Positive Economics

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Definition

1) "A body of systematized knowledge discussing what is." [1]

Positive statements are objective, and concern themselves with matters of fact rather than matters of opinion. They can also question how things actually are. Doing so, they do not use value judements or emotion, but rather concentrate on empirical data to back claims.

Examples

   -- A decrease in interest rates will cause a decrease in the exchange rate and an decrease in the demand for imported products
   -- The creation of a national minimum wage would likely cause a decrease in the demand for low-skilled labour
   -- Employment is higher in the United Kingdom than it is in Germany
   -- After 9/11, the American stock market had a recession
   -- Lower taxes may stimulate an increase in the active labour supply

History

Vienna Circle

The Vienna Circle was a group of philosophical mathematicians and physicists who met to discuss the philosophy of science. Established in 1925, the group had a variety of members who formed the idea of logical positivism. They believed that their group had reached a "decisive turning point in philosophy"[4], but made sure to reference similarly-minded predecessors. Their influences basically consisted of all philosophers who disagreed with metaphysics or speculation, notably Ernst Mach, Bertrand Russell, and Ludwig Wittgenstein. By the 1930s, the movement expanded out of such a small circle. As more economists entered into the discourse, disagreement grew and the Circle eventually disintegrated.

Goal: Logical Positivism

The goal of the Vienna Circle was to discover the true aim of philosophy. Through discussion, members came to agree that the goal of philosophy is logical analysis. With logical positivism in mind, one could use logic to analyze the world and 'solve' empirical science, including economics.

"We have characterized the scientific world-conception essentially by two features. First it is empiricist and positivist: there is knowledge only for experience, which rests on what is immediately given. This sets the limits for the context of legitimate science. Second, the scientific world-conception is marked by the application of a certain method, namely logical analysis. The aim of scientific effort is to reach the goal, unified science, by applying logical analysis to the empirical material." ~ Hahn, Neurath, and Carnap [4]

Relationship to Metaphysics

The Vienna Circle believed that only 'meaningful statements' should be permitted during scientific examination. They defined meaningful statements as ones which are either "analytic (tautologies or self-contradictions) or synthetic (factual statements which may be verified or falsified by evidence)."[4] Metaphysical statements describing abstract thoughts, because they cannot be verified or denied, were deemed meaningless by the Vienna Circle.

"The empiricist does not say to the metaphysician 'what you say is false', but 'what you say asserts nothing at all!'"[4]

Graphs

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