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-