In this paper the aim is to show how the translation of a logical positivist epistemology into neoclassical economics has had profound methodological consequences which over‐determine an inability to predict cusps and their associated crises.
Based on a review of epistemological and methodological literature, it is argued that the financial crises of the past 20 years ought to initiate a questioning of the epistemological foundations of the discipline.
As an alternative, it is suggested that an economics methodology informed by critical realism would increase the probability of a timely prediction of crises.
The paper de‐emphasises falsification as a key criterion for assessing the quality of knowledge, provides more space for non‐quantified reflections on relationships, a thicker model of human agency, a well‐specified model of collective human economic behaviour as well as an endogenous possibility of dramatic change within the economic domain.
