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FINAL EXAM INTRODUCTION TO SOCIAL SCIENCES

PART A

A(i): In what sense is economics scientific?

There has been a longstanding debate about whether or not economics can be considered
a scientific discipline. Mises (1949) points out that there are “some naturalists and physicists
who censure economics for not being a natural science and not applying the methods and
procedures of the laboratory” (1949, p. 7). Mises also points out that these critics praise natural
sciences for “improving the general standard of living to an unprecedented extent” (1949, p. 8)
while at the same sanctioning economics by saying it has “utterly failed in the task of rendering
social conditions more satisfactory” (ibid). Mises (1949) argues that these critics fail to notice
that, although using a different method, the teachings derived from economics have allowed for
“tremendous progress of technological methods of production and the resulting increase in
wealth and welfare” (1949, p. 8) by dismantling the theoretical foundations of retrograde and
harmful policies and doctrines, such as mercantilism or protectionism.

In any case, it is necessary to define what may afford the scientific character to a given
discipline to determine whether economics follows a scientific method. Hutchinson (1938) has
pointed out that “The scientist proceeds by means of the two inextricably interconnected
activities of empirical investigation and logical analysis” (1938, p. 9). In this sense, economics
proceeds scientifically insofar as it uses logical conjecture to formulate hypotheses and empirical
observations to test them. Moreover, Sowell (2015) argues that “what makes a particular field
scientific is not automatic unanimity on particular issues but a commonly accepted set of
procedures for resolving differences about issues when there are sufficient data available” (2015,
p. 839). For instance, the labor theory of value was refuted and displaced by the introduction of
marginal analysis in the field of economics and “the elaboration of the modern theory of value by
Carl Menger, William Stanley Jevons, and Léon Walras” (Mises, 1949, p. 121). Hence, Sowell
(2015) argues that the agreement on how to test and verify conclusions and the definition of the
concepts subject to study are essential to any scientific venture.

Regarding this point, Kuhn (1970) has argued that what distinguishes science from other
fields, is that in science there is no room for subjective appreciation of reality, and therefore
mutually contradictory theories cannot coexist indefinitely; either one or the other is correct, and
this discernment must take place after sufficient evidence is provided. Furthermore, economics
distances itself from non-scientific pursuits, such as religion or philosophy, by not contaminating
its conclusions with moral judgments or subjectivity. On the contrary, economics attempts to
objectively and systematically study the laws and patterns of “human action and social
cooperation” (Mises, 1949, p. 2).

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Nevertheless, Sowell (2015) argues that “economics is scientific only in the sense of
having some of the procedures of science. But the inability to conduct controlled experiments
prevents its theories from having the precision and repeatability often associated with science”
(2015, p. 840). Other fields with a recognized scientific basis, such as astronomy or meteorology,
suffer from the same conundrum. To explain the scientific validity of the method in economics,
Sowell (2015) draws an interesting parallel with meteorology. He argues that almost all
controversies amongst economists “usually do not involve disagreement about fundamental
principles of the field but about how all the trends and conditions will come together to
determine which of those principles will apply or predominate in a particular set of
circumstances” (2015, p. 842). Likewise, Sowell (2015) argues that in meteorology, making
forecasts about particular events in a day is much more hazardous than predicting what will take
place if a known set of circumstances actually comes together. In this sense, the way economists
elaborate their conjectures and laws is always under the ceteris paribus assumption, since there is
no way of making a general statement about how every factor in the social process is going to
unfold, but much can be said about what will happen if one factor varies in a certain way while
all the others remain unchanged.

However, in recent times, the refinement of macro-econometric modeling has enabled a

whole new empirical approach to the study of economics, which helps address the weaknesses of
the field that Sowell was referring to. For example, in India, government decision-making was
aided by models that “were used to explore interactions among various sectors in the economy
and analyse policy effects by undertaking simulations as well as forecasting and analysis”
(Radhakrishna, 2021, p. 19). Another exciting application of this econometric modeling has been
the study of the “Effects of the Minimum Wage on Employment Dynamics” (Meer & West,
2016, p. 1), where the authors derive very useful conclusions for policymaking. All these are
clear examples of a rigorous empirical approach.

In conclusion, by bringing together all the fundamental aspects of the scientific enterprise,
such as objectivity, rationality, the strive for internal logical consistency within the field, and the
ever more sophisticated approach to empirical observation, economics gathers the essential
requisites to be recognized as a scientific discipline.

A(ii): In what sense are politics and economics interrelated?

Milton Friedman critiques the notion present in modern political discourse that
economics and politics are separated and unconnected, and therefore any form of economic
arrangement can coexist with any form of political arrangement. He points to the advocacy for
“democratic socialism” as the “chief contemporary manifestation of this idea” (Friedman, 1962,
p. 15), where the many promoters of this viewpoint believe that political freedom can be
maintained while simultaneously adopting the essential features of the economic arrangements

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characteristic of Russian socialism. Friedman asserts that “such a view is a delusion” (ibid) and
further provides different examples of how politics and economics are clearly intertwined.

Friedman (1962) points to many instances where political and economic freedoms
interplay, so the hindrance on one of them clearly affects the free exercise of the other. For
example, Friedman (1962, p. 15) points to the period after World War II when citizens from the
United Kingdom were deprived from spending a vacation in the United States (US) because of
the imposition of an exchange control, which could be considered a restriction on economic
freedom. Likewise, US citizens were deprived from going on a vacation to Russia because of the
travel ban imposed on them due to the conflict between both countries. In either case, a
fundamental human freedom was restricted; even though in one instance there was a restriction
on economic freedom and in the other a political restriction, there is no substantive difference
between the two. In this way, restrictions on economic freedom can impact the scope of political
freedoms and vice-versa.

One could also point to the period in Chile during the presidency of Salvador Allende,
where the nationalization of the paper industry gave the government the ability to interfere with
the free exercise of a political freedom, such as freedom of expression, by depriving the media
outlets opposed to the government from the material means necessary to make their criticisms
and express their opinions (Farías, 2000). Technically, Allende never decreed the cessation of
freedom of expression or freedom of the press. However, political censorship was possible with
the restrictions on economic freedom through the state monopoly of the paper industry.

Friedman (1962) also stresses the importance of the maintenance of law and order as a
necessary precondition for the peaceful social cooperation that takes place through the market
process. The existence of a political system that guards individuals from physical coercion and
allows for the peaceful resolution of conflicts, is indispensable for the full exercise of economic
freedom. In this sense, politics and economics clearly influence one another.

There is also a question about how different political systems allow for a greater or lesser
degree of economic freedom. For example, economist Hans-Hermann Hoppe (2001) argues that
monarchical political systems allow for greater economic freedom than modern liberal
democracies. Hoppe argues that taxation, by its nature, is always parasitic upon previous acts of
production; therefore, a monarch, in order “to preserve or even enhance the value of his [sic]
personal property, he would systematically restrain himself in his taxing policies, for the lower
the degree of taxation, the more productive the subject population will be” (2001, p. 19) and
therefore a larger amount of resources can be extracted from them in the long run. Then Hoppe
argues that, in contrast, regularly elected government officials, by being entitled only to the
current use of government resources and not to the capital value of the state, have an incentive to
consume as many government resources as quickly as they can, because whatever they do not
consume in the present, they may be unable to consume in the future. This analysis (although

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unconventional) reveals yet another interesting way in which politics and economics are
interrelated.

References

Farías, V. (2000). La Izquierda Chilena (1969-1973): Documentos para el Estudio de

su Línea Estratégica. Santiago de Chile: Centro de Estudios Públicos (CEP).

Friedman, M. (1962). Capitalism and Freedom. 2. ed. Chicago: The University of Chicago Press.

Hoppe, H-H. (2001). Democracy—the god that failed: the economics & politics of monarchy,
democracy & natural order. New Brunswick, New Jersey: Transaction publishers.

Hutchinson, T. W. (1938). The Significance And Basic Postulates Of Economic Theory. London:
Macmillan and Co., Limited.

Kuhn, T. S. (1970) The Structure of Scientific Revolutions. 2. ed. Chicago: The University of
Chicago Press.

Meer, J. & West, J. (2016). Effects of the Minimum Wage on Employment Dynamics.
[Electronic] The Journal of Human Resources, vol. 51 (2), pp. 500-522. Available: University of
Wisconsin System [2022-09-22].

Mises, L. V. (1949). Human Action: A treatise on Economics. Alabama: The Ludwig Von Mises
Institute.

Radhakrishna, R. (2021). Production of Knowledge in Social Sciences: Paradigms and Methods.

[Electronic] IASSI Quarterly, vol. 40 (2), pp. 209-236. Available: Supplemental Index [2022-09-
22].

Sowell, T. (2015). Basic Economics: A Common Sense Guide to the Economy. 5. ed. New York:
Basic Books.

Manuel Alvarez Capriles