It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Monday, June 25, 2007

Is Economics a Science?

If the question "is climatology a real science?" is fair game, the question "is economics a real science?" cannot just be dismissed as subversive. What we really know, how valuable our conceptual models are and how reliable our computational embodiments of them are, are questions everyone offering expertise should be willing and able to answer.

It appears that a few economists are asking the question of one another. Here's a brief article in an online economics periodical called Economists' Voice. Consider the abstract:
How do economists know what they know? In a call for a new empiricism Barbara Bergmann asserts that economists mainly make it up.
Alas, Bergmann's plea for evidence-based economics is adorned with the following motivational exhortation:
If we had some realistic ideas about how business people arrive at their decisions on investment in plant and equipment, our ability to formulate policies that would stimulate growth would improve.
(Emphasis added.)

Sigh. Naturally. Of course there is not even the slightest hint of re-examination of the idea that the objective of macroeconomic management must be to stimulate growth.

Regardless, the article closes with the observation that a pioneer in the use of observations in economics does not teach the technique to his students on the grounds that this would be likely to "ruin their careers".

See also this letter in response in the same publication.


Sherry (transit of venus) said...

"Is Economics a Science?"

No I don't think so. Not if they don't test their ideas against the real world.

The worry is these untested ideas are converted into policies and inflicted on the rest of us.

Compare the level of certainty some people (eg our prime minister here is Australia) seem to require from climate science before taking action, when they'll happily go along with any untested economic ideas that happen to suit their worldview.

SCM said...

It is a worry the lack of real world testing that goes on in economics. I guess is is more a branch of applied mathematics than science.

Its interesting to see how untested economic theories can be applied with enthusiasm to generate policy, when by contrast, 100% certainty seems to be required from climate science before some Govts will take action.

Rob said...

I found Doug Henwood's book "Wall Street" to be a great eye-opener on how bogus parts of Economics can be.

You can get the whole book online

I recommend Chapter 4 on Market Models.

A sample quote:
"In its forecasting, math-happy economics exposes its limits to the world, proving Wassily Leontief (1971) too kind in his remark that “in no other field of empirical inquiry has so massive and sophisticated a statistical
machinery been used with such indifferent results.” Two examples of selfcriticism come to mind. In a review of the forecasting accuracy of the IMF’s World Economic Outlook and that of the Organization for Economic Cooperation and Development, Fund staff economist M.J. Artis (1988) found them roughly comparable, with a decent record if you go no further than one year out, but likely to miss turning points. In other words, if next year is pretty much like this year, the forecast will be accurate."

Hank Roberts said...

I note in this year's annual Environmental Studies report from Oberlin that, as of this past year, the undergraduate curriculum now includes Econ 109, Principles of Financial and Managerial Accounting:

The article goes on: "The currency and budget that our graduates and their peers across the globe need to be most concerned with relates not to dollars, euros, yen or yuan, but to the element carbon..... the accounting of the stocks and flows of this element through the biosphere and economy ....."

Hank Roberts said...

If you're having trouble as I did with the link for Henwood's book, try:

Rob said...

This economics self-examination is going on elsewhere. See this thread on TPM Cafe:


And if that link doesn't work:

Rob said...

I think I see the problem. To long of a url:

Lets see if tinyurl can help:

Michael Tobis said...

Very nice article. Thanks Rob!