Econometric methodology and the philosophy of science

Econometricians have generally used the term 'methodology' to be synonymous with 'methods' and, consequently, the field of econometric methodology has been dominated by the discussion of econometric techniques. The purpose of this paper is to present an alternative perspective on econometric methodology by relating it to the more general field of economic methodology, particularly through the use of concepts drawn from the philosophy of science. Definitional and conceptual issues surrounding the term 'methodology' are clarified. Three methodologies, representing abstractions from the actual approaches found within econometrics, are identified. First, an 'a priorist' methodology, which tends to accord axiomatic status to economic theory, is outlined, and the philosophical foundations of this approach are explored with reference to the interpretive strand within the philosophy of the social sciences. A second approach is an 'instrumentalist' one emphasising prediction as the primary goal of econometrics, and a third methodology is 'falsificationism', which attempts to test economic theories. These are critically evaluated by introducing relevant issues from the philosophy of science, so that the taxonomy presented here can serve as a framework for future discussions of econometric methodology.