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Hume: The power of abduction and simple observation in economics

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  • Jorge Streb

Abstract

In Hume’s epistemology, induction leads to discovery in matters of fact. However, because of the poor data Hume analyzes the balance of trade with a thought experiment, doing what Mill makes explicit afterwards: reason from assumptions, to reach conclusions which are true in the abstract. Hume’s potential explanation, what Peirce later calls abduction, is backed by a case study, the price revolution of the 16th century, which supports half his abductive inference, when money supply is multiplied fivefold. Given that economics reasons abductively, Hume’s attention to realistic hypotheses and the adjustment process matters.

Suggested Citation

  • Jorge Streb, 2010. "Hume: The power of abduction and simple observation in economics," CEMA Working Papers: Serie Documentos de Trabajo. 417, Universidad del CEMA.
  • Handle: RePEc:cem:doctra:417
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    File URL: http://www.ucema.edu.ar/publicaciones/download/documentos/417.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    abduction; case study; realistic assumptions; Hume; Mill; Peirce; Hayek; Akerlof;

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F1 - International Economics - - Trade

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