METHODOLOGICAL ISSUES IN MONETARY ECONOMICS
The application of the work of I. Lakatos to economics suggests that the neo-Walrasian monetary model is generated from a neoclassical microeconomic research program, as is the rational expectations hypothesis. At the macroeconomic level, there are competing Keynesian and conservative programs. The latter contains monetarism as a constituent set of theories. Methodological and policy-related debates reflect competition between these three programs. Despite the similarity between the policy recommendations of monetarism and the rational expectations hypothesis, their theoretical apparatus--dictated by the positive heuristic of their respective programs--are substantially different. Monetarism shares its macroeconomic equipment with Keynesianism, but the two differ in their policy recommendations. A major characteristic of the neoclassical microeconomic program is the situational determinism found in its member theories. This is turn follows from the substantive (rather than procedural) rationality displayed by all economic agents in these theories. The same can be said of the rational expectations hypothesis. On the other hand, macroeconomic theories, whether Keynesian or monetarist, display a situational determinism only at the level of the policy-maker. The separation of economics from the other social sciences leads to a situational logic which enables the policy-maker in these models to reach decisions through the use of the substantive form of rationality.
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