1) At the start of Harrod's talk, he readily acknowledges the concern, which I hear often among economists, that actually doing economic research is what's interesting, and methods can only be judged after their results are known, so talking about what methods should be used in future research is a waste of time. Here's Harrod on why many economists actively seek to avoid discussion methodological issues.
In my choice of subject to-day, I fear that I have exposed myself to two serious charges: that of tedium and that of presumption. Speculations upon methodology are famous for platitude and prolixity. They offer the greatest opportunity for internecine strife; the claims of the contending factions are subject to no agreed check, and a victory, even if it could be established, is thought to yield no manifest benefit to the science itself. The barrenness of methodological conclusions is often a fitting complement to the weariness entailed by the process of reaching them.
Exposed as a bore, the methodologist cannot take refuge behind a cloak of modesty. On the contrary, he stands forward ready by his own claim to give advice to all and sundry, to criticise the work of others, which, whether valuable or not, at least attempts to be constructive; he sets himself up as the final interpreter of the past and dictator of future efforts. ...
The principles by which progress in a science proceeds can only be reached by observing that progress. They cannot be deduced a priori or prescribed in advance. ... And for this reason the methodologist is bound to occupy the rear, and not the vanguard. He studies the specific nature of the selected principles after the selection has been made. ... The function of the methodologist is to say what it in fact is, or, more strictly, has so far been. The proper and final reply to the would-be reformer is, " Stop talking and get on with the job; apply your method, and, if it is productive, you will be able to display your results."
2) There's a widespread quick-and-dirty version of the relationship between theory and empiricism in economics, which is that one first creates theories, tests those theories with data, and then iterates with new theories and empirical tests. But in the 21st century, I'm not sure anyone really believes this. It's well-known that you can create an internally consistent theory to reach pretty much any conclusion you want, as long as you tinker with the underlying assumptions. Moreover, it's well-known that when doing empirical work, one can try out a bunch of different statistical tests until you find one that reaches the conclusion you want. To make matters worse, there's no particular reason to believe that if some particular economic theory is validated by some particular empirical estimate in one context that it will also hold true in all other times and places. These concerns prove the case that a social science is not a natural science, but it would be as severe overreaction to hype them up into a claim that social sciences can't lead to meaningful knowledge. Much of Harrod's essay is aimed at an argument that economists can and should strive for general insights applicable in a number of settings. I'll include here a quotation from Keynes, in their correspondence, in which Keynes argues for a central task for economists is weeding through models and choosing the applicable one--and that empirical tests offer only limited help in this task.
This is part of a letter from Keynes to Harrod, upon receipt of the draft of Harrod's talk, dated July 4, 1938. It is taken from a website, "The Collected Interwar Papers and Correspondence of Roy Harrod," edited by Daniele Besomi. It's letter #787 at that website, and it's easy to click from letter to letter through the correspondence.
Progress in economics consists almost entirely in a progressive improvement in the choice of models. ... But it is of the essence of a model that one does not fill in real values for the variable functions. To do so would make it useless as a model. For as soon as this is done, the model loses its generality and its value as a mode of thought. ... The object of statistical study is not so much to fill in missing variables with a view to prediction, as to test the relevance and validity of the model.
Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world. It is compelled to be this, because, unlike the typical natural science, the material to which it is applied is, in too many respects, not homogeneous through time. The object of a model is to segregate the semi-permanent or relatively constant factors from those which are transitory or fluctuating so as to develop a logical way of thinking about the latter, and of understanding the time sequences to which they give rise in particular cases.
Good economists are scarce because the gift for using "vigilant observation" to choose good models, although it does not require a highly specialised intellectual technique, appears to be a very rare one.
3) Finally, Harrod closes his essay by responding to an argument that economists often hear from social reformers, which is basically that the economists should stop playing intellectual games, and become part of the movement for needed change. Harrod's response is that there are lots of articulate advocates for social change, but what economists can bring to the party is a set of general lessons about the likely causes of social problems and the likely effects of proposed reforms. (The last part of the quotation below, after the final ellipses, actually appears earlier in the essay, but I inserted it at the end here for clarity.) Here's Harrod:
Zealous humanitarians may be impatient for quick results. All men of goodwill may see without more ado that there is much amiss with the world. Should not social students postpone their abstruse intellectual problems, of fascination mainly to themselves, and get together in a sort of academic tea-party to list our known abuses and our known resources and arrive at a programme of reform on the basis of mutual goodwill ? And do they not in fact, so the critic proceeds, bury themselves in unintelligible jargon, because they fear that, if they proceeded with their more immediate duties, they would disturb vested interests, incur social odium and signally fail to feather their own nests ?
The criticism misconceives the duty of the student and the true source of his power for good. It may be the case that much could be put to rights without further scientific knowledge. But the sociologist will agree that if known abuses are not redressed it is not for lack of a catalogue of them, or even for lack of men of goodwill. ... [H]is experience will lead him to suspect that the equilibrium is not likely to be shattered by the breath of an academic tea-party. Nor have academic students a monopoly of goodwill or the power to express it.
Only in one way can the academic man change the shape of things, and that is by projecting new knowledge into the arena. In goodwill he may partake in greater or less degree along with more practical persons, and he is at liberty to join with them in political parties or social-welfare groups. His specific contribution is the enlargement of knowledge, and particularly of the knowledge of general laws. ... To reach general laws it is usually necessary to abandon the straightforward terms of common sense, to become immersed for a time in mysterious symbols and computations, in technical
and abstruse demonstrations, far removed from the common light of day, in order to emerge finally with a generalisation which may then be re-translated into the language of the workaday world.