As part of reframing a paper on the history of swaps and Glass-Steagall,* I’ve been reading a lot of papers in economics journals about financial innovation. In 2004, Frame and White published a very useful survey in Journal of Economic Literature of empirical studies of financial innovation. F&W argue that despite a massive wave of innovation starting in the 1970s-1980s, there has been very little empirical research on the topic (unlike other forms of innovation). What’s interesting to me is how they define empirical for purposes of their survey:
Empirical: The article must have formally presented data and tested hypotheses. As a result, a necessary condition for inclusion in the survey was that a standard error (and/or a t-test) appeared some where in the article. (124)
Ok, I know that F&W are mostly trying to distinguish empirical articles from theory articles, and that in economics itself such a rule-of-thumb (does it have a t-test?) probably comes very close to catching all relevant papers, but I still find the collapsing of “empirical” to “amenable to a t-test” to be quite confining. Do case studies never add to our knowledge? If they do, aren’t they “empirical”? This definition excludes all of the work from the social studies of finance tradition, for example. Even if you only believe such case studies are useful for generating, and not testing, hypotheses, they would still seem of interest to scholars of financial innovation.
I’m guessing this definition of empirical is reasonably widely held in economics, but I wonder how pervasive it is (if less audibly so) among quantitative sociologists.
*Earlier version here, but note that the next version will look very different.