Is Economics a science-three comments
by Mike Kimel
Is Economics a Science – Three Comments
In the last few days I came across three very different posts, each of which covers (to some extent) the question of whether economics is a science. In order of how focused on the posts are on that particular question….
Barry Ritholtz is on fire with this post on Alan Greenspan.
Mike the Mad Biologist on when economists misunderstand biology. (My answer to whether economics is a science appears in comments to Mike’s post.)
Brad DeLong provides an insider’s view of the problem.
Update: Discussion hits a chord with bloggers and readers. Here are other links to the discussion.
Peter Dorman at Econospeak
Links section at Naked Capitalism in comments.
In this case I will comment before reading any of the 3 posts, because I don’t want those to cloud my thinking on the question. Yes, it is a science. But, a complex one because it is heavily behavioral/psychological. All the theories are based on expected behavioral outcomes that are not easy to quantify. Some of the systems trying to be predicted are HUGE, and have a lot of players – individuals, countries, corporations large and small.
So yes science, but a difficult science like trying to explain the origins of the universe at times.
Ok, I have read through the posts. The Delong one was the most thought provoking overall, and a lot of food for thought. I guess I stand by my first post, but do have a comment from the Delong piece that delves into the behavioral aspect.
Delong writes: “Had Zingales known all of this, he would have recognized that expansionary fiscal policy was a perfectly respectable policy response to the shortage of safe, liquid assets created by the trust crisis.”
But wasn’t it expansionary fiscal policy that got us into this mess? Tons of liquidity being dumped into the housing market, and related securities driving the prices up to unsupportable levels? And that expansionary policy was a response to fix the dot com bubble bursting and 9/11? How do we know the current expansionary policy won’t lead t the same problem? Is it a cure or a temporary aspirin?
For the expansionary policy to work, doesn’t it need to affect psychology to a great extent? How do we know it will?
So I guess I stand by my behavioral/psychology statement, but it is still a science, albeit not a very exact one.
Economics is an art not a science for money is an abstraction.
Expansionary fiscal policy? If Economics were a science, given this graph (http://www.presimetrics.com/blog/?p=278) nobody would be able to say the Bush tax cuts were expansionary and taken seriously ever again. And remember, I’ve had post after post after post after post on the effect of tax rates on growth for years. We’ve looked at state level data, at tax burdens, at marginal rates, etc. And I’m not the only pointing stuff like this out.
And that is precisely my point. The field collectively knows things that aren’t true and acts as if they are true, the data be damned. That’s the behavior you see in alchemy, astrology, and other forms of woo, most definitely not the behavior that is acceptable in anything resembling a science.
And I might add… the field collectively ignores fairly simple stuff. The graph to which I linked can be reproduced by anyone with an eighth grade education. This is not like someone contradicting some information that can only be collected with the LHC and calling himself a physicsts. This is like someone insisting that objects don’t drop when dropped from 6 feet above Italian soil and calling himself a physicist. What exactly would you expect if every physicist did exactly that?
Make that “objects don’t fall when dropped from 6 feet above Italian soil”
Mcwop. I hear this all the time from Economists and its crap. Yes you could construct a science that studied economic behaviour, but what is described as “economics” today is not a science.
There are bits that are slowly getting there, largely thanks to other people coming in from outside the profession (which makes a change from economic imperialism). So you now have behavioural economics, which is psychology done (mostly) very badly, but still a huge improvement upon what came before it.
And yes studying people and behaviour is hard, but there are disciplines that do it well (or at least parts of those disciplines). And the thing that distinguishes those disciplines is that they take methodological, experimental and empirical problems seriously. They also don’t pretend that there are definitive solutions to many of these problems, or that ideology can be wished away.
Economists could learn a lot from sociology and cognitive psychology. Hell they could probably learn a fair bit from anthropological economics. The inverse is not true, sadly.
And that’s before you even get to stuff like the Cambridge Capital Controversy, or the various Sraffian criticisms of neoclassical economics (which includes what is called “Kenesianism” by people like DeLong, Krugman etc). Which mainstream economics ignores, despite the fact that it blows a huge hole through most of their arguments (“sciences” don’t do that), or the bizarre reliance upon C19th maths because its easier to pretend that economic systems are in equilibrium.
Mike – I am curious as to why you refer tax rates? I was not referring to tax rates at all. I am referring to easy credit – more the result of the fed – which cranked up quite a bit post dot com bubble and 9/11. This then cycled into a rapidly growing cycle of more credit, and ourageous leverage. This of course all collapsed, and involved a high degree of crowd behavior around the housing market.
Not saying tax policy may not be a factor, but not sure it was the largest factor that contributed to the expansionary credit boom.
I am referring to this:
Physicists have their own problems. Ask five different physicists about the concept of time in the Grand Unification Theory, and you will likely get five different answers. (BTW, this is really fun to do at a dinner)
Medicine too has it’s issues….too much dogmatic thinking unsupported by evidence. When evidence based medicine began to come into the picture, a lot of docs hated it. “There’s no thinking involved” they would say. Even now, some docs waste an inordinate amount of time attacking studies, or study construction, rather than evaluating the evidence and/or (gasp) changing their practice habits.
Economics is a science, although it is a social or behavioural science..much like sociology or psychology is. It is not a hard science.
I’ve long said, and yes, I’m quoting myself: “Economics is nothing more than the study and prediction of human and societal behaviour using a singular medium…money”.
OK, let’s consider two states of the world. In one, we all agree that economics is not a science. In the other, we all agree that it is. Would we care less about what the velocity of money in the former case than the latter. Would we have less interest in the incidence of a tax in the former case than the latter? Would unemployment produce less distress if we were comfortably informed that economics is not a science?
The whole debate is getting to be a lot like Monty Python’s sod-busting, mud-smeared peasants arguing over the dialectic while Lancelot rides by, looking for a lady in distress. After playing enough rounds of “bash the economist”, it may SEEM to matter whether economics is a science, but other than as a matter of bragging rights, it probably doesn’t.
Physics and other hard sciences create theories that are falsifiable, whereas economists always debate results/outcomes and the importance of specific laws to real world economies. Economics masquerades itself as a hard science through the graphism thesis ‘loophole’, but we shouldn’t fall for it.
Mike upon re-reading your comment I may have misunderstood it at first pass. Got it.
I really don’t care if people want to call economics OOGA BOOGA WOOGA (as long as economists are cool with that). But economics–and economists–make a lot of claims about how we should structure our lives. Given that many economists, especially those with influence, completely missed the loss of trillions of dollars of housing assets, some introspection might be in order (or else stop making claims–which isn’t what I want at all). As Mike Kimel notes, ideally the policy would be informed by an economics which confronts its ideas with data and discards those ideas that don’t actually describe reality.
Economics shares a lot in common with biology (at the turn of the 20th century, what’s now known as ecology was referred to as economics, biological economics, or the economics of natural systems). And all of us, including non-economists, need a better economics. Which is why I wrote my post.
I do think that economics is a social science.
However, if everyone agreed that economics is not a science, I doubt if we would put much stock in projections of the soundness of Social Security far into the future. That would be a great good, IMO. 😉
Also, while we would probably have internecine warfare between different sects of economists, the public would realize that it was a religious squabble, and could be ignored. In the U.S., with our history of pragmatism, there would be more room for pragmatic approaches to societal problems. (Whether we would take advantage of that is another question. 😉 )
McWop – you mentioned expansionary fiscal policy in your comment.
Michael Halasy & Kevin,
Physics gets away from science when it moves away from hard data. I am no physicist, but I understand that right now, a true GUT is pure conjecture. There have been enough approaches that haven’t panned out for it to be natural that five (or twenty five) experts will each have their own opinion about whether it will happen, and what it will look like. Time is a difficult concept because we observe it ourselves directly (and thus intuit it) in a way that seems to be more limited than the evidence indicates it should be understood. A blind man might be able to describe colors mathematically, but he will never intuit them.
Medicine, sadly, is closer to economics right now (which speaks poorly of medicine) than it is to physics. Walk into any hospital and you’ll find any number of MDs with opinions that are contradicted by facts known for decades. I suspect (and I’m not a doctor, and I’m observing from a far, far distance so I may come out sounding extremely ignorant) that some areas get close to being a science. My guess is that epidemiology would be one field. Anesthesiology, given how thoroughly the field has been tracking what works and what doesn’t on the ground for the past decade and change (in reaction to previously crazily increasing insurance rates), probably qualifies too. But there seems to be almost as much quackery in medicine as in economics.
I think I’ve already gone way past where I’m qualified to have anything resembling an opinion about medicine so let me stop.
http://rjwaldmann.blogspot.com/ Robert Waldman was too shy to post here….but he agrees with the Mad Biologist.
A lot of economists have a lot invested in the notion that economics is a science. Perhaps if they understood what it would take for economics to become one we might get somewhere.
Here’s what I think the field needs:
1. We need someone (or someones) who looks a bit like Tycho Brahe, a bit like Galileo, and a bit like Gregor Mendel.
2. We need to treat the alchemists and the lobbyists and the fantasists (who care nothing about data) and obfuscators (who perform sleight of hand on the data) who currently make up the bulk of the field as pariahs.
Most of us are human – we can’t do much about item 1, but we sure as can do more about 2.
How do economists test hypotheses, or do they?, or is economics a purely thought science? How do you set up a proper experiment to test the hypothesis? Do you take existing data which may be “real” but lacks a valid experimental design and report, not a “truth” but rather a “result” under the constraints of the data source and analysis. Can you take your observations and build physical models as opposed to empirical models?
In my mind the second you factor in behavioral variables, economics cannot be a science any more mature than behavioral science itself. You can get empirical “on average” type results but you cannot measure the physical variables required to test a “theory”. You can just test a model subject to what appears in many cases to be a large distribution of error in most cases.
I am not an economist and do not read the economics literature. Perhaps, if you can validate the data, you might consider economics as an “applied science” like most of medical science. However I would argue that, to some extent, many medical hypotheses can be tested in an adequate experimental design, with well defined constraints, and careful data acquisition. But not all. And the universe of measurement related sciences is the universe of the design, data, and model. This may be predictive but only within the universe that was modeled until the predominance of outside data points extends the bound of the model.
Can economics make measurements that can be validated by independent investigations? How does your science, whether theoretical or applied proceed from an “idea” to a currently “accepted” theory? Note that many fads in science have given way, largely due to evidence, to newer ones.
How do you keep economic thoughts-of-the-day in the laboratory until they are ready for prime time? How do you determine “prime time” emergence? Do you simply apply it to public policy and hope it works? Economics must discipline their own when theories can be readily dispelled by existing data or by new events. Else, economics is not a science but a clique or a fan club. Do young economists reject membership in a purist camp and pull the best from all camps? Science very often has to abandon/modify their accepted “truth”. It is usually not a smooth transition. This seems to be one of the things it shares with economics.
Most of all “what does it take to be a science”? As you can see, I have my own doubts based on what I am accustomed to as well as ignorance of the insider world of economics. But does it matter? I would say if calling it a science enables economists to make bolder statements about unproved or disproved ideas or ideologies, calling it a science is not wise. This is because it appears that ideological camps get to test these on real-world economies.
From the recent links at NC, the beginning conversation is also about our friend Mad Biologist.
What I see in response to asking why it matters whether economics is a science is a couple “if-then” propositions. One is that if we are going to listen to economists, then economists need to be better disciplined, behaving in ways that are more likely to produce useful advice. The other is that economists are more likely to behave in ways that produce useful advice if they strive to be scientific.
Let’s grant that these two propositions are correct – though I have my doubts about the second one. How does the argument over whether economics is a science do much to get where we want to go? This strikes me as one of those cases in which the disucssion seems to serve the purpose we have in mind, but does not.
Now, let’s consider the anecdotal evidence before us. Here’s Mike, who has resorted to data over and over to evaluate claims made by politicians about the way the economy works. Here is Mike, raising the question of whether economics is a science, and taking the position that if economists were more prone to discipline their claims against the data, they’d do better things. Here is Mike, repeating the same villainous slander against “the bulk of the field” of economics has he has offered in the past, without a shred of evidence.
Did Mike know when he published his trash talk about economics, not data he can look up, but data that he knew at the time of publication: How many economists there are practicing in the US or North America or the world or whatever? How many can be shown to meet the standard of “alchemists, lobbyists, fantasists and obfuscators”? Is there a clear standard for any or each of these by which we can judge. Do they amount to “the bulk”?
Because if Mike can’t show a clear standard for his school-yard name-calling, doesn’t have the data with which to do the math and show that the “bulk” he claims is really the bulk, then I don’t see why his call for other economists to adopt his standard should carry any weight at all. If he can’t, then apparently doing some math with some data is just a way to claim authority when stooping to the same low, crappy behavior as any lobbyist or obfuscator.
The question is not whether or not economics is a science. As DeLong seems to conclude, the question is which individuals identified as economists are plying their profession as a craft or a science? There is also the suggestion that there is some level of ignorance of the field that is leading some economists to be less than scientific in their application of craft. That is actually a kinder interpretation of the issue than I think is warranted given the outcomes of poor scientific application in the field of economics. Economics is at best a social science which are the “soft” sciences given the difficulty in defining and measuring human social phenomenon. The application of numbers doesn’t harden the analysis. Add to that the fact that economics is the one, maybe only, field of study with significant financial opportunity for its practitioners. Add a big pay day to any field and you will find participants begin to assimilate to the established meme or schema of that segment of the field that produces the biggest pay day. Success is not then measured by scientific rigor, but by philosophical support for a particular point of view. For example, corporate taxation results in either poor or negative GDP growth. Or, government spending resulting in greater government debt is counter productive in a recessionary environment. The validity of the hypothesis is no longer called into question. Only the support that the hypothesis lends to an established point of view is important because on one hand it fits into a body of thought, if not a body of knowledge. On the other hand promoting the hypothesis that promotes a particular ideology has financial value. Some would call it a sell out. I’d suggest rather that it is a filtering process that assures the dominance of ideas that do not have support from economic science, but have utility in the field of applied economics. This problem of there being both a science of economics and a profession of economics is exacerbated by the media’s lack of understanding of the difference between the two. The Chicago School as referred to by BR falls into the profession of economics, but utilizes its understanding of, regardless of its limited extent, the science of economics. The media reports on both the science and the profession as though one defines the other. The practitioners of the profession, whether in academia, the think tank industry or private industry, are motivated by the pay day. It’s not a matter of a quid pro quo. It is more so one of going along to get ahead of the pack. Remember that the flotsam and jetsam float to the top.
Easy to explain. Economics is a science. Professional economists are bought off accountants.
Much too simplistic. Accountants serve a useful purpose and don’t prognosticate regarding the future and the effects of anything other than the current costs and income. Their creativity is limited to the details of taxation and even then most are not too adventurous.
Though once an accountant becomes too successful and is required to find creative avenues to increase revenues at a corporate level disregard all of the above. The greater the amount of money in question the more similarity one is likely to find between accountants and the profession of economics. One is the applied rendition of the other.
For what its worth, while I am pretty good at math (by the standards of economics), I have studiously avoided using math (other than implicitly as part of statistical work) for theoretical purposes. I think math is part of the problem in econ – until we have a grasp of the actual facts, using math to describe to describe “stylized facts” is just going to lead us down the garden path.
As to what I claimed about economists…. go to the link I provided upthread. You’ve seen the graph before. I’ve posted it (and similar) several times. And you know it can be replicated by the average eighth grader. Now, conduct an experiment – ask yourself how many economists know that’s what the curve looks like. Feel free to conduct a poll if you’d like. And feel free to limit it to economists who have no problems offering up macroeconomic policy advice. Then ask yourself whether it seems to you that there an awful lot of people who are perfectly willing to provide advice without having the first clue about what the effect of that advice might be.
Perhaps economics could take some lessons from medicine.
We “practice” medicine or law…why? Cause, it is constantly evolving, changing, and all of us as practitioners are getting better at it slowly.
Perhaps if economics began to think of themselves as economic practitioners, and started to look at economics not as a conclusion, but a process….it might be a start at least.