This is a second fragment of my research project at the Institute of Economic Affairs in London.

After Popper, other authors treated the question of how scientific knowledge grows, trying to advance into the formalism of the critic rationalism and thus to renew logical positivism. In particular, there are two notable authors: Thomas Kuhn and Imre Lakatos.

In the preface of his “Structure of scientific revolutions”, Kuhn acknowledges the serious problem that social scientists have in their clashes among the accepted scientific methods. The main input of this american physicist is that science does not grow in a cumulative process of individual discoveries or inventions. In addition, he asserts that scientific progress is achieved through scientific revolutions, which are built around the concept of paradigm. Kuhn defines paradigm as “universally recognized scientific achievements that, for a time, provide model problems and solutions for a community of researchers”. 

Following to Popper, Kuhn criticizes the inductivist method of some philosophers like Bacon. He argues that just the previous theory can assure the future success of the scientific research. Thus, it is clear that Kuhn´s approach gives an important role to theory, questioning the original roots of positivism. In fact, he also develops a critic on Popper´s system:

“No process yet discovered by the historical study of scientific development appears in anything to demonstration methodological stereotype of falsification, by direct comparison with nature. This observation does not mean that scientists do not reject scientific theories or that experiment or experience are not essential in the process where they act. It means (which is after all a central point) that the act of judgment which leads to scientists to reject a previously accepted theory, is always based in more than a comparison of this theory with the world.” 

Kuhn does not believe in Popper´s falsification because he acknowledges that scientists might create a set of ad hoc auxiliary hypothesis that protect the main theory.

Therefore, the scientific revolution emerges as an episode of not cumulative process in which an old paradigm would be substituted by another new paradigm. The arrives of the new paradigm has important implications in the scientific research, due to the changes that scientists face in phenomena already studied and observed. Now they learn to observe with new roots and techniques. But also, and this is key, the new paradigm brings as consequence a change in the perception of the map of concepts. In effect, data are not unequivocally stable. Later we will demonstrate that this idea is specially relevant for the field of social sciences, with the aim of linking to Kuhn with the approach of some authors of the Austrian School.

The third relevant philosopher to considerate is Imre Lakatos, who tried to conciliate both proposals of Popper and Kuhn. Lakatos agrees with Popper in his reject to inductivism, though he acknowledges that his falsification system is not enough to resolve the problem of demarcation between scientific knowledge and pseudoscience. So, basing in Kuhn, Lakatos demonstrates that scientists elaborate auxiliary hypothesis to pass the test. Instead of possible refutations to a theory, scientists talk of anomalies. Nevertheless, Lakatos does not support Kuhn´s thesis,considering that scientific revolutions assume the change to other set of irrationals convictions, to the extent that these have not been tested. Thus, Lakatos brings his model: methodology of scientific research programmes (SRP). Indeed, the success of scientific knowledge is not based in an isolated hypothesis but in a SRP. The SRP is constituted by a hard core of ideas (equivalent to Kuhn´s paradigm) and a protective belt of auxiliary hypothesis. Also, SRP´s heuristic (or machinery) let it correct possible anomalies. Lakatos finds examples of SRP in Einstein´s theory of relativity or in marxism. Both have a hard core and a protective belt, and also machinery to solve the problems. Defined the SRP, Lakatos distinguishes sharply between progressive SRP and regressive SRP. The first one shows a theory which discovers new facts that before were totally unknown. In contrast, regressive SPR theories serve only to accommodate already known facts. Marxism was never capable of successfully predict any fact , and it has been forced to continually create auxiliary hypothesis so as to explain the events that were happening.

Said this, Lakatos conceives that the true scientific revolution arises from tow SPR models. Faced with instant rationalization of popperian solution and the sudden and irrational change of paradigm of Kuhn, Lakatos speaks of a substitution (in time, not immediate) of a regressive SPR to a progressive SPR.

 

Friedman´s Methodology of Positive Economics.

 

After this brief review, we are ready to analyze the main work to the defense of positivism within economic science. This work is “The methodology of Positive Economics” by Milton Friedman. In this essay, Friedman introduces his inquiry distinguishing between “positive economics” (study what the economic science is) and “normative economics” (study what the economy should be, this is to say, a set of rules to get an end). The confusion among both approaches leads to Friedman to consolidate the concept of positive economics, considering that “what is” must be independent of any ethic judgment about “what should be”.

Friedman defines positive economics as a “system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances. Its performance is to be judged by the precision, scope, and conformity with experience of the predictions it yields.” 

Thus, positive economics must be understood as an purely objective science. While Friedman admits that economics studies human beings and that the researcher is both observer and observed (following the idea of Max Weber), for him these considerations are not important. The goal of positive science is the development of a theory or set of hypotheses that yields significant predictions of not yet observed phenomena.

Regarding to the concept of theory, it would be constituted by two elements: first, a language destined to foster systematic and organized reasoning methods; second, a set of substantive hypotheses designed to abstract essential phenomena from a complex reality.

As a language, the theory is constituted as a set of tautologies, a system to organize empirical data and facilitate its comprehension. That is to say, that categories are logic and well classified. Friedman gives a good example with the categories of supply and demand, which are basic so as to explain relative prices of products and factors of production. To ensure that this dichotomy is useful, empiric research must find a list of its forces, which must be clearly distinguished for the case of supply and for the case of demand. In those markets (such as speculative markets) where the empirical evidence can not accomplish a clear distinction of these forces, then, the categories of supply and demand would not be useful.

As a set of substantive hypotheses, theory is tested by its power of prediction for the kind of phenomena that it tries to explain. That is why only the factual evidence can prove whether a theory should be accepted as valid or whether on the contrary must be rejected. Accordingly, “the hypothesis is rejected if its predictions are contradicted (“frequently” or more often than predictions from an alternative hypothesis); it is accepted if its predictions are not contradicted; it is accepted if its predictions are not contradicted (…) Factual evidence can never “prove” a hypothesis; it can only fail to disprove it, which is what we generally mean we say, somewhat inexactly, that the hypothesis has been “confirmed” by experience.”

It may be noticed the great influence of Popper in Friedman´s thesis. Certainly this economist tries to be prudent when he considers the difficulty of experimenting in social sciences, precisely because of its peculiar nature. Nevertheless, as before mentioned, these differences are only differences of extent. To Friedman, the problem of the logical interpretation of facts (pointed out by Kuhn) is not important and he regrets the return to the tautological and formal analysis of some economists. In summary, a theory is not explained by the realism of its assumptions, but by the empirical testing of these ones. For instance, the hypothesis of profit´s maximization from entrepeneur is not true because of it emerges from a logic deduction, but because the factual evidence do not disprove it.

The work of Friedman shows the essentially positivist character of the methodology which is applied in economic science nowadays.