Disenlightenment: A Response to Friedman’s “The Methodology of Positive Economics”

by Shaun Terry

The Age of Reason gave us much to be thankful for, but residue from their pursuit of a calculative ethos has had drawbacks.

Friedman offers, on page 6, that “[his] judgment … is itself a ‘positive’ statement to be accepted or rejected on the basis of empirical evidence.” Friedman sometimes makes statements in such absolute terms. He sometimes points out that he writes from his perspective or that his writing reflects his opinions, avoiding stating that something “is.” That he does not do so more often reflects failing I see in some academic writing.

Friedman argues for separation between positivist and normativist economics. I would argue that this is a mistake. I would argue that an approach that attempts to separate description from prescription: 1) is impossibly unrealistic; 2) misses the point of research.

Addressing the first point, conclusions in research often include extrapolative data analysis. To observe an example, I searched for “economic research paper” online and opened the first result, a paper from Kar and Pentecost, titled, “Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue.” This is the article’s conclusion:

 

In this paper, the direction of causality between financial development and economic growth in Turkey is investigated for the period 1963-1995. In order to see the impact of different aspects of financial development, five alternative financial development indicators are proposed. Granger causality tests have been carried out in the context of cointegration and vector error-correction mechanisms. The empirical results show that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development in Turkey. There can therefore be no ‘wholesale’ acceptance of the view that ‘finance leads growth’ just as there can be no ‘wholesale’ acceptance of the view that ‘finance follows growth’ in Turkey. The results do however, imply that the strength of the causality between financial development and economic growth is much weaker than that between economic growth and financial development. Indeed it would not be inconsistent with the results obtained to argue that for all intents and purposes in Turkey economic growth leads financial development.

 

The point of Kar’s and Pentecost’s paper seems to be to identify causation. I think that is a noble but unrealistic cause — a pursuit that leads to misguidance.

I believe that Hume is right to problematize inductive reasoning. We can assume that gravity works in the way we think it does and that it will continue to do so, but there is a chance that it does not and/or will not. It seems that claims of knowledge require leaps of faith.

When Kar and Pentecost state, “The empirical results show that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development in Turkey,” they make an assumption based on ideas about methods and observations. There are explanations for why their assertions might not hold: perhaps their methods are not all efficacious toward ends that they seek, perhaps they did not correctly execute the methods, or perhaps the observed case is merely a coincidence and not something more meaningful. Kar’s and Pentecost’s conclusion contains more statements with similar problems. I use this paper as an example of flaws I have seen in academic writings.

These issues are not limited to these kinds of papers, though. The problem lies in pursuit of objectivity altogether. In debate, assessments of value appear necessary, but valuations rely on biases. Without valuation of ideas, actions, policies, etc., there seems to be nothing to argue. But biases are biases because they happen outside the view of our conscious minds, so they cannot be mitigated against. This brings me to my second point from above.

Humans are not rational, and human experience is not rational, at least not in the way that we often conceive of rationality. Human perspectives are limited and the human mind assures biases. Definitions of “objectivity” include words like “unbiased,” “known,” “independent,” “thoughts,” “feelings,” “interpretation,” and “prejudice.” Humans cannot be unbiased, humans are not independent, the human mind does a lot of interpretation subconsciously, and so on. Take an extreme case like murder: with few exceptions, we agree that murder is wrong, but not thanks to mathematical thinking. Humans agree that murder is wrong because we have a bias that developed through evolution. Whether or not someone tries to rigorously defend that murder is wrong, humans start from the position that it is wrong. In Antonio Damasio’s book, Descartes’ Error, he points out that emotionality affects decision-making, whether we realize it or not, and that much of what goes into decision-making happens in parts of the body found outside the brain. Human “objectivity” can be described in relative terms, but herein lies another problem.

Friedman acknowledges that separation of description and prescription is not altogether realistic, but I would argue that his proposed solution is counter-productive. So long as people value “objectivity,” they are likely to be led to undesirable outcomes. The subconscious decision-making apparatus is efficient and effective at making contributions to decisions that produce desirable outcomes, a point made in Damasio’s book. Often, people make poor decisions due to rationalizing past the point of good decisions that would have been led to by being more accepting of “gut responses.” A 2013 study, by Lee, Blumenfeld, and Esposito, titled, “Disruption of Dorsolateral But Not Ventrolateral Prefrontal Cortex Improves Unconscious Perceptual Memories,” found that humans often perform better when they do not allow their consciousnesses to impede the decision-making process. If all this is true, then pursuit of objectivity can lead to errors and misunderstandings.

I believe that it would be better if research were more committed to acknowledging biases and stating arguments in understated ways. It is reasonable to suggest possible relationships between observed phenomena, but stating such relationships as facts, while pursuing objectivity, seems problematic.

Advertisements