When "Other Things" Won't Stay Equal: Structural Limitations of Ceteris Paribus in Complex Economic Systems
DOI:
https://doi.org/10.14738/abr.1410.12505Keywords:
economic methodology, ceteris paribus, abstraction, omitted variable bias (OVB)Abstract
This article provides a systematic examination of the methodological foundations and principal limitations of the ceteris paribus ("other things being equal") assumption. It explores the challenge of balancing abstraction and empirical reality, discusses the aggregate demand–aggregate supply (AD–AS) model as a representative example of a highly abstract analytical framework, and examines the role of ceteris paribus in economic policy analysis and its ambiguity in empirical validation. The paper synthesizes the principal critical approaches to ceteris paribus within a unified methodological framework. These include omitted variable bias (OVB), the behavioral economics critique of the homo economicus model - particularly concerning risk preferences and the shape of the utility function - the unrealistic nature of the assumption that all other conditions remain constant in complex and dynamic economic systems, and the limitations of Friedman’s instrumentalist methodology. The central argument of the paper is that these limitations are not incidental but structural, indicating that ceteris paribus can no longer be regarded solely as an a priori and empirically untestable methodological postulate. Instead, they provide a foundation for its data-driven, dialectical reinterpretation and for the development of a quantitative measure of its empirical validity.
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