korrish Journal of Poliriml Economy. Vol. 41, No. 2, May 1994 0 Scottish Economic Socity 1994. Published by Blackwell Publishers, 108 Cawlcy Road, Oxford OX4 IJF, UK and 238 Main Strcel, Cambridge, MA 02142. USA CAUSALITY AND DETERMINISM IN ECONOMICS Stavros A. Drakopoulos* and Thomas S. Torrance** I INTRODUCTION In recent years there has been a growing interest within economics in causality and related concepts, as the crucial place these notions occupy in the discipline becomes more widely appreciated. One clear manifestation of this interest is in the field of econometrics, where debates concerning the nature of causality are increasingly common. For a long period, however, such concepts were thought by most economists to be clear-cut and relatively unproblematic. The reason for this attitude was the dominance of a central unchallenged paradigm. Although the term is multi-ambiguous, a paradigm is often understood to be a skeletal structure which any explanatory theory should adopt in order to establish its credibility within a particular scientific peer-group. And the para- digm that until recently was virtually unchallenged within economics was deter- minism. Acceptance of this paradigm amounts to a belief in the existence of a closed explanatory system for the relevant subject area and in the possibility that a researcher can be wholly detached, in a causal sense, from the events being explained. The determinist paradigm originally evolved in the eighteenth and nineteenth centuries as a guide for authoritative explanatory procedures within classical mechanics and thermodynamics, but over time the paradigm came also to be regarded even by those working in psychology and the social sciences as an ideal to be as closely approached as possible. This paper examines the background and relevance of the concepts of causality and determinism in economics (including econometrics), and also the appropriateness of the dominant deterministic paradigm for the discipline. In particular, after a discussion of the meaning and significance of these concepts and their customary use by economists, the paper questions the entrenched idea that causal reasoning in economics requires the wider vision of determinism. In the light of developments in twentieth century physics, we further argue that determinism is an unsuitable paradigm even for the natural sciences and that thus, even more strongly, it ought no longer to have a prescriptive role for any of the social sciences. * Department of Economics, University of Aberdeen. ** Department of Economics, Heriot-Watt University. 176