The Burden Of Proof

The discovery of the Higgs boson announced at CERN last week is probably the most significant event of the year. Not so obvious, perhaps, is the careful statistical analysis of immense amounts of data that finally allowed scientists to make the announcement with confidence. A physics discovery, by general agreement, requires five sigma confidence, which means that there is less than one chance in a million that the observed signal is due to random variations in the background.

Not so in economics, where no such discipline exists. A recent study shows that economists are unaware of the limitations of the data they use when they tell us how to organize our affairs.

By reading journals in economics they will necessarily acquire a false impression of what knowledge gained from economic research allows one to say. In short, they will believe that economic outputs are far more predictable than is in fact the case.

I’m not surprised, economists see what they believe, not what’s there. This is why the predictive value of economics is largely non-existent.

If we are uncritical we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories. In this way it is only too easy to obtain what appears to be overwhelming evidence in favor of a theory which, if approached critically, would have been refuted.

— Karl Popper, The Poverty of Historicism (1957) Ch. 29 The Unity of Method

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