A recent guest post at Naked Capitalism by economics student Jake Romero lists “Ten Principles of Responsible Economics.” What intrigued me was principle #10 (boldface original):
10) In theory, economics is a science. In reality, economics is a science the way Ayn Rand is a literary luminary
To casually label economics a science is at best aspirational, at worst manipulative, at a minimum misleading. At the introductory level, the issue at stake is less one of methodology than of how deferential the layperson or novice should be to the authority of expert or policy entrepreneur appeal to economic theory. Skepticism is always a virtue. When evaluating claims based on simple economic models, it’s self-defense.
My first thought is “Wow. You’ve dedicated years of your life to economics. That’s very sad”, followed by, “Well, then what is economics?” This is actually an important question. In any intellectual discipline, including biology, it is useful, once in a while, to examine what you do from a broader perspective. And, of course, like it or not (and many days, I don’t like it at all), economists have a disproportionate influence on the boundary conditions that affect how we do science. In a word: funding. If we’re told we need to cut spending, well, that will put the damper on research and technological development, while if we’re told we need to increase federal spending, well, write up that ad for a post-doc. They both can’t be right at the same time. So if economists are doing a shitty job, then we all suffer.
So what is economics? The snarky answer is that it’s theology.
There is a set of a priori beliefs that are held, and internally valid constructs are made to justify those beliefs. Before you think this is ridiculous, there is an entire vein of steampunk science fiction that has people worshiping algorithms, such as Tim Akers’ Heart of Veridon. I realize calling it religion is inflammatory, but arguably, one could perceive much of economics as philosophy (perhaps bad philosophy) with some simple math draped over top of it. It seems to me that, for example, the argument over whether recessions should be viewed as ‘vacations‘ has as much to do with deeply internalized views about human nature based on personal experience and values as it does evidence (although regular readers of this blog will know that I think the ‘Great Vacation’ idea is ludicrous). So to describe economics as a philosophy, perhaps a political philosophy, doesn’t seem so far-fetched.
I don’t think it’s fair to describe economics as sociology: that would be an insult to good sociologists. When done well, most sociologists readily acknowledge the limitations of their work (e.g., the first chapters of both Peter Moskos’ Cop in the Hood or Lisa Dodson’s The Moral Underground: How Ordinary People Subvert an Unfair Economy). They admit the very human limitations of their approaches.
But perhaps economics is mostly where population genetics was sixty to seventy years ago. At that time, population genetics was almost entirely a theoretical science, and it was mostly deductive, in large part because we lacked the tools to quantify genetic variation*. There was a lot of elegant (and not so elegant) mathematical modeling work that was done which described how things should work, given a set of assumptions. Much of this theory wasn’t ‘wrong’: there’s no way the neutral theory of evolution can be ‘wrong’, since it is internally consistent.
The important question is ‘does it have any relevance to biology‘? And we couldn’t begin to answer that until we start collecting mounds of data. And I’m not talking about a time series with fifty points; I mean gobs of the stuff. As Barry Eichengreen put it:
The late twentieth century was the heyday of deductive economics. Talented and facile theorists set the intellectual agenda. Their very facility enabled them to build models with virtually any implication, which meant that policy makers could pick and choose at their convenience. Theory turned out to be too malleable, in other words, to provide reliable guidance for policy.
In contrast, the twenty-first century will be the age of inductive economics, when empiricists hold sway and advice is grounded in concrete observation of markets and their inhabitants. Work in economics, including the abstract model building in which theorists engage, will be guided more powerfully by this real-world observation. It is about time.
The absence of data about how real-world economic systems behave is a glaring absence. I can’t imagine doing biology without all of the stupid natural history facts we’ve collected–and economics, like biology, studies complex systems. So maybe there’s some hope after all?
So, what do you think economics is? Or should be?
*One exception was quantitative genetics which had very immediate and applied contributions.