‘..Contrary to the assumptions of the “positivist” school, we do not consider empirical evidence alone sufficient to confirm or refute a scientific theory in the field of economics. We deliberately stated that we aim to study how historical events “illustrate” or “fit in with” the theoretical conclusions reached in our analysis, not to carry out an empirical test allowing us to falsify, confirm or demonstrate the validity of our analysis. Indeed though this may not be an appropriate place to reproduce the entire critical analysis of the logical inadequacies of “positivist methodology,”80 it is clear that experience in the social realm is always “historical,” i.e., it consists of extremely complex events in which innumerable “variables” are involved. It is not possible to observe these variables directly; we can only interpret them in light of a prior theory. Furthermore both events (with their infinite complexity) and their specific structure vary from one situation to another, and hence, though the typical, underlying forces of greatest significance may be considered the same, their specific historical nature varies substantially from one particular case to another.’
– Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles (pdf), page 476 and page 477
80 A summary of the critical analysis of positivist methodology, along with a brief bibliography of the most important writings on the topic, appears in our article, “Método y crisis en la ciencia económica,” Hacienda pública española 74 (1982): 33–48, reprinted in Jesús Huerta de Soto, Estudios de economía política (Madrid: Unión Editorial, 1994), chap. 3, pp. 59–82. See also our article, “The Ongoing Methodenstreit of the Austrian School,” pp. 75–113. The methodological ideas of the Austrian School evolved in parallel with the debate on socialist economic calculation, and criticism of positivist methodology is one of the most interesting by products of this debate. The very factors which make socialism an intellectual error (the impossibility of obtaining the necessary practical information in a centralized way, for example) actually explain why it is not possible in economics to directly observe empirical events, nor to empirically test any theory, nor in short, to make specific predictions with respect to the time and place of future events. This is because the object of research in economics consists of the ideas and knowledge which human beings possess and create in connection with their actions, and this information changes constantly, is highly complex and cannot be measured, observed nor grasped by a scientist (nor by a central planning agency). If it were possible to measure social events and empirically test economic theories, socialism would be possible. The very factors which make socialism impossible demonstrate that positivist methodology is inapplicable. Thus “events” in the social realm, given their “spiritual” nature, can only be interpreted from a historical perspective, and this always requires a prior theory. For more on these controversial and thought-provoking issues, see the 33 bibliographical sources mentioned in our article, “Método y crisis en laciencia económica,” and especially Mises’s book, Theory and History (New Haven, Conn.: Yale University Press, 1957), Hayek’s article, “The Facts of the Social Sciences,” in Individualism and Economic Order, pp.57–76, and The Counter-Revolution of Science (Glencoe, Ill.: Free Press,1952; Indianapolis, Ind.: Liberty Press, 1979). A favorable and unbiased explanation of the Austrian methodological paradigm appears in Bruce Caldwell, Beyond Positivism: Economic Methodology in the Twentieth Century (London: George Allen and Unwin, 1982; 2nd ed., London: Routledge, 1994), esp. pp. 117–38.