PKT message, On Economics and Metaphysics

The following message to Geoffrey Gardiner may be of interest:

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As you may recall, I posted a brief message to Gang8 on Sept. 4, 2002, on issues relating to Keynes' Treatise on Probability.

Briefly, Keynes was not satisfied with the logical foundations of probability theory - specifically, the Frequentist Approach whereby observed relative frequencies of Events A, B, and C are translated into probabilities of future observations of A, B, and C.

Later, his concerns in this respect were reflected in his mercilessly lucid comments in 1937 on (future Bank of Sweden Nobel Memorial Prize recipient) Jan Tinbergen's econometrics work for the League of Nations (judged by Randy to be a classic in the field).

For all econometrics is predicated on the Frequentist Approach.

As indicated in my Sept. 4 message, I agree with Keynes that the Frequentist Approach does not provide a satisfactory logical foundation for the probability calculus.

However, based on my own work on physics and related epistemological issues, I do not agree with Keynes' working hypothesis that there exists some such logical foundation - later, Karl Popper would translate the like working hypothesis into the proposition that, while all scientific theories are 'falsifiable', some meaning can still attach to the notion that working our way through a succession of such theories will bring us closer to the "truth", even if we can never be sure what it is.

I do not agree with Popper.

The key point at issue concerns the dependence of all scientific theories on some set of arbitrary pre-suppositions or axioms, the potentially devastating implications of which for the Keynes/Popper "truth" school of thought was stated succinctly by Einstein in August 1954 as follows:

"I concede, however, that it is quite possible that physics cannot be founded on the concept of field - that is to say, on continuous elements. But then, out of my whole castle in the air - including the theory of gravitation [General Relativity - insert], but also most of current physics - there would remain almost nothing."

Alas, most of Einstein's peers equate perfection of practical results with adequacy of logical foundations, as in the case of modern Quantum Mechanics.

A view-point which led Cornell philosopher E. A. Burtt, author of a 'classic' (1920/1930s) work entitled The Metaphysical Foundations of Modern Physical Science to observe with ruthless clarity:

"It has, no doubt, been worth the metaphysical barbarism of a few centuries to possess modern science."

For metaphysical pre-suppositions are always reflected in scientific theories - including those of Einstein's QM peers who, to a man, pride themselves on being free of all metaphysical concerns of the kind which caused Einstein to question the logical foundations of modern Quantum Mechanics as distinct from their practical efficacy.

The subject matter is of immense importance for the cause of better economics for the 21st century for, as Paul Samuelson wrote in 1964 Preface to his Foundations of Economic Analysis:

"Now in a hard, exact science a practitioner does not really have to know much about methodology. Indeed, even if he is definitely a misguided methodologist, the subject itself has a self-cleansing property which renders harmless his aberrations. By contrast, a scholar in economics who is fundamentally confused concerning the relationship of definition, tautology, logical implication, empirical hypothesis, and factual refutation may spend a lifetime shadow-boxing with reality."

Gunnar