Is Economics A Science?

An academic emails me: “I didn’t read the book, but if Glaeser is describing it accurately then the authors have a very naive understanding of science–i.e., interminable disagreement means an activity isn’t science. Galeser points out that physicists disagree about some things in quantum mechanics, but disagreement is more extensive than that in physics and other recognized sciences. Many physicists think that string theory is untestable in principle and has no value. Ditto for supersymmetry. In evolutionary biology, behavioral genetics, linguistics, etc. researchers disagree about fundamental issues concerning theory and methodology, but few people deny that these are legitimate sciences.

That being said, I think that under the rubric of economics you can find legitimate science, nonscience, and pseudoscience. You can use mathematics to model macroeconomic trends–that’s probably the most solid science. Economists who pass off their personal value judgments as “science” are engaged in nonscience, even if they use mathematics. Economists who take it as dogma that people make decisions according to rational choice theory, and come up with clever models to explain away all counterexamples, are probably engaged in pseudoscience.

I always thought that it’s a bad idea to have a Nobel Prize in economics. (Of course there shouldn’t be Nobels for peace/literature either, but for different reasons.) In physics/medicine/chemistry the Nobel seems to play a productive role, motivating scientists to make important discoveries. Economists don’t make discoveries in the same way–they propose theories giving tentative explanations of certain phenomena, and these theories that can become more or less influential. Then they win the prize if their work happens to be influential, which can reflect more on the politics/sociology of the economics community than the intrinsic value of the work. Winning a Nobel also gives the economist extra authority to present his value judgments as science, which is unhelpful.”

Harvard Economics professor Edward Glaeser writes in the WSJ:

The authors make two main arguments against the scientific status of
economics. First, economists disagree about a lot. Second, economists
write fancy mathematical models that aren’t empirically relevant.
There is some truth to both statements. Economists do disagree, partly
because doctoral programs attract both liberals and conservatives.
Messrs. Offer and Söderberg point to surveys showing that economists
disagree over statements like “the distribution of income should be
more equal” or “the redistribution of income is a legitimate role for
government.” They note that “one would hardly expect such lack of
agreement over core issues in the application of physics, chemistry,
or biology.”

Yet disagreements do not disbar a field from being scientific. In a
recent poll of participants in a conference on quantum mechanics, for
instance, 52% believed “that physical objects have their properties
well defined prior to and independent of measurement,” and 48%
disagreed.

Moreover, the authors have chosen questions whose answers depend far
more on ideology than on economic knowledge. Economics can tell us
whether higher tax rates will reduce labor supply or how to design a
more effective tax system but not whether it is a good thing to take a
dollar from a rich man and give it to a poor man. Any social
preference for redistribution reflects ideology, not economics, and
disagreements over ideology say nothing about whether economics is a
science or not.

More telling are the disagreements that the authors cite about core
issues in macroeconomics or about the disputes between two of the
financial economists—Eugene Fama and Robert Shiller—who shared the
2013 Nobel Prize with the far less disputatious Lars Hansen.

In the case of finance, the public disputes reflect the relative
newness of the field. Mr. Fama essentially founded the empirical
branch of financial economics; he has long emphasized the efficiency
and rationality of markets. Mr. Shiller is the foremost modern analyst
of irrational exuberance. Today the mainstream of financial economics
has moved toward a middle-ground consensus that accepts that markets
are not always perfectly rational, that arbitrage is difficult but not
impossible, and that psychology does move markets.

In the case of macroeconomics, the fundamental problem is data. We
don’t have an enormously large set of recessions matched with
randomized governmental responses to those downturns. Yet we would
need such randomized control trials if we were to definitively settle
the long-standing disputes between Keynesians and their opponents.

Science is ultimately about method, not the degree of certainty.
Economics is a science whenever economists use the scientific method,
which I understand to mean Karl Popper’s process of starting with
particular facts, producing refutable hypotheses and then seeing
whether the data reject those hypotheses. Yet the public unfortunately
takes the word science to mean “certitude,” and economists (including
myself) have too often been guilty of wrapping ourselves in our
scientific mantles to make ideological pronouncements seem more
compelling. Messrs. Offer and Söderberg suggest that “policy requires
more humility” and that economists should face “some downgrading of
authority, but not all the way.” I agree with the need for humility
but would point out that politicians, pundits and ideologues of all
stripes regularly make statements with far less factual basis than
most economists.

In the book, all this discussion of economics as a science is tied up
with the authors’ discussion of the internal politics of Sweden itself
and the country’s occasional deviations from social-democratic
orthodoxy. Assar Lindbeck, a distinguished Swedish economist who the
authors claim “dominated the Nobel awards” for years, is something of
a villain in “The Nobel Factor.” The authors’ criticism of the Nobel
Prizes given to pro-market economists during the Lindbeck years is
linked to their antagonism toward Sweden’s own market reforms during
the early 1990s. Even more strangely, they blame the pro-market
policies pushed by Washington-based entities like the International
Monetary Fund and the World Bank for “a tide of corruption which
welled up in the borrowing countries.”

My own view is that Sweden’s sensible economic reforms produced a
country with both economic dynamism and a welfare state. Germany and
the Netherlands have managed the same balancing act. The social
democracies of Europe that did not reform, including France, Greece,
Italy and Spain, are in far worse shape. The idea that market-friendly
reforms lead to corruption seems implausible, especially considering
that corruption plagued the developing world long before there was a
Nobel Prize in economics.

The best role for the Nobel Prize in economics is not to advance an
ideology but rather to reinforce the requirement that economists
should play by the same rules as scientists. Many economists,
particularly Marxist economists, once disagreed with this view,
favoring dialectic over evidence. That perspective has weakened,
perhaps partially because the Nobel Prize has consistently rewarded
economists who really advanced human knowledge. This is something
worth celebrating in Sweden, and the Hart-Holmstrom prize is yet
another example of the committee supporting superb social science.

About Luke Ford

I've written five books (see Amazon.com). My work has been followed by the New York Times, the Los Angeles Times, and 60 Minutes. I teach Alexander Technique in Beverly Hills (Alexander90210.com).
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