Two Twists in Economic Methodology: Positivism and Subjectivism

Abstract

Abstract. AS the contradictory evidence gathered by other social scientists has continued to accumulate, two new twists have been added to the methodology of neoclassical economics. From Milton Friedman's positivism came the twist that “unrealistic” assumptions can be ignored, prediction is all that really matters. From the Austrian School's subjectivism came the twist that since economic theory is the a priori logic of subjective individual choice, the theory cannot be tested in the scientific sense at all. Neither qualitative historical evidence nor quantitative prediction can yield a scientific test of theory. At least Friedman's positivism allows for predictive testing, even though decisive tests are seldom found in social science. But Austrian subjectivism insulates economic theory completely from scientific testing. Neither methodology is conducive to scientific progress.