Money, Banks and Finance in Economic Thought

Karl Brunner’s Philosophy of Science: Macroeconomics through the Lens of Logical Empiricism

Hoover Kevin, Duke University

Best known as a monetary economist and prominent proponent of monetarism, Karl Brunner was deeply knowledgeable about the philosophy of science and attempted to explicitly integrate logical empiricist thinking, derived in some measure from his engagement with the work of the philosopher Hans Reichenbach, into his economics. His philosophical commitments are clearly reflected in this empirical work on monetary economics, his monetarist analysis, and in his critical approach to econometrics, microfoundations, and the New Classical macroeconomics. Broadly, Brunner was a supporter of both Friedman’s monetarism and his philosophy of science. In both cases, Brunner arrived at his positions independently and found Friedman’s positions lacking with respect to formal theory. He reworked Friedman’s methodology of positive economics in a manner more congenial to logical empiricism and advocated a monetarism that was critical of, but more closely engaged than Friedman’s, with theoretical developments in monetary economics – e.g., with the “New View” of money associated with the work of Gurley and Shaw and of Tobin – was well as with the work on empirical macroeconometric modeling associated with Klein, Modigliani, Ando, and others. Subsequently, he developed substantive methodological criticism of the econometric practices of empirical macroeconomists. He occupied a middle ground in that he defended the empirical methods of the St. Louis monetarists, defended aggregate macroeconomics against demands for microfoundations as a sine qua non of acceptable macroeconomics, and attacked the overweening claims of real-business-cycle and dynamic-stochastic-business-cycle (DSGE) modelers to have discovered the only valid methodology. Brunner was skeptical of empirical progress in economics. Significantly, the skepticism was not of its possibility, but of the practices of economists seen through the lens of his philosophy of science. He believed that economists had paid too little attention to developing the kind of theories that were susceptible to critical resolution of empirical implications.

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Keywords: Karl Brunner, philosophy of economics, philosophy of science, logical empiricism, econometrics, microfoundations, the New Classical macroeconomics

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