The Economic Scene:The Search for Reality |
 item written by Leonard Silk |
The Economic Scene:The Search for Reality |
item written by Leonard Silk |
The philosopher Mortimer Adler has been explaining on television this week that truth is not a matter of belief but of objective reality that can be empirically tested, a reality that is the same for all people no matter what they think about it.
Does economics confront an objective reality? If so, what is the truth about the current economic situation?
Now that the election is out of the way - and before the next election campaign gets rol-ling – this may be a good time to try to define that reality.
The other day at the White House, the latest Nobel laureate in economics, Prof. George Stigler of the University of Chicago, told a news conference that the United States was in a depression. When the reporters gasped, Mr. Stigler said he could call it a recession if they preferred, but the press corps, eager for a story, shouted, “No, no,” and Mr. Stigler let “depression” stand, to the discomfiture of the White House, which had thought fir Stigler was its side.
He was, but he saw no reason to sugarcoat a bitter truth.
Under similar circumstances, Prof. Alfred Kahn of Cornell University, when he was President Carter’s chief inflation fighter, suggested calling a recession a “banana.”
“What’s a name?” asked Shakespeare, and Professor Adler agrees. You can label reality whatever you like - aaarghhh,” he suggested - and will not be affected in the slightest.
So what is today’s underlying economic reality? Economists and statisticians trot out these so-called facts:
*The rate of increase is the hourly earnings of nonfarm production workers has slowed to 6 percent.
*Rotary rigs operating in oilfields in the contiguous 48 states declined from almost 4,500 in mid-1981 to 2,466 in September.
*Capacity utilization in manufacturing has fallen to 69.1 percent.
And so on and on. But what do all the signs mean? As another philosopher, Susanne Langer, said, all signs may be misunderstood. Wet streets are not a reliable sign of recent rainfall if the sprinkler wagon has just passed by. A gunshot may mean the start of a race, the rise of the sun or the sighting of danger. “Where we find the simplest form of error,” Miss Langer said, “we may expect to find also, as its correlate, the simplest form of knowledge.” It is the kind of knowledge, she said, that we share with animals.
The difference between economists and other, animals, however, is that economists commonly have preconceptions about what things mean that grow out of the economic theories they learned as students. They also have political ideologies, conscious or unconscious, that derive from their social values or the political or economic interests they choose to serve.
Does this affect the underlying reality that economists are trying to observe and diagnose? It should not.
Economists seek to differentiate between “positive economics” (the description of reality, like it or not) and “normative economics” (the prescription of economic policies to achieve the values that particular economists or their masters favor). Positive economics says what is, presumably for everyone; normative economics says what ought to be, according to a particular viewpoint.
But the analytically sharp line between positive and normative appears to vanish in the real world of political economy. Why can empirical evidence - the test of reality - not act as a checkrein on economists and politicians?
One reason is that there are so many facts and so many opportunities for interrelating them in different ways that reality never assumes a firm and consistently clear shape.
And what is often in dispute is not present or past reality but the future - and the future is not “real.” It does not yet exist. It cannot be described because it is still to be created by a multitude of decisions, big and small, and by accidents or discoveries that cannot be known in advance.
Human beings cannot bear all that uncertainty. They feel they must know the future, or something about it, as a basis for rational actions – that is, actions designed to serve their self-interests.
Does all this mean there is no economic reality? Not at all. It is an extremely complex reality, difficult to work out. But truth is there to be deciphered as a basis for intelligent action - whether in the interests of the individual, the business, the nation or the world.
That is the creed of the economist as social scientist. Or, to be normative, it ought to be his creed - before, during and after election campaigns.