CLOSING THE OPEN SYSTEMS:
THE 'DOUBLE HERMENEUTICS' IN ECONOMICS

Hüseyin ÖZEL (Hacettepe University)

The starting point of this paper is the criticisms by Roy Bhaskar directed to the Humean conception of causality as constant conjunctions of atomistic events, as the basic characteristic of "closed system" theorizing. On the basis of these criticisms, the importance of "open systems" in the social world is emphasized and the implications of this fact with respect to economics will be explored. It is argued in the paper that because of the ubiquity of open systems in the social world, economics, which essentially adopts a "closed-system" thinking, is forced to direct its energy to "close" the real world itself by creating and/or changing the institutional structure within which the theory is developed. In order to show this "double hermeneutics", a term by Anthony Giddens, is an integral part of economics, three cases from the history of economic thought will be examined: Polanyi's understanding of the market system as created by a conscious attempt of the liberal thinkers, Keynes's views and the creation of the "welfare state", and Schumpeter's insight for the institutionalization of the "creative destruction" by devising an appropriate corporate environment, i.e., research and development activities. The basic argument of the paper is then straightforward: the "vision" to be adopted by economics should consider the importance of open systems in the human realm.

A tentative outline of the paper is as follows:

1. Critical Realism and Positivism

a. The Humean Notion of Causality and the "Closed Systems"
b. The "Epistemic Fallcy" and Ontology: Methodological Individualism
c. Open Systems and the "Closure": Experiments in the Natural Science
d. The Stratification of the Reality and "Emergence"

2. Ubiquity of Open Systems in the Social World

a. The Activity-dependence of Social Structures
b. The Concept-dependence of Social Structures: "Double Hermeneutics" and the Constitutive Role of the Social Science
c. Time/Space-dependence of Social Structures
d. The Problem of "Agency" in Social Science

3. "Ontological closure" and Economic Theory: the Design of Social Institutions

a. Polanyi; The institutionalization of the market system and the unintended consequences
b. Keynes; Uncertainty, "escape from propensities" and the welfare state.
c. Schumpeter: Institutionalization of R&D and investment.

Conclusion: The Importance of Interdisciplinary Approaches: "Open" the Social Science