01.
Approaches
02.
Methods
03.
Target analysis
04. Means analysis
05. Promoter analysis
06.
Political economy
07.
Welfare economy
08.
Order analysis
09.
Order conception
10.
Order dynamics
Outline:
1.
Introduction
2.
Are there economic laws?
2
a. The controversy between Karl Menger and Gustav von
Schmoller
2
b. Friedrich List: Are laws confined to a historical phase?
2
c. Historical laws in terms of economy stages
2
d. Developmental laws
2
e. Human liberty prevents laws
2
f. Too little empirical knowledge?
2
g. Von Hayek: Confinement to pattern statements
2
h. Walter Eucken: Historically different forms
3.
The principle of the non-normativity
3
a. Max Weber: Freedom from value judgment
3
b. Assessments within the radius of science
3
c. Three different positions
3
d. The socio-technical restatement
4.
The reproach of the model platonism
4
a. Theory as thinking tool
4
b. Hans Alberts reproach against the neoclassical economics
4
c. The importance of models of thought
3. The principle of the non-normativity
3 a. Max Weber: Freedom from
value judgment
The
representatives of the historical school were secondly attacked not only
because of their method. It was made the reproach that they were trying to
justify value judgments scientifically. Especially Max Weber arose as a
proponent of a value-free science. An empirical social science can only provide
information about how certain social problems are actually solved, not how they
should be solved best. A value judgment can only be given because of an
ideological position, but cannot be proved scientifically.
However,
this does not necessarily mean that on the part of scientists no political
advice should be given. It would quite match to the principle of freedom from
value judgment when a scientist would derive a specific recommendation -
perhaps along with some other facts - from superodinated
objectives. The principle of freedom from value judgment relates only to the
impossibility of being able to verify scientifically the ultimate basic values.
Generally,
in the context of policy advice scientists are asked to recommend measures
which appear suitable to achieve certain goals. The targets are here
predetermined by the politicians, so they are in some measure taboo for
scientists and the proposals which are then submitted to the politicians can be
derived from these predetermined objectives. Again, here it is about valuing
statements by the science but without violating the principle of freedom from
value judgment, since this kind of evaluation is only a logical conclusion of
the aims targeted by politicians.
However,
Max Weber by no means wanted to exclude the scientists from the political
debate. Max Weber himself repeatedly joined in the political debate and
therewith indicated the fact that the political commitment of a scientist does
not contradict the ideal of a value-free science. Of course, the scientists
also can comment on basic aims, attack or defend these. This is a right of
every citizen and of course, the scientists may not be exempted from it.
Well
the scientists should not leave his audience (reader) in the dark about when he
refers to the analysis of factual connections and when he talks judgmental
about political issues. With this demand Max Weber wanted to prevent that
personal value judgments are carried forward in scientific garments and, due to
this hidden and surreptitious manner, claim a higher truthfulness than they are
in fact assigned to. At the level of the final basic values, which cannot be
attributed to any other higher values, the opinion of a scientist is worth as
much as the opinion of any citizen, not more but not less.
This
requirement is especially true in a pluralistic society in which there is no
consensus over ultimate basic values. Here the risk is close that the scientist
presents his own worldview in the garments of scientific results and thus valid
for all and therewith ensures unauthorized starting opportunities to himself.
A
political statement of a special kind can be that the scientist refuses to give
the politicians or practitioners certain factual information. Especially
relevant is this issue in dictatorships. Even when the scientist confines
himself to answering factual questions, his answers may empower the dictator to
suppress the population more than before. But here it must be said that this
right of refusal in no way contradicts to the ideal of value-free science.
Basically
Max Weber's requirement results from assessments, which were already previously
formulated by the representatives of early liberalism. So David Hume had
already found that out of Being never an Ought can be derived directly. Reason
alone would also not be able to derive moral rules. Moral conceptions would
always be caused by emotions. The reprehensibility of e.g. a murder arises not
only from rational considerations, but first of all from the feeling of
disapproval.
3 b. Assessments within the radius of science
From
the postulate of value-free science formulated by Max Weber results by no way
that science has nothing to do with values. We would like to show some value
references below that are quite compatible with the ideal of a value-free
science.
It
should be undisputed that values and assessments go down as an object of study
in the empirical social science. The formation of social assessment processes
is even a major problem of social science. The traditional national economics
primarily examines the determinants of prices. But what else is the price than
an evaluation of the goods?
Three
sets of questions interest in this context. An empirical social science first
asks for the determinants of socially relevant values and assessments. So the
economic theory points out that the price of a good is produced as resultant of
the structure of supply and demand. Furthermore, we have to ask what social
consequences are arising from a certain assessment. So perhaps a wage increase
- a reassessment of the work - can increase productivity.
Finally,
it is a legitimate concern of science to illuminate the logical and factual
relations of individual values. Our environment has become so complicated that
we do not readily recognize whether two values are dependent or mutually
exclusive. Who wants to decide without theoretical knowledge whether the goals
of price stability and full employment exclude each other?
An
empirical social science wants to discover primarily factual connections. This
objective must not be a self purpose. Knowing these factual connections serves
us rather to facilitate decisions in politics and in everyday life. We are
constantly faced with decisions. We can tread several ways in a case and we
have to get clear what are the alternatives we want to tread.
If
we behave rationally, we decide in favor of the alternative with the most
advantages and the least disadvantages. Which way seems most advantageous, in
fact can only be clarified by assessment. However, this must be preceded by the
knowledge of the consequences associated with each alternative. Assessment is
nothing else than to estimate the effects and to evaluate them. However, the
knowledge of these effects renders the scientist. By giving the practitioner
the conditions for a rational decision, the scientist meets one of its most
important functions to the society.
But
if a rational decision requires the previous knowledge of the factual
connections, it may be that we need to review our policy decisions due to new
knowledge. While it is not possible to conclude immediately from the Being to
the Ought. This does not mean that changes in Being could not also necessitate
changes in Ought.
Knowledge
is not only a prerequisite for a rational assessment. In turn itself depends in
many ways on our value judgements. It is an old and repeatedly re-confirmed
empirical proposition that the world view of the individual scientist as well
as of his time decisively influence the scientific progress. The worldview can
inhibit scientific progress, but also can promote it. Worldview and science are
to be separated one from another only logical, but not factual.
Truths
are often uncomfortable and adversely to self-interest and therefore often
remain unspoken. It is also a known fact that we sometimes do not see things
because we do not want to see them. We observe things not as they are, but
rather as we have learned to see them. Even the most objective observation
comes as a result from a variety of psychological factors.
Of
course, we should not make a maxim of this experience. Although psychological
and ideological factors influence frequently on our scientific work, this is no
reason to present this influence as an ideal. On the contrary: the fact that
such an influence appears in principle possible warns us to double attention.
Our demand, to eliminate this influence wherever possible, remains.
However,
we also should not overestimate this influence. Science has developed methods
to keep it down. For an individual scientist the correlation between worldview
and knowledge may be considerable. However, what applies to the individual
scientist may be far from applying to the science as a whole. Also today the
knowledge is created more and more from a cooperation based on division of
labor.
If
an individual scientist gets to new hypotheses because of empirical studies,
the development process of this knowledge is by no means completed. Only the
first step is done. For our hypothesis to become a generally accepted theory,
it requires a thorough scientific discussion. Just in this facility is situated
a key element of scientific work at all. In this way a hypothesis can be
criticized and if appropriate disproved. The result of this discussion is in a
much lesser extent vulnerable for ideology and interests than the hypothesis of
a single scientist.
Worldview
and interest can not only exert a negative influence on the scientific
development process. On the contrary, the worldview of the individual
researcher can emanate strong incentives that promote the knowledge process. In
the long term probably just the fact that the ideological struggle is being
fought on the scientific grandstand, will help to revise long-established
prejudices. Therefore, one should be cautious in attempting a de-ideologization of sciences. Again, there can be an excess,
even here there is a danger that together with the worldview we eliminate an
interest in new knowledge.
From
the proponents of value-bound science is often interposed against the concept
of a value-free science, that the in every science necessary abstraction and
selection of problems already brings an evaluation along. The reality would be
so complicated that we always have to confine us to a few effect correlations.
Thus we give certain problems priority, in other words, we evaluate.
The
fact as such is not denied by the supporters of a value-free science. However,
in this case it is a very different kind of evaluation that does not permit
practical policy recommendations. Nevertheless, it must be acknowledged that
the practitioner understands this selection sometimes in the sense of a
recommendation.
Moreover,
this selection problem indicates us that we can ever come to knowledge only
because of certain evaluations. Whether we consider a hypothesis as confirmed
by reality can not be decided only by scientific means. We have already seen
that a hundred percent confirmation of a general statement is logically not
possible. It requires a convention about when a theory is considered verified.
This agreement is already an assessment.
From
supporters of a value-free science is therefore not required that our knowledge
must arise without evaluations; this is not possible at all. Much more it is
doubted alone that out of the empirical work can be drawn immediately
judgmental policy conclusions based on scientific results.
The
scientist therefore has to keep on certain rules in his work. These do not only
mind to guarantee the success of science, but also to eliminate as much as
possible negative secondary effects that may arise from the scientific
operation. Rarely not our knowledge could be improved by daring and doubtful
experiments. Most scientists reject such practices, as they come into conflict
with the basic human values. In acknowledgement of these rules enters another
evaluation element in the field of science. But also this evaluation element is
not drawn into conflict with the ideal of a value-free science.
Let
us summarize the results of our reflections: The demand for value-free science
in the sense of Max Weber must not be taken too literally. Every science has to
do with values and evaluations. That is also not denied by most supporters of a
value-free science. If one wants to, the program of a value-free science
consists of a truism and of a demand well accepted by most scientists: From the
truism that ought-sentences cannot be logically deduced alone from
being-sentences, that therefore every political opinion also contains a core of
personal volition, and out of the demand, approved by the majority, that in the
discussion about political values the personal opinion of a scientist should
not outweigh the opinion of another citizen.
3 c. Three different positions
If
one accepts this principle of freedom from value judgment, there are basically
only three different positions of a scientific examination of normative
statements. Firstly one can present, together with Hans Albert, the opinion
that a scientist had to confine itself to examine factual connections in terms
of a factual analysis. The scientist could thus e.g. investigate and explain
how a Keynesian fiscal policy would be affecting inflation, but using scientific
methods he was unable to judge on the desirability of such measures as a
scientist. Thus he had - in his capacity as a scientist- to refrain from any
normative statements about the desirability of policies or conditions.
A
second position on this question took Gerhard Weisser (by the way the teacher
of Hans Albert). The scientist could - without coming into conflict with the
principle of freedom from value judgment - very well advance to normative
statements on policies and conditions if he would disclose previously the value
premises, due to which he came to these statements.
A
scientific analysis in accordance with this scientific normativism
formulated by Gerhard Weisser always begins thereafter with the disclosure of
the value premises of the scientist, followed by the then correct derivation of
normative statements from those disclosed value premises for concrete policies.
Such an approach should - so meant Weisser - therefore be preferable to that
way proposed by Hans Albert, as the scientist was much better able to draw
conclusions from value premises and material contexts than a normal economical
untrained citizen would be.
Though
here would be noted critically, that these conclusions in this case have
validity only ever for those citizens who are sharing the value judgments of
the scientist. The danger here is that the group of scientists gets divided
into ideologically structured subgroups and that therefore the claim, that
scientific statements should be valid regardless of the ideological position of
the individual scientist, is lost.
A
third position took the traditional welfare theory. In a first step it tried to
check which final value premises are accepted by the vast majority of citizens,
and then cleared in a second step, the concrete measures and economic systems
that are necessary in order to realize this generally accepted basic
objectives. This third position also does not contradict the principle of
freedom from value judgment formulated by Max Weber.
3 d. The socio-technical restatement
In
the first chapter of this lecture we have seen: Social facts can be presented
as a cause-effect relationship or an aim-means relationship. In both cases, the
scientist confines himself to a factual analysis and abstains from any value
judgment.
We
bring an example: An increase in consumer demand increases - when certain
conditions are met - the level of employment. The increase in consumer demand
is considered as a cause, the increase in the level of employment is considered
as an effect. The same situation we can restate in an aim-means relationship.
This is known as a socio-technical restatement. Our proposition would then
mean: If we wish to increase the level of employment (so if we pursue the aim
to increase the level of employment), we need to increase consumption demand
(or also a different demand). Measures which lead to increase in consumption
would then be the means to achieve the employment aim.
With
this conditional recommendation the scientist does not issue an assessment, he
remains within the scope of a factual analysis. We could even rephrase this
statement so that at first sight their conditional content is no longer
recognizable and initially looks like a categorical recommendation: To increase
the level of employment an increase in consumer demand is required.
4. The reproach of the model platonism
4 a. Theory as thinking tool
A
controversy about the method within the economics grew thirdly from the very
different use of the word 'theory'. Some scientists understand theory in the
sense of thinking tool. Although a thinking tool allows gaining control over
the social reality, it though must not be confused with the actual knowledge of
facts correlations.
The
theory in terms of a thinking model would be a way to expand our knowledge, but
it would not be this knowledge itself. Such a theory would confine itself to
arrange already known facts and to draw further conclusions from given
assumptions. The discovery of new facts relationships would be up to the
sociologist, not to the economic theorist. Economic theory itself could not
check the validity of the assumptions. If one disregards logical thinking
errors, a theory cannot be right or wrong, but at most be up to date and appropriate
or may not.
4 b. Hans Alberts reproach against the neoclassical economics
These
widespread theories of the neoclassical theory were attacked by the
neo-positivists around the middle of the last century. So meant Hans Albert
that the economic theory would have degenerated to a model platonism.
Of a real theory could only be spoken if their statements relate to fact
relationships that are already checked on the reality or at least could be
checked. The neoclassical theory in contrast would issue propositions that are
merely derived logically from hypothetical assumptions and yet need the
empirical revision, as already proven empirical truths.
Moreover,
the neoclassical economics work with assumptions that already have been disproved
due to past empirical studies. Finally, the neoclassical economics, in the
attempt to defend classic positions, had more and more fled in tautologies,
which are logically consistent always right, but just because of this it would
have solidified to an empirically trivial empty formula.
Despite
all the justified criticism of the neoclassical economics, however, most
neoclassical theories quite allow to be reformulated so that they contain
empirically meaningful statements, which can be checked empirically. Take the
case of the marginal productivity theory of wages. This theory developed by
John Bates Clark corresponds in its original form, in fact, to the features
scourged by Albert.
This
theory is based on three assumptions: first, the assumption of profit
maximization, secondly the assumption that the entrepreneurs behave as quantity
adjusters, which take the price as the date from the market and third, the
adoption of a production function, which such as the Cobb-Douglas production
function is determined by the law of diminishing partial marginal returns of
work.
It
is not considered a task of this theory to test these assumptions empirically.
They are assumed to be given. When these theorists are reproached that these
assumptions do not at all correspond to the reality, it is countered that this
theory does not take any position on this issue, merely it is postulated that
if these assumptions are given, the alleged conclusions, the wage corresponds
to the marginal product of labor, would apply.
These
conclusions now result in fact from the three assumptions alleged. Supposed
that an entrepreneur demands a certain amount of work. He faces the question of
whether he should extend his demand for labor. He will expand it, if he can
increase his profit by this. And this is exactly the case when the increases in
expenditure, due to the more demand for labor, are lesser by one unit, namely
the wage rate, than the hereby acquired surplus, that is to say the marginal
product of labor. Therefore the entrepreneur will expand his demand for labor
as long until the marginal product of labor just corresponds to the wage rate
given externally.
These
conclusions result in fact solely from the assumptions made and therefore, do
also not include any additional information, which go beyond what we already
assume in the three assumptions.
We
will now try to reformulate this theory so that it consists of falsifiable
hypotheses. First we make the assertion that the entrepreneurs are in
competition with each other. This is not a self-evident assumption, it has to
be verified empirically, however, it can be classified as realistic, if we
assume that a competition authority effectively prevents the formation of
monopolies.
The
second hypothesis says then that under competitive conditions strong incentives
go out to enterprises to take advantage of any increase in profits, otherwise
they run the risk of being thrown out of the market by the competitors. Here
too, it is by no means a self-evident assumption. We could for example
insinuate that enterprises renounce certain forms of profit-taking in kind of
an informal lockstep; they can afford this attitude, because they assume that
almost all other competitors behave in the same way. Nevertheless, this
hypothesis of profit maximization may be quite broadly in line with reality.
As a
third hypothesis a Cobb-Douglas production function is then assumed which
indeed again is not self-evident, we know also other production functions such
as the classical production function. But here too, we can assume that this
function has been repeatedly tested empirically.
4 c. The importance of models of thought
With
the models of thought we are trying to organize systematically a complex of
statements about a clearly defined factual area. But in what consists the
organizing principle? We examine every statement to see if it is dependent on
the other statements of the system. Statements that can no longer be traced
back to other statements of the system, and therefore must be taken as given,
we call premise or data of the model. The assumptions derived from these
premises however are a matter of dependents, variables or problem sizes.
A
first task of a model of thought consists in getting clear about the
consequences that imply certain assumptions. The assumptions as such are
regarded as established. The model of thought is not able to check their
validity and closeness to reality. We do not get to know more than we have
already implicitly alleged in the assumptions. Surely, using a model of thought
we can clarify our actual knowledge, as we are not always readily aware of all
consequences of certain assumptions.
Secondly,
we can use models of thought to make us aware of the requirements of certain
statements. It is based on the same logical relationship. While in the first
case we presuppose the assumptions as known and ask us for the consequences,
here we assume a concrete, publicly expressed statement and we get clear under
which conditions such statement can ever claim validity.
Thirdly,
models of thought can fulfill the task to work out the problems of a situation.
The model of thought allows us to uncover the logical relationships between the
currently as valid regarded assumptions about reality. We give ourselves an
account of what we know and what we do not know yet. In some circumstances we
may come across some logical contradictions of various statements, and
eventually we can decide whether we can clarify all known facts with the help
of our current knowledge. The model of thought helps us to formulate more
clearly the not yet satisfyingly answered questions.
Models
of thought can help us fourthly to form new hypotheses. Not yet empirically
verified statements about the reality we understand as hypotheses. A priori,
the most diverse connections are conceivable. We would however, violate the
principle of rationality, if we painstakingly wanted to check empirically all
possible connections for validity. In practice, we apply a promising method.
Based on our previous experience we resort among the millions of possible
connections a small number, which seem realistic and check them in the reality.
Also with this method the model of thought serves us well. Yet it indicates us
which hypotheses match best to our current knowledge.
A
fifth task of the model of thought is in the pedagogical. We do not just
uncover new facts connections, but also have to make the students understand
the already known, but often difficult to understand, relationships. Here it
may be appropriate for educational reasons, to initially start from knowingly
unrealistic but simple assumptions to give in this way evidence to certain
relationships more clearly. Have the simplest connections got clear to the
student, it is much easier to adapt the model of thought to the reality and now
understand even complicated structures.
So
it is usual to examine in a first step the circuit connections of a closed
national economy without economic activity of the state, not because these
assumptions are viewed to be realistic, but because under these simplified
assumptions specific relationships can be recognized better. It is then easy to
remove these unrealistic assumptions in a second step and to show that the
initially identified connections in principle retain validity even under more
realistic, more complex assumptions.