Persuasion: Reflections on economics, data, and the 'homogeneity assumption'

Abstract

This paper discusses issues to do with the empirical basis of modern economics and points towards the need to look more closely at the ‘homogeneity assumption’ that underpins much economic theory. It argues that severe problems currently prevent economics from becoming more persuasive to both students of economics and those outside the discipline. The issue involves the management of disciplinary boundaries, and excessive use of the ‘homogeneity assumption.’ Three areas of concern are explored. First is the literature on causes of growth, and the role of policy. The paper documents reasons to doubt the existence of robust relationships between growth and policy variables. Second is the ‘homo..