Saturday, November 21, 2009

What if a Recovery Is All in Your Head?

New York Times article "What if a Recovery Is All in Your Head?" (November 21st, 2009) is deeply troubling, as it offers an unfalsifiable hypothesis. The author offers the following idea:

Consider this possibility: after all these months, people start to think it’s time for the recession to end. The very thought begins to renew confidence, and some people start spending again — in turn, generating visible signs of recovery.

Without any exogenous variation on this somewhat amorphous concept, the argument is ludicrous, and appears untestable. Indeed, the article admits as much:

According to the standard schedule, we’re due for recovery. Given this knowledge, the mere passage of time may spur our confidence, though no formal statistical analysis can prove it.

If philosophy gained anything in the 20th Century, it was the concept that statements are scientific if and only if they are falsifiable, if they are testable. By its own admission, the article is unscientific in its conjectures. Insofar as it takes economics out of the realm of science, Corrections follows Hume's self-condemnatory suggestion at the end of "An Enquiry Concerning Human Understanding" (1748)

When we run over libraries, persuaded of these principles, what havoc must we make? If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.

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