Why do we *still* have a Nobel Prize in economics?

I think your interpretation is unfair, John.

Shiller did of course show that the strictest interpretation of EMH is ludicrous. He did not “demolish it”. It is still true that it is very difficult to beat the market, and that beating the market is self-defeating. This will always be so. That is a very powerful insight and it was a game-changer, even Krugman admits as much.

That both Shiller and Fama won the Prize can be seen as an acknowledgement of the difficulty and nuance of economics, not a cause for “But they said different things lulz!” (Nicely enough, the link between the two – empirical methods – was rewarded this year.)

I don’t know enough to evaluate your arguments, but from the quality of thought I’ve seen around here I’m sure they’re good ones. Still, though, there is no Nobel in mathematics, so there should be one in economics because Kenneth Arrow.

“economics is still at a pre-scientific stage” — I couldn’t agree more. With my retirement a year ago, I started studying up on economics. It is definitely not a science. I still can’t decide what it is. “How to use graphs and charts to justify political philosophy” maybe?

I’m not sure I know where to draw the science/not-science divide, or even if it’s relevant, but the “economics is not a real science” argument irks me. My older brother studied math and physics at CalTech, and I studied economics at schools that were not CalTech. We discuss this a lot, and I’m still pretty sure I just have little brother syndrome about the whole thing.

In my mind, the standing of economics and physics parallel each other well. There was the classical theory that wasn’t quite right but stood for many years, and then two separate theories emerged in the twentieth century to describe what happens at the really small scale and the really big scale. Sometimes predictions line up, sometimes are directly contradictory, sometimes stuff happens that nobody can explain, and everyone wants very badly to square it all together.

I do think that when economic predictions fail, it’s much more obvious to people outside the field. I don’t really understand disagreements about how many types of Higgs bosons there might be. Everyone understands the importance of a disagreement on whether a fiscal multiplier will be above or below one. Is it the degree or the obviousness of tensions within economics that make it less scientific?

I would think the juxtaposition in the prize, which John Quiggin highlights, would qualify economics, not as pre-science, but as what Michael Betancourt identified as agnotology (or agnotologic capitalism), a word commenter john c. halasz used the other day in another thread.

It isn’t just that the work of these scholars is logically opposed, it is that their work is actively and aggressively used to support a policy of bubbles, which depends upon people — not just professional economists, but a broad swath of the economically active public — being ignorant about what is going on, and how it is likely to affect them.

It seems to me that the problem for economics is not so much whether it is or is not a “science” but whether its epistemology makes sense. Philosophically, it seems like a lot of economists haven’t really gotten past “out-of-sample validation = good model” without bothering to ask whether the model actually captures some relevant causal mechanism.

In a well-functioning decentralized economy, which uses prices to coordinate activity, it is important that prices, generally, be “right” or, if you prefer, “efficient”. But, the work being honored with this prize is not the arguably respectable academic economic research, but the political uses made of it, political use, which has included the deliberate wrecking of the global financial system in the 2008 crisis, political uses, which Fama and Shiller have encouraged.

The Efficient Markets Hypothesis, properly, is a technical point, which ought to be of interest only to professionals, doing economic research on prices in financial markets. But, it has been turned into a proposition about actual markets (not just markets in financial securities, but markets and “markets” of all kinds), and the proposition into a dogma, to be authoritatively and deceptively propounded in a political context. And, the dogma is: market prices are magically right, and if they aren’t, you cannot question it, because no one can beat the market (it’s magic!), therefore, you can not know if prices are “wrong”, therefore, bubbles cannot be prevented.

Instead of advancing understanding of how financial (and other) markets work, and can be made to work well, this work has been used to make people incredibly stupid and uncomprehending. It is not about advancing science, or “pre-science” — it’s about a political agenda of institutional corruption, protected from democratic reform by manufactured ignorance.

JW Mason:
I don’t disagree with this post. But I’m curious why the alternative to “science” is “pre-science”. Aren’t there valid forms of knowledge that are neither science nor on their way to becoming science?

This.

JQ’s rejoinder, I suppose, would be that economics aspires to the status of a natural science, whereas the other social sciences don’t, or at least not in quite the same insistent way. (For “economics aspires” read “most economists aspire.”)

Actually, when JQ says at the end of the post “there is no agreement on fundamental issues” he may be overstating. Though I’m not sure, I’d imagine most economists agree on at least a couple of fundamental issues. But IANAE.

Oh right, the multiplier. When John Cochrane says that there is a nonzero multiplier in New Keynesian models only because government spending raises inflation (and so reduces real interest rates), is he wrong? Would Michael Woodfors disagree?

Re: “Overall, economics is still at a pre-scientific stage, at least, as the idea of science is exemplified by Physics and Chemistry.”

As noted above, economics is a social science, and I doubt there are any persuasive reasons for assessing its scientific character by way of physics or chemistry (a belief in reductionism of one sort or another undergirds the claim these are the ‘purest’ or ideal exemplars of scientific practice). The methods and techniques vary for the different sciences, making it difficult if not impossible to say any one or more of the sciences should be held up as an exemplar or exemplars for what counts as science. Consider, for instance, the fact that the “techniques used in scientific research are extraordinarily diverse, from counting sheep and watching birds to detecting quasars and creating quarks. The epistemic methodologies of research are equally varies, from mental introspection to electronic computation, from quantitative measurement to speculative inference.” (John Ziman) Science is best thought in terms that apply across the entire range of organized knowledge, composed of motley intellectual traditions and disciplines, hence the “many different ‘sciences’—physical, biological, behavioral, social, human, medical, engineering, and so all,” perhaps best thought of under the cultural umbrella of “academic science.” (Ziman)

The myriad fields of scientific inquiry increasingly exists side-by-side with the desire if not necessity for boundary crossing, given the fact that most practical problems are of a “transdisciplinary” character (hence the emergence, for instance, of ‘law and economics,’ ‘behavioral economics,’ ‘institutional economics,’ and so on). Ziman provides us with a telling example: how do we approach the problem of Bovine Spongiform Encephalopathy (BSE), commonly known as “mad cow” disease? It seems myriad fields are called upon to understand and stop the spread of the disease: veterinary pathology, neurophysiology, microbiology, animal nutrition, epidemiology, agricultural economics, even international law. Increasing specialization appears inevitable in a number of scientific fields, all the while the larger or more urgent problems “necessarily rely on the collective activities of specialists from a variety of disciplines.” (Ziman)

Economists, as Moisés Naím argued not long ago, “would…be well advised to trade in their intellectual haughtiness for a more humble disposition. Albert O. Hirschman, a superbly original economist, borrowed freely from other disciplines and aptly titled one of his books Essays in Trespassing. We need more trespassers. Fortunately, a few of today’s economists are beginning to hurdle professional fences and mine neurology, psychology, sociology, and political science to enrich their analysis.”

Empirical number-crunching is no more intrinsically “rigorous” or “hard” than other methodologies from disparate disciplines, all with their respective appropriate domains and requisite purposes. In Ziman’s words, “not all scientifically observable features of the world can be measured, and not all the results of scientific measurement properly be treated as variables in mathematical formulae.” In particular and in “practice, most of the entities that figure theoretically in the human sciences are not ‘arithmomorphic,’ and are not at all amenable to formal mathematical analysis.” The belief or wish that things are or will be otherwise, however, is an obdurate one. Whatever my distaste for or disagreement with her specific views on neo-classical economics, Deirdre McCloskey has courageously, cleverly, and persistently endeavored to persuade her colleagues in economics to rely far less on mathematical formalism and a “scientistic style,” and much more on the “whole rhetorical tetrad—the facts, logics, metaphors, and stories necessary” [….] that enable her discipline to become at once “more rational and more reasonable….” No doubt McCloskey, who says that “It would of course be idiotic to object to the mere existence of mathematics in economics,” shares Hilary Putnam’s motivation behind the mention of the Pragmatist “revolt against formalism:” “This revolt against formalism is not a denial of the utility of formal models in certain contexts; but it manifests itself in a sustained critique of the idea that formal models, in particular, systems of symbolic logic, rule books of inductive logic, formalizations of scientific theories, etc.—describe a condition to which rational thought can or should aspire.” In our case, the reference would be to the rationality peculiar to scientific methods and theorizing. To paraphrase and quote again from Putnam, our conceptions of even scientific rationality cast a net far wider than all that can be logicized or mathematized, in short, formalized: “The horror of what cannot be methodized is nothing but method fetishism” Or, in the words of Ziman, “the domain of science extends far beyond the scope of formal reasoning,” and thus formal reasoning is not emblematic of the “highest” or “best” sort of scientific theorizing, as the types and standards of scientific reasoning vary from discipline to discipline.

By way of illustration, consider Kevin Drum’s comments on a snippet from a recent piece by editors of Nature: “‘Because they deal with systems that are highly complex, adaptive and not rigorously rule-bound, the social sciences are among the most difficult of disciplines, both methodologically and intellectually….So, what has political science ever done for us? We don’t, after all, know why crime rates rise and fall. We cannot solve the financial crisis or stop civil wars, and we cannot agree on the state’s role in systems of justice or taxation. As Washington Post columnist Charles Lane wrote in a recent article that called for the NSF not to fund any social science: “The ‘larger’ the social or political issue, the more difficult it is to illuminate definitively through the methods of ‘hard science’.”’ In part, this just restates the fact that political science is difficult. To conclude that hard problems are better solved by not studying them is ludicrous. Should we slash the physics budget if the problems of dark-matter and dark-energy are not solved? Lane’s statement falls for the very myth it wants to attack: that political science is ruled, like physics, by precise, unique, universal rules.

The public commonly thinks of disciplines like physics and chemistry as hard because they rely so heavily on difficult mathematics. In fact, that’s exactly what makes them easy. It’s what Eugene Wigner famously called the ‘unreasonable effectiveness’ of math in the natural sciences: the fact that, for reasons we don’t understand, the natural world really does seem to operate according to strict mathematical laws. Those laws may be hard to figure out, but they aren’t impossible. And once you do figure them out, the rest is mere engineering. Hari Seldon notwithstanding, the social sciences have no such luck. Human communities don’t obey simple mathematical laws, though they sometimes come tantalizingly close in certain narrow ways — close enough, anyway, to provide the intermittent reinforcement necessary to keep social scientists thinking that the real answer is just around the next corner. And once in a while it is. But most of the time it’s not. It’s decades of hard work away. Because, unlike physics, the social sciences are hard.”

It’s time to forswear forever the use of terms that posit or assume a divide between the so-called “hard” and “soft” sciences, with its barely concealed and untenable judgment of the superior value and epistemic rigor of the former over the latter. This is simply nonsense and a curious relic from the history of hard-headed positivism. The difference is based largely on a false understanding of both the nature and role of quantification and measurement in the natural sciences as exemplified by physics (and in fact, as Ziman notes, thereby lends a ‘paradoxical’ quality to much of twentieth-century physics, for instance, in the denial of the possibility of perfectly precise simultaneous measurements of position and momentum). Even the exalted objective status of measurement involves a basis or standard for comparison, something that involves communal or intersubjective agreement on what entities and procedures are to be regarded as “standard.” Quantitative measurements have led to impressive results in many of the natural sciences and no one questions the significance of empirical quantitative data. What is questionable, however, is the wholesale importation of this particular form of standardization as an ideal methodological desideratum for the social sciences. Moreover, one should not lose sight of the important fact that “there are many scientifically interesting aspects of the natural world that are not amenable to this treatment” (Ziman). There are good reasons that efforts to extend the methodology of numerical measurement into the human sciences have produced comparatively meager results. Ziman reminds us of the often arbitrary and subjective categories that lie at the basis of social statistics and even basic demographic data.

All scientific facts, be they from the natural or social sciences are “contextual,” and thus entail the intertwining of both “theoretical” and “subjective” features. One way of putting this is to refer, with Hilary Putnam, to the “entanglement of fact and value,” in this case with an invocation of four principles from A.E. Singer, Jr.:
1. Knowledge of facts presupposes knowledge of theories.
2. Knowledge of theories presupposes knowledge of facts.
3. Knowledge of facts presupposes knowledge of values.
4. Knowledge of values presupposes knowledge of facts.

It goes for both the natural and social sciences that there “are no absolute rules on what constitutes a scientific fact” (Ziman). Philosophers, philosophers of sciences and meta-scientists have come to recognize scientific theories in both the natural and social sciences as analogous to (and thus having all the ‘rigor’ of) maps:

“Almost every general statement one can make about scientific theories is equally applicable to maps. They are representations of a supposed ‘reality.’ They are social instruments. They abstract, classify and simplify numerous ‘facts.’ They are functional. They require skilled interpretation. And so on. The analogy is evidently much more than a vivid metaphor.” (Ziman) What we might call “soft” scientific realism (a la Philip Kitcher, among others) likewise understands scientific representation on the order of “models” and “maps” which are, in turn, often dependent on analogies and metaphors. As Ronald Giere explains,

“Maps have many of the representational features we need for understanding how scientists represent the world. There is no such thing as a universal map [one reason why Kitcher says we cannot have a ‘Theory of Everything,’ for an ‘ideal atlas is a myth’]. Neither does it make sense to question whether a map is true or false. The representational virtues of maps are different. A map may, for example, be more or less accurate, more or less detailed, of smaller or larger scale. Maps require a large background of human convention for their production and use. Without such they are no more than lines on paper. Nevertheless, maps do manage to correspond in various ways with the real world. Their representational powers can be attested by anyone who has used a map when traveling in unfamiliar territory.”

Ziman summarizes the scientific significance of the cartographic analogy: “As philosophers and other meta-scientists are coming to realize, theories are very like maps. Almost every general statement one can make about scientific theories is equally applicable to maps. They are representations of a supposed ‘reality.’ They are social institutions. They abstract, classify, and simplify numerous ‘facts.’ They are functional. They require skilled interpretation. And so on. The analogy is evidently much more than a vivid metaphor. In effect, every map is a theory. An analysis of the most commonplace map explores almost all the meta-scientific features of the most recondite theory. From a naturalistic point of view, the London Underground map exemplifies these features just as well as, say, the ‘Standard Model’ of particular physics.”

The cartographic analogy is central to Giere’s notion of a “perspectival realism” that attempts to steer a middle course between (traditional and strongly metaphysical) scientific realism and purely constructivist accounts of science, that is to say, it endeavors to appreciate their relative merits on both epistemological and metaphysical grounds. Kitcher’s discussion of “mapping reality” is likewise on behalf of a “modest realism” that wishes to retain the notion (in some measure) of a “mind-independent” reality or robust conception of objectivity while acknowledging such things as the underdetermination of theory by evidence. In Kitcher’s words, “There is all the difference between organizing thought and speech, and making reality:…we should not confuse the possibility of constructing representations with that of constructing the world.” Or, as Helen Longino puts it, “one can be a realist in the sense of holding that there is a world independently of our thinking that there is one, without being a scientific realist in the sense of holding that the successes of our best theories consists in the world having exactly the features attributed to it by those theories.” This is a lesson we might have also gleaned from study of the history of science if only because, as Nicholas Rescher writes, “we shall ultimately recognize many or most of our current scientific theories to be false and that what we proudly vaunt as scientific knowledge is a tissue of hypotheses—of tentatively adopted contentions many or most of which we will ultimately come to regard needing serious revision or perhaps even abandonment.”

In the human or social sciences we might call upon a notion of “empathetic rigor” rather than empirical rigor, given that empathy “is an essential feature of observation in the human sciences. This is an old idea, going back to the eighteenth century. Ethnographers employ empathy constantly, as when they use interviews to enter people’s lives and elicit their personal value systems. In spite of insisting on their objectivity, historians have always had to infer the thoughts and motives of the human agents in their stories by re-enacting them in their own minds.”(Ziman)

And the fact that the human sciences often depend fundamentally on verstehen, that they are steeped in hermeneutics (which also relies on intersubjective norms), is not a fact to be bemoaned and overcome through displacement by empirical rigor. Indeed, I think Ziman (a former Professor of Theoretical Physics) is absolutely right to argue “the knowledge produced by the natural sciences is no more ‘objective,’ and no less ‘hermeneutic,’ than the knowledge produced by the social, behavioural and other human sciences. In the last analysis, they are all of equal epistemological weight.”

The “hard-soft” dichotomy is further unavailing when we consider the fact that “many important scientific disciplines, such as brain science and ecology, have emerged in the wide open spaces between hard-core physics and soft-centered sociology.” The so-called hard sciences hold no monopoly over, no patent on, no proprietary right to, what counts as “good science.”

Formalization, be it with statistics, logic, algorithmic compression, or Bayes’ theorem, for example, does not define a sine qua non for scientific theorizing. In any case, formalization is a matter of degree and much of science is not now nor will ever be conducive to formalization (for instance, we delude ourselves if we think the fullness of time will lead to a ‘Newton’ of sociology or anthropology, with the corresponding principles and laws for social interaction, institutions, and so forth). For perfectly sensible and sound reasons, the language of scientific discourse is not circumscribed by what falls within symbolic logic. A mathematical argument is no more important or rigorous epistemically speaking than the theory in which it occurs. In the end, scientific rationality is but a species of or no more than (transcultural modes of) practical reasoning. Different kinds and standards of rationality are set in the various domains and disciplines of scientific research.

Indeed, and much to the chagrin of the old-fashioned scientific (or ‘hard’) realist, “It is clear that scientific maps, models, metaphors, themata and other analogies are not just tools of thought, or figures of speech. They are of the very substance of scientific theory. As sources of meaning and understanding, they stand on an equal footing with explicit verbal and symbolic representations.” To be sure, “perspectival” realism and “modest” realism are still species of realism, yet there is no longer the hard and fast metaphysical commitment to the idea of science as describing things “out there”—objects or not—as they really are or giving us the definitive account of how the world, simply and absolutely, in fact is.

“In 1969, economics really did seem like a progressively developing science in which new discoveries built on old ones.”

Wait, this doesn’t sound, at all, like science, at least if we take any common demarcation criteria (think Popper) as reference. If not, why exactly is ‘new discoveries building on old ones’ science? Who has ever formulated the idea of ‘agreement on fundamental issues’ as science? I thought the idea behind any modern defintion of science (be it as process or from an epistemological point of view) was that such things are exactly not what delimits science – but method(s) is (are).

“The result is that prizes are awarded both for “discoveries” and for the refutation of those discoveries.”

The idea behind this sounds much more like science.

Perhaps the Nobel Prize for economics is best compared to the Nobel Prize for Literature, not physics or chemistry. Nobody claims that literature is a science; the prize each year goes to a skilled story teller and story telling (somewhere along the fiction non-fiction continuum) is what economists do, with greater or lesser amounts of skill.

Don’t worry, chemistry is also in a pre-scientific stage. It’s mostly cooking, with a dash of systematization, often derived from physics. Kind of like French cooking, but with physics taking the role of roux.

Disagree. Chemistry is not a science – but it’s post-scientific, not pre-scientific. There’s very little left to ‘discover’. Go too big, and you’ve become a biologist. Too small, and you’re a physicist.

Chemistry has passed through a few hundred years of being a science. Everything that you usefully need to learn to appreciate the whole subject can be taught to an undergraduate in a few years. It’s now an engineering subject, dedicated to producing and characterising novel molecules.

“They can’t see the outside world, so they do “experiments” on the “world” they can see.”

Perhaps it’s not that they can’t see the outside world, but that they affect their own world too much. A Martian could study modern economics on Earth; a present day economist can study the economics of ancient Rome, but it’s hard to study the phenomenon that is being significantly affected by your studying.

Why would disagreement detract from economics having the status of a science? Isn’t the problem the opposite?

Physics envy has long been a blight on economics. Economists would be far better off recognising that it belongs with other human sciences such as sociology and psychology. After all, economics is fundamentally about human behaviour.

Alex – you could say it’s both: too much agreement within the tent, coupled with denial of the existence of any tents in other parts of the, er, field.

= = = McGrupp @ 2:21 am: In my mind, the standing of economics and physics parallel each other well. There was the classical theory that wasn’t quite right but stood for many years, and then two separate theories emerged in the twentieth century to describe what happens at the really small scale and the really big scale. Sometimes predictions line up, sometimes are directly contradictory, sometimes stuff happens that nobody can explain, and everyone wants very badly to square it all together.= = =

The difference perhaps being that classical physics, although later proved “wrong” at a deeper level, generated not only testable hypotheses but predictions and equations that were sufficient for hands-on people (inventors, engineers, builders) to use to build the Industrial and Electrical Revolutions.

Curie, Heisenberg, Bohr, Einstein, et al eventually showed that there was a lot more to physical laws than the grosser Newtonian mechanics, but while that has contributed to e.g. far better materials the analysis that goes into bridges, office buildings, 95% of machine tools, etc is still the old classical stuff. When long-held economic hypotheses fail they leave behind a 2007-2008 and never work again.

Cranky

If enough of these people had instead believed in the EMH the crisis would have been prevented.

I’ve seen some wild counterfactuals, but this one might be the wildest.

@40,41: I think that may be intended in a “you can’t cheat an honest man” sense — if people like Countrywide REALLY believed in the EMH, they wouldn’t have been trying to do what they were trying to do, because they would have believed that it was impossible. It’s only because they knew that the system could be beaten that they tried to beat it and blew themselves up.

Of course, the act of blowing themselves up ALSO refutes the EMH — in an efficient market nobody would have trusted those clowns with their money.

People do not make massively leveraged speculative bets on assets that they believe to be fairly priced. And if you are seriously in hock to the EMH, then you believe that EVERY asset is fairly priced.

Chris @43 I don’t disagree – but the truth of a theory is a separate matter from its influence on behavior.

is anyone here truly qualified to talk about what Fama did ?
Just because he may, or maynot, have said stupid things after he formulated EMH doesn’t mean EMH is wrong.
Newton, astrology
Schockley, eugenics
Pauling, vitamin C

“The result is that prizes are awarded both for ‘discoveries’ and for the refutation of those discoveries.”

This seems misstated. One could agree, for instance, that both Mancur Olson and Elinor Ostrom had something very insightful to say, yes? It’s not the refutation of earlier work but the elucidation of its limits that gets—or at least deserves—the recognition.

22, 25: ‘agreement on fundamental issues’ as science

Science as Virtue, in MacIntyre’s sense, plus the whole other attachment to Reality thing: yes. Economics would be a Virtue, but perhaps the reality which it attempt to attach to is too arbitrary and self-referential to be other than Chaotic (in the technical sense of radically unstable). In which case it can still be descriptive: specialized History.

The problem I have with Patrick’s long comment is that it is all true AND economists try (largely with success) to get treated by the public as if they have a level of understanding comparable to that of a chemist or physicist. If economists regularly admitted they they don’t have much understanding, and that their science is in its infancy so maybe we shouldn’t listen to them, that would be one thing. But in reality they push their conclusions like an enthusiastic proponent of a fad diet–except with less understanding of the body.

@ Sebastian H

If economists regularly admitted they they don’t have much understanding, and that their science is in its infancy so maybe we shouldn’t listen to them, that would be one thing.

Funny. When I come on here and say things like “The most honest assessment to the size of the multiplier is an acknowledgement of the variety of estimates.”, I get derided for “not taking a stand.”

@Inthesky,

Perhaps it may even have gone too far: It has gotten to the stage where well-identified (but largely meaningless) causal mechanisms are valued more than dubious identification strategies of important policies.

How does this make any sense? Causal mechanisms cannot by definition be meaningless; they are everything, they are what drive the model. How could you possibly do worse at identifying “strategies of important policies” with a causal mechanism than without?

Without a causal model, the best you can do is correlation. That’s the benefit of formalization: if you have a theory that makes it explicit what drives what, then you can formalize that theory and put it to an empirical test. That doesn’t mean that a causal theory is always available, but all other things being equal, a theory which identifies the correct causal mechanisms will do better than one that doesn’t.

Indeed this speaks to more general point of “science”. Economics could go more scientific and become essentially useless to society, or it could go more discursive and potentially be very useful.

What exactly does this mean? What’s the boundary between “scientific” and “discursive” and why should a “more scientific” economics be “essentially useless to society?” This strikes me as a completely false dichotomy that doesn’t really get at the foundational issue of how you can know that what your models are telling you makes sense.

This is why most economists don’t care about the “science” debate much at all. I and many others judge the discipline on whether over a reasonable period (a decade, say) we have contributed to understanding economics.

This is self-referential to the point of question-begging. Put aside the word “science” and ask yourself by what criteria do you judge what it means to “understand” economics? How does your theory, whether it be computational or discursive or anything else, actually generate outputs that you take as “true” for whatever value of “true” you’re using?

Hmmm. Is the following really a good form of argument?

This is why most homeopaths don’t care about the “science” debate much at all. I and many others judge the discipline on whether over a reasonable period (a decade, say) we have contributed to understanding homeopathy

Physics is a really terrible template for a science if we’re looking at social sciences. The social world is complex and physics hits boundaries pretty quickly when things start getting complex (Chomsky’s standard example is that physicists can’t predict what happens when a drop of cream falls into a cup of coffee).
Looking at something like medicine seems a lot more reasonable. And there you do see a lot of contradictory views on important questions, a lot of tapping in the dark, a lot of terrible, terrible studies that get published in supposedly high ranked journals. Like medicine, broad economic narratives are on much weaker footings than narrower empirical findings.
Social science is never going to be physics. Good social science can help us understand social phenomena and predict some small scale issues (e.g. economics is quite good at not just understanding, but also predicting auctions). Personally I’m sceptical about how much a lot of the mathematical modelling type of economics (say, articles like “Regret theory with general choice sets” ;)) is helping in that enterprise, but I think that’s a valid debate. I also agree with @20 that the negation of anything that isn’t strictly quantifiable evidence by economists is a problem for the discipline.

What 26 said. Literature isn’t a science. Neither is peace, for that matter.

Now, is economics important enough to have a Nobel-type prize? I dunno … but I’m not in charge of handing out the kroner, either.

Yes, this is the other side of the problem: it’s not enough for the model to be formally causal (i.e. just to identify some variables and hypothesize how they affect each other), but it actually has to be causal. As in, those mappings between what’s in your formalism and what’s actually in the world have to be correct; the model has to be coupled to the world in some meaningful sense.

I’m one who thinks the prize should be the Nobel in Social Science. There’s no reason to distinguish economics from its sister sciences.
The natural science envy of economics actively, I think, harms the field. Economists, starting with Walras, as Mirowski has exhaustively showed, got sucked into the 19th century fetishism for energy, and tried to make economics something like the discussion of matter in physics, up to and including the idea of a sort of Maxwellian field. But to my mind, economics is much more like humoral medicine, with its primitive idea of balances and its disguised “fortuna” function, currently parading around under the name of the efficient market hypothesis.
One of the most interesting pop science books I’ve read, lately, is Henry Wootton’s Bad Medicine, a revisionist history of medicine that underlines the bogusness and damage that medicine did through much of history. I found the chapter on scurvy and its cure extremely interesting as a sort of metaphor for what economists have done to us all lately. Scurvy, Wootton says, started becoming a big killer in the navies of France, England, Holland, Spain, etc. in the 17th century, as more long distance journeys were being made. The portugese and the dutch simultaneously discovered that carrying fruit – limes – on voyages cured scurvy. So did the english – until the official medical establishment stepped in. Because scurvy had to be explained via the humoral medical paradigm, and because there was no fit in that paradigm for fruit, the English medical establishment literally drove out the fruit, and for more than a century made ship surgeons use bleeding and vinegar to fight scurvy. Of course, both methods failed miserably, but they were ‘scientific’ – unlike the popular remedy of sucking fruit. To my mind, this closely parallels our austerian times.

I don’t disagree with this post. But I’m curious why the alternative to “science” is “pre-science”. Aren’t there valid forms of knowledge that are neither science nor on their way to becoming science?

Economics isn’t on the pre-scientific pole of the science spectrum – it belongs to the non-overlapping magisteria of faith where true believers can remain detetched from trivial matters of logic and evidence as their opponents are quite obviously Evil.

chris: The efficient market hypothesis doesn’t mean that markets are perfect in every way, just that they are effective (by varying standards as you move from the weak EMH to the strong EMH) at incorporating available information about the values of assets into prices. The most practical implication of that is that trying to beat the market in investing is stupid, but it doesn’t imply (even though some of its adherents like to act like it does) that regulating the market is stupid.

Somewhere in “Debunking Economics” Keen pretty effectively demolishes Friedman’s justification of the counterfactual (= false) assumptions of economics, which devout economists always parrot back to me whenever this question comes up.

http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926#reader_1848139926