuring Real Value and Inflation," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(20), pages 1-26.
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