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One obvious disadvantage of testing a given claim with scientific constraints is that one may never know the number of possible constraints to try, in which combinations, and in which order to modify them. The tester may be incapable of demonstrating a claim's validity due to the sheer number of possible influences.

For example, consider the following political/economic claim:

Increasing the minimum wage for companies not operated by philanthropists, will increase societal wealth by giving more money to consumers who will spend this money in the economy and generate more demand and therefore more jobs, profits, etc.

If this claim were to be empirically tested across many types of businesses, mixed results could show up due to seasonality, geography, climate, employee characteristics, outside global trade factors, regulation, etc. So, in theory, someone could end up testing this claim until the end of time, with no clear way to control the "proper" factors and get a consistent, reproducible result. They could perpetually claim that their results are flawed because of flaws in the experiment itself, or they could end up with a flawed result while a flaw in the experiment is still present but claim to have proven the claim to be true or false.

The logical alternative to this approach could look something like this rough sketch:

  1. Humans act in the world
  2. Humans act out of self interest, pursuing what they believe will benefit them.
  3. Increasing the cost of operating a given business, by providing higher wages, will lower the profit margins of a given enterprise.
  4. If a individual (who is not pursuing philanthropic goals) decides to increase the wages of his employees, he can only do so by A) taking less profit himself B) lowering the quality of his goods/services or C) firing employees.

Therefore, increases to the minimum wage (in businesses that do not exist for philanthropic reasons) cannot make a society wealthier, according to this logic.

...but how can one know when logic, empirical study, both, or neither will provide the most efficient access to the truth value of a given claim? Is there even a suggested heuristic for such a choice? Some recommended reading would be appreciated.

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  • The philosophical guidance is that there is no such choice, any empirical study inevitably uses logic to draw conclusions, and much more besides (background assumptions, theoretical principles, etc.). This is roughly characterized as hypothetico-deductive method of science, but its applicability to economics is controversial. In your example the "logical" approach is just an instance of "empirical" ones more vaguely described, and has the disadvantage that the premise 2 is empirically false (as are all rationality assumptions). – Conifold Dec 21 '18 at 22:07
  • Thanks for the link. Premise 2 was not meant to imply rationality, but to describe the path of choice from the subconscious to the conscious mind. Maybe a better way to phrase it would be "Humans act on choices they receive into consciousness from brain functions that are beyond conscious control and because a single brain, uniquely paired to its associated body, acts with the same genetic code as said body, the brain is acting in the genetic interest of its hosting organism." Is this a useful edit to make? Or have I opened up a rabbithole? – JacobIRR Dec 21 '18 at 22:21
  • I do not believe there is a phrasing that makes anything like self-interest true (the brain certainly does not act from genetic code, and there is no such thing as "genetic interest", biology favors the species, not selves). It might be a useful simplifying assumption in some contexts, but which contexts is an empirical matter, so it is not "logical". The a priori/empirical approaches in economics, and the role of "unrealistic assumptions" is subject to much debate, you can read a discussion on SEP. – Conifold Dec 21 '18 at 22:40
  • eh, in that case economic and biological details will only derail the intent of the question. The real meat of the question is related to dealing with the problem of empirical testing and the inability of a person to know all influential factors that contribute to a given claim. Are there scientific measures taken to address this? And are these measures more useful in certain fields of science over others (pharmacology vs mathematics)? Based on what criteria? – JacobIRR Dec 21 '18 at 22:57
  • A "scientific measure" would have to make an idealization already, so such things are only relevant in discussing less adequate models in terms of more adequate ones. In full generality this is not a promising question, when idealization is good enough for a purpose is highly sensitive to both context and purpose. In the context of economics see the linked SEP article. – Conifold Dec 22 '18 at 0:50
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This distinction is nonexistent. Deductions are based on facts and facts require deduction to know when they are supported or refuted. All facts are theory-laden and all theories are observation-based. These two things are not alternatives, they are components of a single system.

If you have a choice, choose theories that are mature, and are not making flawed predictions. But you generally don't have a choice.

Here, you do. Your example is not logical, and its disproof is a good example. Like all logical deductions that apply to reality, it is based on a theory, that theory is incomplete and as a consequence, your deduction is wrong. You should, instead, use the better-supported theory, which is available, and is in use in the boxed quote.

(Obviously, this is not described perfectly, if it were that simple, we could just create growth arbitrarily, and we would. There are obviously times when 'lowering the center of gravity' in the economy won't help speed it up. We have just been through a period where the US Federal Reserve, using this theory, basically tried to give away free money, setting the lending rate at zero, and failed. But it is more correct than the classical theory you are using.)

Keynes proved that all your stated assumptions could be true and the entire economy could contract or expand because of the relationship of overall profit to the velocity of monetary circulation. Profit that is saved up for too long and re-invested too slowly contracts the economy no matter how high the rate of profit-taking, even if that approach is in the best interest of those making those decisions. And reinvestment at a low level of the economy due to the profit of individual householders raising their standard of living can expand the economy as easily as ordinary reinvestment at the level of organized business. So forcing people to spend when they would otherwise delay spending, via taxation or madate, can, in fact, grow the economy, even if it puts people out of business. We have the currency system we have exactly because it handles bankruptcies well as part of the overall plan, something that older economies had much more difficulty with.

The omission of this notion of circulation had led economists to to an old formula known as Say's Law, which Keynes disproved mathematically, after observing that the objective facts of the 1920's and 1930's violated it. The rate of re-investment has a lot to do with collective psychological forces that encourage saving or spending more strategically or more opportunistically at different times -- the so-called 'animal spirits' of the markets.

And personal best interests often make these all the wrong times, investing into bubbles or retrenching in the midst of a contracting wave are individually wise choices -- until everyone fails together and someone is left holding the bag. So large institutions like governments and widely-invested banks may need to act to restrain these 'spirit' forces in their own more global self-interest.

The boxed blurb is informal, but the theory behind it is more sound than the classical economic theory behind your argument. And it has been tested empirically by historical comparisons.

So which approach would you think Keynes used? He was motivated to contribute the purely abstract mathematics, and logically deconstruct Say's work because the existing theory did not explain what was going on around him. There is not a choice here, there is a coordination between the two approaches. That is the usual reality.

(And there are issues with Keynesian approaches. We just faced one in 2008. We realized that 'too big to fail' institutions, like governments, GM, and AIG, don't ultimately have to pay their debts, if they can threaten us with their instability. We are skittish about letting them go bankrupt. So we have ever-increasing drag and instability on the economy created by the debts of states and the risk-positions of large corporations.

That has nothing to do with this particular issue. Keynesianism works: you can create growth, within limits, by spending taxes and mandating private spending, we do it all the time, openly, or underhandedly via the manipulations of the Reserve Banks. But you still pay for everything in the long run.)

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