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Jim Thomas

July 14th, 2021

The influence of Karl Popper on LSE Economists in the 1950s

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Estimated reading time: 3 minutes

Jim Thomas

July 14th, 2021

The influence of Karl Popper on LSE Economists in the 1950s

0 comments | 2 shares

Estimated reading time: 3 minutes

Karl Popper’s influence on some of the younger economists at LSE in the 1950s should be recorded, writes Jim Thomas. The foundation of the Methodology, Measurement and Testing Seminar by Dick Lipsey and others is one such example.

By the late 1950s, while the Economics Department at LSE had a high reputation internationally, the majority of the professors were approaching retirement age and, given the scepticism about the use of statistical analysis in economics that Lionel Robbins had expressed in his book, The Nature and Significance of Economic Science (Robbins 1935), there was no teaching of econometrics or encouragement for its use in economic research. Instead, statistical data were chosen to illustrate and support theoretical propositions.

Karl Popper c 1980s. IMAGELIBRARY/5. LSE
Karl Popper c 1980s. IMAGELIBRARY/5. LSE

A number of the younger economists in the department were unhappy with this approach to Applied Economics. The leader was Dick Lipsey, who had read Popper’s Logic of Scientific Discovery, which argued that the correct way to carry out scientific research was to see what predictions a theory made and then to use statistical data to test them. Together with some of the other younger members of the Economics Department, including Chris Archibald, Morris Peston, Kurt Klappholz, Kelvin Lancaster and Max Steuer, he set up “The Methodology, Measurement and Testing Seminar” (or the M2T Seminar, as I renamed it) in the late 1950s.

Members of the seminar set out to explore the different components in M2T: Klappholz, together with Joseph Agassi, one of Popper’s former students, discussed methodology in economics (Klappholz and Agassi, 1960); Archibald’s investigation of whether Marginal Productivity Theory yielded any testable predictions reached negative conclusions (Archibald, 1960), and Lipsey set out to estimate and test whether the Phillips Curve, a popular diagram in many economic textbooks, held for the UK, which it appeared to do (Lipsey, 1960):

Theoretical Phillips Curve: The Phillips curve shows the inverse trade-off between inflation and unemployment. As one increases, the other must decrease. In this image, an economy can either experience 3% unemployment at the cost of 6% of inflation, or increase unemployment to 5% to bring down the inflation levels to 2%. (Lipsey, 1960)
Theoretical Phillips Curve: The Phillips curve shows the inverse trade-off between inflation and unemployment. As one increases, the other must decrease. In this image, an economy can either experience 3% unemployment at the cost of 6% of inflation, or increase unemployment to 5% to bring down the inflation levels to 2%. (Lipsey, 1960)

During the 1960s, the composition of the Economics Department changed. The older professors retired and were replaced by younger economists, many of whom had trained in the US, where they had studied statistics and, in many cases, carried out empirical studies in their PhD theses, so that the M2T Seminar had lost its original purpose. It continued for some time as a seminar where empirical research could be presented, as a replacement for the famous Robbins Seminar, which had ceased to meet following the retirement of Robbins.

Lionel Robbins c1970s. IMAGELIBRARY/599. LSE
Lionel Robbins c1970s. IMAGELIBRARY/599. LSE

The M2T spirit survived and visiting economists who came to deliver papers were often shocked in the discussion that followed the presentation to be told that the theory they were presenting didn’t appear to suggest any testable propositions. A further development that reduced the appeal of the seminar was the establishment of new seminars in particular areas of economics. Monetary Economics was the first, set up by Roger Alford and then taken over by Harry Johnson. Others, including Public Finance and Labour Economics then followed. As a result, the M2T Seminar finally stopped meeting by the mid 1960s.

At its foundation, the M2T Seminar represented a very clear and specific response to Karl Popper’s Logic of Scientific Discovery and even after the seminar stopped meeting, the methodology continued to influence empirical research carried out by LSE economists.

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References

For more detailed information on the M2T Seminar, see Thomas (2009)

Archibald, G C (1960) “Testing Marginal Productivity Theory”, Review of Economic Studies, 27 (June), 210-3.

Cowell, F and A Witzum (eds) (2009) Lionel Robbins’s essay on the nature and significance of economic science: 75th anniversary conference volume, (London: STICERD, LSE).

Klappholz, K and Agassi, J (1959) “Methodological Prescriptions in Economics”, Economica, 26 (February), 60-74.

Lipsey, R G (1960) “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1862-1957”, Economica, 27 (February), 1-31.

Popper, Karl (2002) [1959]. The Logic of Scientific Discovery. (Abingdon-on-Thames: Routledge).

Robbins, L C (1935) An Essay on the Nature & Significance of Economic Science (Second Edition), (London: Macmillan).

Thomas, J (2009) “Robbins’s Nature and Significance and the M2T Seminar: Measurement with Theory and Theory with Measurement” in Cowell and Witzum (eds) (2009), 403 – 424.

About the author

Jim Thomas

Jim Thomas

Jim Thomas is Emeritus Reader in Economics and a Research Associate at STICERD, LSE.

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