The methodology of positive economics

Correct predictions of the uncertain future are perhaps the only way to organize our society.
They help us understand the world around us, what we want to attain here, and the means we
dare to use to get there. Positive economics is a path of how to make those predictions. As we
know economics is not a precise study. Thus, with only factual knowledge we surely don’t know
how to predict for instance consequences of a policy we want to bring to life. According to
Freidman, economics ought not to be only a set of tautologies that could explain only the
consequences of an action that already happened. From that point of view, his theory brings a
lot to economic science and creates a completely new way of thinking about it.

  Those claims though are facing serious critics on the ground of ethical issues. “What we ought
to do?” – that’s how people imagine the core of positivist problematic. But actually, positive
economics is not trying to answer that question but rather that question: “What ought to be
done?” In that way, it’s a different situation and that’s why it’s hard to accuse positive
economists of ethical issues. They are just not concerned with ethics. It’s the problem of politics
directly or society indirectly to resolve. They are concerned with what is right to do but the
economics, namely positive economics, just try to elaborate ways of achieving those policies.
Figuring out the consequences of a policy is crucial in understanding whether it could lead to
some good consequences or not. And if we want to know that, we surely cannot make only
factual statements but positive, because if we don’t have any empirical evidence of that policy
working, factual evidence couldn’t provide us with those. Only predictions could tell us some
probabilities of different consequences that we might face. From those conclusions we
can subsequently deduce whether to institute it or not. I consider economics perhaps the most
dependent on predictions and probabilities because it has to deal with people, whose behavior
as a society is very hard to predict. That's why Friedman's thoughts are so useful.

   On the other hand, to make those assumptions about the future, economics has to come up
with theories or hypotheses that are based on some probabilities. But as we know people
generally are not good at calculating probabilities. We always tend to overestimate or
underestimate them. Even scientists’ scrutiny could fail to take into account all risks and assess
their consequences with relation to their probability. The notorious effect of "black swan" for
example. That’s probably the most dangerous thing we can think of if we base our society on
some theories and probabilities. Almost every hypothesis just cannot include all unlikely effects
but which could severely damage or even destroy everything if happen to occur. And they do
sometimes. That’s what makes the whole system fragile. I’m prone to think that this issue is
crucial when considering positive economics with its theories.

  Summing up Freidman’s work is trying to merge in some way normative and positive
economics. Surely no study could rely desperately only on theories. It has to have some facts,
norms, and general rules. Those tautologies are fundamental parts on which every theory is
built. They both support each other in creating strong knowledge about our world and the
society we live in. But from my point of view, there is still an abundance of issues, a lot of things
and philosophies still to discover, that would make our society more fair, rugged, and precise.

The changing concept of law

Rules are important. For us, as a society, they are crucial because there is a lot of us. For small
groups of people (approximately 50-100) that live together with no external connections with
other groups, there could be no rules at all. Everything will go on its own. Some controversies
could be fixed by the whole group's compromise and consent. But the real-life is different.
There are 7 billion of us and surely such a huge amount of people should be ruled by law
otherwise, chaos would happen. But the question is what laws there ought to be.  

   Hayek argued that people do not create any law, they just articulate what already exists in
society. That’s a very interesting thought which is strongly supported by history. But any
conclusions about it are strongly dependent on answering the question of whether people are
rational. If they are, even to some extent, those ulterior rules should be right. Their behavior
even without written law knows what is right to do. But if people are rather not rational, only
law can rule their behavior otherwise, chaos happens. So here we come to quite a controversial
conclusion because both of them are right. People subconsciously know what is right to do and,
at the same time, people go crazy without a law. So, humans are both rational and irrational.
But if we're irrational even partially, how our subconscious can be right on what is acceptable.
I’m prone to think that because of that people can make new laws for themselves. Those laws
would be able to sometimes restrict them from natural reality for common well-being in the
long run. Sometimes that subconscious law is so complicated that it needs clarification to be
used properly. That’s why articulation of those rules brings more explicitness so everybody
understands it in the same way.
  According to Hayek, there cannot be any certainly precise definitions of those ulterior rules.
Human relations are so complex and hard that there is no elaborated general law that can rule
every man regardless of his situation. Here comes the ethics and moral values of people. Some
actions generally seem to be absolutely bad but could be morally acceptable in certain
situations. We might consider the law that it’s bad to kill people. But if we think of the situation
in which a pregnant woman wants an abortion because the baby could kill her if she delivers it
then it's quite murky. Here that rule doesn’t work as it should. Hence human legislation
couldn’t be right all along.

  As we know there is no perfection in human knowledge, nor in human law. Generally, we

know what is good and bad, but our actions tend to behave differently. Perhaps someday if
there is some omniscient algorithm that could tell us what is right and what is wrong, we will no
longer need any law or legislation. Just based on the fact that it’s smarter than we all taken
together. But the question is still unanswered – would that algorithm analyze our behavior and
history and come up with decisions that are based on that or would it elaborate its own laws
that we are not conversant with but which would make us better off in the long run. Perhaps
they would even be fair. Nonetheless, I’m inclined to think that the latter one is right because
we would be much more primitive in contrast to him. That’s why our law and behavior still may
be changed.