Two Cheers for Positivism: On the Methodology of Economics

Bruce Caldwell is an economist, historian of economics, Hayek scholar, and Director of the Center for the History of Political Economy (“CHOPE”) at Duke University.  I recently came across his 2012 Southern Economic Association presidential address, “Of Positivism and the History of Economic Thought” (VI), in which he links the decline of positivism with the hope will that the study of economic history will be increasingly featured within undergraduate and graduate economics curricula.

What’s the link between positivism and whether economists study their past?  In Caldwell’s words:

A bedrock belief of positivism is that all real sciences are cumulatively progressive, that slowly but surely within science errors are discarded and a widely accepted body of knowledge is created.  This view leads naturally to the belief that an understanding of the history of a discipline is simply irrelevant for a scientist, because all knowledge is contained in the most recent working papers.

“History,” he continues, “is for antiquarians and hobbyists, not for real scientists.”1  And not, we would add, for “real economists”, especially if the latter are concerned to uphold the never-completely-unchallenged claims of economics to be a science.

Few would dispute that a history-is-bunk attitude took hold of U.S. economics departments post WWII – and Caldwell provides some splendid anecdotes to illustrate what a narrow-minded turn this was.  But more was going on than historical amnesia.  For one thing, economics saw a massive (though partly war migration-driven) shift in recognized thought leadership from Europe to the United States.  At the same time, the whole style of doing theoretical work in economics was being reversed.  Economics switched from being a way of producing narrative analyses, illustrated by occasional graphs and tables, to a modeling discipline, driven by equations.  Roger Backhouse (II) has noted that between 1930 and 1980 the proportion of articles in  the Economic Journal and American Economic Review containing algebraic manipulation rose from 10% to 75%.  The change brought new rigor, new scientific prestige and perhaps not a little Yankee arrogance to the discipline of economics – with concerns emerging even before the end of the period surveyed by Backhouse about where the modeling emphasis might lead.   Was economics simply turning into applied mathematics?  Might it veer into an empty formalism whose theories would have little relation or applicability to the actual economy?

Positivism, as the then-dominant philosophy of science, was obviously implicated in both the benefits and drawbacks of the self-conscious attempts of economics to be a science.  With Caldwell, we can count a certain presentism as among the bad effects of the positivist turn.  But positivism cuts two ways, and I would argue that there were good effects as well.

What are the two ways?  First, let me say that under the term “positivism” I am grouping a number twentieth century thinkers and strands of thought in a way that academic methodologists would not like.  For example, I take both Karl Popper (though he called himself a “critical rationalist”) and Carl Hempel (though he preferred the term “logical empiricist”) to be positivists.2  Whatever their differences, positivists demarcate science from non-science by insisting both that scientific theories display a certain logical structure and that these theories are not self-evident truths but must be subjected to some kind of test.  Another way of putting this is to say that positivists oppose both theory without measurement and measurement without theory.  Science is theory with measurement.

And so one benefit of positivism in economics is that it may protect us, not from ignorance of history, but from falling into its thrall.  As Mark Blaug put it, “The danger of arrogance towards writers of the past is a real one – but so is ancestor worship.”  The latter often shows up as an appeal to authority, couched in historical awareness.  Joseph Stiglitz was certainly taking a positivist stance  when in 1975, he began a review of Luigi Pasinetti’s Growth and Income Distribution (VII) with:

It is curious how, to some economists, showing the historical antecedents of one’s thoughts is sometimes viewed as lending an aura of authenticity and credibility to ideas that apparently cannot be verified in a more reputable way.  (XI, p. 1327)

Alongside the appeals to economic authorities are the attempts to save their appearances. And so we see papers – or whole self-designated “research programs” – dedicated, often on a priori grounds, to recovering or reasserting, say, the labor theory of value.  “Marx was right,” or so the acknowledged (or unacknowledged) premise may go, “and therefore present mainstream theories must be wrong.”  And therefore the writer is justified in working within a “paradigm” that is not answerable to the presumably stifling canons of hypothesis and evidence that apply within the mainstream.3  Positivism, of course, grants no such privileged positions.  There is nothing in science that has to be true.

Can positivist rejection of heterodox positions go too far?  Undoubtedly.  It is easy, too, to exaggerate positivism’s practical, day-to-day effects.  In the real, institutional world, science cannot operate without a certain conventionalism; despite positivism’s normative edicts, everything in science cannot be up in the air at once.  And so real-world, post-positivistic thinkers like Thomas Kuhn and Imre Lakatos produced, in their “paradigms” and “research programs”, more naturalistic, perhaps more historically realistic descriptions of how scientific theories play out.  Does this mean that positivistic standards and demarcations no longer apply?  I would hope not.  There is too-much ideologically-driven pseudo-science to raise a flag on.  Caldwell, in his earlier Beyond Positivism4 (V), expresses the hope that economists will move on to a more mutually sympathetic “methodological pluralism”.  He concedes, however, “…it is probably true that most practicing economists believe theirs to be a ‘positivistic’ discipline…”5  I’m guessing this is still true and, if it is, I think it is a good thing.

But hear what I am not saying.  I am not saying that theory-without-measurement or measurement-without-theory are bad things.  All I am saying is that, if economics is a science, then these things are not economics.  I would not be without master narratives, such as Immanuel Wallerstein’s world-systems theory6, but I would not call such treatises “economics”.  It’s a closer call, but I say that Luigi Pasinetti’s structural dynamics (VIII) are not economics either.  Pasinetti’s “natural economic system”, with its touches of Rawls and Rousseau (not just Ricardo and Marx!), seems ultimately to be a normative rather than a positive theory.

As for measurement, most macroeconomists would find themselves  in a pretty tough spot without the enormous efforts that go into producing national accounts, populating input-output tables, and reconstructing time-series data sets.  And these constructs are not just grist for economists’ mills.  Thomas Piketty’s Capital in the TwentyFirst Century (IX), magnificently displays how data, when effectively compiled and marshalled, can almost seem to speak for themselves.  That Piketty’s opus contains only a rudimentary sort of macroeconomics does not detract from it at all.

All three of the writers I have just mentioned speak to our time in important and challenging ways.  Wallerstein writes avowedly as a social theorist.  Piketty most powerfully as an economic historian.  Pasinetti, I would argue, as a social theorist who spins his theories in the language but not the spirit of “scientific” economics.  In each case, I have sympathy with the agenda, given these men’s long immersion in questions of inequality, distribution, and social justice.  But implicit in these calls to awareness and action is the need to craft effective responses to the present crisis.  For the hard work to be done on the needed remedies, I don’t see the need to get “beyond positivism” at all.

—–Notes—–

1 The quote can be found on page 11 of the online working paper version.

2 For Popper, perhaps the best short exposition is his Science: Conjectures and Refutations” in X, pp. 43-77, and for Hempel, “Studies in the Logic of Confirmation”, IV, pp. 258-278.  The latter article will explain to you why the redness of cardinals “confirms” that all ravens are black and the former will remind you that a stack of confirmations, plus a token, will get you on the subway.

3 Again, the reference is to Luigi Pasinetti, only this time to his later work.  See  the exchange between Pasinetti and Robert Solow in I, pp. 267-287, where, in response to Solow’s invitation, essentially, to come in from the cold, Pasinetti insists that his work is incompatible with neoclassical growth theory and that it occupies a different paradigm.

4 …which, by the way, is a simply excellent book.  Readers wanting a brief, clear intro to positivism could hardly do better than Caldwell’s chapters 1-3, as long as they keep in mind that the distinctions drawn by Caldwell are more logical than chronological.  The subsequent sections on positivism-reflecting disputes is equally good.  I would differ from Caldwell only  in placing more emphasis on how working economists sort out their methodological commitments into working assumptions (see the next footnote) .  And so, for my money, the very substantive Fritz Machlup-George Stigler-Richard Lester “marginalist” controversy of 1946-7, reprised by Machlup  (1966),  would have provided a messier and even more interesting example of methodenstreit than the Machlup-Terrence Hutchison pure methodology shootout of the 1950s.  I’ll save that one for another post.

5 V, p. 226.  See also p 231: “In the construction and evaluation of their theories, most economists adhere to some variant of confirmationism or instrumentalism.”

6 As in XII, for a pungent short version, or in his 4 volume (so far) The Modern World System.

—–References—–

I.  Arena, Richards and Porta, Pier Luigi, Structural Dynamics and Economic Growth, Cambridge University Press: Cambridge, 2012.

II.  Backhouse, Roger E., “The Transformation of U.S. Economics, 1920–1960, Viewed through a Survey of Journal Articles”, History of Political Economy(1998) 30(Supplement): pp. 85-107.

III.  Blaug, Mark, Economic History in Retrospect, 5th Edition Cambridge University Press: Cambridge, 1992.

IV.  Brody, Baruch A. and Grandy, Richard E., Readings in the Philosophy of Science, 2nd, Prentice Hall: Englewood Cliffs, 1989.

V.  Caldwell, Bruce J., Beyond Positivism: Economic Methodology in the Twentieth Century, rev. ed., Routledge: London, 1994.

VI.  Caldwell, Bruce J., “Of Positivism and the History of Economic Thought,” Southern Economic Journal, (2013), 79(4), pp. 753-767. Also available online as a CHOPE working paper:

VII.  Pasinetti, Luigi L., Growth and Income Distribution: Essays in Economic Theory , Cambridge University Press: Cambridge (UK) 1974.

VIII.  Pasinetti, Luigi L., Structural Change and Economic Growth, Cambridge University Press: Cambridge (UK), 1981.

IX.  Piketty, Thomas, Capital in the TwentyFirst Century, Harvard University Press: Cambridge (MA), 2014.

X.  Popper, Karl, Conjectures and Refutations, Routledge: London, 2006 (1963),

XI.  Stiglitz, Joseph, Review of Growth and Income Distribution: Essays in Economic Theory. by Luigi L. Pasinetti,  Journal of Economic Literature (1975), Vol. 13, No. 4 (Dec., 1975), pp. 1327-1328.

XII.  Wallerstein, Immanuel, WorldSystems Analysis, Duke University press: Durham: 2004.

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