Re: Say's Law and Operationalism

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

Jonathan:

The concept of an "operationally meaningful theorem" entered the vocabulary
of theoretical economics at the outset of Paul A. Samuelson's 'Foundations
of Economic Analysis' as follows:

"By a meaningful theorem I mean simply a hypothesis about empirical data
which could conceivably be refuted, if only under ideal conditions.  A
meaningful theorem may be false.  It may be valid but of trivial importance.
Its validity may be indeterminate [???], and practically difficult or
impossible to determine.  Thus, with existing data it may be impossible to
check upon the hypothesis that the demand for salt is of elasticity -1.0.
But it is meaningful because under ideal circumstances an experiment could
be devised whereby one could hope to refute the hypothesis."  (Foundations,
Atheneum, New York, 1970, p. 4)

In my note, I was not concerned to evaluate the concept's merits but to
underscore that Samuelson and Tobin have yet to reach first base with
respect to the mainstream research agenda, as stated by Samuelson:

"In this study I attempt to show that there do exist meaningful theorems in
diverse fields of economic affairs.  They are not deduced from thin air or
from a priori propositions of universal truth and vacuous applicability.
They proceed almost wholly from two types of very general hypotheses.  Etc.
etc." (p. 5)

The latter include Samuelson's Nobel Prize-winning "hypothesis" that
MAN-MADE market economies are "system[s] in 'stable' equilibrium or motion".
IF this were so in fact, THEN economic predictions could "in principle" be
termed 'scientific' in the sense of that term in NATURAL science.

Or, as Milton Friedman put it in his essay on 'The Methodology of Positive
Economics':

"In short, positive economics is, or can be, an "objective" science, in
precisely the same sense as any of the physical sciences."  ('Essays In
Positive Economics', The University of Chicago Press, 1974, p. 4)

Given Samuelson's hypothesis, Friedman's conclusion is irrefutable.

In this context, Paul Davidson's "thesis about nonergodicity", namely, that
"there are no numerical constants anywhere in [economics]" challenges (a)
Samuelson's hypothesis, and (b) Friedman's conclusion.  As such, Davidson's
thesis, if accepted, would negate the intellectual capital invested by
mainstream and monetarist scholars in its anti-thesis.

Gunnar



----- Original Message -----
From: Jonathan D Halvorson <jdh11@xxxxxxxxxxxx>
To: Gunnar Tomasson <tomasson@xxxxxxxx>
Cc: POST KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Sent: Monday, May 08, 2000 6:08 AM
Subject: Say's Law and Operationalism


> Gunnar,
>
> I think that you've misrepresented what it means to operationalize a
> theory.  It's true that an operationally meaningful theory is in principle
> falsifiable/disconfirmable, but then so are many claims which we would
> never think to call scientific theories.  I had always thought the point
> of operationalization was to facilitate unambiguous testing by predictive
> implications through identifying a measurement procedure by which the
> relationships between variables are to be determined and tested.  It isn't
> enough to refer to "factors of production", you have to measure such
> things in a way that a machine could do, eliminating intuition and
> controversial interpretation.  And then you can't keep fiddling with the
> results in an ad hoc way to keep your theory despite its poor performance.
>
> Of course, testing operationalized theories hasn't been seriously
> performed for major economic theories like Say's Law (There are a number
> of articles on this...Summers' jibe at Prescott comes to mind).  To the
> extent that it has been done, no empirical law has been confirmed. There
> are no numerical constants anywhere in the social sciences. This is why I
> cannot understand all the resistance Davidson gets to his thesis about
> nonergodicity:  it is simply a straightforward explanation of a fact (the
> lack of constants).
>
> In defense of empirical laws in economics, it is sometimes said that
> there are no quantitative laws, but there are qualitative laws (by which
> they mean that you cannot make point predictions, but you can make
> unconditional inferences about the direction of change in a variable given
> the direction of change in another).  For what it's worth, I think this is
> also false, for the simple reason that all such economic laws depend on
> the assumption that agents are rational in a very stringent sense, and of
> course we are not always rational in any nontrivial sense of the term.
> Those "laws" that exist can only be normative ideals, analytical tools,
> and useful approximations for certain situations.
>
> Jonathan Halvorson
> Department of Philosophy
> Columbia University
>
>
>