Realistically, economics is an art, not a science.
Friday, March 26, 2010 at 11:07AM David Brooks' high-level historical overview of economics concludes it's not a science at all and eventually economists may realize that.
In Act IV, in other words, economists are taking baby steps into the world of emotion, social relationships, imagination, love and virtue. In Act V, I predict, they will blow up their whole field.
Economics achieved coherence as a science by amputating most of human nature. Now economists are starting with those parts of emotional life that they can count and model (the activities that make them economists). But once they’re in this terrain, they’ll surely find that the processes that make up the inner life are not amenable to the methodologies of social science. The moral and social yearnings of fully realized human beings are not reducible to universal laws and cannot be studied like physics.
Once this is accepted, economics would again become a subsection of history and moral philosophy. It will be a powerful language for analyzing certain sorts of activity. Economists will be able to describe how some people acted in some specific contexts. They will be able to draw out some suggestive lessons to keep in mind while thinking about other people and other contexts — just as historians, psychologists and novelists do.
At the end of Act V, economics will be realistic, but it will be an art, not a science.
In addition to dismissing much of modern economic science as virtual reality games, I have noted that economic theories are as far from the complexity of real economies as cell biology is from physicians diagnosing and treating real human patients. The cell biologist may know a great deal that is useful, but he doesn't know nearly enough to be entrusted with patients. Cell biologists seem much better than macroeconomists at knowing their own limits.
Skeptic
To be fair to economists, many of them are aware of the problem, according to Tim Hartford here. For example, in a 1983 article, Let's Take the Con Out of Econometrics, Edward Leamer pointed out that econometricians often have great difficulty teasing out cause and effect.
This is the “identification problem” – trying to work out whether a statistical pattern is caused by what we think it has been caused by. It muddies any statistical analysis of data that have not been generated by a controlled experiment, and it particularly plagues econometricians, the statistical wing of the economics profession. But, complained Leamer, throughout the 1970s they too rarely cared, and much of their work was dubious at best. Leamer was not alone. David Hendry showed in 1980 that by using the standard methods of the day, he could demonstrate that rainfall caused inflation. Or was it that inflation caused rainfall?
Hartford says progress has been made.
Skeptic
Commenting on the same Brooks column, economist Justin Fox says economics is too important to be left to the economists.
[T]he ways in which scholars interpret the world can (with a time lag and a lot lost in translation) have a big influence on the way the rest of us see things. Over the past half century, economists have come to utterly dominate thinking about economic matters, and begun to insinuate themselves into lots of other fields too. Business education, and business advice, has certainly become much more economics-oriented. Which isn't all bad. But even an economist would agree that we could use more competition in the marketplace of ideas. Right?
Skeptic
Arnold Kling says there are too many things going on in the real world to be represented by one model applied to one data set.
Reader Comments (1)
Interesting post. I came across your blog after googling the phrase "art not a science." I recall reading through Mr. Brooks' article when published. I can see where he makes that conclusion after reviewing the modeling accuracy of his decidedly austrian-leaning perspectives of macroeconomic mechanics in a the modern monetary environment. His macroeconomic perspective is built of wishful thinking and wrong-heading conclusions from the data.
Next, his idea about economics not being a science seems to place science into an "always accurate" column and doesn't allow space for correction and refinement along the way. Perhaps what is leading him to that conclusion is that the burning platform of mainstream economic thought is failing from multiple ends. Modern monetary theorists like Randall Wray and Bill Mitchell are on a decidedly more sure path. MTC.