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

Here are some examples of positive statements. They simply describe the world as it is, or as it may be in future.

   -- 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] All other statements were labeled as meaningless.

The Vienna Circle used an objective criterion to determine whether a statement was analytic, synthetic, or meaningless. It was extremely conservative and dogmatic to do so, but it fell nicely into the 'empirical evidence' tradition. A statement was given meaning if it was able to be completely, utterly, and fully verified by observation.

Metaphysical statements fall into this last category because they can not be verified or denied. They describe deeply abstract thoughts and are concerned with first principles such as being, existence and truth.

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

Problems

Although the verifiability principle worked well to eliminate normative metaphysical statements about the 'best' way to run a country, live life, and more, it created problems regarding theoretical claims. The insistance on the primacy of physical data basically eliminated the opportunity for scientists to make statements what they could not see. For example, since no scientist had ever seen a proton, neutron, or electron, the Vienna Circle's verifiability principle asserted that statements about these things were nonsensical! Ernst Mach, for example, wrote that

"The atom must remain a tool for representing phenomena, like the functions of mathematics. Gradually, however, as the intellect, by contact with its subject matter, flows in discipline, physical science will give up its mosaic play with stones and will seek out the boundaries and forms of the bed in which the living stream of phenomena flows."[4]

What he is referring to by stones and the riverbed itself are abstractions and actual verifiable data. What he means is that eventually scientists will stop thinking in terms of abstractions and theory, and only talk about what they can empirically justify.

It is important to realize that there was no unified answer to the possibility of nonsense in theoritical, physical claims. Although Mach's answer is evident of more recent positivist thought, it was disagreement over this type of issue that caused a breakdown in the Vienna School.

Others

Although the Vienna Circle was a textbook case of early positivist thought in the early twentieth century, it is important to realize that its members were not alone. Other similar groups existed, such as:

   -- the Lwow-Warsaw group in Poland (with the influential Alfred Tarski)
   -- the Munster group in Germany
   -- the Uppsala School in Sweeden
   -- the operationalists and pragmatists in America

Graphs

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