The Competitiveness of Nations
in a Global Knowledge-Based Economy
H.H. Chartrand
April 2002
Milton Friedman
Essays in Positive Economics
Part I - The Methodology of Positive Economics (b - cont'd)
Web Page 1 Introduction, 3; I. The Relationship between Positive
and Normative Economics, 3;
III. CAN A HYPOTHESIS BE TESTED BY
THE
REALISM OF ITS
ASSUMPTIONS?
We may start with a simple physical example, the law of falling bodies.
It is an accepted hypothesis that
the acceleration of a body dropped in a vacuum is a constant - g, or
approximately 32 feet per second per second on the earth - and is
independent of the shape of the body, the manner of dropping it, etc. This implies that the distance traveled
by a falling body in any specified time is given by the formula s = ½
gt2, where s is the distance traveled in feet and t
is time in seconds. The
application of this formula to a compact ball dropped from the roof of a
building is equivalent to saying that a ball so dropped behaves as if it
were falling in a vacuum. Testing
this hypothesis by its assumptions presumably means measuring the actual air
pressure and deciding whether it is close enough to zero. At sea level the air pressure is about 15
pounds per square inch. Is 15
sufficiently close to zero for the difference to be judged insignificant? Apparently it is, since the actual time
taken by a compact ball to fall from the roof of a building to the ground is
very close to the time given by the formula. Suppose, however, that a feather
is
16
dropped instead of a compact ball. The formula then gives wildly inaccurate
results. Apparently, 15 pounds per
square inch is significantly different from zero for a feather but not for a
ball. Or, again, suppose the
formula is applied to a ball dropped from an airplane at an altitude of 30,000
feet. The air pressure at this
altitude is decidedly less than 15 pounds per square inch. Yet, the actual time of fall from 30,000
feet to 20,000 feet, at which point the air pressure is still much less than at
sea level, will differ noticeably from the time predicted by the formula - much
more noticeably than the time taken by a compact ball to fall from the roof of a
building to the ground. According
to the formula, the velocity of the ball should be gt and should
therefore increase steadily. In
fact, a ball dropped at 30,000 feet will reach its top velocity well before it
hits the ground. And similarly with
other implications of the formula.
The initial question whether 15 is sufficiently close to
zero for the difference to be judged insignificant is clearly a foolish question
by itself. Fifteen pounds per
square inch is 2,160 pounds per square foot, or 0.0075 ton per square inch.
There is no possible basis for
calling these numbers “small” or “large” without some external standard of
comparison. And the only relevant
standard of comparison is the air pressure for which the formula does or does
not work under a given set of circumstances. But this raises the same problem at a
second level. What is the meaning
of “does or does not work”? Even if
we could eliminate errors of measurement, the measured time of fall would seldom
if ever be precisely equal to the computed time of fall. How large must the difference between the
two be to justify saying that the theory “does not work”? Here there are two important external
standards of comparison. One is the
accuracy achievable by an alternative theory with which this theory is being
compared and which is equally acceptable on all other grounds. The other arises when there exists a
theory that is known to yield better predictions but only at a greater cost.
The gains from greater accuracy,
which depend on the purpose in mind, must then be balanced against the
costs of achieving it.
This example illustrates both the impossibility of
testing a
17
theory by its assumptions and also the ambiguity of the
concept “the assumptions of a theory.” The formula s = ½ gt2
is valid for bodies falling in a vacuum and can be derived by
analyzing the behavior of such bodies. It can therefore be stated: under a wide
range of circumstances, bodies that fall in the actual atmosphere behave as
if they were falling in a vacuum. In the language so common in economics
this would be rapidly translated into: the formula assumes a vacuum. Yet it clearly does no such thing. What it does say is that in many cases
the existence of air pressure, the shape of the body, the name of the person
dropping the body, the kind of mechanism used to drop the body, and a host of
other attendant circumstances have no appreciable effect on the distance the
body falls in a specified time. The
hypothesis can readily be rephrased to omit all mention of a vacuum: under a
wide range of circumstances, the distance a body falls in a specified time is
given by the formula s = ½ gt2. The history of this formula and its
associated physical theory aside, is it meaningful to say that it assumes a
vacuum? For all I know there may be
other sets of assumptions that would yield the same formula. The formula is accepted because it works,
not because we live in an approximate vacuum - whatever that
means.
The important problem in connection with the hypothesis
Is to specify the circumstances under which the formula works or, more
precisely, the general magnitude of the error in its predictions under various
circumstances. Indeed, as is
implicit in the above rephrasing of the hypothesis, such a specification is not
one thing and the hypothesis another. The specification is itself an essential
part of the hypothesis, and it is a part that is peculiarly likely to be revised
and extended as experience accumulates.
In the particular case of falling bodies a more general,
though still incomplete, theory is available, largely as a result of attempts to
explain the errors of the simple theory, from which the influence of some of the
possible disturbing factors can be calculated and of which the simple theory is
a special case. However, it does
not always pay to use the more general theory because the extra accuracy it
yields may not justify the extra cost of using it, so the question under what
circumstances the simpler theory works “well enough” remains important. Air pressure
18 Index
is one, but only one, of the variables that define these
circumstances; the shape of the body, the velocity attained, and still other
variables are relevant as well. One
way of interpreting the variables other than air pressure is to regard them as
determining whether a particular departure from the “assumption” of a vacuum is
or is not significant. For example,
the difference in shape of the body can be said to make 15 pounds per square
inch significantly different from zero for a feather but not for a compact ball
dropped a moderate distance. Such a
statement must, however, be sharply distinguished from the very different
statement that the theory does not work for a feather because its assumptions
are false. The relevant relation
runs the other way: the assumptions are false for a feather because the theory
does not work. This point needs
emphasis, because the entirely valid use of “assumptions” in specifying
the circumstances for which a theory holds is frequently, and erroneously,
interpreted to mean that the assumptions can be used to determine the
circumstances for which a theory holds, and has, in this way, been an
important source of the belief that a theory can be tested by its
assumptions.
Let us turn now to another example, this time a
constructed one designed to be an analogue of many hypotheses in the social
sciences. Consider the density of
leaves around a tree. I suggest the
hypothesis that the leaves are positioned as if each leaf deliberately sought to
maximize the amount of sunlight it receives, given the position of its
neighbors, as if it knew the physical laws determining the amount of sunlight
that would be received in various positions and could move rapidly or
instantaneously from any one position to any other desired and unoccupied
position. 14 Now some
of the more obvious implications of this hypothesis are clearly consistent with
experience: for example, leaves are in general denser on the south than on the
north side of trees but, as the hypothesis implies, less so or not at all on the
northern
14. This example, and some of the
subsequent discussion, though independent in origin, is similar to and in much
the same spirit as an example and the approach in an important paper by Armen A.
Alchian, “Uncertainty, Evolution, and Economic Theory,” Journal of Political
Economy, LVIII (June, 1950), 211-21.
19
slope of a hill or when the south side of the trees is
shaded in some other way. Is the
hypothesis rendered unacceptable or invalid because, so far as we know, leaves
do not “deliberate” or consciously “seek,” have not been to school and learned
the relevant laws of science or the mathematics required to calculate the
“optimum” position, and cannot move from position to position? Clearly, none of these contradictions of
the hypothesis is vitally relevant; the phenomena involved are not within the
“class of phenomena the hypothesis is designed to explain”; the hypothesis does
not assert that leaves do these things but only that their density is the same
as if they did. Despite the
apparent falsity of the “assumptions” of the hypothesis, it has great
plausibility because of the conformity of its implications with observation.
We are inclined to “explain” its
validity on the ground that sunlight contributes to the growth of leaves and
that hence leaves will grow denser or more putative leaves survive where there
is more sun, so the result achieved by purely passive adaptation to external
circumstances is the same as the result that would be achieved by deliberate
accommodation to them. This
alternative hypothesis is more attractive than the constructed hypothesis not
because its “assumptions” are more “realistic” but rather because it is part of
a more general theory that applies to a wider variety of phenomena, of which the
position of leaves around a tree is a special case, has more implications
capable of being contradicted, and has failed to be contradicted under a wider
variety of circumstances. The
direct evidence for the growth of leaves is in this way strengthened by the
indirect evidence from the other phenomena to which the more general theory
applies.
The constructed hypothesis is presumably valid, that is,
yields “sufficiently” accurate predictions about the density of leaves, only for
a particular class of circumstances. I do not know what these circumstances
are or how to define them. It seems
obvious, however, that in this example the “assumptions” of the theory will play
no part in specifying them: the kind of tree, the character of the soil, etc.,
are the types of variables that are likely to define its range of validity, not
the ability of the leaves to do complicated mathematics or to move from place to
place.
20
A largely parallel example involving human behavior has
been used elsewhere by Savage and me. 15 Consider the problem of predicting
the shots made by an expert billiard player. It seems not at all unreasonable that
excellent predictions would be yielded by the hypothesis that the billiard
player made his shots as if he knew the complicated mathematical formulas
that would give the optimum directions of travel, could estimate accurately by
eye the angles, etc., describing the location of the balls, could make lightning
calculations from the formulas, and could then make the balls travel in the
direction indicated by the formulas. Our confidence in this hypothesis is not
based on the belief that billiard players, even expert ones, can or do go
through the process described; it derives rather from the belief that, unless in
some way or other they were capable of reaching essentially the same result,
they would not in fact be expert billiard players.
It is only a short step from these examples to the
economic hypothesis that under a wide range of circumstances individual firm
behave as if they were seeking rationally to maximize their expected
returns (generally if misleadingly called “profits”) 16 and had full
knowledge of the data needed to succeed in this attempt; as if, that is,
they knew the relevant cost and demand functions,
15. Milton Friedman and L. J. Savage, “The Utility
Analysis of Choices Involving Risk,” Journal of Political Economy, LVI
(August, 1948), 298. Reprinted in American Economic Association, Readings in
Price Theory (Chicago: Richard D. Irwin, Inc., 1952), pp.
57-96.
16. It seems better to use the term “profits” to refer to the difference between actual and “expected” results, between ex post and ex ante receipts. “Profits” are then a result of uncertainty and, as Alchian (op. cit., p. 212), following Tintner, points out, cannot be deliberately maximized in advance. Given uncertainty, individuals or firms choose among alternative anticipated probability distributions of receipts or incomes. The specific content of a theory of choice among such distributions depends on the criteria by which they are supposed to be ranked. One hypothesis supposes them to be ranked by the mathematical expectation of utility corresponding to them (see Friedman and Savage, “The Expected-Utility Hypothesis and the Measurability of Utility,” op. cit.). A special case of this hypothesis or an alternative to it ranks probability distributions by the mathematical expectation of the money receipts corresponding to them. The latter is perhaps more applicable, and more frequently applied, to firms than to individuals. The term “expected returns” is intended to be sufficiently broad to apply to any of these alternatives.
The issues alluded to in this note are not basic to the
methodological issues being discussed, and so are largely by-passed in the
discussion that follows.
21
calculated marginal cost and marginal revenue from all
actions open to them, and pushed each line of action to the point at which the
relevant marginal cost and marginal revenue were equal. Now, of course, businessmen do not
actually and literally solve the system of simultaneous equations in terms of
which the mathematical economist finds it convenient to express this hypothesis,
any more than leaves or billiard players explicitly go through complicated
mathematical calculations or falling bodies decide to create a vacuum. The billiard player, if asked how he
decides where to hit the ball, may say that he “just figures it out” but then
also rubs a rabbit’s foot just to make sure; and the businessman may well say
that he prices at average cost, with of course some minor deviations when the
market makes it necessary. The one
statement is about as helpful as the other, and neither is a relevant test of
the associated hypothesis.
Confidence in the maximization-of-returns hypothesis is justified by
evidence of a very different character. This evidence is in part similar to that
adduced on behalf of the billiard-player hypothesis - unless the behavior of
businessmen in some way or other approximated behavior consistent with the
maximization of returns, it seems unlikely that
they would remain in business for long. Let the apparent immediate determinant of
business behavior be anything at all - habitual reaction, random chance, or
whatnot. Whenever this determinant
happens to lead to behavior consistent with rational and informed maximization
of returns, the business will prosper and acquire resources with which to
expand; whenever it does not, the business will tend to lose resources and can
be kept in existence only by the addition of resources from outside. The process of “natural selection” thus
helps to validate the hypothesis - or, rather, given natural selection,
acceptance of the hypothesis can be based largely on the judgment that it
summarizes appropriately the conditions for survival.
An even more important body of evidence for the
maximization-of-returns hypothesis is experience from countless applications of
the hypothesis to specific problems and the repeated failure of its implications
to be contradicted. This evidence
is extremely hard to document; it is scattered in numerous
memo-
22
randums, articles, and monographs concerned primarily
with specific concrete problems rather than with submitting the hypothesis to
test. Yet the continued use and
acceptance of the hypothesis over a long period, and the failure of any
coherent, self-consistent alternative to be developed and be widely accepted, is
strong indirect testimony to its worth. The evidence for a hypothesis
always consists of its repeated failure to be contradicted, continues to
accumulate so long as the hypothesis is used, and by its very nature is
difficult to document at all comprehensively. It tends to become part of the tradition
and folklore of a science revealed in the tenacity with which hypotheses are
rather than in any textbook list of instances in which the thesis has failed to
be contradicted.
IV. THE SIGNIFICANCE AND ROLE OF
THE
“ASSUMPTIONS” OF A
THEORY
Up to this point our conclusions about the significance
of the “assumptions” of a theory have been almost entirely negative: we
have seen that a theory cannot be tested by the “realism” of its
“assumptions” and that the very concept of the “assumptions” of a theory is
surrounded with ambiguity. But, if
this were all there is to it, it would be hard to explain the extensive use of
the concept and the strong tendency that we all have to speak of the assumptions
of a theory and to compare the assumptions of alternative theories. There is too much smoke for there to be
no fire.
In methodology, as in positive science, negative
statements can generally be made with greater confidence than positive
statements, so I have less confidence in the following remarks on the
significance and role of “assumptions” than in the preceding remarks. So far as I can see, the “assumptions of
a theory” play three different, though related, positive roles: (a) they
are often an economical mode of describing or presenting a theory, (b)
sometimes facilitate an indirect test of the hypothesis by its implications,
and (c), as already noted, they are sometimes a convenient means of
specifying the conditions under which the theory is expected to be valid. The first two require more extensive
discussion.
23
A. THE USE OF “ASSUMPTIONS” IN
STATING A THEORY
The example of the leaves illustrates the first role of
assumptions. Instead of saying that
leaves seek to maximize the sunlight they receive, we could state the equivalent
hypothesis, without any apparent assumptions, in the form of a list of rules for
predicting the density of leaves: if a tree stands in a level field with no
other trees or other bodies obstructing the rays of the sun, then the density of
leaves will tend to be such and such; if a tree is on the northern slope of a
hill in the midst of a forest of similar trees, then... ; etc. This is clearly a far less economical
presentation of the hypothesis than the statement that leaves seek to maximize
the sunlight each receives. The
latter statement is, in effect, a simple summary of the rules in the above list,
even if the list were indefinitely extended, since it indicates both how to
determine the features of the environment that are important for the particular
problem and how to evaluate their effects. It is more compact and at the same time
no less comprehensive.
More generally, a hypothesis or theory consists of an
assertion that certain forces are, and by implication others are not, important
for a particular class of phenomena and a specification of the manner of action
of the forces it asserts to be important. We can regard the hypothesis as
consisting of two parts: first, a conceptual world or abstract model simpler
than the “real world” and containing only the forces that the hypothesis asserts
to be important; second, a set of rules defining the class of phenomena for
which the “model” can be taken to be an adequate representation of the “real
world” and specifying the correspondence between the variables or entities in
the model and observable phenomena.
These two parts are very different in character. The model is abstract and complete; it is
an “algebra” or “logic.” Mathematics and formal logic come into
their own in checking its consistency and completeness and exploring its
implications. There is no place in
the model for, and no function to be served by, vagueness, maybe’s, or
approximations. The air pressure is
zero, not “small,” for a vacuum; the demand curve for the product of a
competitive
24
producer is horizontal (has a slope of zero), not
“almost horizontal.”
The rules
for using the model, on the other hand, cannot possibly be abstract and
complete. They must be concrete and
in consequence incomplete - completeness is possible only in a conceptual world,
not in the “real world,” however that may be interpreted. The model is the logical embodiment of
the half-truth, “There is nothing new under the sun”; the rules for applying it
cannot neglect the equally significant half-truth, “History never repeats
itself.” To a considerable extent
the rules can be formulated explicitly - most easily, though even then not
completely, when the theory is part of an explicit more general theory as in the
example of the vacuum theory for falling bodies. In seeking to make a science as
“objective” as possible, our aim should be to formulate the rules explicitly in so far as possible and
continually to widen the range of phenomena for which it is possible so. But, no matter how successful we may be
in this attempt, there inevitably will remain room for judgment in applying the
rules. Each occurrence has some
features peculiarly its own, not covered by the explicit rules. The capacity to judge that these are or
are not to be disregarded, that they should or should not affect what observable
phenomena are to be identified with what entities in the model, is something
that cannot be taught; it can be learned but only by experience and exposure in
the “right” scientific atmosphere, not by rote. It is at this point that the “amateur” is
separated from the “professional” in all sciences and that the thin line is
drawn which distinguishes the “crackpot” from the
scientist.
A simple example may perhaps clarify this point. Euclidean geometry is an abstract model,
logically complete and consistent. Its entities are precisely defined - a
line is not a geometrical figure “much” longer than it is wide or deep; it is a
figure whose width and depth are zero. It is also obviously “unrealistic.” There are no such things in “reality” as
Euclidean points or lines or surfaces. Let us apply this abstract model to a
mark made on a blackboard by a piece of chalk. Is the mark to be identified with a
Euclidean line, a Euclidean surface, or a Euclidean solid?
25
Clearly, it can appropriately be identified with a line
if it is being used to represent, say, a demand curve. But it cannot be so identified if it is
being used to color, say, countries on a map, for that would imply that the map
would never be colored; for this purpose, the same mark must be identified with
a surface. But it cannot be so
identified by a manufacturer of chalk, for that would imply that no chalk would
ever be used up; for his purposes, the same mark must be identified with a
volume. In this simple example
these judgments will command general agreement. Yet it seems obvious that, while general
considerations can be formulated to guide such judgments, they can never be
comprehensive and cover every possible instance; they cannot have the
self-contained coherent character of Euclidean geometry
itself.
In speaking of the “crucial assumptions” of a theory, we
are, I believe, trying to state the key elements of the abstract model. There are generally many different ways
of describing the model completely - many different sets of “postulates” which
both imply and are implied by the model as a whole. These are all logically equivalent: what
are regarded as axioms or postulates of a model from one point of view can be
regarded as theorems from another, and conversely. The particular “assumptions” termed
“crucial” are selected on grounds of their convenience in some such respects as
simplicity or economy in describing the model, intuitive plausibility, or
capacity to suggest, if only by implication, some of the considerations that are
relevant in judging or applying the model.
B. THE USE OF “ASSUMPTIONS”
AS AN
INDIRECT TEST OF A THEORY
In presenting any hypothesis, it generally seems obvious
which of the series of statements used to expound it refer to assumptions and
which to implications; yet this distinction is not easy to define rigorously.
It is not, I believe, a
characteristic of the hypothesis as such but rather of the use to which the
hypothesis is to be put. If this is
so, the ease of classifying statements must reflect unambiguousness in the
purpose the hypothesis is designed to serve. The possibility of interchanging theorems
and axioms in
26
an abstract model implies the possibility of
interchanging “implications” and “assumptions” in the substantive hypothesis
corresponding to the abstract model, which is not to say that any implication
can be interchanged with any assumption but only that there may be more than one
set of statements that imply the rest.
For example, consider a particular proposition in the
theory of oligopolistic behavior. If we assume (a) that
entrepreneurs seek to maximize their returns by any means including acquiring or
extending monopoly power, this will imply (b) that, when demand for a
“product” is geographically unstable, transportation costs are significant,
explicit price agreements illegal, and the number of producers of the product
relatively small, they will tend to establish basing-point pricing systems.
17 The
assertion (a) is regarded as an assumption and (b) as an implication
because we accept the prediction of market behavior as the purpose of the
analysis. We shall regard the
assumption as acceptable if we find that the conditions specified in (b)
are generally associated with basing-point pricing, and conversely. Let us now change our purpose to deciding
what cases to prosecute under the Sherman Antitrust Law’s prohibition of a
“conspiracy in restraint of trade.” If we now assume (c) that
basing-point pricing is a deliberate construction to facilitate collusion under
the conditions specified in (b), this will imply (d) that
entrepreneurs who participate in basing-point pricing are engaged in a
“conspiracy in restraint of trade.” What was formerly an assumption now
becomes an implication, and conversely.
We shall now regard the assumption (c) as valid if we find that,
when entrepreneurs participate in basing-point pricing, there generally tends to
be other evidence, in the form of letters, memorandums, or the like, of what
courts regard as a “conspiracy in restraint of trade.”
Suppose the hypothesis works for the first purpose,
namely, the prediction of market behavior. It clearly does not follow that it will
work for the second purpose, namely, predicting whether there is enough evidence
of a “conspiracy in restraint of trade”
17. See George J. Stigler, “A Theory of
Delivered Price Systems,” American Economic Review, XXXIX. (December,
1949), 1143-57.
27
to justify court action. And, conversely, if it works for the
second purpose, it does not follow that it will work for the first. Yet, in the absence of other evidence,
the success of the hypothesis for one purpose- in explaining one class of
phenomena - will give us greater confidence than we would otherwise have that it
may succeed for another purpose - in explaining another class of phenomena.
It is much harder to say how much
greater confidence it justifies. For this depends on how closely related
we judge the two classes of phenomena to be, which itself depends in a complex
way on similar kinds of indirect evidence, that is, on our experience in other
connections in explaining by single theories phenomena that are in some sense
similarly diverse.
To state the point more generally, what are called the
assumptions of a hypothesis can be used to get some indirect evidence on the
acceptability of the hypothesis in so far as the assumptions can themselves be
regarded as implications of the hypothesis, and hence their conformity with
reality as a failure of some implications to be contradicted, or in so far as
the assumptions may call to mind other implications of the hypothesis
susceptible to casual empirical observation. 18 The reason this evidence is indirect is that the
assumptions or associated implications generally refer to a class of phenomena
different from the class which the hypothesis is designed to explain; indeed, as
is implied above, this seems to be the chief criterion we use in deciding which
statements to term “assumptions” and which to term “implications.” The weight attached to this indirect
evidence depends on how closely related we judge the two classes of phenomena to
be.
Another way in which the “assumptions” of a hypothesis
can facilitate its indirect testing is by bringing out its kinship with other
hypotheses and thereby making the evidence on their validity relevant to the
validity of the hypothesis in question. For example, a hypothesis is formulated
for a particular class
18. See Friedman and Savage, “The Expected-Utility
Hypothesis and the Measurability of Utility,” op. cit., pp. 466-67, for
another specific example of this kind of indirect
test.
28
of behavior. This hypothesis can, as usual, be stated
without specifying any “assumptions.” But suppose it can be shown that it
is equivalent to a set of assumptions including the assumption that man
seeks his own interest. The
hypothesis then gains indirect plausibility from the success for other classes
of phenomena of hypotheses that can also be said to make this assumption; at
least, what is being done here is not completely unprecedented or unsuccessful
in all other uses. In effect, the
statement of assumptions so as to bring out a relationship between superficially
different hypotheses is a step in the direction of a more general
hypothesis.
This kind of indirect evidence from related hypotheses
explains in large measure the difference in the confidence attached to a
particular hypothesis by people with different backgrounds. Consider, for example, the hypothesis
that the extent of racial or religious discrimination in employment in a
particular area or industry is closely related to the degree of monopoly in the
industry or area in question; that, if the industry is competitive,
discrimination will be significant only if the race or religion of employees
affects either the willingness of other employees to work with them or the
acceptability of the product to customers and will be uncorrelated with the
prejudices of employers. 19 This hypothesis is far more likely to appeal to an
economist than to a sociologist. It
can be said to “assume” single-minded pursuit of pecuniary self-interest by
employers in competitive industries; and this “assumption” works well in a wide
variety of hypotheses in economics bearing on many of the mass phenomena with
which economics deals. It is
therefore likely to seem reasonable to the economist that it may work in this
case as well. On the other hand,
the hypotheses to which the sociologist is accustomed have a very different kind
of model or ideal world, in which single-minded pursuit of pecuniary
self-interest plays a much less important role. The indirect evidence available to the
sociologist on
19. A rigorous statement of this hypothesis would of
course have to specify how “extent of racial or religious discrimination” and
“degree of monopoly”are to be judged. The loose statement in the text is
sufficient, however, for present purposes.
29
this hypothesis is much less favorable to it than the
indirect evidence available to the economist; he is therefore likely to view it
with greater suspicion.
Of course, neither the evidence of the economist nor
that of the sociologist is conclusive. The decisive test is whether the
hypothesis works for the phenomena it purports to explain. But a judgment may be required before any
satisfactory test of this kind has been made, and, perhaps, when it cannot be
made in the near future, in which case, the judgment will have to be based on
the inadequate evidence available. In addition, even when such a test can be
made, the background of the scientists is not irrelevant to the judgments they
reach. There is never certainty in
science, and the weight of evidence for or against a hypothesis can never be
assessed completely “objectively.” The economist will be more tolerant than
the sociologist in judging conformity of the implications of the hypothesis with
experience, and he will be persuaded to accept the hypothesis tentatively by
fewer instances of “conformity.”