June 26, 2017

Sherlock Holmes Was Right: Economics Should Be Value-Free

Value Free Economics
Sherlock Holmes Looking For Clues

Fitting Facts to Theories – The Need To Be Value-Free In Science

There is a mental and emotional trap of all people to want to be right. No one wants to hold to a point of view that is functionally wrong. In the case of economists, it is very true that no matter the historical influence from which one’s leanings come from, no one want to be incorrect about their own individual bent on the study of the dismal science. This is where the extremely important but increasingly overlooked concept which keeps popping up more frequently in Austrian circles and it is often a major point of contention Austrians have with other schools of economics.

Science includes the study of praxeology (and therefore economics) in order to remain as unbiased as possible must always hold themselves to the discipline of being wertfrei as Ludwig von Mises puts it in his work Human Action (page 46). Wertfrei is German for “value-free” or signifying that as one looks at the evidence and data, one should be as neutral in regard to judgments of value. All sciences should be from the start of their analysis into whatever phenomena they study, should be “value-free”.

Human beings are not simply one-dimensional; there is not someone out there who is purely into the biology of birds to the exclusion of other interests. If there were, how much of an engaging and interesting person would he/she be? But it is precisely this issue which may indeed cloud scientific exploration into differing fields. From Climate Change to Evolution, to Religion to even the “Flat Earth Theory” (let me go on record and say that the Earth is a sphere and that we also landed on the moon) one should state with a clean slate of assumptions of how the world operates. This is not to say that one forgets all known knowledge and training, but that the assumptions of outcomes must be left to the end of the issue being studied, not assumed right from the start. Lightbulbs are not darkness suckers from another dimension simply because you would like to think another dimension exists.

In Economics, the many topics which are not value-free have crept into the discipline. Even terms and classification belonging in the realm of other scientific lenses such as those of sociology (a study in need of its own revamping) have been mistakenly taken to be part of the study of economics. That is a topic of another future post.

The issue with not being wertfrei is that one begins to have outlooks based perhaps not on data and rational deductive reasoning, but a desire to be correct.

In Economics, it is often that those in the profession are asked to use the crystal ball all Economists are given when they graduate from university, in order to make predictions. All schools of thought agree that predictive statements can be made based on an understanding of Economics, but differ on methods and belief of how “long” into the future these predictive statements can be made with accuracy (this is a topic that would have to be unpacked in a very long future post itself). Austrian economists have long criticized how wrong Neo-Classical/Keynesian/Post-Keynesian Economists have been in many of their predictions. They were wrong partly because they were not value-free.

My hope is that Austrians keeps this in mind when putting a prediction out there for the short term which may fit a scenario that only proves them correct, but is perhaps not the correct short term outcome. We must be open to what is and not closed off to what is not.

Sir Arthur Conon Doyle said it best in the famous quote of Sherlock Holmes “It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”

 

Michael Tabone

3-12-17

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