Critical Rationalism

BSc in International Shipping and Trade

Autumn semester 2022

Key concepts:
Falsification, induction, deduction, problem of induction, critical test, expectations

Charlotte Cator: cc.mpp@cbs.dk

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 Overview of PP on Popper’s critical rationalism

1. Popper & Logical Positivism:

Enemies who agreed on most matters.
2. Popper’s first refinement:
Falsification and Expectations
3. Popper’s second refinement:
Falsification vs. Verification
4. Additional elements of Poppers
falsificationist methodology
5. Brief summary of Popper’s critical
rationalism [perhaps not presented in
class]
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1. Popper’s relationship to
the logical positivists
Both “friends” and “enemies”

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 Logical positivism
as a point of departure for Popper
• Popper was schooled in logical positivism and had limited contact with the “Vienna Circle” –
a main center for logical positivism. Logical positivism was thus his starting point, but also
the position he criticized most frequently.  

• On a basic level Popper shares the logical positivist picture of science as an observation-
driven discipline that uses the tool of logical and mathematical analysis to a significant
degree.

• In addition, Popper also shares a number of the more concrete methodological assumptions
of logical positivism
1. Naturalism: Only appeal to natural, tangible properties
2. Priority of concrete “countable” entities.
3. Knowledge is exclusively empirical or logical.
4. Distrust of pure theory and common sense.
5. The unity of science.
6. Causality and causal laws are the mark of science
7. The “value-freedom” of science.

• NB! Popper is thus sometimes, if you read other books on methodology, counted as a part of
positivism. 4
 Poppers “opponents”:
Logical positivism & the Vienna Circle

Rudolf Carnap
(1891-1970)
Otto Neurath
Moritz Schlick (1882-1945)
(1882-1936) Ludwig Wittgenstein
(1889-1951)

Herbert Feigl
Carl G. Hempel
(1902-1988)
(1905-1997)
Hans
Reichenbach
(1891-1953) 5
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 The key parts of Logical Positivism targeted
by Popper’s critique
Popper also assigned key importance to observations and
empirical data.
Yet the following key points of logical positivism, Popper
believed, were wrong:
• Science starts with observation (inductive methods).
• From observation, science creates theories, and its job is to
continually verify these theories

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 2. Falsification and expectation: we expect
something when we observe
it is not observation is start first but mostly
like what you expect to observe and expect
the outcome

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 Karl Popper
The development of a science
• The development of science does not start with
observation, as the positivist asserts.

• It starts with problems, (New)

problem
when expectations
are not met.
Possible
Hypothesis
falsification

Critical test

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 Problems arise in relation to expectations
• Imagine, for example, that we have (as we in fact do) a microeconomic
theory that asserts that all economic actions are based on perfect rationality.
– Model of the homo economicus  

• Then the expectation is that when farmers buy tractors, they optimize
between the price and the size (in terms of the needs of their farm). 
• Then we observe that, say, some farmers buy much bigger (and much more
expensive) tractors than they need.
• In this case, we are faced with a problem: our expectations have been
disappointed. The farmers seem to be acting irrationally.
• But without this theory of perfect rationality, it had just been a meaningless
observation.
– Problems arise in relation to expectations.

– And it is these problems that turn observation into science.

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 Expectations and falsification attempts

• Our simple microeconomic homo

economicus model has now been
falsified – this is a problem.

• In response, however, we can put forward a new hypothesis:

– Agents always act rationally
– AND “economically optimal or rational” also includes the utility of happiness
and enjoyment of big machines as a monetary-economic equivalent.

• We can then try to test this hypothesis by measuring happiness

achieved by buying large tractors. If this happiness, translated into
monetary terms, is greater than the cost of the bigger tractor, then
the micro-economic hypothesis survived the falsification attempt. 10
 Falsification
Definition of falsification: Disproving a general theory through an empirical observation
that contradicts with what can be deduced and predicted from the theory.

Example:
A general theory says
– During a labour shortage in a country, wages move upwards.
– This leads to rising demand for and prices of consumer goods.
– This leads to demands for higher salaries.
– The result is an overheating of the economy and, ultimately, inflation.

Deducible claim: There must be inflation under labour shortages (given a suitable time
lack).

Hence, if we observe a combination of a labour shortage and a deflation will, in this

case, be a falsification. It empirically contradicts the theory.

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Quiz: Which of the following statements are falsifiable?

1. The interest rates in the Eurozone are always at least 1%. 

2. The southern tip of Greenland is exactly 4509 miles from 
Copenhagen

3. The interest rates in the Eurozone are either equal to, X

below or above 1%.

4. The greatest growth period for the Mærsk so far was 1985- 
1990.

5. By ”deflation”, one understands a relative increase in the X

purchasing power of money.

6. All bachelors are unmarried. X

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 Karl Popper: A bad theory is a false one.
A good theory is a falsifiable one.

• The more falsifiable a theory is, the better a theory.

• The more a theory claims, the more observations could potentially

be able to falsify it.

• For example:
– Theory 1: A rise in interest rates in Uruguay will lead to deflation in Uruguay. 
– Theory 2: A rise in interest rates in any country will lead to deflation in that
same country. Theory 1 is smaller than theory 2.
• Which theory is the most falsifiable and thus the preferable one for
Popper?
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 Karl Popper
Theory 1’s potential falsifiers is a subclass to
the larger class of Theory 2’s potential falsifiers.

If we observe that an increase in interest rates

in Australia leads to inflation in Australia: Theory 2
Then we have not falsified Theory 1, but we
have falsified Theory 2.

Theory 1
And everything that falsifies Theory 1 would
also falsify Theory 2, but not vice versa.

Therefore: Theory 2 is a better theory (in the

sense of more far-ranging and more general),
since it has many more falsifiers.

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 Quiz: Karl Popper

Theory 3: A rise in the interest rate in any country can

often lead to deflation, but there can be other factors
that contravene this effect, and in many situations you
might even observe the opposite, inflation. 

This seems a like sensible, balanced and general theory.

But would Popper prefer it to Theory 1?
To Theory 2? … And why? Or why not? 

T​ heory 1: A rise in interest rates in Uruguay will lead to deflation

in Uruguay. ​
Theory 2: A rise in interest rates in any country will lead to
deflation in that same country. 15
3. Falsification vs. Verification

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 Inductive method
(favored by positivism)
• Using an inductive method, one starts with a series of
empirical observations. Then, one creates general hypothesis,
which is confirmed by all the empirical observations.
• The empirical observation “Michael is an employee at Mærsk
Lines and he is working overtime” confirms and can help
create the general hypothesis “All employees at Mærsk Lines
work overtime”. 
• On its own, this observation about Michael does, of course,
not prove the general hypothesis. It only confirms it. It is
confirming evidence, which however has to be weighed
against other pieces of data/evidence. 

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 Inductive method (ctd.)
• Observation 1: Michael is an employee at Mærsk Lines and he is working
overtime.
• Observation 2: Mary is an employee at Mærsk Lines and she is working
overtime.
• Observation 3: Bill is an employee at Mærsk Lines and he is working overtime.  

• Inductive inference from these observations, a good candidate for general

hypothesis: All employees at Mærsk Lines work overtime. 

• Such inferences are widely used, but they are not logically valid:
The observations confirm or partially verify the inductive conclusion, but the
conclusion does not follow – this is the so-called the problem of induction. (NB!
Note this concept)
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 Inductive method (ctd.)
The problem of induction (Holm):
Even if all our observations of the world have so far
yielded the same result, we can never be certain that
our next observation will not produce a different result.

 We can not construct general theories on the basis

of observations.

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 Inductive method

Creation of the ‘Overtime Mærsk Lines’-hypothesis

Theory

Empirical
Phenomena Michael Mary Bill

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 Deductive method
• Deductive method – opposite to the inductive method – starts from a theory,
assumed to be true, and then deduces what must be the case about empirical
instances. It is an anti-empiricist method, since it starts from “theory” and
“conceptual reflection”. 

• Theory (assumed to be true), e.g.: Everyone has a formative yet traumatic

relationship to their mother (Freud). 

• Empirical consequence 1: Michael has traumatic relationship to his mother.

• Empirical consequence 2: Mary has a traumatic… etc.

• Logically valid inference, but only on the assumption that the theory is true. 

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 Deductive method

Theory of traumatic mother-relationships (Freud)

Theory

Empirical
Phenomena Michael Mary Bill

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 Falsification
(favored by Popper)

• Here we start with a theoretical hypothesis and then deduce

empirical consequence of the theory.

• But then, one finds out that this empirical consequence is not
actually the case.
– Premise 1:  If theory X is true, then (derived logically)
consequence x of theory X is also be true. 
– Premise 2: Consequence x of theory X is not true
– Conclusion: Theory X is not true 

• Example:
– A theory holds that all swans are white, and thus leads to the deductive
conclusion that all concrete empirical swans are white.
– But we have found a black swan.
– So we reject the theory.
This approach is logically valid.
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 Falsification

All swans are white

Theory

 The theory
is rejected

Empirical
Phenomena White swan White swan Black swan

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 The logical advantage of falsification
• The failure of induction: The impossibility of inferring from single (or
finite) instances to a general law that states that x must always happen.

• A thousand confirming instances is not enough to conclusively verify a

general theory. BUT one instance is enough to reject a theory. 
– One can imagine a biologist finding 10.000 confirming instances of the
hypothesis “All swans are white”… But merely ONE observation, “16 July in
New Zealand, Mary saw one black swan.” falsifies the whole theory.

• Thus, the logical advantage of falsification is: For complete verification, an

infinity of observations is needed, while for falsification only one instance
is needed.

• This shift leads Popper to turn the principle of verification (logical

positivism) on its head.

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 The principle of verification:
• The principle of verification: A sentence is only cognitively meaningful, if it can
potentially be confirmed by empirical observation
+: ”There are 4 students in this room.”
+: ”There over 200 kinds of fish in the Atlantic.”
+: ”The American stock market lost 48% of its value in 1973.”
+: ”The Western countries are the richest in the world.”

÷: “God exist.”
÷: “Animals experience pain in the same way as humans.”
÷: “We should, regardless of consequences, be kind to one another.”
÷: “Human history is a process at least aimed at progress.”

• All knowledge can be confirmed by observation. Science makes those observations. And
everything else is just metaphysics – questions of irrational faith or emotions. This is the
demarcation of science: the criterion of separating science clearly from anything else.
 The principle of falsification:
• Any scientific theory must be, in principle, falsifiable by at least one empirical
observation. The following statements:
+: ”There are 4 students in this room.”
+: ”The American stock market lost 48% of its value in 1973.”
+: “The Western countries are the richest in the world.”

÷: “God exist.”
÷: “Human history is process at least aimed at progress.”
÷: “All human behavior is related to early childhood patterns.”

• Much alike the principle of verification, BUT note following differences:

– It is not a semantic criterion of meaningfulness, but ”merely” a criterion of scientific status.
– Scientific work does not consist in verifying theories, but in continually rejecting them in
search of better ones.
– Knowledge is knowledge that has not (yet!) been falsified.
4. Additional elements of Poppers
falsificationist methodology

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 Popper: Context of discovery
versus context of justification

• One must distinguish 'context of discovery' and 'context of

justification'.

• In the 'context of discovery‘:

– You come up with various hypotheses
– Anything goes: induction is allowed, and rationalist creativity is required (that
why it is called ‘critical rationalism’).
– Be bold and creative. 

• In the 'context of justification’:

– Only use the procedure of falsification.
– The hypothetical-deductive method is used to derive predictions from the
hypothesis.
– If these predictions do not in fact occur, the hypothesis/theory must be rejected. 
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 Popper: Additional elements

• ‘The searchlight theory of science’:

– Observations are always focused and planned. You can’t “just observe”.
– To that degree, our observations are influenced by theories.
– But observations are not determined by theory, and they can still lead
us to reject theories.

• The danger of ‘ad hoc’ additions in order to save hypotheses

from falsification.
– A typical way of dealing with falsification is to add ad hoc and ceteris
paribus clauses to theories, e.g. ‘A micro-economic theory, except for
farmers buying tractors’…
– But such additions weaken theories significantly and so Popperians do
NOT like them. 

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 Conclusion on Popper:
What is the best theory?

• The amount of phenomena that the theory explains.

• The amount of tests of falsifications the theory has survived.

• How surprising and bold its conjectures are (i.e. its promise)

• Its ability to give explanations within areas where old theories

failed.  

• Its ability to explain things outside the area of the old theory.
The more general, the better.   

• One that does not use ad hoc hypotheses to defend against

partial falsifications.
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 5. Summary of Popper
[depending on time, perhaps not presented in class]

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 Summary of Popper:
What is good methodology and what is a good theory?

1. We should distinguish between science and pseudo-science.

– However, not on the basis of a general criterion of linguistic meaning,
which distinguishes between meaningfulness and metaphysical
nonsense, as for the logical positivists.
– But rather through simple scientific methodological rules.

2. Good scientific work is not driven by verification.

Verification plays a secondary role in scientific work.
– If we are only looking for data that confirms our theory, we are
engaging in bad science.
– Verification is only that which we cannot help having, if we are in the
fortunate position of a really good theory.
– It is not something we should look for.
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 Summary of Popper:
What is good methodology and what is a good theory?
3. Knowledge, not absolute truth, is the central aim.
– The goal of science is truth, but it remains an abstract ideal we never reach.
– We should stop trying to reach this
– And instead aim to achieve knowledge that can be used to generate predictions
and to deal with the world.

4. Only a theory that allows itself to be falsified, is scientific.

– Theories that are not falsifiable are empirically empty and say nothing.

5. The research process should be driven by bold hypotheses

and systematic attempts at falsification.
– Falsification and subsequent elaboration of new theories increases process of
knowledge-generating.
– Failure is good. To err in science is also important result that says something
about the world. When our theories collide with the world of empirical facts, it
also says something about the world.
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 Summary of Popper:
What is good methodology and what is a good theory?

6. A good theory is one that has survived many falsification attempts and
which is doing well in the competition with other theories.
– The measurements of this “competition” is prediction-power and generality.

7. Critical rationalism is to be used in all sciences.

– Not because all sciences are fundamentally the same; they are very different. But they
are all subject to the same logical rules of method.

8. In social science, “situational analysis” and a limited use of “hermeneutic

methods” is allowed.
– In social science (not natural science!), the difference between an agent’s understanding
of a situation and the actual situation is often an explanatory relationship.
– Therefore, we should sometimes seek an understanding of how the agent sees a
situation, regardless of how ‘true’ this perspective might be.
• E.g. If we want to explain the failure of a big firm – say, Lehmann Brothers – it will often be relevant
to account for the fact that management held erroneous beliefs about the world. 36