ABSTRACT
I have argued that the failure ismore profound than generally recognized. It goes back to the foundations of economic theory. Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who cannot base their decisions on perfect knowledge; yet, they cannot avoid making decisions since avoiding them also counts as a decision. They introduce an element of indeterminacy into the course of human events that is absent in the behavior of inanimate objects. The resulting uncertainty hinders the social sciences in producing laws similar to Newton’s physics. Yet, once we recognize this difference it frees us to develop new approaches to the study of social phenomena. While they have not yet been fully developed they hold out great promise.
