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Hume: The power of abduction and simple observation in economics

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.

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Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 417.

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Length: 33 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:cem:doctra:417
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  1. R. J. Overy, 2000. "Book Reviews," Business History, Taylor & Francis Journals, vol. 42(4), pages 198-199.
  2. Ricardo F. Crespo, 2011. "Two conceptions of economics," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 181-197, November.
  3. Pablo Druck & Jorge M. Streb, 2001. "Economic Development as a Matter of Political Geography," CEMA Working Papers: Serie Documentos de Trabajo. 182, Universidad del CEMA.
  4. Maria Pia Paganelli, 2006. "Hume and Endogenous Money," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 533-547, Summer.
  5. Leonard, Robert J, 1994. "Reading Cournot, Reading Nash: The Creation and Stabilisation of the Nash Equilibrium," Economic Journal, Royal Economic Society, vol. 104(424), pages 492-511, May.
  6. Hicks, J. R., 1979. "Critical Essays in Monetary Theory," OUP Catalogue, Oxford University Press, number 9780198284239, July.
  7. A. M. C. Waterman, 1988. "Hume, Malthus, and the Stability of Equilibrium," History of Political Economy, Duke University Press, vol. 20(1), pages 85-94, Spring.
  8. Robert J. Leonard, 1992. "Reading Cournot, Reading Nash / or / The Emergence and Stabilization of the Nash equilibrium," Cahiers de recherche du Département des sciences économiques, UQAM 9214, Université du Québec à Montréal, Département des sciences économiques.
  9. Dow Sheila C., 2009. "David Hume and Modern Economics," Capitalism and Society, De Gruyter, vol. 4(1), pages 1-31, June.
  10. G. C. Peden, 2000. "Book Reviews," Business History, Taylor & Francis Journals, vol. 42(2), pages 188-189.
  11. Berdell, J F, 1995. "The Present Relevance of Hume's Open-Economy Monetary Dynamics," Economic Journal, Royal Economic Society, vol. 105(432), pages 1205-17, September.
  12. Filippo Cesarano, 2006. "Economic history and economic theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 13(4), pages 447-467.
  13. K. Austin Kerr, 2000. "Book Reviews," Business History, Taylor & Francis Journals, vol. 42(2), pages 192-193.
  14. R. E. Tyson, 2000. "Book Reviews," Business History, Taylor & Francis Journals, vol. 42(3), pages 158-159.
  15. Thomas M. Humphrey, 1981. "Adam Smith and the monetary approach to the balance of payments," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 3-10.
  16. Roger B. Myerson, 1999. "Nash Equilibrium and the History of Economic Theory," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1067-1082, September.
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