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Introduction.
1 Perfect and Monopolistic Competition: Two Variations on the Neo-
classical Programme of Situational Determinism.
(a) Perfect Competition and Monopoly.
INTRODUCTION
This paper attempts to identify and appraise two rival research programmes
in a major branch of modern microeconomic theory: in the theory of the
firm. I shall call them 'situational determinism' and 'economic behavioural-
ism'.
In section 1 I argue that the much publicised so-called Chicago-
Chamberlin controversy1 did not address itself to fundamentals but was.
primarily a family quarrel between two slightly differing branches of the
same dominant research programme, namely, 'situational determinism'.
The programme is identified and its main applications in the theory of the
firm are discussed. In section 2 I suggest that all major variants or models
of the basic underlying research programme of 'situational determinism' are
• The author wishes to acknowledge helpful criticisms by P. T. Bauer, L. P. Foldes, L.
Hurwicz, T. W. Hutchison, K. Klappholz, I. Lakatos, J. W. N. Watkins and B. S.
Yamey; although, I take it, none of them will agree with everything in the present
version.
1
For interesting and informative presentations of this controversy see Stigler [1949] and
Archibald [1961] and the references given there.
Received 25 April 1971
208 Spiro J. Lattis
our model once adjustment has taken place? This positive heuristic has
the advantage of generating statements about equilibrium conditions,
and about changes in variables in response to variations in parameters, in
the absence of exact quantitative information. The comparative static
mechanism was first rigorously spelt out by Samuelson.1 Archibald has
argued however that this method yields testable conclusions only if very
restrictive conditions are fulfilled, and that therefore its. value for the
empirical assessment of theories is very small.2 Moreover, the comparative
static apparatus cannot answer certain questions concerning the possibility
of attainment of equilibrium or concerning the path followed during dis-
Ghamberlin's writings in' price theory from 1933 onwards reflect the
belief that a satisfactory theory of the firm can be developed simply by
inserting elements of monopoly into a theory of market behaviour according
to which firms operate under situational determinism.
It has come to be recognised in subsequent work (some interesting variants
of which is noted in the concluding part of the present section) that even when
sellers are relatively numerous decisions are often interdependent. The in-
adequacy of situational determinism is especially manifest when decisions are
interdependent. Recognition of the importance of interdependence in decision
making has therefore probably contributed to the partial retreat from situational
Chicago approach; he does not deny that at any given time there are open specific con-
crete problems (p. 23) the solving of which puts (in a Kuhnian-Lakatosian sense)
rather the economist than the economic theory to test. Indeed, Friedman says that what
-distinguishes a 'professional' from a 'crackpot' is the ability to distinguish a serious
counter-example from a mere anomaly or from some phenomenon which does not come
at all under the purview of the programme (p. 25).
1
Classical inductivism—the requirement of proving one's theories from facts—has
rarely been seriously presented in recent debates. The only such attempt occurred in
one or two of Samuelson's too many contributions to the methodological debate in the
1950s and the 1960s in the columns of the American Economic Review. (Samuelson [1952],
p. 57 and [1963], pp. 231-6; but see Machlup [1964], pp. 733-5.)
4
Samuelson [1963], p. 232. * * Friedman [1953], p. 15.
* {Added in the press): Recently Kuhnians who were first to show up some of the weak-
nesses of what they christened 'naive falsificationism' came to the fore of methodological
discussion also in economics to save 'paradigms' from falsificationists; cf. e.g. Coats
[1972] and Loashby [1971]. They appeared in economics at a time when Kuhn
himself withdrew or weakened most of his sharp theses (cf. e.g. Musgrave [1971]). But
- does not the methodology of research programmes retain all the advantages of the
Kuhnian approach without its disadvantages?
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