Critical realism in economics and open-systems ontology: A critique

Abstract

This paper examines the treatment of ontology offered by critical realism. It addresses much of the material elaborated upon in two editions of this journal. Three main groups of criticisms are made here of the critical realist treatment of open systems. It is argued that critical realism, particularly in the project in economics emanating from Cambridge, UK, tends to define systems in terms of events. This definition is shown to be problematic. The exemplar of a closed system provided by critical realism of the solar system is shown to be flawed in that it is not closed according to the closure conditions identified by critical realism. Second, the negativity of the definitions adopted is problematic for heterodox traditions attempting to build positive programmes. Furthermore, the dualism of the definitions is also inconsistent with Dow's approach, which has ramifications for the coherence of post Keynesianism. Third, the definitions tend to polarize open and closed systems and ignore the degrees of openness evident in reality. The polarization of systems leads to polarized methodology and unsustainable arguments to reject so-called “closed-systems methods.”

Keywords:

• open systems
• closed systems
• critical realism
• post-Keynesianism
• dualism

Notes

Other significant members of this category are Clive Lawson (1996), Pratten (1996), Runde (1996), Lewis (1996), Ingham (1996), Siakantaris (2000), Faulkner (2002) and Fleetwood (1999, 2002), all of whom teach, taught or studied at Cambridge. Pinkstone (2000) and Rotheim (1998, 1999) were temporarily based at Cambridge in the 1990s and 1980s respectively. Clearly, there is a geo-historical justification for the identification of this collection of scholars as a group. Additionally, there is sufficient coherence in terms of their influences and approach on issues of economic practice to warrant their being grouped together. It is beyond the scope of this paper to prove this point fully. However, it should be stressed that the coherence of approach on key issues is more significant in identifying the Cambridge group than is some common geography: For example, Setterfield (2003) also studied at Cambridge, but has arguably moved in a different theoretical direction.

Bhaskar (1978: 51 – 52) defines a (generative) mechanism as “nothing other than a way of acting of a thing. It endures, and under appropriate circumstances is exercised, as long as the properties that account for it persist.”

Here, “experimental” refers to a situation in which a scientist intervenes to isolate and control a specific mechanism. Thought experiments are not included, which is slightly unsatisfactory because thought experiments are also important to science; and because thought experiments might also involve the isolation and control of mechanisms, albeit in thought.

Neither Lewis and Runde nor Lawson define clearly what is meant by a well-behaved probability distribution; however, both seem to mean a distribution that is symmetrical; for example, the normal distribution. This interpretation is consistent with Lawson's (1989b) treatment of the ECC in econometrics.

Lawson (2003: 15) does develop his concept of closed systems. He distinguishes between “closure as concomitance” and “closure as causal sequence.” However, the closure is still identified via the event level.

In fact, Lawson (2003) spends little time defining open systems. However, he does also define them in terms of the presence of multiple causes or conditions (2003: 42, 56, 125, 229, 233) or where reality is highly internally related (p. 229).

Lawson (1997) is somewhat ambivalent on this point: frequently he strictly separates closures and the conditions necessary for them (ICC and ECC), which matches Pratten's position; however, he (pp. 76 – 78) also discusses closure as being achieved by the ICC and/or ECC, for example in “isolated systems” (p. 78) or “closed economies” (p. 78).

Viskovatoff (1998) questions Lawson's characterization, arguing that there are (at least) two methodologies in orthodox economics: one, he claims, pays no attention to empirical outcomes. Lawson (1998a) disagreed. Mearman (2003, 2004) argues that the language of some orthodox economists, such as Sutton (2000), Morgan (2002) and others, implies a concern for mechanisms.

For example, whilst Austrian and Marxist economists might agree with the need to go below the surface of events, they would disagree strongly about what lies beneath. An event-level definition avoids such disagreement, albeit temporarily.

As an illustration, two pertinent definitions to consider are Kapp's (1968) and Dow's (1996). Kapp's definition corresponds exactly with an aspect of the GST definition in one way: that an open system is one that receives (and survives on) impulses from outside. It is difficult to identify this aspect in the critical-realist definition since in it, a) “system” is not well defined, and b) the spatial aspect is de-emphasized (Bhaskar 1978: 76 – 77). Another aspect of Kapp's definition is that in open systems there is an interaction between sub-systems, which is akin to the common notion that larger systems (often considered open) do comprise sub-systems. For the same reasons as stated immediately above, it is difficult to conceptualize this notion in CR, for, although Kapp's concept of the boundary might be thought of as similar to the ECC, clearly a) there is no concept of boundary in CR; and b) there is no notion in CR of the system requiring external impulses for its survival. For the same reasons, Dow's (1996) definition of an open system, which stresses fuzzy or indeterminate boundaries, is a departure from the CR definition. Dow also notes that an open system is identifiable by imperfect ordering, i.e. with a degree of disorder (Dow 1996: 14). This is opposite to the GST concept of closed systems being associated with randomness (in the usual sense). Disorder is perhaps only present in CR in that a non-invariant empirical relationship might imply disorder.

This argument is complementary to Brown et al.'s (2003) argument that critical-realist abstraction is weak in terms of reconstituting the concrete.

Lawson (2003: 15 – 16) also downplays the significance of the term “system,” claiming that the definition of the system is merely dependent on the area or time over which an event regularity can be found.

Above, it was argued that such diversity of views might be regarded positively, for example as a sign of flexibility. However, in the case of the definition of the system, there is simply a lack of coherent treatments. Other economists drawing on CR, such as Downward (1999), Lee (2002), Brown et al. (2003) and Mearman (2002b) are trying to address this apparent lacuna.

Lawson (1989a: 71) does offer a definition of a “system”, in terms of a combination of structures. Second, he defines a totality and differentiates between it and a system: arguably in terms of the extent of internal relationality between structures. Furthermore, the dialectical turn of CR has produced the concept of “totality,” which is a system of internal relations (Bhaskar 1993: 405), with an intensive and extensive margin (p. 125). Clearly this captures better the notion of “system”. Bhaskar (1993: 95 – 96, 127, 269, 273; 357) distinguishes between open and closed totalities but these are distinct from the concept of open (and closed systems) used, which remains: “Systems where constant conjunctions of events do not occur” (p. 401).

I acknowledge the suggestion of this point by an anonymous referee.

Others, such as Dow (1996) and Setterfield (2003), offer a similar definition.

In terms of economic applications, Mearman (2002a) has argued that Veblen's work exemplifies an open-systems approach. Veblen does not discuss systems, or use that terminology; however, there is clear evidence of his thinking in terms of multiple mechanisms, ontological depth and complex patterns of events. Mearman argues that Veblen's approach is consistent with the OSO outlined in the first section.

One of the principal tasks of heterodox economists and organizations is to develop coherence and/or develop arguments against the necessity of coherence. This remains, in spite of the clear fragmentation of the orthodoxy (cf. Viskovatoff 1998; Caldwell 1982).

Mearman (2005) shows that technically, polar concepts strictly cannot be duals under Dow's definition. However, polar concepts can be rendered duals by imposing an artificial dividing point between the poles.

Clearly this assumes a broader definition of work than, for example “leave the home to work on another's property”. This is contentious but consistent with the critical-realist treatment of “work” (Bhaskar 1978: 194 – 195).

Bhaskar (1978: 253, n. 1) makes the same point: “… it is clear that some systems, such as biological ones, are more nearly closed (reveal a greater degree of regularity of behaviour, or recurrence of syndromes) than others …”

Lawson (2003: 105 – 106) clarifies his concept of demi-regularity. It can apply to any rough and ready pattern, even when the pattern involves a deviation from an expected regularity.

It should be noted immediately that closed-systems methods are not a synonym for what Lawson called the “mathematical-deductive” approach. Although both mathematics and deduction are “closed-systems methods” the term is not restricted to them. Moreover, whereas in Lawson, deductivism implies nomological arguments; and further, that such laws are formulated in terms of universal event regularities; “closed-systems methods” do not necessarily presuppose event regularities.

See Mearman (2004) and Downward and Mearman (2002, 2003, 2004), who argue that a strategy of triangulation of methods—which employ varying degrees of closure—might be preferable in open systems.