The Consequences of Positivism in Economics

On December 16, 2018, qz.com (AKA Quartz) published an article by Eshe Nelson titled,
"The Dismal Costs of Economics Lack of Diversity." The central claim in the article is that there
is a glaring lack of diversity in the upper echelons of the economic sector, and this is indicative
of a general lack of diversity in the profession as a whole. This lack of diversity is an issue that
requires resolving. Now, the entire premise of diversity being a end worthy of pursuit can
certainly be challenged, however, there is something far more telling in the claims made in the
article. For the mainstream of economics, their adherence to positivism requires that they can't
simply dismiss this claim. Mainstream Economists, if consistent, can't refute the idea of diversity
without testing it.


To quickly backtrack, positivism is the methodology that states that truth is found through
experience. (Not a precise definition, but that is the core claim) This means that in order to know
if something is really true, we would need to have all possible experience of it. To put in different
terms, if I was to say that all toothbrushes are yellow with green stripes, to see if this claim was
true or not, I would need to see every toothbrush in order to know that they are, in fact, all yellow
with green stripes. However, in the natural sciences, which also use empiricism as their
methodology, there are laws. Doesn't this mean that there are at least a few things that we know
for sure? No. These laws in the natural sciences are just rules by which we believe that
particular field of inquiry operate. We still don't know if they are true, but the reason they have
the status of laws is because of the general feeling of validity and their being consistent with
large amounts of experience (i.e. experiments).This has implications for any sort of truth claim,
namely, that they can't be dismissed the same way the claim that 2+2 = 5 is dismissed. In the
same way, if a empiricist economist was presented with an idea that increased diversity in
economics would lead to better policy decisions, he is in no position to immediate say that the
idea is nonsense. After all, how could he know? Wouldn't he need experience?

To take this same idea to an extreme, if this article were to claim that increased diversity
could show, simply on the basis of having new and different experience, that the law of demand
(That demand rises as price falls and vise versa, keeping everything else equal) is false, the
consistent empiricist could not dismiss this out of hand. It could be true, in his worldview, that
the law of demand could actually not be true for everyone, and thus, not a law. However, no
empirical  economist lies awake at night pondering the validity of the law of demand. This is
because they aren't consistent empiricists. After a while, out of convenience (and possibly their
own sanity), they accept something as being 100% true. If someone said that they had
discovered the law of demand wasn't true, they would be laughed at, not given a Nobel Prize.
This methodology contrasts sharply with the Austrian School. Praxeology, the
methodology of the Austrian School, describes Economics as an A Priori science. This means
that we can deduce everything in Economics without any experience at all. All of Economics can
be boil down to human action. Action comes from our own minds, so all that is needed to learn
about it is to reflect on our own minds. Empiricism would not be able to derive any of these
concepts, as the actions of individuals is always changing. This is why every economic law
always includes the term, "Ceteris Paribus" or, "Keeping all else equal." Empiricism is in no
position to establish the Law of Demand, as in the real world, everything is not kept equal.
Individual actions are not like the natural sciences, where there are consistent causal chains
that one can uncover. If a empirically derived fact like "Toothbrushes will always sell more units
on Mondays than Tuesdays" is discovered, all that has been discovered is a historical fact. In
the future, the exact opposite could turn out to be true.


Proposals like the one in the article above above often find refuge under the wings of
empiricism. The reason for this is the relative comfort that it affords to any truth claim. This is
especially true in the case of the social sciences where an almost infinite number of
permutations of all variables at hand, and thus different experiences one could have, exist. This
allows one a near unlimited almost of chances to try anything, as one can always say, "Well, we
didn't account for X, Y, and Z. If we try it again, we might get the result we want." The Austrian
approach gives ideas no such luxury.


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