Two Essays in the Philosophy of Economics

This paper addresses the question of how fundamental theories in economics (e.g. game theory and general equilibrium theories) are related to theories of specific markets or market phenomena. This question arises because, in neoclassical economics, fundamental theories typically are not subjected directly to empirical tests. The argument presented here has two parts. First it is argued that, even without being directly tested itself, fundamental theory can help to refine, test and evaluate specific theories. Six ways in which this can occur are enumerated. Second, it is argued that the close relationship between fundamental and specific theories is a general feature of positive economics rather than being a special feature of neoclassical theory, and that this relationship makes it possible systematically to test or evaluate fundamental theory. Views of Friedman, Machlup and von Mises are considered.