Scientific realism and Austrian explanation^∗

Abstract

In the recent writing on the methodology of economics there has been a shortage of systematic analyses of realism and explanation and an absence of analysis of their inter-relationships. This article attempts to provide a detailed account of the structure of economic explanation built upon realist and essentialist premises. Invisible-hand explanations characteristic of Austrian economics and the question of using the quantity theory for explaining inflation are used as illustrations. From another perspective, the analysis amounts to providing a reconstructive interpretation of the deep structure of the Austrian approach to explaning economic phenomena. It is suggested that realist-essentialist explanations be analysed in terms of redescription, reduction, ontological identification, and unification: Austrian (as well as some other) explanaions can be analysed as reductive theoretical redescriptions of economic phenomena using ontological identification statements and pursuing ontological unification of apparently diverse phenomena. Among these and other things, questions related to the deductive-nomological model, prediction, the implications of subjectivism and the role of common sense are discussed.