The suggestion has recently been put forward that the laws of nature can be established by purely deductive reasoning instead of by induction from observation. We may, with Eddington, start the chain of reasoning from epistemological premises or, with E. A. Milne, from axiomatic statements regarding the nature of the system to be studied. Different opinions may be held regarding the value of a deductive method, but a final judgment can hardly be passed on a deductive theory until the initial premises are clearly revealed. We may, indeed, justly require of the author of such a theory that he fulfil the following conditions. He should, firstly, be himself aware of all the axioms which he employs. If he is not, there is the obvious danger that he may use inductions from observation without being aware of doing so. But he may also arrive at quite erroneous conclusions about the range of validity of his results. For instance, a deductive theory may produce a formula which is interpreted as the inverse square law of gravitation. It is then very necessary to know whether the initial premises are axioms concerning the nature of the universe as a whole or whether they merely define local conditions. In the first case the law of gravitation is deduced from the nature of the universe as a whole, in the second it is shown to be merely a “local” law.
An Axiomatic Treatment of Enlarged Separation Portfolios and Treasurer’s Portfolios (with Applications to Financial Synthetics)