Today’s Quote of the Day…

…is from page 14 of Mancur Olson’s 1982 book The Rise and Decline of Nations:

Although we should not be satisfied with any theory that fails to explain a lot with a little, we need not of course expect any one theory to explain everything, or even the most important thing.  Absolutely nothing in all of epistemology suggests that valid explanations should be monocausal.

JMM: It’s typical to hear opponents of this theory or that theory be dismissive of the theory because it fails in some way (“Economics is broken because it failed to predict the 2008 recession!” or “Socialism is broken because it failed to predict Venezuela!” etc).  But the world is a complex place.  Few things, if any, are monocausal: Did the Red Sox win the World Series because they had the largest payroll?  The best players?  Luck?  A favorable schedule?  Some kid in Maryland was watching them?  All of these factors played in (well, almost all of them).  They’re all part of the cause (and some even in more ways than one).

When evaluating a theory, we always need to remember to evaluate it on its own terms.  Does it make sense doing what it is trying to do?  Three great examples of this are Adam Smith’s examination of mercantilism in The Wealth of Nations (see Book IV) and Hayek and Mises’ critiques of socialism in the Socialist Calculation Debate.

One thought on “Today’s Quote of the Day…

  1. Most economic theories relies on the ceteris paribus assumption. Will raising the minimum wage result in a lesser quantity demanded of low-skilled labor? Yes, ceteris paribus. But that doesn’t stop someone from observing that minimum wage hikes tend to take place in places where demand for labor is growing strongly. Hence when they don’t see huge reductions in employment of low-wage workers they shout, “Aha! The theory of demand is not valid.” Did the Russians influence the last election? Well, yes, if you mean they probably changed one or two votes. No, if you mean did they elect Donald Trump.

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