Methodological Mistakes and Econometric Consequences
published in International Econometric Review, Sep. 2012, Vol. 4, Issue 2, p.99-122.
Abstract: Econometric Methodology is based on logical positivist principles. Since logical positivism has collapsed, it is necessary to re-think these foundations. We show that positivist methodology has led econometricians to a meaningless search for patterns in the data. An alternative methodology which relates observed patterns to real causal structures is proposed.
Key Words: Econometric Methodology, logical positivism, realism, causality, VAR models, Forecasting, surprise, goodness of fit.
JEL Classifications: C18, B40
Response to Comments on ‘Crisis in Islamic Economics
Rejoinder, Journal of King Abdulaziz University: Islamic Economics, 25: 2, p.227-250,(Sept. 2012)
Crisis in Islamic Economics: Diagnosis and Prescriptions
Discussion Paper, Journal of King Abdulaziz University: Islamic Economics, 25: 1 ,(April/May 2012)
Abstract: There is substantial evidence that the development of the discipline of Islamic Economics is currently in crisis. In this article we argue that the main reason for this is that most Muslim economists have accepted too many of the ideas of Western economists uncritically. The methodological framework, and underlying assumptions are wrong, and in conflict with Islamic views. This conflict has not been recognized, and the attempt to combine contradictory bodies of knowledge has failed. We also present alternative foundations on which a genuine Islamic economic theory could be constructed.
Keywords: Islamization of Knowledge, Islamic Economics, Economic Methodology
An Islamic Critique of Neoclassical Economics
Pakistan Business Review, April 2012
The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature
[with Mehmet Karacuka] International Journal for Pluralism and Economics Education Vol. 3 (4) 2012, p 366-414
Abstract: Current Economics Textbooks and Economists justify a theory of consumer behavior based on utility maximization on a priori grounds. This methodology follows Lionel Robbins’ idea that economic theory is based on logical deduction from postulates which are “simple and indisputable facts of experience.” Strong evidence has emerged from many different lines of research that these “simple and indisputable facts of experience” are contradicted by human behavior. In this article, we summarize some of main contradictions between predictions of utility theory and actual human behavior. Efforts to resolve these contradictions continue to be made within orthodox frameworks, but it appears likely that a paradigm shift is required
The Normative Foundations of Scarcity
Real-World Economics Review, issue no. 61, 26 September 2012, pp. 22-39
Abstract: Since Robbins (1932) influential essay on the methodology of economics, scarcity has been taken as the fundamental economic problem. We will argue that this is based on a tacit assumption of primacy of property rights. We illustrate how differing ethical commitments on part of a society lead to differing formulations of the fundamental economic problem.