The Nature of Economics

Unrealisticness is one of the key challenges to Neoclassical Uncertainty Paradigm. In this chapter I discuss the Critique Realist’s approach to uncertainty. I begin by clarifying the meaning of critical Realism and argue that it is not about realisticness per se. Instead, Critical Realism aims at understanding the problem of phenomenon under study, by analysing its ontological structure. Based on these ontological analyses, methods appropriate to the problem need to be identified. Therefore, the Critical Realists Approach of uncertainty begins with an ontological analysis of the structure of economic reality. It is argued that the economy has to be understood as an open and complex system with emergent properties, which is structured and in which demi-regularities can be identified. Furthermore, economic reality is mutable, so that the degree of uncertainty, which originates from the ontological structure of economic reality, may be different in any two economic situations. From my point of view four stages of uncertainty, which vary in their degree of uncertainty, can be differentiated. Though Critical realism allows for this, compared to neoclassical economics rather detailed analysis of economic reality, it also gives no sufficient answer to the question, of how economic analysis should proceed in the face of Fundamental Uncertainty, which is according to Critical Realism the standard case in economics.