Positive Economics: The Logic of Neo-Classical Economic Theory

Abstract

Positive Economics, as a theory of the logic of neo-classical economic theory, was a post-war invention. By then the claim that economic theory is a positive, as opposed to normative, field of inquiry was already well-established. But this claim is neither the sole methodological criterion, nor the exclusive distinguishing feature of Positive Economics, even though some of its adherents (and critics) seem to believe that a mere distinction between fact and value is sufficient for its methodological requirements. The situation is further complicated by the fact that Positive Economics has now come to connote both the method and the substance of economic theory. In fact, it is intended as a logical positivist interpretation of the method of neo-classical theory. Nevertheless, it has partially confused the criteria of logical positivism in theory; and it has seldom adhered to them in practice. In retrospect this post-war marriage of neo-classical theory with logical positivist philosophy seems somewhat strange. For, if interpreted consistently, the methodology of Positive Economics stands the pre-war theory of economic method on its head. Yet it does so with little or no change in the content and analytical procedure of neo-classical theory which both these views have claimed to describe. More explicitly, if economic method was what von Mises and Robbins had described it to be (although, to Robbins’s credit, the two views were not entirely identical), then it would not be strictly consistent with the rules of logical positivism. This inconsistency between the two views would become very pronounced if we add the rejection by Hayek and Knight of the distinction between fact and value in social and economic knowledge.