Irrealist Lines of Defense in Econometrics (Work in Progress)

This essay explores the mechanisms which allow econometrics to remain an ideology, rather than a science, although econometricians look at data every day. One cannot expect econometrics to automatically become a science just be-cause it deals with data. According to Bhaskar, such an expectation commits the ontic fallacy, i.e., it assumes that the ontological makeup of the world necessarily generates correct scientific methods. Marx himself made this mistake when he ex-pected that economic crises would “drum dialectics into the heads ” of mainstream economists. The present essay argues in one specific case study why the ontic fallacy is indeed a fallacy. The specific case is the econometrics of the consumption function. In the 1950s, with the permanent income hypothesis, econometrics seemed to move towards depth realism: econometricians recognized that consumers do not react to empirical events (actual income) but to the underlying mechanisms (permanen