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Equilibrium Versus Understanding : Towards the Restoration of Economics As Social Theory
The theories we use shape the way we look at the world and influence our explanations of people's behaviour.
Equilibrium versus Understanding argues that neo-classical theory is incapable of explaining decisions and choices. The author asserts that a different sort of economic theory is required if economists are to understand how the world works. As an alternative, he proposes a hermeneutic theory.
The book is divided into two parts. The first contrasts the positivist methodology of neo-classical equilibrium theory with that of an interpretative approach to social theory. The author rejects the 'third-person perspective' of the former in favour of a subjectivist theory incorporating a 'first-person perspective'. He goes on to discuss what a hermeneutic theory entails; why it is a suitable framework for explaining people's conduct; how it differs from orthodox economics; and how it enlarges the scope of economics.
The second part of the book uses the problem of industrial location to illustrates how both third and first person perspectives explain business decisions. The analysis shows how the explanations provided by traditional location theories mislead us and also provides insight into the nature of investment decisions. Throughout the book, the discussion of methodologies affords a novel critique of equilibrium theory and insight into the nature of business decisions and uncertainty, the issue of prediction, and the use of mathematics in economics.
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Taylor & Francis
October 23, 1995
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