Objectivism & Economics, Part 21

Uncertainty. Central to the Objectivist philosophy is the notion that certainy is possible. Rand went so far as to suggest that the denial of certainty “means that no knowledge of any kind is possible to man, i.e., that man is not conscious.” It is also generally believed among the Objectivist faithful uncertainty, or “skepticism,” is a morally deplorable philosophical position, an epistemology that paves the way for dictatorship and tyranny.

Despite these rather eccentric views of uncertainty, Objectivists nevertheless recognize that not all knowledge claims are certain. They tend to assume that most knowledge claims made by Rand or by the denizens of ARI are “certain” and therefore can’t be wrong. But Peikoff does admit the existence of a class of claims that are merely “probable” or “possible.”

How does one distinguish between a claim that can be regarded as certain and one that is probable or possible? Peikoff explains: 


Idea X is “certain” if, in a given context of knowledge, the evidence for X is conclusive. In such a context, all the evidence supports X and there is no evidence to support any alternative.

The problem with this “solution” to the issue of certainty is that it evades the “hidden data” problem. When Peikoff talks about “all the evidence,” what does he mean? All the evidence available to one person? to group of people? to all mankind? The most likely interpretation is that he means the single individual. But individuals are limited in the amount of knowledge they know. Worse, they are not aware of what they don’t know, which means they have no way of knowing whether they are in command of all the evidence or not. As Thomas Gilovich points out in How We Know What Isn’t So:

It should be clear that the problem of hidden or absent data ... affects the kinds of inferences we draw and the beliefs we have about everyday life. Oftentimes, the lifestyles we lead, the roles we play, and the positions we occupy in a social network deny us access to important classes of information and thus distort our view of the world.

Another source of hidden data relates to all estimates dealing with the possible outcomes that arise from choices made by human beings. Since human beings exercise volition, it is impossible to know for certain how they are going to behave. Action within a social context magnifies this uncertainty. How, for example, will Obama’s “stimulus” package affect the economy? Since our estimate depends on attempting to figure out how the stimulus will affect thousands of people whom we don’t even know, to regard any such estimate as “certain,” even in the odd Objectivist sense of the word, would be ludicrous. Yet nearly all non-trivial judgments about economics and business are tainted with this uncertainty, since they all involve guessing how people will behave in general situations that are assumed to arise from a given policy.

The businessman is also afflicted by this kind of uncertainty, as the economist Frank Knight has shown:

Take as an illustration any typical business decision. A manufacturer is considering the advisability of making a large commitment in increasing the capacity of his works. He "figures" more or less on the proposition, taking account as well as possible of the various factors more or less susceptible of measurement, but the final result is an "estimate" of the probable outcome of any proposed course of action. What is the "probability" of error (strictly, of any assigned degree of error) in the judgment? It is manifestly meaningless to speak of either calculating such a probability a priori or of determining it empirically by studying a large number of instances. The essential and outstanding fact is that the "instance" in question is so entirely unique that there are no others or not a sufficient number to make it possible to tabulate enough like it to form a basis for any inference of value about any real probability in the case we are interested in. The same obviously applies to the most of conduct and not to business decisions alone.

Knight’s point about the uniqueness of a given situation is an important insight: each instance is unique because (1) of the inordinate complexity of any given social situation and (2) because the outcome of a given decision or policy must depend on how a great many individuals react to it, and it is impossible to have certain foreknowledge about those reactions, because people have volition.

Now Rand believed that innate tendencies don’t exist. If she were right about this, it would be impossible to make any kind of rational estimate about human behavior, and social science would be a futile exercise. Fortunately, Rand was wrong on this issue: human beings do have innate tendencies, and from these innate tendencies one can fashion estimates or guesses as to what is likely to happen under a specific set of conditions. But these estimates are only guesses. Even when such estimates enjoy a high degree of “probability,” it would be gratuitous to regard them as certain. So when Objectivists declare that the current crisis was caused solely by government interference, they are at best making only a guess. They can’t know such a thing for certain. Nor would such a claim constitute a particularly good or even probable guess, since some of the worst financial dysfunction occurred in the least regulated markets.

To sum up: even if certainty were possible, it would hardly matter, because most of things people argue about in economics and pubic policy are not capable of meeting even Objectivism's standard of certainty. Most of the things people argue about can never be known with certainty. If certainty could be attained, there would exist a consensus among the intelligent and the rational. Where no such consensus exists (as on most issues relating to social and economic policy), certainty is also, in all likelihood, impossible.