Presidential address delivered before the London Economic Club; November 10 1936.

The ambiguity of the title of this paper is not accidental. Its main subject is, of course, the role which assumptions and propositions about the knowledge possessed by the different members of society play in economic analysis. But this is by no means unconnected with the other question which might be discussed under the same title--the question to what extent formal economic analysis conveys any knowledge about what happens in the real world. Indeed, my main contention will be that the tautologies, of which formal equilibrium analysis in economics essentially consists, can be turned into propositions which tell us anything about causation in the real world only in so far as we are able to fill those formal propositions with definite statements about how knowledge is acquired and communicated. In short, I shall contend that the empirical element in economic theory--the only part which is concerned not merely with implications but with causes and effects and which leads therefore to conclusions which, at any rate in principle, are capable of verification -- consists of propositions about the acquisition of knowledge.¹ Read more