Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

478 Money, Bank Credit, and Economic Cyclesvalid theories which permit the adequate interpretation ofreality. Hence no irrefutable historical evidence exists, muchless evidence capable of confirming that a theory is valid orinvalid. Therefore we should be very cautious and humble inour hopes of empirically corroborating a theory. At most wemust be satisfied with developing a logically-coherent theorywhich is as free as possible of logical defects in its correspondingchain of analytical arguments and is based on the essentialprinciples of human action (“subjectivism”). With this theoryat our disposal, the next step is to check how well it fits inwith historical events and allows us to interpret actual occurrencesin a manner more general, balanced and suitable thanother, alternative theories.These considerations are particularly relevant to the theoryof the business cycle. As F.A. Hayek has indicated, the“scientistic” attitude which has so far dominated economicshas determined that only economic theories formulated inempirical terms and applicable to measurable magnitudes areheeded. In Hayek’s words:It can hardly be denied that such a demand quite arbitrarilylimits the facts which are to be admitted as possiblecauses of the events which occur in the real world. Thisview, which is often quite naively accepted as required byscientific procedure, has some rather paradoxical consequences.We know, of course, with regard to the market andsimilar social structures, a great many facts which we cannotmeasure and on which indeed we have only some veryimprecise and general information. And because the effectsof these facts in any particular instance cannot be confirmedby quantitative evidence, they are simply disregardedby those sworn to admit only what they regard asscientific evidence: they thereupon happily proceed on thefiction that the factors which they can measure are the onlyones that are relevant. The correlation between aggregatedemand and total employment, for instance, may only beapproximate, but as it is the only one on which we havequantitative data, it is accepted as the only causal connectionthat counts. On this standard there may thus well existbetter “scientific” evidence for a false theory, which will beaccepted because it is more “scientific,” than for a valid