Falsification in Economics. Is Karl Popper's Philosophy of Science Applicable to Economic Research?

Seminar Paper, 2016
16 Pages, Grade: 1,7
Simon Valentin (Author)



1. Introduction

2. Karl Popper and his Philosophy of Science
2.1 Karl Popper and his work
2.2 Philosophy of Science and the method of falsification

3. Falsification and Economics
3.1 Karl Popper’s legacy in economics
3.2 Application and applicability of falsification
3.3 Broader view on Popper’s falsification
3.4 Implications for economic science

4. Conclusion


1. Introduction

It is often said that a significant characteristic of economic research is the strong staying power of theories, even with contradicting empirical evidence. Moreover, the scientific character of economic science is often questioned. In this context economic research is criticised for a lack of falsification or even a lack of falsifiability (cf. Lindner 2015). But is it true and what does this mean?

The concept of falsification as a deductive method was brought up and made popular by the Austro-British philosopher Karl Popper in the 1930s. In contrast to the idea of gaining truth or principles through a lot of empiric observations (inductive method), he claimed that it is logically only possible to refute general statements by empirical observations. Consequently, Popper advocates for a method of research through trial and error. Science should use the method of falsification and for him the use of it is the demarcation criterion between science and non-science. Karl Popper’s methodological writings have been a cause of debate since the 1930s.

This scientific method is nowadays established particularly in natural sciences where you can tell more easily if a theory is wrong than in other disciplines. Economic research is part of the second group of disciplines, where we often find huge differences between Popper’s prescriptions and the common practice and where normative statements are often part of all considerations.

The question I want to examine in this paper is if and how falsification as a method and Popper’s philosophy of science in general is appropriate for and applicable to economic research. To begin with I will start with a short introduction about Karl Popper and his philosophy. Then I will explain and evaluate the concept of falsification with its strengths and weaknesses and its use for science in general. Afterwards I will examine the influence and actual usage of falsification in economics in general to finally evaluate the chances and limits of the concept in this area of science.

2. Karl Popper and his Philosophy of Science

2.1 Karl Popper and his work

The Austrian-British philosopher Karl Raimund Popper was born in Vienna in 1902 to affluent intellectual parents, who allowed him to develop interest in philosophy, music and sciences. He spent his adolescent years studying different subjects at the University of Vienna as a guest student, worked temporarily as a street constructor, made an apprenticeship as a cabinet-maker before he finally became a secondary school teacher for maths and physics after doing his doctorate in psychology at the University of Vienna in 1928. After the First World War and the breakdown of the Habsburg monarchy Vienna was ruled by the Democratic Party which achieved many social reforms and led to a liberal and fruitful atmosphere in the city. At that time Popper was attracted by Marxism and joined the Communist Party for a short time, but was soon disillusioned as they accepted killings to reach their aims. He stayed a pacifist and supporter of social liberals for the rest of his life.

In 1934 Popper wrote one of his leading works “Logik der Forschung” (The Logic of Scientific Discovery) as a critique of the theory of logical positivism, which advocated for the empirical method for sciences, mainly represented by the Vienna Circle, an important group of philosophers and intellectuals from Vienna. At the same time he wrote “Die beiden Grundprobleme der Erkenntnistheorie” (The Two Fundamental Problems of the Theory of Knowledge), published only in 1978.

In the 1930s, although converted to Protestantism, Popper saw himself and his family exposed to increasing humiliation for their Jewish descent. So he accepted the offer for a position as a lecturer for philosophy at the Canterbury University of Christchurch, New Zealand, where he emigrated with his wife in 1937. There he published his works “The poverty of historicism” in 1944 and his most renowned book “The Open Society and Its Enemies” in 1945. In the latter he analysed in two volumes the totalitarian tendencies in the works of Plato, Marx and Hegel as the predecessors of the totalitarian ideologies which still prevailed in most of Europe at that time.

In 1946 he moved to London, Great Britain, where he became a professor for logic and scientific methods first at the London School of Economics and Political Science and later, in 1949, at the University of London (Corvi 1997, pp. 3-12). Although he retired in 1969 he remained active and published almost until his death in 1994 in London. A bibliography of his work collected in 1974 runs 86 pages (Caldwell 1990, p. 1). During his lifetime he received many honours and awards from societies and universities around the world. In 1965 he was knighted by Queen Elizabeth II for his lifetime achievement. Many scientists and politicians, for example Helmut Schmidt, were friends and admirers, whereby he had an influence on society until his death.

It is mainly his political philosophy, about the Open Society and against totalitarianism, what makes him so popular still today that even the German Federal President Joachim Gauck in his speech after the terrorist attacks on Charlie Hebdo in Paris in January 2015 summons Popper’s concept to illustrate the dangers of indifference, stating that the fight for freedom is eternal. Even for explaining the so-called PEGIDA movement in Germany the “Badische Zeitung” uses Popper’s idea and describes their programme as a longing for the security of a closed society. As Popper said, the enemies of an open society do not travel from far away, they have always been there and we have to fight it permanently (Kech 2015).

Popper’s philosophy of science that knowledge is only temporary and prone to error is highly interconnected with the awareness that only a society where cultural and religious freedom is guaranteed is open for new and alternative points of view and can thus be a human society.

2.2 Philosophy of Science and the method of falsification

In science, still today, Karl Popper is best known for his approach of falsificationism. Within his theory of critical rationalism he deals with the epistemological question on how it is possible to gain knowledge in general, in everyday situations but especially in science. He wants to answer the question on how to form scientific knowledge and how scientific process can be made. Popper extensively formulated his views of philosophy of science in his book “Logik der Forschung” (The Logic of Scientific Discovery), which was first published in 1934 in German and not translated into English until 1959. Popper expanded, improved and renewed it continuously until a few months before his death in 1994.

His basic assumption is that everything we know can possibly be wrong. There is absolutely
nothing we as humans know for sure. We cannot know if something is true, regardless of how accepted the idea is and how likely it seems to be. Furthermore, we cannot even prove if a statement or a theory is true at all. All we can do is tell if something is wrong and consequently falsify a theory if we have evidence that contradicts with the theory. Science and scientific progress in his view is therefore a process of continuously developing new theories and then trying to falsify them. That is all science can logically do (Corvi 1997, pp. 16-50). He argues against the method of inductivism that he attributes to most of the historic philosophers of science from Aristotle to Francis Bacon, which very simplified claims that science consists of observing nature, then generalizing the observations to form patterns and a broader law and then confirming the law by lots of observations. The problem is that there is a conclusion from individual cases to a general rule, what is logically invalid. This problem, called the problem of induction, was already brought up by David Hume with the example that men believe to know the natural law that the sun always rises in the morning by past experience. But this is not logically valid because there is absolutely no guarantee, that what we have experienced so far will continue in the future (cf. Blaug 1992, p. 13). So we cannot know more than we know. Another famous example that Popper used himself is the one with the black swan. Even if someone has observed hundreds or thousands of swans, and they were all white, he or she cannot inductively conclude that all swans are white, because not all swans were observed. But if someone observes one black swan, then we know for sure the theory that all swans are white must be wrong. Popper follows that there is a “fundamental asymmetry between induction and deduction, between proving and disproving, between verification and falsification, between asserting truth and denying it” (Blaug 1992, p. 13).

Science should hence not try to confirm theories, but try to falsify theories and develop new ones and the main method should be deductive falsification and to question everything. Therefore he denies any unquestionable dogma or the existence of any Archimedean point for science. Metaphysical assumption cannot be part of science. Nevertheless they can be useful by providing myths and dreams so scientists can create and develop new falsifiable theories. As an example he mentions the speculative atomism which leads to an empirical-scientific atomic theory (cf. Popper 2005, p. 16). Theories can be freely invented as long as they are falsifiable. According to Popper there is no methodically rational method for discovering theories but it is all trial and error. In an evolution-like selection process those theories prevail of which the refutation fails (cf. Popper 2005, p. 91). These theories can then be counted as “corroborated” (Popper 2005, p. 90) and can be used but they are never ultimately verified.

In Popper’s book falsificationism is not only one method of science but the only acceptable one. All scientific theories should be formulated in a way that they can possibly be falsified; they have to be “inter-subjectively testable” (Popper 2005, p. 23). When developing a theory the scientist should ideally explain how and with which observation the new theory can be refuted. For Popper this distinguishes the scientific area from the unscientific. He made falsifiability instead of verifiability the demarcation criterion for science. Every statement that is unfalsifiable is thus classified as unscientific (cf. Popper 2005, pp. 17-20). “It must be possible for an empirical scientific system to be refuted by experience” (Popper 2005, p. 18).

The worst of all for Popper was a scientist who tries to defend his theory, even when contradicting observations should lead to dismiss the theory by “introducing ad hoc an auxiliary hypothesis or by changing ad hoc a definition” (Popper 2005, p. 20). The scientific “aim is not to save the lives of untenable systems but, on the contrary, to select the one which is by comparison the fittest, by exposing them all to the fiercest struggle for survival” (Popper 2005, p. 20). But as Mark Blaug mentioned, for Popper the borderline between science and non-science is not absolute. Even falsifiability is a matter of degree and forms a “continuous spectrum of knowledge, at one end of which we find certain hard natural sciences such as physics and chemistry, next to which we get the softer sciences such as evolutionary biology [...] and at the other end of which we find poetry, the arts, etcetera” (Blaug 1992, p. 14). In this picture, the social sciences and most important for this work also economics are located somewhere in between. Popper’s idea was not that every theory could or should be overthrown by one single piece of evidence but that it should be possible in general to refute a theory and most important that immunizing strategies should be banned (cf. Blaug 1992, pp. 17-21).

Karl Popper demonstrates his idea of perfect science with the example of Albert Einstein’s theory of relativity. Until Einstein, Isaac Newton’s law of universal gravitation was generally accepted and counted as an irrefutable law of nature and no one doubted its validity and finality. The theory seemed to be proven by lots of observations and also could make accurate predictions. Einstein as an ideal scientist nevertheless tried to falsify Newton’s theory and promoted his own new and more powerful theory. Furthermore, Einstein tried to find contradicting evidences, he even encouraged other scientists to falsify his theory and showed how and with which observations his new theory could be disproven.

3. Falsification and Economics

3.1 Karl Popper’s legacy in economics

From today's perspective we have to state that “a great many professional philosophers are critical of Popper’s philosophy of science” (Caldwell 1991, p. 30) but surprisingly Popper and his thinking are still today popular outside of the field of philosophy of science and are particularly popular in economics (cf. Caldwell 1991, p. 30). To explain the outstanding popularity of Popper in economics, the historian of economics Bruce Caldwell mentions a few arguments. First of all Popper taught at the London School of Economics and Political Science which maybe brought some economists in touch with his ideas. Secondly, he claimed that Popper’s critique of Marxism was of course welcomed by the mainstream economists. But more important than these social and ideological explanations are, according to Caldwell, two other reasons: In contrast to most of the other academic philosophers Popper wrote well, in a direct and appealing style by which he made his work accessible for a broader audience. In addition to that, Popper, again in contrast to other philosophers, deals with topics that have a close connection to the problems that actually concern practicing scientists like how to distinguish between science and non-science or how to evaluate competing theories (Caldwell 1991, p. 30).

Popper’s influence on economics is hard to measure but it is undeniable. Lots of economists have read his books and somehow took away different ideas and applied them in their own work or somehow got in touch with his ideas. Friedrich August von Hayek for example who was one of the most important figures for the economics in the 20th century can be seen as a Popperian or, as a close friend, at least strongly influenced by Popper. So in one way or the other every economist in the last fifty years was influenced by Popper (Caldwell 1991, pp. 5-6).

Popper himself, however, mentioned economics only very carefully in his work, so that there remains “considerable doubt about his views of economics or his view of the applicability of his philosophical concerns to the study of economics” (Boland 1990, p. 1). To conclude and with regard to the scientific literature and without going more deeply into details we have to state that there is still today a huge debate about “The Popperian Legacy in Economics” (Marchi 2008) and how he has or should have influenced economic science (cf. Boland 1990; Marchi 2008; Nooteboom 1990).

Some reasons why Karl Popper is certainly still popular and his name was often mentioned within economic scientists over the years, were given at the beginning of this chapter, but there might be another explanation. Popper’s critical rationalism and his demarcation criteria seem to aim for the natural sciences where the falsification method intuitively fits best. By using the Popperian terms and by claiming to use his methodology economists attempt to shift their discipline of science from the field of social science towards the field of natural sciences, where most of the economists want to be located. Moreover, the Popperian methodology still seems to be regarded as an ideal for perfect science.


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Falsification in Economics. Is Karl Popper's Philosophy of Science Applicable to Economic Research?
University of Kassel  (Institut für Volkswirtschaftslehre (IVWL))
Philosophy of Economics
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Philosophy of Economics, Philosophie, Wirtschaft, Popper, Falsifikation, Falsification, Economics, Philosophy, Philosophy of Science, Wissenschaftstheorie
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Simon Valentin (Author), 2016, Falsification in Economics. Is Karl Popper's Philosophy of Science Applicable to Economic Research?, Munich, GRIN Verlag, https://www.grin.com/document/321581


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