Is Economics a Science?
I was just skimming through an economics text the other day on international trade, and was amazed at how many differential equations there were in the text. The text had numerous theorems laid out with accompanying equations, and then, just like in an engineering subject, the equations were manipulated to give new insights into what the theorem was about. Now, although the text contained a lot of mathematical equations, it did strike me that this was more of a pretense to knowledge than legitimate knowledge. After all, economists completely missed the 2007-2008 financial breakdown. Sure, there were a handful of economists who predicted some major problems, but none predicted the actual major meltdown we faced. Top economists, throughout history, have made some embarrassingly timed public speeches, claiming to have actually solved the business cycle problem, right before another major crash. In fact, the then president of the American Economics Association gave such a speech shortly before the 2007 crash as I recall.
In my opinion, economics is a valuable discipline, but not a science. After all, in an introductory economics class one is shown a supply and a demand curve. The demand curve is typically downward sloping, representing less demand as prices of a good rises, and more demand as the price falls. Now, how can this be empirically verified? It can't be. If a price shift occurs, how can one know this is the result of a movement along the demand curve, as opposed to a shift in the curve, or in the supply curve? One can figure out how many goods are selling at specific market prices, but one cannot construct a demand curve from this information. Yet, despite not being able to empirically establish the existence of such curves, the economic text I reviewed had all sorts of intricate curves in boxes supposedly illustrating the ideas behind some theory that was supposedly scientific. I view this as nothing more than smoke and mirrors or bullshit on steroids.
And why do we have to refer to economics as an actual science anyway? After all, history, literature, mathematics, and logic are of great value, and not one of these disciplines is a science. It's as if economists are so insecure that they have to hide behind a cloak of "science" rather than just admit that their knowledge of the economy is at such a beginning stage that it's too early to call economics a science.
In my opinion, economics is a valuable discipline, but not a science. After all, in an introductory economics class one is shown a supply and a demand curve. The demand curve is typically downward sloping, representing less demand as prices of a good rises, and more demand as the price falls. Now, how can this be empirically verified? It can't be. If a price shift occurs, how can one know this is the result of a movement along the demand curve, as opposed to a shift in the curve, or in the supply curve? One can figure out how many goods are selling at specific market prices, but one cannot construct a demand curve from this information. Yet, despite not being able to empirically establish the existence of such curves, the economic text I reviewed had all sorts of intricate curves in boxes supposedly illustrating the ideas behind some theory that was supposedly scientific. I view this as nothing more than smoke and mirrors or bullshit on steroids.
And why do we have to refer to economics as an actual science anyway? After all, history, literature, mathematics, and logic are of great value, and not one of these disciplines is a science. It's as if economists are so insecure that they have to hide behind a cloak of "science" rather than just admit that their knowledge of the economy is at such a beginning stage that it's too early to call economics a science.
Comments (37)
Mainly it's a consequence of positivism - not the specific and very narrow doctrine of 'logical positivism', but the underlying notion that science is the ne plus ultra of all human knowledge, originating with the work of Auguste Comte, 'father' of social science. In this schema, all significant knowledge is progressing towards the status of 'science' through historical phases:
Wikipedia entry on Comte.
So maybe economics has been overblown as a science. But as an art form, with the aid of some faiirly basic stats and logical analysis in conjunction with an inquisitive mind, freakonomics is the way to go!
The focus on retrojection rather than projection in economics and how central tenets and predictions can be contradicted but derived models using those tenets are still used in the circumstances we know they don't represent well suggest that economic research programs are typically degenerate; fitting fact to theory where it's important rather than theory to fact.
This isn't to say everything produced in economics is wrong, just that predictions by theoreticians and applied practitioners (the aggregate skill of skilled investors produces a coin flip on gain vs loss and 0 net gains, so much for their savvy intuitions) are rarely seen as important when wrong, just important when right.
I don't think it is referred to be a science. Or at least anything close to natural sciences. If someone refers it to a science, then he or she defines political science, sociology or even history as a "science".
Please give a reference where someone believes economics is more of a "hard science" than other social sciences. (And as they are indeed called 'social sciences', you can see the use of the term doesn't point out economics.)
Not to mention that when the situation involves investment assets, we definitely do not have downward sloping demand curves. If a person buys gold at $300.00 an ounce, and by the end of the year, the price rises to $400.00 an ounce, will the person now buy less gold? He's likely to buy more, as are other people, who think that gold is a great investment. Hence the formation of asset bubbles, including the infamous tulip bulb bubble. The point being that not only is there no way to confirm the existence of a demand curve, we can easily think of situations where the downward sloping demand curve would definitely not exist, which makes it that much more difficult to empirically verify the existence of a demand curve, as its shape is not necessarily of a specific preconceived shape, so we don't even have that as a guide.
Lots of people understood that the run-up of house prices in our own neighborhoods was abnormal in 2003-2007. $75,000 of value gained (without so much as washing the windows) in a 4 year period of time is a sign of speculation, or a bubble. We homeowners didn't know when things would change, either, but a lot of us understood that there was no point in selling our inflated houses and using the profit to buy a more expensive houses. Then the bubble burst. People who sold and bought up in the market got screwed royally when housing prices dropped dramatically (not for lack of demand, but for lack of financing and liquidity).
But it wasn't just too much speculation in housing. It was the rampant corruption in the finance industry that caused so much trouble: the credit default swaps, the mortgages to people whose main asset was a regular pulse, and the packaging of very dubious mortgages into bundles of "high grade" securities.
Economists didn't see it coming. Neither did regulators. Same thing applies to the tech bubble at the end of the 20th century, and the 1987 recession. (Some disruption was expected after the OPEC oil boycott in 1973, and then after 9/11.)
Clearly, immensely complex behavior is involved in economics: 7 billion+ agents acting alone and in various combinations all trying to make the best of their situation at any given time. All of the behavior is too complex to track, capture, and predict. In addition, some agents (very wealthy people, corporations, and governments) also have mixed agendas and the wherewithal to affect aspects of life for hundreds of millions or billions of people.
For all of that, we should keep trying to improve our understanding of economic activity. We don't have to call it a science to do that.
"We really can't forecast all that well, and yet we pretend that we can, but we really can't."
Economics is an important field of study, and that study is and should be as analytic as possible, whether or not you call it "science " or not, seems like some sort of very unimportant personal value judgment.
Just another goat brought to be burned at the altar of science
As far as your other point, I'm not sure what your point is? Is it that there are no sciences at all, including physics, because we don't have all the answers? And who said medicine was a science? It's based on science, but it's somewhat like engineering, applying science as opposed to being an independent science itself.
In any event, you indicated that economics is a science, just not a very good one. What is your basis for stating that economics is a science? After all, the stock market just got crushed, and how many economists saw that coming? As far as comparing the predictions in economics to physics, they aren't even remotely comparable, with physics far in the lead. A physicist can calculate how much farther away the moon will be from the Earth a year from now, based on conservation of angular momentum, and be extremely accurate in the prediction. There is nothing comparable to that in all of economics.
It's not about comparisons but ends. The kind of ends which should determine means. Science tells us that there's an average amount of calories that the average person needs. Some may argue that they need more or less than that but the question is why would a person need more or less than what is within the acceptable range? The answer can only be necessity and it can only be employed through discipline, simplicity and moderation, yet, what we observe in the world is the opposite.
Nature is the best way to determine the measure of anything. It does not exaggerate. Humans don't need to be overweight or underweight; we do not need millions or tens, hundreds or thousands of millions in currency when others have almost nothing; we do not need habits that yield little to no value in knowledge; we do not need to distort information, etc, etc.
We've become blind to the objective because we're too busy trying to be different from others of our kind. How much sense is in doing that? Jimmy Cliff (in the song 'I'm gonna live, I'm gonna love') says, "it's not nice to be all by yourself, it's not wise to see heaven through one eye,...". That's economics right there!
Well, at least here political science is called that and it is taken as an academic research area. Yeah, that field either hasn't solved all the political problems in the World, so one can argue it's not as successfull as Physics. So economics, or political economy as it was used to call, isn't all alone there.
Perhaps the argument ought to be then are the social sciences sciences?
Now, I may simply be biased on this issue, as my undergraduate major was in physics. However, even as an undergraduate I did take upper division classes in economics, psychology and sociology, so I am not against people studying these subjects. It's just that they do not seem even remotely scientific in the same sense that physics is a science.
That is at least partially due to the definition of modern science, in particular. It’s here that the emphasis on precisely quantifiable data becomes. fundamental. But it’s also worth recalling that Newton referred to his own work as ‘philosophy’, as the sharp distinction betweeen science and philosophy was not drawn until much later. (In fact Walter Isaacson says in his book The Innovators that the designation ‘sciientist’ originated in the salon of Charles Babbage, in London, in the 1830’s.)
The social sciences wish to emulate this approach, with the salient difficulty being that it involves the study of subects, not the objects of physics.
I think one thing is quite clear: these areas of academic research are not young or making any step of turning into a "hard" science.
First and foremost, as you studied physics you do understand how difficult everything turns into when a measurement has an effect on what is measured, even if it is a totally classical system. Well, that's the basic problem in social sciences. Because they become also subjective: social sciences themselves have an effect how we view ourselves and our societies.
Think about it. Assume that the economic and investment decisions you make could be modelled extremely accurately and made into a mathematical model. Now if we could then model everyones decision making process similarly and the interactions between everyone, at first glance someone might think from this we could get an accurate estimation of the aggregate. But there's a glitch, which isn't so easy to disregard. Because if this model would tell so well what people think, wouldn't the results of what it says be very useful when making investment decisions? But if you start to decide your investment decisions on the model, how does the model take itself into the equation? Just like Wittgenstein said in his Tractatus: A function cannot be its own argument. The problem won't go away just using some kind of dynamic model, because these models have to "behave" well and not go into infinite regress.
Remember when Milton Friedman (or Richard Nixon) declared "We are all Keynesians now"? When the heads of state believe in an economic model or idea, how much subjective weight that model then has? In Physics it's different. If we would use just Newtonian Physics with our GPS systems, the system simply would be less accurate than when we take into account relativity. But when the study is itself human behaviour, it's totally different..
The next obvious issue is the uniqueness of what we call history. And that uniqueness might just happen because we do learn from history. At least not to make exactly the same mistakes. Hence our society that we have created and our views of that society are allways unique and will change as it has changed in the Centuries that have gone.
How groups behave is different from how an individual behaves, even if groups are made of individuals. Just like a metallurgist cannot design an airplane even if he knows everything about the nuts and bolts it's made of. A thing like aerodynamics of the whole plane comes into play.
Refuse?
These connections are so obvious that economists have to refuse from acknowledging them?
The idea that you could 'base' economics on theories of Physics or Biology is a most vulgar reductionist and pseudoscientific idea I've heard in a long time. Of course I might be wrong here, so if you would give us an example of such a relevant theory in Physics or Biology that could be a base for economics...
For example, economists have real issues with the idea that Nature is not really best described in economical terms: species, resources, competence, predation and partnership, leading to "evolution" or cumulative capital. Nature is just a market yet to be exploited by man, so nothing can be learnt from Ecology or Biology that should be applied to Economics. It´s economics that explain nature, in this pseudo-scientific view, very much like gender theory enthusiasts think that human nature is best explained by Judith Butler and not by anthropologists.
To say that economists always avoid nature, is simply not true. Perhaps some models do, but only when the facts regarding nature are deemed insignificant for the issue being addressed. Where that is not the case, economics does address such things as harm from pollution, and limited natural resources.
I would also note that much work in biology uses economic models in describing even such things as how bacteria cells interact with one another in communities.
Astrology is not so bad; consider how people such as Newton, Copernicus or Tyco Brahe were accomplished astrologers, and they were great contributors to knowledge. Brahe is famous for his study on the first supernova, based on papers sent by his friend the English wizard John Dee. Astrology was a science in the Modern Age, only it was based on a paradigm that was later abandoned: that is, that planets emitted a radiation that affected life on Earth. It turned out that only the Sun and the Moon can exert that influence on living organisms in our planet, as they are close to us.
Astrology, like Economics, did a very good job for millennia of calculating the passing of comets, predicting eclipses, adjusting the calendar to the celestial motions, and perfecting navigation. It was rejected by the new Science becouse the Enlightenment needed a new paradigm, a new way of arranging the puzzle of the Universe above and below. Copernicus wanted this change, but he was not to see it, becouse he could never produce hard evidence that the models Astrology was based on were false. This evidence came a century ago, with the development of optical telescopes.
Likewise, we have Economics today, that is based on real calculations and facts, just like Astrology was based on real formulas and the empirical observation of the sky. However, something is missing, or we wouldn´t have caused the Sixth Extinction or the Population bomb. Economics is based on the wrong paradigm, and we can not tell becouse Science is based on the same paradigm. Just like Astrology fitted pretty nicely with the theory of the four humours, Platonism, and creationism, and all these explanations seemed to reinforce each other and do a good job of describing real phenomena.
As the old name of economics shows, political economy, the bond between economics and other social sciences is obvious. Just as you can go from biology to biochemistry to chemistry, so does economics, political science and sociology have things in common. Yet to go from Physics to economics is a bit confusing: you can use perhaps some mathematical model in both fields, but then again you can statistics and for example calculate the mean average of a multitude of data. That you can calculate the mean average and get doesn't mean that there obviously is a connection with the various data.
Quoting DiegoT
Sorry, but I've not yet met (or read) the Economist that thinks that economics explains nature. I think they do have a respect for Biology.
Here's an easy understandable video on the difference of the sciences. As this person points out, the subjectivity of some complex topics is important. Yet the scientific method can be used in these fields. He even adds arts to this 'map'.
You mean early astronomy, right? I think something perfecting navigation isn't astrology. Astrology is when you measure celestial bodies to give political advice or similar forcasts, not things like maritime navigation.
Is it still a science? Also yes.
As far as the rest of your comment, you have simply made unfounded assertions. Like your claim that it is a bad thing that biologists use concepts from economics. No, it isn't, and one could not even explain evolution without referencing economics. For example, our distinctive advantage as humans is intelligence. So why are we not getting smarter and smarter and an exponential rate? It's because we have costs as well as benefits associated with our big brains --- like the bigger our brains, the harder it is to have successful births as a baby's skull has to fit through a narrow birth canal. There is also an enormous energy cost associated with a bigger brain, as we presently use about 20% of our energy on our brains. Economics is also used to study how collections of cells form communities and when it would and would not be advantageous to do so.
I also am not aware of any economist rejecting biology in engaging in economics.
If you had taken such courses in college you would have learned that Economics can be subdivided into micro-economics (the economics of individuals and households) and macro-economics (the economics of nations and the world). International would fall under macro.
Since economics starts with data and observations and progresses to theories of behavior it is definitely a science. No question about it.