Daniel Hausman The Inexact and Separate Science of Economics (1992)
In this book Hausman defends the old-fashioned view that economics proceeds by deducing the consequences of “apriori” axioms in particular situations. (This could be called Situational Analysis). The axioms are “inexact”, and they only permit the prediction of tendencies (propensities?). He suggests that confidence in the implications (predictions and explanations) of economics comes from confidence in the axioms rather than from testing their implications.An initial reaction, it is absurd to think that our confidence in the starting point of deductions has nothing to do with the results (the implications), even if the process is not depicted in terms of testing. Every economic action can be regarded as an experiment, even if it is just the process of living without any formal chain of reasoning and a detailed analysis of the results.
Presumably the axioms that he has in mind would be such things as the laws of supply and demand, diminishing returns, marginal costs, opportunity costs, comparative advantage, and the benefits of the division of labour.
Some texts such as Human Action by von Mises give the impression that everyone has to learn economics from scratch, perhaps by meditating on the concept of human action, but of course we inherit a body of economic principles, methods and precepts. The purpose of scholarship, research and critical thinking is to improve them.
Hausman’s point is that the old-time economists did not do too badly and the efforts that have been made in the 20th century to improve economics by injecting modern “state of the art” epistemology and methodology have done nothing to help. He is especially critical of the positivists, the Popperians and the post-positivists.
This reading started as an exercise in documenting defective Popper scholarship. It will help to put both Hausman’s argument and Popper’s ideas in a better light to read or re-read Popper not as a falsificationist, obsessed with the demarcation between science and non-science, but as a fallible apriorist (in the language of Barry Smith), concerned to promote the search for the truth and the growth of knowledge by making the best use of our imaginative and critical faculties (and evidence) to solve problems of all kinds (theory, method, practice).
Chapter 9 describes the methodological revolution of the 20th century when the deductive method of the 19th century came under serious attack in the 1930s. These attacks came from the logical positivists, from people who picked up bits of Popper (notably the idea of falsification), from Samuelson’s version of positivism (conventionalism?) and from Friedman’s instrumentalism.
He quotes from Koopmans.
The theories that have become dear to us can very well stand by themselves as an impressive and highly valuable system of deductive thought, erected on a few premises that seem to be well-chosen first approximations to a complicated reality. They exhibit in a striking manner the power of deductive reasoning in drawing conclusions which…are highly relevant to questions of economic policy. In many cases the knowledge these deductions yield is the best we have, either because better approximations have not been secured at the level of premises or because comparable reasoning from premises realized as more realistic has not been completed or has not been found possible. Is any stronger defense needed, or even desirable?”
Hausman is sympathetic to that view but suggests that more is needed to flesh out the scientific acceptability of “well chosen first approximations”, to identify the role of observations and experiments, and to legitimate the methodology in the face of “another three decades of misconceived methodological debate largely divorced from methodological practice”. The main villains in this debate were Popper and Lakatos and their interpreters because the positivists were mostly sidelined as a result of the post-positivist revolt of the 1960s and 1970s. (Though the corrosive legacy of the positivist-empiricists lives on in the US schools of philosophy and in the customary misinterpretation of Popper due to his interminable debate with the positivists and the way that his ideas were reduced to “falsificationism”).
Hausman concluded that “Popper’s and Lakatos’ views are no more hospitable to towards the deductive method than are those of the logical positivists and logical empiricists.” And if Popper is correct then the traditional approach affirmed by Koopmans is “completely untenable”.
Interesting to note that inductivists sometimes mock Popper’s “deductivism”!
Moving on to the critique of Popper in Chapter 10, Hausman notes that his criticisms are widely accepted among philosophers (citing Levison (1974), Lieberson (1982a, 1982b), Putnam (1974) in the Schilpp volume, Grunbaum (1976) and Salmon (1981). It has to be said that practically all the standard anti-Popper arguments in the philosophical literature are not valid, though they gain credibility by repetition. Putnam (1974) is a particularly poor effort and Salmon (1981) has been refuted in a post further down this site.
10.1 Demarcation
First a comment on the exaggeration of the demarcation problem. Popper regarded this as one of the two fundamental problems in the philosophy of science and I am not sure why this is the case. I suspect it is a legacy of the impact of Newton’s theory which inspired a quasi-mystical attitude towards science and replaced the older concept of science as any organized body of knowledge, and to be scientific was simply to be deliberate and systematic in addressing any subject, from angling to astronomy.
Unfortunately Popper was sucked into the vortex of the positivists who were obsessed with the methods of Science (and the justification of belief) and so spent a lot of his time trying to shift them out of the rut of verification and justification, without success, at the cost of time and also having his views shrunken down to “falsificationism” because that was the most obvious point of confrontation with the positivists.
Moving on to Hausman on the problem of demarcation, two issues appear. First, he was confused by the distinction that Popper drew between the logic of falsifiability and the practice of testing (attempts at falsification). And second, Hausman insists on the crucial importance of beliefs, so that theories need to be positively justified in some way that the inductivists and other “justificationists” have never been able to explicate.
On falsifiability he wrote: “I cannot judge how important logical falsifiability is to Popper, since he apparently contradicts himself on this matter.”
Hausman seems to conflate the distinction between falsifiable and unfalsifiable statements with the difference between science and non-science, which of course raises the issue – what do we mean by science? This has to be read in context to identify whether we are talking about particular statements, the corpus of scientific knowledge in a field, some methods that are claimed to be scientific, the infrastructure of science (laboratories, institutes, journals etc) or the whole social and political enterprise of science .
When Popper was wearing his logic of science hat, he used the logical asymmetry of verification and falsification to make the point that the positivists and inductivists did not have a helpful theory to specify the uses and limitations of evidence. So the logic of scientific investigation is the deductive logic of the Modus Tollens. The answer to the question, “what can you do with a true existential statement?” is – you can refute a universal statement but you can’t verify a universal statement.
Moving from the logic of testing to the practice, Popper emphasized that there can be no decisive falsification due to the Duhem problem, to the uncertainty of evidence, and the possibility that test statements can simply be ignored or dismissed or explained away by ad hoc hypotheses. In this context Popper was concerned with conventions, or rules of the game of science that would maximize the effectiveness of criticism, criticism of all kinds and especially the criticism of testing by evidence. This is a common factor in Popper’s philosophy of science and his philosophy of politics, that is the critical appraisal of the “rules of the game”.
A recent book by Jarvie clearly explains Popper’s “social turn” to the rules or conventions of scientific practice, and this points to the unifying feature of Popper’s work on science and society – that is, is the all-important role of conventions and institutions, the written and unwritten the rules of the game.
Popper’s approach focuses attention on the comparative merits of rival theories, or perhaps the problem of preference which Hausman (in another paper) identified as the centre of attention in the field after Popper and other distractions were put aside. This position, which Hausman considers to be more advanced, could have been derived from a more sympathetic reading of Popper long ago.
10.2 Logical falsifiability and Popper’s solution to the problem of induction
In this section Hausman argues against Popper’s solution to the problem of induction. He notes that Popper’s proposal for the demarcation criterion gave him the clue to solving the problem of induction, or at least the problem as it impacts working scientists, not the inductivists (including Hausman) who are looking for the justification of beliefs. The problem for working scientists is how to use evidence most effectively to promote the growth of knowledge and indeed to engage in any kind of problem-solving.
Popper’s answer is to use evidence for testing, as one of the various forms of criticism. By testing and by finding refutations, we make progress by eliminating error (and by finding new problems, which are the growing points of science). Actually there is another kind of progress that comes from inventing better theories; theories which explain more, unify disciplines, predict more precisely (if it matters) and stand up to criticism, including the test of practical application in technology or experiments. Popper was concerned with several kinds of progress – eliminating error, identifying new (hopefully deeper) problems and inventing better theories.
Hausman:
Popper is proposing to cut the linkage between knowledge and justification altogether. Conjectures about the world constitute knowledge if they are true. In attempting to falsify them, scientists sometimes find out that they are false and not knowledge at all. That which has not been falsified one takes to be knowledge. Justification has no role. Hume is correct that justification is not available, but Popper maintains that it is not needed either. I cannot accept this dramatic problem shift.
That passage contains a very helpful insight into the mind of the justificationist. There is no concept of conjectural knowledge. It it is false it is not knowledge. So when Newton’s theory was refuted it ceased to be knowledge. So much for the achievement of Newton.
Hausman insists that there must be positive reasons to support a theory, not just the negative reason that it has not yet been refuted.
One has no better reason to expect that the predictions of well-tested theories will be correct than to expect that untested theories will predict correctly. This skeptical view is central to Popper’s philosophy of science. For, if Popper were to admit that the results of testing can give one reason to believe in the reliability or approximate truth of claims about the world, then he would have to face the problem of induction and attempt to explain how they can do so. Popper’s option is simpler but it fails.
In reply, try shifting the focus from the justification of beliefs and think in terms of critical preferences between alternative theories. Popper has written that we can often justify preferences in a way that we cannot justify the ultimate truth of any theory. This is a matter of situational analysis, rather like making choices of goods or investments in the marketplace.
To paraphrase the celebrated section of Orwell’s Animal Farm, “all theories are conjectural but some are more conjectural than others”. The original reads “All animals are equal but some are more equal than others”.
Some theories are better than others, that is a matter of the situation, their track record and the nature of the problem – theories that are known to be false may be good enough for calculations (as Koopmans note above).
Appealing to the track record is not smuggling in a principle of induction, it just depends on the existence of regularities in the world, and that is a metaphysical theory about the world. This is often used as the last resort of the inductivist after appeals to inductive logic have failed, then the regularity of the universe is postulated as the inductive principle.
Hausman continued with several pages of criticism of falsificationism as a methodology, this all looks very convincing and damning for Popper but in fact it beside the point because Popper’s views on falsification apply to the use of evidence and they cannot usefully be viewed as the whole of his methodology which is essentially about making use of all the forms of criticism to advance the critical discussion of theories.
This chapter is followed by a critique of Lakatos who he depicts as a rather more interesting kind of Popperian but also useless for economists.
To demonstrate the durability of lazy Popper scholarship I turn to Hausman’s Introduction to The Philosophy of Economics (CUP).
This collection of papers appeared in 1984, with revised editions in 1994 and 2008. The Introduction runs through some of the familiar territory about assessment and demarcation, Hume’s problem, Neurath’s metaphor of the ship that has to be rebuilt while at sea, a reference to Carnap on inductive logic, “a failure that helped to locate more promising developments in confirmation theory”!!
He then came to Popper.
After sketching Karl Popper’s “more radical” views on induction he replicated his confused comments on Popper’s demarcation principle. He then went on to Popper’s rules of the scientific game. “Popper is often concerned instead to distinguish those attitudes, rules and practices that distinguish a scientific community from other attitudes and practices.”
But then he lost the plot. In the 1984 edition he wrote :
According to Popper, scientists propose bold conjectures and then seek out the hardest possible tests of them. When the conjectures fail those tests, no excuses are permitted. The theories are regarded as refuted, and new conjectures are proposed and scrutinized. (31)
Note 31 is Conjectures and Refutations pp 49-52, though I can’t see anything there about immediately discarding refuted conjectures. In fact I can’t see anything there about refutation and proposing new conjectures.
It is not surprising that there is no supporting citation from Popper because Popper was aware that apparent refutations can be contested . He was never a naïve falsificationist, contra Lakatos and Kuhn. He appreciated that new theories need to be developed to get over early problems, one of his rules of procedure was that no theory that had proved useful should be dropped without good reason, such as the availability of a better theoryand he even suggested a methodological excuse for a whiff of dogmatism to allow time to develop apparently struggling young theories. In the essay in the collection Criticism and the Growth of Knowledge (1974) Popper wrote “I have always stressed the need for some dogmatism: the dogmatic scientist has an important role to play. If we give in to criticism too easily we will never find where the real power of our theories lies”. Bartley disputed this formulation because it is enough to signal that adverse results rendered a theory “problematic” and no hint of dogmatism is required to keep the theory under consideration for development on a conjectural basis (like every other theory).
The same “no excuses” passage stands unchanged in the second edition of the book.
In the third edition there is a minor change.
These rules require that when the conjectures fail those tests, scientists do not make excuses. Instead they should regard the theories as refuted and they should then propose and scrutinise new conjectures. (20) As many have noted, including Thomas Kuhn and Imre Lakatos, it is a good thing that scientists do not follow these rules.
Note 20 refers to LSD chapter 5. The statement in the text clearly misrepresents Popper’s position regarding putative refutations (stated above) and chapter 5 “The Problem of the Empirical Base” does not provide support for Haussman’s claim.
This is very strange. A clearly false interpretation of Popper’s ideas has remained in place for 25 years through two revised editions of the book. In the latest edition note 42 of the Introduction acknowledges the assistance of three other scholars who read drafts of the Introduction and improved it. These are Wade Hands, Kevin Hoover and Margaret Schabas. “One of great (sic) privileges of having worked so long on economic methodology is being able to count such wonderful people and wonderful intellects as friends”.
Also here
