Monday, September 29, 2008

Falsifiability

This one goes out to Pete, who is studying philosophy of science. I'm not sure how many of you are familiar with Karl Popper, but his famous contribution to philosophy of science is the strategy of "falsifiability". Popper accepts a hypothesis as legitimate (but not necessarily correct--in fact, no hypothesis can be shown to be correct, nor false, but I digress) as long as it can be shown to be false. A famous example of a non-hypothesis would be Freudian psychology, which enjoys the ability to explain any phenomenon in one way or another.

Let's consider this bailout as a phenomenon that market economics hopes to explain. Now, it is safe to say that the economists who advised trickle-down economics and deregulation of Wall Street dating back to the 70's were basing their policies off of free market models. They assumed such policies would spur growth, but alas! The market crashes. Libertarianism has three rational possibilities...
  • First, it can admit defeat. If you were a true "falsificationalist", this obvious counterexample to a hypothesis would warrant rejection.
  • Second, you can attempt to explain the current dilemma as the natural result of the model of free market economics. However, you cannot go all "Freudian" on me. If you believe this example to actually support libertarianism, please provide an example that would disprove it.
  • Third, you can attribute the falsification of the theory as actually a failure on the part of an auxiliary hypothesis. An auxiliary hypothesis is any supporting argument that was assumed in the testing of your main hypothesis. Again, which auxiliary hypothesis should be rejected?
I encourage you guys to read the linked article. Lastly, I was wondering if anyone had any ideas for expanding our readership. I would prefer to join forces with other up-and-coming economics blogs, expanding on our community of philosopher kings--I mean author commenters. Anyone know of any such blogs?

5 comments:

Tim Moreland said...

I don't have anything intelligent to say at the moment, but I thought I would say that the cartoon is quite funny.

Josh Knox said...

Reading the article, it is plausible that American voters are at an inflection point, though yesterday’s public outcry over the bailout might indicate otherwise. But even if we are not at an inflection point, it is at least apparent that Americans suffer from a lack of their own history. One point of contention I would raise with the article would be to ask for an explanation how "The war that followed (Roosevelt's third term election) produced huge economic growth and sharp increases in income equality." That in itself seems to be a poor reading of history.

Anyways, to comment on the topic itself, the falsifiability of the free market, governments will always exist so to some extent libertarians can always take the unfalsifiable position that some government action prevented the market from properly functioning. That being said, empirical analysis can make these claims convincing enough to the point of appearing true. Dr. Thomas Rustici’s dissertation is a very convincing paper on the Smoot-Hawley tariffs as a root cause of the great depression. I imagine within the next 20 years a similar dissertation will be written on the moral hazard that was created by the presumption that the government would be the lender of last resort to a system of unsound mortgages and poor investments. I suppose because this theory rests upon the beliefs and motivations of investors, it is slightly Freudian, but it is my belief that empirical data will validate it, as empirical data validates Rustici’s position.

That’s my two cents anyways.

Josh Knox said...

Here's an article explaining why the current financial market troubles should not be considered a failure of the free market.

Zachary Piso said...

Hypotheses cannot be validated through empirical evidence...

If H, then E
E
______________
Then H

Who knows what's wrong with this?

SAE Virginia Delta said...

If it rains then the ground is wet. But just because the ground is wet, we cannot assume it has rained.

I suppose validate is the wrong word to use, maybe it is better to say that empirical evidence could give weight to those hypotheses.

On that note, if empirical evidence cannot validate hypotheses, what can? and if no hypothesis can be validated, then can there be scientific progress?