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Closing open systems: Two examples for the ‘double hermeneutic’ in economics

Özel, Hüseyin
The present paper, which takes as its starting point 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, emphasizes the importance of complexity, or the prevalence of “open systems,” emanating from the hermeneutic character of the social world. It is argued in the paper that because of the ubiquity of open systems in the social world, economics is not only concerned with explaining social reality, but also with changing this very reality by creating and/or transforming the institutional structure within which the theory is developed. In order to show that this ‘double hermeneutic’ is an integral part of economics, two cases from the history of economic thought are examined: creation of the market system as by a conscious attempt, and the creation of the ‘welfare state’, by considering the views of Polanyi, Keynes, and Schumpeter.