An InTErVIEW WITH ECOnOmIST BrUCE CaLDWELL

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An InTErVIEW WITH ECOnOmIST BrUCE CaLDWELL Powered By Docstoc
					the global economy




An Interview with Economist
Bruce Caldwell                                                                                                       Lukáš Kovanda



                                               that is very different from pure math-         quantity, numbers, and formulas were re-
       A reassessment of posi-                 ematics. The world needs to see more           garded as the Holy Scripture or the guar-
       tivism in economics.                    economists who approach “economics             antee of Truth? Is positivism’s influence so
                                               with common sense,” rather than econ-          strong that it could surpass reality?
                                               omists who simply dress it up as math-         That could be true. This leads me to recall
                                               ematics.                                       another famous example – the collapse
                                                                                              of the US hedge fund Long Term Capi-
                                               Some economists, like Bruno Frey or Ed-        tal Management. LTCM’s collapse came
                                               mund Phelps, believe that the current fi-      in 2000 after employing complex trading
                                               nancial crisis results from excessive trust    strategies throughout the 90s. What’s sur-
                                               in the ability to model and predict risk. Is   prising is that two Nobel Prize winners
                                               it possible that bankers in a certain sense    for economics were even on the Board of
More than 25 years ago you wrote the suc-      yielded to the magic of positivism and for     Directors: Myron Scholes and Robert C.
cessful book “Beyond Positivism,” in which     all their numbers, formulas, and equa-         Merton. Initially, everything seemed to
you claimed that positivism (a philosophy      tions lost an overview of the market as        be calculated to the very last detail. In the
which holds that authentic knowledge is                                                       end, the surprise came when mathemati-
acquired solely through observation and                                                       cal models failed to predict the future and
experience) may see a  revival if it’s an-                                                    provide all the answers.
tithesis, the so-called post-positivism of               Economists need
Thomas Kuhn or Paul Feyerabend, proves                                                        You profess to advocate pluralism in eco-
ineffective. Has positivism seen a  revival
                                                           to approach                        nomic methodology, but it seems to me you
since that time?                                         “economics with                      strongly prefer the aforementioned econo-
Certainly, positivism still influences                   common sense.”                       mist Hayek and the Austrian school. Why?
some social sciences, especially econom-                                                     
				
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Description: Do you believe that in the last few decades of the twentieth century people became influenced by positivism to the extent that quantity, numbers, and formulas were regarded as the Holy Scripture or the guarantee of Truth? [...] the surprise came when mathematical models failed to predict the future and provide all the answers.
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