The Competitiveness of Nations
in a Global Knowledge-Based Economy
June 2002
Tony Lawson
The Relative/Absolute Nature of
Knowledge
and Economic
Analysis
The Economic Journal
Volume 97, Issue 388
Dec. 1987, 951-970.
Index
I. Certainty and Uncertainty in
Knowledge
The Fallibility of Certainty, Correct Foresight and
Truth
II. Fallibility, Justificationism and
Keynes
Different Types of Knowledge in Keynes’
Account
III. Direct Knowledge and
Foundationalism
The Relative/Absolute Nature of Direct
Knowledge
The Relative/Absolute Nature of
Truth
Resolving Initial Difficulties
Foundations and Economic Analysis
A Qualitative Aspect of Progress in Economic
Knowledge
V. Final Comments and Conclusion
Central to economic analysis are assumptions and
hypotheses concerning the extent and nature of the knowledge held by
individuals. In this respect it is
a noticeable feature of realist 1
accounts that they tend to focus upon
the pervasiveness of uncertainty as an undeniable fact of economic life. (Non-realist, or instrumentalist
accounts, in contrast, tend to assume that agents have perfect information,
correct foresight, rational expectations, and so on.) It is also apparent that this realist
focus upon uncertainty tends to give rise to a concentration of attention upon
those situations in which (possibly numerically measurable) probabilistic
knowledge is thought to be available. Clearly such accounts are important.
Nevertheless, I wish to suggest
that such a restricted choice of focus for the realist is not entirely
satisfactory, since, in particular, it tends to lead to a neglect of the
widespread observation that feelings of certainty and claims to truth are
also pervasive in human society. I want to suggest, moreover, that if we
are to account for the latter observation (and economists concerned with realism
of analysis surely need to) then various arguments and conclusions have to be
taken on board which, in turn, appear to bear consequentially upon the nature
and conduct of economic analysis in general.
Section I below discusses such possible limitations of
existing realist accounts of agent knowledge in some detail. The suggested route for responding to,
and resolving, apparent problems - which involves the argument that aspects of
knowledge can have a relative as well as an absolute character - is described in
sections II and III; and the various analytical consequences of the account
there set out are discussed in section IV. Section V contains concluding comments
and touches upon ways in which the proposed account might be appraised and made
operational.
I.
CERTAINTY AND UNCERTAINTY IN KNOWLEDGE
It is not unusual for economists concerned with realist
analysis, especially those concerned with matters of economic policy
formulation, to defend their own beliefs as truths held with
certainty. Indeed they are
sometimes explicitly
1. Realism involves a commitment to a view of the actual
(or at least possible) existence of some disputed entity. In the context of economic analysis I
take realism to be the doctrine that the objects of research analysis exist
independently (at least in part) of the enquiry of which they are the objects.
As such realism incorporates the
belief that there is an objective world which exists independently (in part) of
consciousness but which is knowable by consciousness. This view contrasts with instrumentalism
(among other doctrines) in which the objects of enquiry tend to be treated as
mere ‘convenient fictions’ or some such. Realist explanations or ‘models’
postulate entities on grounds additional to analytical convenience and involve a
commitment to their further/continuous scrutiny (see Lawson, 1987b).
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criticised for doing so. Thus Hahn (1985, p. 20) asserts that the
‘display of certainty by many economists in discussing matters of economic
policy is not only lacking in honesty but extremely harmful to the subject’.
No doubt there are situations in
which this ‘display of certainty’ is partly ‘bluff’ designed, perhaps, to
intimidate opponents into agreement. Nevertheless it is difficult to attribute
this pervasive ‘display’ entirely to dishonesty. Moreover, such certainty of belief is
hardly confined to economists. Indeed it is found in all walks of life,
as a moment’s reflection should confirm. In general, people holding theories or
views about the world and society in which they live, about matters which affect
them, do seem to hold on to them as if they represent the truth. Certainty of belief is not a peculiarity
of economists.
It is noticeable, however, that economists who are
concerned with realism of analysis, and who focus explicitly on the knowledge
that individuals possess, tend to emphasise almost exclusively the fact of
uncertainty surrounding economic activity. Now it is the case, of course, that
uncertainty is a pervasive fact of life. Nevertheless, an over-preoccupation with
emphasising and describing it can mask the fact that certainty is also a
pervasive feature of human agency. This emphasis on uncertainty and
consequential neglect of certainty and true belief, in fact, may be a reaction
to the widespread supposition in economic analysis that situations of certainty
and truth must somehow involve complete or perfect information. Certainly an assumption that is often
made in orthodox economic analysis is that agents do indeed have perfect
information or, if prediction is the aim, correct foresight. It is not clear, in fact, that such
analyses ever take realism as their aim; but, in any case, the typical response
by realist minded economists is to reject the possibility of perfect
information, to emphasise instead the fact of uncertainty and, in so doing,
usually to concentrate upon theories of probabilistic knowledge that do not
appear to presume so much by way of agent information.
One such probabilistic account which seems to be
increasingly, if belatedly, attracting the attention of economists (see, e.g.
contributions and references in Lawson and Pesaran, 1985) is that set out in a
realist vein by Keynes in his A Treatise on Probability, and this is
considered in some detail below. Keynes’ theory is concerned with the
degree of belief that it is rational for a person to have in a particular
proposition, given the evidence available; and, as such, there is an explicitly
objectivist or absolute aspect to this account. Perhaps the more widely adopted view of
probabilistic knowledge in economics, however, is that provided within
‘subjectivist’ or Bayesian accounts. Although adopting this ‘subjectivist’
label some such accounts often appear to adopt some form of realism as an aim,
and even criticise the lack of realism of the more extreme subjectivist analysis
(see, e.g. Hey, 1979, p. 232; 1983b, p. 138). In fact, in situations where, in Keynes’
account, a prior probability is considered to be determinate (and
possibly in other situations also) the accounts of Keynes and some prominent
Bayesians would seem to possess significant similarities. There may be disagreement over whether
initial or prior probabilities can be numerically determined in certain
situations but (and contra many, more extreme, subjectivists, e.g. Savage, 1954,
p. 3), some Bayesians contend, along
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with Hey (1983a), that we should ‘expect increasing
agreement between people as the amount of shared information increases’ (p.5), a
conclusion that appears to be consistent with Keynes’, and indeed with any
objectivist analysis. However, for
present purposes a point to note is that, for these more realist inclined
accounts of probabilistic knowledge, certainty and truth concerning the
proposition under consideration only seem to arise when information is somehow
complete; that is, the process of revising probabilistic knowledge converges
eventually upon certainty and truth only as an ‘end product’ (Hey, 1983a, p.i)
or with a ‘completeness of information’ (Keynes, 1973, p. 345). 2
Now, important though such probabilistic accounts
certainly are, the fact is that claims to certainty and truth appear to be
pervasive in society while, usually, information is incomplete or imperfect.
3 Depending upon what ‘completeness of information’ means
here, it seems that, at the very least, something wider or more general than an
account of probabilistic knowledge per se is required. A slightly different route seems
necessary if both claims to truth and the fact of imperfect information are to
be features of realist analysis. Ultimately, in fact, it seems necessary
to acknowledge that claims to certainty and truth generally correspond to
situations of imperfect information and that, as such, claims to certainty and
truth must be fallible and susceptible to possible
revision.
The Fallibility of Certainty, Correct Foresight and
Truth
The path of questioning explicitly the meaning of terms
such as certainty, etc., is one previously embarked upon by Alan Coddington
(1982) and, as Coddington makes clear, it is a path which is not without its
difficulties. Coddington
4 first focuses upon the ‘ambiguous’ nature of the term
certainty. He recognises that
certainty must be considered as a ‘state of complete confidence in a belief’ but
rejects, as ‘evidently not much use’ to economic theory, the view that this is
‘irrespective of whether that belief is correct’ (p. 483),
2. In A Treatise on Probability, and later in the
General Theory, Keynes essentially distinguishes three types of
probability-relation: the first where a probability-relation is numerically
indeterminate and possibly not even comparable to (in terms of less than, equal
to, or greater than) other probability relations; the second where probabilities
are numerically determinate but less than unity (and greater than zero); and the
third where probabilities take the value of unity (or zero). The first type of probability, for
Keynes, corresponds to a situation of uncertainty (see Lawson, 1985) and
the third to a situation of certainty. Moving from the first type through
the second towards the third, Keynes talks both of the argument in question
being less ‘uncertain’ and also of the weight of the argument increasing.
For Keynes the weight of an
argument appears to be the ‘degree of completeness of the information upon which
a probability is based’ (Keynes, 1973, p. 345) or, equivalently, the ‘balance…
between the absolute amounts of relevant knowledge and of relevant
ignorance respectively’ (Keynes, 1973, p. 77). Thus as relevant evidence increases so
too does the weight. Keynes seems
to suggest that certainty can only be reached when weight is at its highest, and
this in turn appears to correspond to a situation where the relevant evidence is
complete.
3. Moreover the assumption of perfect foresight and
complete information can be made even in probabilistic accounts. Traditionally this assumption has been
employed in the context of a presumed deterministic world. Recently it has also been carried over to
a stochastic setting via the rational expectations hypothesis. As numerous commentators have pointed out
the most significant presumption of this hypothesis is the claim made about the
substantial knowledge supposedly held by individuals. Indeed, while in the traditional
perfect-information models it is assumed that individuals know everything
in a determinate world, under the rational expectations hypothesis it is
assumed that individuals know everything that there is to know in a
stochastic world. As such, the
latter hypothesis appears to be merely a stochastic euphemism for ‘perfect
information’ and just as unrealistic.
4. All undated references to Coddington refer to
Coddington (1982).
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concluding that certainty can only be a ‘state of
complete confidence in a belief, together with the correctness of this belief’
(p. 483). Yet certainty remains a
pervasive feature of human agency. Consequently, in order to avoid presuming
infallible, omniscient agents, Coddington emphasises that much therefore hinges
upon what is meant by the term ‘correct’ in the assumption of ‘correct
foresight’. But in rejecting the
implication that beliefs and expectations must be correct ‘in every particular,
at every instant’ he finds himself in something of a quandary. In fact, having allowed for notions such
as correct beliefs or foresight to contain error, Coddington is left with what
he takes to be the undesirable conclusion that all beliefs must therefore be
correct under some suitably lax definition:
But as soon as it is admitted that any reasonable
conception of correct foresight must allow for some (reasonable) margins of
error, we are on the beginning of a slippery slope. For we then have to admit that there is
no clear dichotomy between certainty and uncertainty (or between knowledge and
ignorance, for that matter). Just
to emphasize the point, we could go to the other extreme and claim that all
foresight is ‘correct’ (to some sufficiently lax standards of approximation),
just as all foresight is ‘incorrect’ (by the absurd standards of comprehensive
exactness) (p.483).
The sort of reasoning displayed by Coddington in this
statement has led others to claim that indeed there is no difference
between knowledge and ignorance, etc. Thus, once imperfect information and
fallibility are acknowledged, there arises the possibility of an inexorable
slide towards what is considered to be the opposite polar assumption to perfect
information/foresight (although in some ways it has much in common with it), the
view that expectations (and possibly current knowledge also) are merely creative
acts of the imagination. In fact
some economists embrace this form of extreme subjectivism as the only position
which is, in their view, consistent with human freedom. This, however, is not Coddington’s
recourse, for Coddington, it seems, wishes to maintain the realist view that
knowledge can retain some grip on external reality. In fact, following on from his reasoning
as set out above Coddington suggests that we are ‘driven to the notion that
correctness must consist in the foresights being within certain “reasonable”
bounds of approximation’, but retreats thereby to the view that it is a
probabilistic theory of knowledge that is the solution - that ‘the notion of
correct foresight is crying out for statistical elaboration’ (p. 484). Once more, clearly, the realist response
is to rely upon accounts of probabilistic knowledge.
The pervasive claims to certainty and true belief
amongst individuals in society thus appear to present the realist economist with
a dilemma. On the one hand, a
coupling of this observation with the view that certainty and truth correspond
to a situation of complete information raises the unrealistic spectacle of
perfectly informed and ultimately infallible omniscient agents. On the other hand, by relaxing the
assumption that certainty, etc., correspond to a state of omniscience, there
arises the subjectivist alternative that knowledge
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is nothing more than creative acts of the imagination.
And, as we have seen, the problems
inherent in each view seem to have led to a realist neglect of any account of
claims to certainty in knowledge, and instead to a restricted emphasis upon
situations of uncertainty and a concentration thereby upon accounts of
probabilistic knowledge.
I wish to argue that the sort of path embarked upon by
Coddington contains the potential for overcoming the problems raised above, but
that the fall-back upon a probabilistic view of knowledge is not in itself
a complete solution to such problems. In what follows the issues and problems
raised will be addressed by following a slightly different route, one which
involves the argument that many aspects of knowledge are, in an important sense
to be made clear below, both absolute as well as, in some sense,
relative. Such attributes,
in fact, are often considered to be oppositional. The intention in the following two
sections is to argue that they need not be so, and in so doing to suggest how
the contention that there is a relative/absolute nature to aspects of knowledge
can lead to an avoidance of the apparent analytical problems outlined above.
It should be emphasised that the
aim is not per se to replace accounts of probabilistic knowledge such as
those discussed above (although, the arguments which follow do involve a
critical reconstruction of aspects of Keynes’ account). Rather, the intention is to suggest how
theories such as these might be supplemented with an account of knowledge
revision which has a bearing even when the beliefs involved reveal a (genuine)
‘display of certainty’.
II. FALLIBILITY, JU5TIFICATIONI5M
AND KEYNES
One of the more thorough-going and still relevant
accounts of knowledge is provided by Keynes in A Treatise on Probability.
(It is indeed much more than an
account of probability per se.) Moreover in recent years there has
been a significant revival of interest in the epistemological aspects of Keynes’
contribution. 5 As such Keynes’ account of belief and knowledge provides
a convenient context in which to develop the arguments I wish to make. This choice of focus is reinforced by the
fact that it is Keynes’ account of knowledge that Coddington seizes upon as
representing the viewpoint which he is attempting to move away from; a viewpoint
which Coddington labels ‘justificationist skepticism’.
The first thing to notice is that Keynes,
6 like
Coddington, appreciates that the term ‘certainty’ tends to be used ambiguously
(p. 15). Keynes reserves its use to
describe the ‘highest degree of rational belief’, which, in fact, can occur only
when the proposition in question is correct or true. It also corresponds to
knowledge:
knowledge of a proposition always corresponds to
certainty of rational belief in it and at the same time to actual truth in the
proposition itself. We cannot know
a proposition unless it is in fact true (p.11).
5. Thus Harrod’s (1972) comment concerning the
Treatise on Probability that ‘Keynes’ work, which is likely in any case
to be for long unmatched in its scope and erudition, will remain of living
importance as a starting point for discussion, until a more satisfying logical
solution of the central problem of human knowledge is found’, (p. 778), seems as
relevant as ever.
6. All undated references to Keynes refer to Keynes
(1973): A Treatise on Probability.
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Keynes and Coddington thus seem to be in general
agreement on this point. In fact
this observation, in turn, leads us to question why Coddington should refer to
Keynes as a sceptic when, apparently, he does not accept the label for himself.
Coddington, in fact, criticises a
view which conflates knowledge with certainty and ‘then argues, in effect, that
since certainty is not attainable, neither is knowledge’ (p. 484). Such a position is indeed one of
scepticism, but it is not Keynes’. As we shall see below, Keynes argues that
knowledge is obtainable and so is not the sceptic that Coddington
suggests.
At this stage, then, it is important to question what it
means, within Keynes’ framework, to claim that a proposition is correct or true;
what it means to assert that certainty of belief is attainable. Just as Coddington sets out to qualify
what is meant by terms such as ‘correct’ so shall I attempt to do the same, but
in a way that I believe makes sense of numerous epistemological insights
provided by Keynes (as well as Coddington), and which does not, of necessity,
lead to Coddington’s ‘slippery slope’. In this, however, it is also necessary to
consider Coddington’s claim that there is a justificationist aspect to Keynes’
account. In fact Keynes’ account
does not presuppose, as Coddington suggests, that ‘knowledge, to count as such,
must be demonstrable, provable, indisputable’ (p. 484). It does remain, however, a form of
justificationism. In order to
understand the sense in which this is so it is necessary first to follow a
slight ‘detour’, and provide a brief sketch of Keynes’ theory of probability and
an overview of his account of direct and indirect
knowledge.
Different Types of Knowledge in Keynes’
Account
In his A Treatise on Probability Keynes
emphasises ‘the existence of a logical relation between two sets of propositions
in cases where it is not possible to argue demonstratively from one to another’
(p. 9). This is the probability
relation or argument. Any conclusion a is related to
a given premiss h via a probability relation, written a | h. In fact Keynes’ notion of logical
probability provides an immediate example of the sort of relative/absolute
interpretation of knowledge that will be developed below, an interpretation, I
believe, that applies in a much wider context than Keynes seems to acknowledge.
For Keynes a probability is in some
sense relative. Just as no place is
intrinsically distant - it is so many miles away from a given position - so no
proposition is intrinsically probable; a proposition has a certain probability
relative to given evidence or background knowledge. At the same time, however, the
probability in a given proposition is not arbitrary, subject to human caprice,
merely relative. Rather, once the
background knowledge or evidence is given, the probability in the given
proposition is fixed, and in this sense it is objective or absolute;
it is concerned with the degree of belief that it is rational for a person
to entertain in the proposition, given this evidence. Thus the probability in a given
proposition has both an absolute as well as a relative character. Acquisition of new relevant evidence
(k say) for a particular proposition may change the probability (to a
| hk, say) but this does not entail that the original
probability-relation (a | h) was incorrectly held; acquisition of
the new ‘evidence’ merely
956
gives rise to the new probability relation. Thus at a particular moment in time,
given the background knowledge available to an individual, the probability in
the relevant proposition is fixed, or absolute. However as evidence ‘accumulates’, so too
the probability attached to the proposition may change; and in this way
probability is relative to the background knowledge to
hand.
This kind of logical relation between sets of
propositions, or from premisses to conclusions, is an important component in
Keynes’ account of how certain types of knowledge are ‘justified’. Keynes, in fact, distinguishes two types
of knowledge: knowledge that is obtained directly and that which is obtained
indirectly - between ‘that part of our rational belief which we know directly
and that part which we know by argument’ (p.12). Direct knowledge, it seems, is not
knowledge which can be justified in any sense. It arises as a ‘result of contemplating
the objects of acquaintance’ (p. 12 - a matter explored further below). Indirect knowledge, however, is
justified knowledge. That is,
relative to such premisses as are known directly, we seek to determine degrees
of rational belief in other propositions which then form part of our indirect
knowledge. In this process, in
fact, it is not only the propositions that make up the premisses of the argument
that may be known directly, for the argument or probability relation is itself a
form of direct knowledge. Thus in
all knowledge there is some direct element (p.15), and it is on the basis of
this direct element that we seek to justify numerous further propositions. In Keynes’ words:
That part of our knowledge which we obtain directly,
supplies the premisses of that part which we obtain by argument. From these premisses we seek to justify
some degree of rational belief about all sorts of conclusions (p.
121).
Clearly, a fundamental feature of Keynes’ account, then,
is his notion of direct knowledge which appears to provide a foundational
aspect for all knowledge. In
order, therefore, to address the question raised earlier as to the way in which
correct beliefs or certain knowledge are to be interpreted in Keynes’ account,
it is to an examination of the particular nature of direct knowledge that I now
turn.
III. DIRECT
KNOWLEDGE AND FOUNDATIONALISM
Attempts within traditional epistemology to provide
foundations for knowledge have usually been made from the viewpoint of one or
other of two doctrines: empiricism which stresses the primary role of
sensory experience in knowledge and rationalism which claims a primary
role for a priori reasoning in knowledge. As we shall see, Keynes’ account of
direct knowledge has been interpreted, on occasion, as supporting each of these
positions.
It has already been noted that Keynes argues that direct
knowledge arises through contemplating objects of acquaintance. Such reasoning
immediately
958
appears to place Keynes within the empiricist camp.
This particular aspect of Keynes’
thinking is most fully captured by the following
statement:
We start from things, of various classes, with which we
have, what I choose to call without reference to other uses of the term,
direct acquaintance. Acquaintance with such things does
not in itself constitute knowledge, although knowledge arises out of
acquaintance with them. The most
important classes of things with which we have direct acquaintance are our own
sensations, which we may be said to experience, the ideas or meaning,
about which we have thoughts and which we may be said to understand, the
facts or characteristics or relations of sense-data or meanings, which we may be
said to perceive; - experience, understanding, and perception being three
forms of direct acquaintance (Keynes, 1973, p.12).
The empiricist aspect of this statement has been noted
by, for example, Hodgson (1985) who argues that the passage ‘supports the
allegation of empiricism’ especially in its ‘assumption that sense-data carry
meaning for the subject, without any mention of the language, the symbolic
order, or the conceptual framework though which they are perceived’ (p.
22).
It must also be noted, however, that if Keynes’ account
is an empiricist one then it is not of the extreme variety that reduces all
knowledge to replicas of sense impressions. In fact the following passage appears to
undermine the empiricist interpretation of Keynes’ account
altogether:
In the case of non-logical or empirical entities, it
seems sometimes to be assumed that our direct knowledge must be confined to what
may be regarded as an expression or description of the meaning or sensation
apprehended by us. If this view is
correct the inductive hypothesis is not the kind of thing about which we can
have direct knowledge as a result of our acquaintance with
objects.
I suggest, however, that this view is incorrect, and
that we are capable of direct knowledge about empirical entities which goes
beyond a mere expression of our understanding or sensation of them (p.
292).
Keynes provides two examples of such direct knowledge
about empirical entities which goes beyond a mere ‘understanding’ and
‘sensation’. The first is the
‘causal irrelevance of mere position in time and space’ (p. 292) and the second
is ‘the law of causation’ - the belief that every object in time ‘has a
“necessary” connection’ with some set of objects at a previous time. He adds that it ‘is to be noticed that
neither of these beliefs clearly arises, in spite of the directness that may be
claimed for them, out of any one single experience’
(p.293).
It would seem, therefore, that Keynes’ account is open
to the accusation of inconsistency. The above passage suggests that direct
knowledge itself involves interpretation and reason, while the former passage
may be construed as denying this. Such a denial, moreover, seems even more
explicit in the following statement: ‘... as to when we are knowing
propositions about sense-
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data directly and when we are interpreting them - it is
not possible to give a clear answer’ (p. 14).
The last passage certainly can be construed as implying
that Keynes believed that some direct knowledge might be possible that is devoid
of interpretation. If this is indeed Keynes’ position then it would be seen to
be untenable from the standpoint of most schools of modern philosophy which
‘accept’ that there is no possibility of any knowledge (direct or otherwise),
even of sense-data, that does not involve interpretation. As such the account
seems to stand in need of critical reconstruction.
At this stage, however, it should also be noted that
some economists have interpreted Keynes’ account of direct knowledge as being
effectively the ‘opposite’ of empiricism, as having more affinity with
rationalism: the view that a priori reasoning takes a primary role in
knowledge.
In a recent contribution which interprets Keynes’
epistemological account as a form of rationalism O’Donnell (1982, p. 78)
writes:
Keynes’s philosophy is a form of foundationalism in
which intuitions (or direct knowledge) serve as base and eliminate infinite
regresses by virtue of the fact that they profess to provide true, certain and
self-evident knowledge. This
contrasts with empiricism which locates its foundations solely in
sense-experience....
Intuition is seen as a synonym for direct knowledge and
seems to be something other than reason or experience, as the following passages
from A Treatise on Probability suggest:
the fact that we ultimately depend upon an intuition
need not lead us to suppose that our conclusions have, therefore, no basis in
reason, or that they are as subjective in validity as they are in origin (p.
76).
… where our experience is incomplete, we cannot hope to
derive from it judgements of probability without the aid either of intuition or
of some further a priori principle. Experience, as opposed to intuition,
cannot possibly afford us a criterion by which to judge whether on given
evidence the probabilities are or are not equal (p.94).
But, while some commentators interpret an approach
resting upon intuition as being rationalist (and the latter statement by Keynes
does suggest that, for him, intuition is a form of a priori principle),
others such as Braithwaite (1975) see the emphasis upon intuition as yet a
further indication that Keynes’ account is a form of
empiricism:
The welcome given to Keynes’s book was largely due to
the fact that his doctrine of probability filled an obvious gap in the
empiricist theory of knowledge. Empiricists had divided knowledge into
that which is ‘intuitive’ and that which is ‘derivative’ (to use Russell’s
terms), and had regarded the latter as being based upon the former by virtue of
there being a logical relationship between them. Keynes extended the notion of logical
relation to include probability relations, which enabled a similar
account
959
to be given of how intuitive knowledge could form the
basis for rational belief which fell short of knowledge (p.
237).
It 7
is not, however, my particular
concern here to argue that Keynes’ account is rationalist or empiricist. It is clear that his account is
not without significant ambiguity and that, consequently, different
interpretations have arisen. 8 The one factor, however, that does appear to be common
to all interpretations of Keynes’ account is that his philosophy is considered
to be a form of foundationalism. It
is this aspect, ultimately, that gives rise to apparent problems or
inconsistencies. In fact, the
arguments above seem to suggest that Keynes does not particularly want to lodge
exclusively in either the empiricist or the rationalist camps; yet he
does want his notion of direct knowledge to form the premisses, the foundations,
of all other knowledge. Keynes is
then left with deciding where direct knowledge comes from: unmediated sensory
perception? a priori thought? or is it something
else?
In fact, foundationalism, at least of the form that
appears to be presupposed by or attributed to Keynes, is not an obviously
tenable position. Sensory
experience, on the one hand, is never a matter of direct or straightforward
contact with observable reality; it never gives us pure and uncontaminated
contact with something. All
experience involves an element of interpretation and judgement. The ‘sensory experience’ that we have
goes beyond what our sense organs entitle us to. The argument here is not that there is
no immediate sensory aspect, but that it is inextricably bound up with
its mediation by education, training or thought in general. Thus sensory experience, in part, is also
the result as well as the stimulation of thought and interpretation. Interpretation, judgement and inference
are always involved. On the other
hand, thought, reasoning and inference (which typically may be considered to be
developments (i.e. in the light of experience, etc.) of simpler and more
primitive biological and physical responses) 9
are not a priori in the sense
of being totally prior to, and independent of, experience. Thus, knowledge can be understood, not as
the building of a superstructure upon an unchanging foundation, but as
proceeding in stages where the foundation at each new stage is the previous one.
In the course of acquiring and
developing knowledge, provisional starting points come to be questioned and
criticised and existing views are rethought and reinterpreted. Thus, despite strong temptations to draw
distinctions between what is immediately given to the senses and what
is
7. In fact Braithwaite’s reference to Russell’s
contributions is not without significance. Russell wrote a series of papers on
‘knowledge by acquaintance’ and ‘knowledge by description’ throughout the period
in which Keynes was working on A Treatise on Probability (see for example
Russell, 1905, 1912, 1914, 1917);
the two of them were in frequent contact with each other, and much of the
terminology they employ is very similar. Similarities exist even down to the level
where, for example, they both cite ‘the other side of the moon’ as a case in
point of something which we do not experience or have direct knowledge of - see
Russell (1914, p. 130) and Keynes (1973, p. 14). Russell is also variously
interpreted as being empiricist, rationalist and ultimately
inconsistent.
8. It should, of course, be noted that different
contributors do use notions such as empiricism and especially rationalism in slightly
different ways. Such differences,
however, do not seem sufficient to explain the very different interpretations
that commentators on Keynes have arrived at.
9. Even Popper (1974, p. 46) talks of ‘inborn
reactions and responses’ which are not conscious but which we may
still speak of as ‘inborn knowledge’.
960
contributed by interpretation, these two aspects - the
immediate and the mediated, the given and the constructed - cannot ultimately be
separated. Knowledge development
involves thought and experience where neither aspect can be isolated as
foundational in any absolute and permanent way.
The
Relative/Absolute Nature of Direct Knowledge
It would, therefore, seem to be the case that to the
extent that Keynes’ notion of direct knowledge is supposed to provide absolute
and immutable foundations, it is no longer tenable. How, then, should claims to direct
knowledge be treated? Perhaps the
notion of direct knowledge should be dispensed with altogether? The problem with this suggestion is that
to do so may put us back on the ‘slippery slope’ to complete subjectivism; it
may take us once again to the conclusion that knowledge is nothing more than the
result of creative acts of the imagination, with no objective or absolute
aspects whatsoever. The dilemma
that was facing Coddington appears to arise once more.
A possible and indeed tempting reaction to the assertion
that there is no such thing as direct, unmediated knowledge is to maintain that,
despite the arguments set out above, there simply is such a thing, in the
sense that we do know certain claims or propositions directly we
hear, think or ‘perceive’ them, while other claims for knowledge are not so
immediate. The concept of’ truth’
may be potentially mysterious with numerous epistemological, and perhaps
definitional, problems associated with it, but is it not clear and
straightforward that some knowledge - of everyday things, ourselves, our
surroundings, etc. - is immediate? The answer, I suggest, is that we do
indeed have direct knowledge, but, just as with the notion of probability,
direct knowledge is both a relative and an absolute notion. Just as no place is intrinsically
distant, and no proposition is intrinsically probable, so no proposition is
intrinsically directly knowable; the directness of knowledge is relative to the
background knowledge of the knower. What a trained physicist experiences, and
sees when he or she is presented with reactions in an X-ray tube, is not so
immediately accessible to, or knowable by, someone without the same training and
education. Closer to ‘home’,
perhaps, an econometrician glancing at a computer print-out may perceive, more
or less immediately, that certain claims to statistical consistency ‘hold up’ in
some sense or do not. Others
possessing the same print-out may need a. course on introductory econometrics
and familiarity with the relevant computer program before such knowledge can be
acquired. Similarly a story or idea
written in English may be more or less directly accessible to someone who is
proficient in the English language, but not to someone who is illiterate, or
perhaps literate only in a different language. Direct knowledge, and thus all knowledge,
then, is a social phenomenon. Different people in different situations,
societies, historical periods, etc., with different educations, roles and
experiences, are liable to see the world differently. Knowledge has a relative aspect and as we
shall see this is a conclusion of consequence for economic analysis. However, in accepting this conclusion
there is no compulsion, thereby, to mount the ‘slippery slope’; it
in
962
no way necessarily follows from this conclusion that
knowledge must be merely relative. Relative to training, etc., there can
still be an absolute aspect to what a physicist experiences in the test-tube or
to what an econometrician perceives in reading the ‘printout’. Relative to training and experience,
etc., we can consider such knowledge to be direct,
absolutely.
Thus, on this view there is such a thing as
direct knowledge which corresponds to our common everyday understanding of the
term. But it is not a matter of
absolute and pure immediacy. Rather
it is a relative immediacy, depending upon our level of biological and social
development. The directness of
knowledge is relative in this sense but, relative to such background knowledge,
etc., it is absolute.
The Relative/Absolute Nature of
Truth
The suggested relative/absolute nature of direct
knowledge and so of knowledge in general bears, in turn, on the nature of truth
and certainty, and thus returns us to the issues raised at the beginning of the
discussion. According to accounts
such as Keynes’ ‘only true propositions can be known’ (p. 18); knowledge
corresponds to certainty of belief which in turn corresponds to correct belief
or truth. In terms of the viewpoint
that is now being put forward, therefore, it seems clear that, if such a notion
of truth is to be retained, then it must be understood as having both a relative
and an absolute character. It is a
relative judgement that is being made when it is asserted that current beliefs
are true or rational. Our beliefs
are justified relatively, not absolutely; they are justified relative to
currently available empirical evidence and our understanding and interpretation
of it. In this sense such beliefs
are justified and in this sense they are true. Knowledge and truth are never purely
absolute, but it does not thereby follow that they must be merely relative.
On the view being put forward
something that is ‘known’ or is ‘true’ is so relative to existing
interpretations and experience; but, as such, this knowledge is something that
is justified.
We may even talk, in a given context, of absolute truth,
but this supposes that we take the limits and relativity of our viewpoint for
granted. We may equally find,
however, that what we hold as true changes.
In short, beliefs held as true, as knowledge, are not
pure truth from an absolute standpoint, never to be replaced by a closer or
better ‘approximation’
962
to reality; but neither are they sheer error. Rather they represent the best account
available in terms of both logical coherence and correspondence with evidence
and experience. They represent a
step on the path to a fuller truth from a wider viewpoint. Truths are partial and relative, to be
replaced by better ways of understanding things, by fuller
truths.
Having set out this account of the relative/absolute
nature of knowledge it is now possible to address explicitly the issues which
motivated this discussion and, further, to indicate various implications that
the discussion bears for economic analysis in general.
Resolving
Initial Difficulties
The foregoing discussion, then, appears to provide an
optimistic response to the problems and issues raised earlier on. If we accept that knowledge can have a
relative/absolute character, it is possible, even in a non-probabilistic
context, to avoid the presumption of infallible omniscient agents without giving
way to extreme forms of subjectivism whereby beliefs are treated merely
as creative acts of the imagination. In the account set out, knowledge can
involve a ‘display of certainty’, and although currently held knowledge or
beliefs held as certain or true may be found to be deficient from the
perspective of knowledge, experiences or interpretations yet to be acquired,
they are, provisionally at least, fixed and in that sense
absolute.
These general conclusions, clearly, do not
necessitate an account of probabilistic knowledge. Nevertheless, probabilistic knowledge may
be pervasive even if it sometimes amounts to little more than the view that a
given event is more probable to occur than not. For example, it seems that rules and
rule-systems are central to most human knowledge (Lawson, 1987 a). Individuals ‘go on’ in their ‘day to day’
activities using their knowledge of matters such as the highway code, rules of
social conduct, the structure of language, and so on. The conformity of individuals to such
rule-systems tends to make their actions predictable, and enables each
individual to get by in a purposeful manner that is coherent to others. However, there will always be some
individuals who ignore part of the highway code, or who are not fully socialised
into the norms of society (or who rebel against them) or who are relatively
illiterate in the relevant language, and so on. In such cases, clearly, a belief about
the ability/desire of other people to conform with given rules/ conventions may
have a probabilistic interpretation even if it amounts to little more than the
view that an unknown individual is more probable than not to ‘conform’ in a
given situation. In any case,
whatever the significance of probabilistic knowledge in such situations, the
point remains that all knowledge is fallible, and probabilistic knowledge is
merely an example of such fallible knowledge.
963
The significance of the above outline can be more fully
brought out by focusing upon an essential element: a recognition that context
matters, and does so in a significant way. Human action always takes place in some
context and human agency is conditioned by context-related knowledge. Whether the object of economic analysis
is to understand and describe human activity or whether it is to formulate and
implement policy, context cannot be neglected.
This sort of conclusion, or course, ought to inform all
areas of social analysis, but it seems to be adhered to in a significant way
only outside economics. 10 Economists, in fact, seem quite prepared to assert,
without further discussion, that modes of behaviour that exist, for example, in
modern-day
10. Not surprisingly, perhaps, such conclusions seem most
widely appreciated in subject areas where communities under study are typically
widely separated from the researcher’s own - such as history and anthropology
(see, e.g. Winch, 1970).
11. As Kahn et al. (1983) observe in their
12. For example, it is often supposed by researchers working
within the Labour Market Segmentation Theory framework that there necessarily
exists a one-to-one correspondence between segmentation in product markets and
segmentation in labour markets (see Lawson, 1981). The reasoning, typically, is that because
a primary sector firm will be able to support primary employment conditions it
will therefore choose to do so - on the assumption that this is the only way a
large-scale firm can secure relatively high productivity from its workforce and
at the same time minimise turnover costs. Secondary workers, instead, are assumed
to reveal unstable work habits, high absenteeism and poor work-rates. In a case study (Lawson, 1981), however,
I found that, on the contrary, primary sector firms are able to secure both
secondary employment conditions and a reliable, highly committed and loyal
workforce. The important factors
behind this observation were the relatively sheltered experiences and
interpretations of a largely rural local workforce, giving rise to a particular
world view which was clearly recognised and encouraged by local businesses,
enabling paternalistic forms of industrial relations, or employer authority, to
be maintained.
964
The main point is a general one and bears repeating.
All action occurs in context, and
thus all capable, intentional action is influenced by context-related experience
and knowledge, including modes of rationality, inference and thought in general.
In short, knowledge has a relative
aspect. As argued at length above,
however, this observation does not mean that knowledge need be interpreted as
merely relative. It does
mean, however, that the relative dimension cannot be neglected. It follows, of course, that if economic
analyses are to be at all relevant, if economists want to understand and
describe existing forms of rationality and purposeful action and to influence
human activity through policy formation and so forth, then to some extent
economists must give up attempts to theorise purely a priori and must go
and ‘look’ as well. At the very
least there seems to be a case for allocating greater resources to examining the
results of case-study and other primary sources. If context or the relativity of knowledge
is completely omitted from economic analysis (and to a significant extent it
does seem to be) it is difficult to understand the point.
Foundations
and Economic Analysis
The last comment can be put a bit more precisely, as
follows. From the realist
perspective of the relative/absolute interpretation of knowledge it follows that
economic doctrines which presume immutable foundations must either make claims
which, interpreted realistically, are untenable, or, alternatively, must
be concerned with something other than realism of analysis. Now attempts, within economics, to
provide such foundations appear, in fact (and perhaps not surprisingly), to
correspond to one or other of the philosophical foundationalist doctrines
discussed above: empiricism or rationalism. To illustrate the point being made,
therefore, examples of each can be considered in turn.
In economics, empiricist inclined accounts tend to
assert the primacy and objectivity of collected data as though these represent
uninterpreted facts, uncontaminated by judgement and theory, and as though
knowledge arises from them via analysis. An unusually explicit 13 example of
this sort of position is provided by Wolfe (1924, p. 450):
If we try to imagine how a mind of superhuman power and
reach, but normal so far as the logical processes of thought are concerned,…
would use the scientific method, the process would be as follows: First, all
facts would be observed and recorded, without selection or a priori
guess as to their relative importance. Secondly, the observed and recorded facts
would be analysed, compared, and classified, without hypothesis or postulates
other than those necessarily involved in the logic of thought. Third, from this analysis of the facts,
generalizations would be inductively drawn as to the relations, classificatory
or casual, between them. Fourth,
further research would be deductive as well as inductive, employing inference
from previously established generalisations.
Perhaps not all accounts in economics which emphasise a
primary role for data and data analysis are so explicit or extreme;
nevertheless, some empirical
13. And consequently one that is often discussed - see,
e.g. Hempel (1966, p.ii) or
Chalmers (1980, p.10)
965
work does appear to labour under the misapprehension
that collected data represent relatively uncomplicated, purely objective
observations upon which all analysis must somehow be founded. From the perspective of the above
discussion such claims are clearly untenable.
More commonplace, perhaps, than the empiricist
orientated foundationalist claims are those corresponding in some way to
rationalism: those stressing a primary role for purely a priori
reasoning. Prominent amongst
these are axiomatic approaches to economics as exemplified by Debreu’s (1959)
renowned contribution concerning economic equilibrium. Clearly such a priori foundational
approaches do not meet the realist view of assessment through continual
interaction between theory and experiment/practice/observation and,
consequently, they seem unlikely convincingly to claim realism as a goal. Indeed, for Debreu it seems that an
axiomatic structure is necessarily constructed without any prior claims to
realism and, indeed, without any reference whatsoever to any interpretation that
might eventually be attached to it:
Allegiance to rigour dictates the axiomatic form of the
analysis where the theory, in the strict sense, is logically entirely
disconnected from its interpretations...
… Such a dichotomy… makes possible immediate
extensions of that analysis without modification of the theory by simple
reinterpretation of the concepts (p. x).
In fact, for Debreu, the axiomatic structure represent
neither model nor abstraction, and there is no requirement that it be confronted
with empirical observation. The
axiomatic approach gives rise to a formal structure and it is legitimate to
analyse it merely as a formal structure, independently of any interpretation
that eventually may be tagged on. The intended aim is clearly not realism
and there seems to be no reason to suppose that such a structure would be
susceptible of realistic interpretation. (On all this see Ingrao and Israel,
1985.)
In truth, however, a claim that economic axioms
are chosen completely independently of interpretation is not particularly
coherent, and in any case it does not appear to be widely subscribed to. Hahn, in particular, seems prepared to
suggest otherwise:
Axioms are not plucked out of thin air and far from
distancing the theorists from what somewhat mysteriously is called the ‘real’
world they constitute claims about this world so widely agreed as to make
further argument unnecessary (p. 5).
A relevant problem 14
with this criterion is that the
axioms that are widely
14. An interesting feature of this criterion is its
historical relativity. A problem
with it, suggested by the above account, is that argument is rarely, if ever,
unnecessary. Many theories once
held as knowledge, many claims about the world once widely agreed upon, are no
longer held as true. It appears to
be no longer widely held that the earth is flat, for example, or that the sun
revolves round the earth, and so on. What does ‘unnecessary’ really mean here?
Similarly, what does ‘so widely
agreed’ really amount to? By all
people? Economists? Economists adopting an axiomatic
approach?
966
agreed upon, such as, perhaps, ‘agents have
preferences’, tend to have little or no analytical content without first being
supplemented with other, more contentious claims or, in Hahn’s words, before
being ‘idealised and strengthened’. The result, however, and as Hahn
acknowledges, is not something that can masquerade as a claim so widely agreed
upon as to make further argument unnecessary:
However at the end we shall have to agree that the
genuine axiom: persons have some preferences has been idealised and strengthened
by theorists beyond the point at which it commands universal consent (Hahn,
1985, p. 7).
In practice it appears that much of the ‘idealising and
strengthening’ involves convenience-assumptions that are designed merely to
achieve mathematical tractability. It is in this sense that the axiomatic
structure becomes particularly arbitrary, or ‘a priori’, with the result
that ‘theorising’ relinquishes its contact with realism. Not surprisingly, Hahn eventually
observes that no-one can understand accounts such as general equilibrium theory
and take them to be descriptive. Needless to say, however, many economists
do treat them as descriptive, as Hahn critically observes (p. 14). However, those intimately involved in
developing axiomatic ‘foundations’ seem eventually to acknowledge, and to
embrace, with Hahn, the conclusion that ‘the aim is not realism...’ (p. 13), but
something else. 15
To reiterate, foundationalist accounts do not seem
relevant from a realist standpoint where the object is to increase knowledge of
real-world economic processes. Empiricist orientated accounts, which
claim a primary role for data and data-analysis, free of judgement and
interpretation, are untenable; rationalist orientated accounts emphasising a
primary role for a priori reasoning, if they are to be free from similar
error, seem destined to end up with a criterion of relevance other than realism
of analysis.
A Qualitative
Aspect of Progress in Economic Knowledge
An additional implication of the viewpoint set out above
is that knowledge does not merely accumulate in a straightforward or piecemeal
fashion. Hey (1983a, p.1)
observes that knowledge ‘in economics is accumulated in much the same way as in
any other discipline, or indeed in everyday life’. Keynes makes much the same point in A
Treatise on Probability. The
above account is to some extent supportive of this observation but emphasises a
particular aspect of the process of knowledge acquisition: that progress in
knowledge is not a purely quantitative affair. The view that ‘scientific development’ is
a piecemeal process whereby ‘items have been added, singly and in combination,
to the ever growing stockpile that constitutes scientific technique and
knowledge’, of course, has been effectively criticised by Kuhn (1970, p. I).
Kuhn, in fact,
does
15. In fact it seems that the objectives of the research
project associated with general equilibrium theory have been found to be
untenable, and, consequently, the project itself must be regarded as having
failed (see, for example, Ingrao and
967
acknowledge a ‘normal’ or ‘quantitative’ phase of the
development of science. However,
during this quantitative phase anomalies and problems are generated, and their
accumulation leads, ultimately, to a crisis situation whereby a qualitative
change occurs. In fact there
are reasons for suspecting that such qualitative changes occur relatively
frequently in social analysis such as economics. First, (well controlled) experimentation
is rarely possible so that the independent effects of various factors upon each
other cannot usually, if ever, be completely isolated and, second, such ‘laws’
or ‘structures’ as are discerned are historically contingent and liable to
change (see Lawson, 1985). Under
these circumstances a qualitative revision of ‘truths’ may be a frequent
occurrence. Of course, the
suggestion is not that a qualitative change will mean a total or arbitrary shift
in perspective; there is always continuity as well as discontinuity. But the point remains that progress in
knowledge has a qualitative as well as a quantitative
moment.
The account outlined in the previous sections bears
further implications that cannot be considered here. However, the examples included above
should suffice both to suggest that the account set out is not without
consequence for the conduct of economic analysis in general, and also to
indicate the sort of analytical implications that follow.
V. FINAL
COMMENTS AND CONCLUSION
The nature and extent of knowledge held by individuals
is central to economic analysis, an observation that seems increasingly to be
acknowledged by economists. In
fact, Rutherford (1984) suggests that the ‘problem facing economists amounts to
nothing short of explaining the state of knowledge or expectations’ (p. 377) and
Loasby (1986), amongst others, observes that it ‘is now becoming widely
recognised that many of the central unresolved problems in economics turn on
questions of knowledge’ (p. 41). The ways in which economists might go
about addressing such questions are, of course, various, and numerous
epistemological issues and frameworks might be emphasised. In this paper I have focused upon the
observation that individuals in all walks of society appear to hold onto
numerous beliefs as if they are, in fact, true or certain; and I have suggested
that this is an observation that realist economics ought to accommodate. I have also suggested that accounts which
suppose that such beliefs must be true or certain in some purely absolute
and indisputable way are inappropriate to realist analysis, as are accounts
which, in contrast, take the view that such beliefs have no absolute element at
all but are merely relative. Consequently, I have put forward a
‘relative/absolute hypothesis’ whereby knowledge, or true belief, has the
characteristic of being both absolute as well as relative. Clearly, the viewpoint, as set out, is at
a rather general level and may entail various different paths of construction
and development. However, as noted
above, even at this general level the account seems to bear implications of some
consequences for current economic analysis.
The empirical validity, or otherwise, of the account
might be gauged by focusing upon various implications that seem to arise from
it. For example,
and
968
again at a very general level, the suggested relative
aspect of knowledge gives rise to the implication that views held with
conviction - perhaps concerning industrial matters or political issues in
general - are likely to vary significantly across time and space contexts (the
latter including, for example, across countries, between urban and rural
centres, and perhaps even between northern and southern regions, and so on).
The objective or absolute
aspect of knowledge suggests that within relatively localised, or similar,
contexts there should be greater conformity of belief. By similar reasoning we should expect a
greater variation in such beliefs across ‘open’ communities where the
inhabitants partake in a wider range of occupations/social practices than, say,
in close-knit, or ‘sheltered’ communities (see, e.g. Lawson, 1981). Also where experiences are most segmented
according to factors such as age or gender positions we may expect some
influence to be found on the degree of variation of interpretations held. And so on. Indeed such implications seem likely to
be borne out, being totally consistent, for example, with the often observed
incomprehension shown by one group of individuals to the beliefs and actions of
a different group inhabiting, or ‘coming from’, a significantly different
environment or situation.
The operationalisation of the account set out above
involves recognising that the emphasis on the importance of the social context
in which beliefs are formed lends weight to those analyses which attempt to
incorporate the results of case-study and other forms of primary research. The general point is that, to the extent
that knowledge has a relative aspect, then attempts to understand
individual beliefs must take account of the context in which agents are acting
and learning: and to the extent that knowledge has an absolute aspect,
then it follows that the task of learning about individual beliefs is unlikely
to be hopeless or irrelevant. It
might also be noted, moreover, that these characteristics of knowledge allow
individuals to act in purposeful and capable ways within the context in which
they are situated, and, indeed, to be able, in turn, to influence their social
environment. Thus, the viewpoint
set out above is supportive of a particular analytical account which, perhaps,
might be termed societal interactionism. On this view, individual agency and
social structures and context are equally relevant for analysis - each
presupposes each other. Thus any
reductionist account stressing analytical primacy for either individual agents
or for social ‘wholes’ must be inadequate. A realist account needs to be thoroughly
interactionist.
Various further implications for analysis are contained
in the above discussion, but the main conclusion remains, basically, an
optimistic one: analysis which involves accounts of the beliefs of individuals,
or groups of individuals, seems entirely feasible, despite the problems noted in
the course of the discussion - although the other side of the same coin, clearly
and to repeat, is that any account that neglects the context of individual
action and learning is liable to be deficient.
Date of receipt of final
typescript: July 1987
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The Competitiveness of Nations
in a Global Knowledge-Based Economy
June 2002