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

by John Quiggin on October 14, 2013

Ingrid links to some fascinating discussion from Philip Mirowski of the role of Swedish domestic politics in the establishment of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, with emphasis on the way in which claims of “scientific” status for economics helped the claim of the Swedish central bank to independence from government.

In the broader context, it seems pretty clear that, if the idea had arisen even a few years later, it would have been rejected. In 1969, economics really did seem like a progressively developing science in which new discoveries built on old ones. There were some challenges to the dominant Keynesian-neoclassical synthesis but they were either marginalized (Marxists, institutionalists) or appeared to reflect disagreements about parameter values that could fit within the mainstream synthesis.

Only a few years later, all of this was in ruins. The rational expectations revolution sought, with considerable success, to discredit Keynesian macroeconomics, while promising to develop a New Classical model in which macroeconomic fluctuations were explained by Real Business Cycles. This project was a failure, but led to the award of a string of Nobels, before macroeconomists converged on the idea of Dynamic Stochastic General Equilibrium models, which failed miserably in the context of the global financial crisis. The big debate in macro can be phrased as “where did it all go wrong”. Robert Gordon says 1978, I’ve gone for 1958, while the New Classical position implies that the big mistake was Keynes’ General Theory in 1936

The failure in finance is even worse, as is illustrated by this year’s awards where Eugene Fama gets a prize for formulating the Efficient Markets Hypothesis and Robert Shiller for his leading role in demolishing it. Microeconomics is in a somewhat better state: the rise of behavioral economics has the promise of improved realism in the description of economic decisions.

Overall, economics is still at a pre-scientific stage, at least, as the idea of science is exemplified by Physics and Chemistry. Economists have made some important discoveries, and a knowledge of economics helps us to understand crucial issues, but there is no agreement on fundamental issues. The result is that prizes are awarded both for “discoveries” and for the refutation of those discoveries.

{ 75 comments }

1

David of Yreka 10.15.13 at 12:29 am

Just because some practitioners of a discipline are not scientists does not mean that the entire discipline is, or is not, a science. I think that the usual understanding of “science” is that a scientific theory (not a field) generates falsifiable hypotheses; it seems to me that many economic hypotheses would be falsifiable if their proponents could bring themselves to look at, and be persuaded by, actual evidence. Insofar as said proponents do not, they are charlatans, whatever they may say and whatever titles, degrees, etc. they may hold. But the mere prevalence of con-men is only evidence of collective gullibility, or perhaps excessive politesse.

2

In the sky 10.15.13 at 12:44 am

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.)

3

marcel 10.15.13 at 12:50 am

I think BDL answers this question as well.

4

Jo 10.15.13 at 1:11 am

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.

5

Ebenezer Scrooge 10.15.13 at 1:20 am

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.

Not that there’s anything wrong with French cooking. And chemistry, IMO, has improved the human condition a damn sight more than economics.

6

chris heinz 10.15.13 at 1:21 am

“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?

7

JW Mason 10.15.13 at 1:31 am

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?

8

McGrupp 10.15.13 at 2:21 am

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?

9

Omega Centauri 10.15.13 at 2:24 am

I suspect there isn’t such a thing as a universal economics, and our only task is to find/verify what it is. Being in essense a social science, the economy is deeply affected by the distribution of attitudes among the people. It is also strongly affected by the overall physical environment -are there adaquate inputs for whatever it is the economy wants to create? Are there opportunities to advancing technology to help create whatever it is that is considered to be good? So even if a really good (highly predictive) economics were invented, it may not port to a different time or place.

10

Bruce Wilder 10.15.13 at 3:29 am

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.

11

stubydoo 10.15.13 at 3:50 am

So when a clever theorist comes up with a theory, and some people believe it for a while but then later another clever theorist proves him wrong, therefore it is not science?

Isaac Newton, anyone?

OK, so I’ve heard that in Newton’s time the preferred term was “Natural Philosophy”, but anyway this was not an eschewal of the term “science” based on the reasoning in the OP.

I couldn’t really say how prevalent, but I’m sure there are some folks out there plying the Economist trade with levels of passion for finding the truth up there with what Newton displayed when he was analyzing the orbits (if not necessarily quite the same extraordinary talent level). It seems a bit spiteful to try to yank the word “science” away from them (and yourself!), even if it technically you have some level of justification for it.

12

Jerry Vinokurov 10.15.13 at 4:04 am

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.

13

Jerry Vinokurov 10.15.13 at 4:07 am

The problem with “finding the truth” is that you have to have some sort of meta-theory that tells you what the truth is. In this respect, if not in any other, Newton’s task was relatively easy; he had a pretty stable ground truth readily available. Economists can’t even seem to agree on what would constitute a ground truth.

14

Bruce Wilder 10.15.13 at 4:22 am

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.

15

Bruce Wilder 10.15.13 at 4:25 am

In short, it is not about finding truth, but, rather, about hiding it under a pile of confusion and excuses for ignorance.

16

LFC 10.15.13 at 4:30 am

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.

17

John Quiggin 10.15.13 at 4:49 am

@LFC The marvels of ambiguity. I meant “there are fundamental issues on which there is no agreement”.

Not just disagreement, but no agreement on how to formulate the question. For example the issue (as a Keynesian would frame it) of the size of the fiscal multiplier.

18

JW Mason 10.15.13 at 4:57 am

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?

19

JW Mason 10.15.13 at 4:57 am

Woodford.

20

Patrick S. O'Donnell 10.15.13 at 5:08 am

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.

21

QS 10.15.13 at 5:11 am

@14: a bit wordy, but that’s the gist of my analysis as well.

22

Martin 10.15.13 at 5:14 am

“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.

23

LFC 10.15.13 at 5:25 am

JQ @17
Thanks for clarifying.

24

John Quiggin 10.15.13 at 5:33 am

“I doubt there are any persuasive reasons for assessing its scientific character by way of physics or chemistry”

The reason I had in mind is that there are Nobel prizes for phsyics and chemistry.

25

LFC 10.15.13 at 5:38 am

@22
Who has ever formulated the idea of ‘agreement on fundamental issues’ as science?

Iirc, Kuhn in Structure of Scientific Revolutions says that, to be able to do ‘normal science’ (i.e. what goes on in most sciences much or most of the time), a field’s practitioners have to agree on a core set of basic points.

26

Tabasco 10.15.13 at 5:46 am

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.

27

Martin 10.15.13 at 5:54 am

@ John Quiggin

Yes, but Nobels for physics and chemistry do not define science. If you narrow the fields of science to those two you are equating science and physics (as chemistry is rather obviously nothing else but a subfield of physics important enough for us to give it its own research agenda); and what you are actually saying, then, is that economics is not physics, which is not exactly a surprise.

@ LFC

What Kuhn is talking about are paradigms, not a definition of science. This core is exactly what is changed when a scientific revolution is underway. “Normal science” does not mean “science”, it simply means science within a set of paradigms. Again, it’s all too easy to interpret what Mister Quiggin identifies as economics’ weaknesses as paradigms shifts, which would once more suggest economics rather as a science than a non-science – this time according to Kuhn.

As I said, this seems to boil down to nothing else than ‘economics is not like physics’, which is trivially true, but also not important. The discussion of economics as a science (or not) is almost always ailed by the same problem, namely that the term ‘science’ is not defined. This term should identify physics as a science, but not equate the to – if it does, the term is completely meaningless.

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seeds 10.15.13 at 6:03 am

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.

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john c. halasz 10.15.13 at 6:07 am

@20:

Wow! That was like a post-epistemological orgy!

30

John Quiggin 10.15.13 at 6:26 am

“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? “

He’s wrong in the empirical sense that recent data on austerity and stimulus imply a substantial multiplier (in both directions) even though inflation has stayed low and stable, with not much variation across fiscal policy regimes.

Whether he’s wrong about NK models I’m less clear. I guess something of the kind has to be implicit in a DSGE model with a representative agent, but, if that’s right, so much the worse for representative-agent DSGE models

31

Metatone 10.15.13 at 7:49 am

To echo Omega Centuri @9 – the biggest practical problem is a combination:

1) that science is about discovering fundamental laws (typically ones that are at least “universal” for our corner of the universe).

2) That economists think they are engaged in this kind of scientific activity.

The reality is that economies are a construction, not a naturally occurring phenomenon. The form of an economy is dependent on the laws, institutions and culture of the societies the economy is part of.

As an analogy: in effect, economists are “scientists” who are trapped (and always have been trapped) inside a large oil tanker. They can’t see the outside world, so they do “experiments” on the “world” they can see. From this, they derive “universal laws” which have all the flaws you might expect – they characterise the oil tanker very well, but show no awareness that said tanker is not the tanker we all live in.

Physics has the twofold advantage – we are all living in the same oil tanker (Earth) when it comes to physics and frankly physicists seem more curious about alternative universes than economists.

32

Mao Cheng Ji 10.15.13 at 9:00 am

“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.

33

Peter T 10.15.13 at 9:27 am

It seems to me that rather than worry about whether what one is doing conforms to some epistemological schema, a more useful question of a field is whether it accumulates knowledge – becomes richer, broader, deeper, better able to explain its subject matter. Physics, chemistry and biology all obviously do this. So does archaeology – we know a lot more today about, say, how Egyptian culture evolved from early farmers to the first kingdom than we did fifty years ago. So does history: a modern day Marx or Engels, seeking to tease out the patterns of the past, would draw from a larger, more detailed, more accurate set of maps than the originals did.

Literature is more problematic, although my sense is that there is development along this kind of line in any given literary tradition. But lines of artistic development seem to reach a point where they are felt to be exhausted, and then abandoned for something new.

Economics seems to me to be stuck somewhere between. Not enough basic is agreed to allow continued progress, not least because the focus is too often on larger theories and formal models rather than patient testing, and there seems to be little emphasis on checking and re-checking against observations, and then comparing and arguing through the inevitable differences in what is observed. Maybe they should give a few Nobels to economists who simply assemble, test and systematise data.

34

Alex 10.15.13 at 9:57 am

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

35

guthrie 10.15.13 at 10:22 am

Ebenezer Scrooge #5 – as a chemist and someone who is seriously interested in history of science, I take issue with your claim. Of course if it was a joke, haha.
If meant seriously, you do know that there isn’t much chemistry research going on these days? It’s all about the physics, i.e. computational chemistry. There’s still work being done on biochem and the like, which aren’t as open to computational forcing as chemical reactions. Chemistry is a mature science!

I also think John is being a bit hard on economics. Nobody said that chemistry was pre-scientific in the early 19th century. Sure, they didn’t even have a proper periodic table, whereas I think modern economics at least has that, although they definitely haven’t discovered all the elements. Rather, economics is at the later 19th century (say 1860’s or 70’s) stage of chemistry and physics – they know the main building blocks, they are aware that there’s things not there or not right and other things that are still a bit of a mystery e.g. blackbody radiation and what atoms are made of. In the case of economics, the atoms are people, for which, I thought, we still haven’t got a very good and useful idea of their psychology.

Alex #34 – one of the things that makes a science a science is that there is disagreement, but then that there is argument about the evidence, search for more evidence etc. A lot of economics looks more like 2 or 3 groups have set up saying “This is the true economics” and most groups don’t want to examine the real evidence. If economists could actually come to an agreement about facets of reality, rather than argue incessantly, it would surely advance to being a mature proper science. Of course a lot of this is coloured by politics, and I thought that actual real academic economists agreed better than economists working for political organisations such as the media and political parties.

Ultimately thought comparing economics with hard sciences (hard in terms of what they do, rather than how difficult people think they are) is potentially useful in discourse but not massively important in the greater scheme of things.

36

M 10.15.13 at 10:25 am

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.

37

Tim Worstall 10.15.13 at 10:30 am

“the Efficient Markets Hypothesis and Robert Shiller for his leading role in demolishing it.”

There is at least a part of Shiller’s work that builds on the EMH rather than destroying it. His comments about the US housing market for example. It is precisely people trading, speculating, that brings their views and information to the market. This is very much the EMH. This is the process by which the markets process that information: that people trade based upon what they know and or think.

Shiller pointed out that in the housing market there’s no real way to go short. Thus the information and or beliefs of those who wished to short the market were not included in those market prices. His solution was that we should create futures and or options markets in housing so as to allow that information and beliefs to flow into market prices.

In short, we have to create the appropriate markets so that the EMH is true.

That’s not a demolition of the EMH really. And Shiller did write a whole book making exactly this argument, so it’s not peripheral to his views.

(One possible way of describing this would be that where there are incomplete markets some information will be an externality and thus not be considered in market pricing. The solution is therefore to have complete markets.)

38

Phil 10.15.13 at 10:40 am

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.

39

Barry 10.15.13 at 10:44 am

David of Yreka 10.15.13 at 12:29 am

” Just because some practitioners of a discipline are not scientists does not mean that the entire discipline is, or is not, a science.”

However, notice that the whackjobs being most commonly mentioned are from Chicago and Harvard, not Mail Order Diplomas U.

40

Cranky Observer 10.15.13 at 11:52 am

= = = 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

41

stubydoo 10.15.13 at 12:18 pm

@Cranky,

You seem to imply that the 2007-08 crisis was caused by the EMH. On the contrary, the crisis was caused by people who believed that house prices could only go up and never go down, a belief that flies in the face of the EMH. If enough of these people had instead believed in the EMH the crisis would have been prevented.

42

Jerry Vinokurov 10.15.13 at 12:25 pm

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.

43

chris 10.15.13 at 12:40 pm

It is precisely people trading, speculating, that brings their views and information to the market. This is very much the EMH.

No, it isn’t. Markets exist, but they’re not efficient in the way the EMH says they are. To even conceive the idea that markets need to be improved to function more efficiently you have to have already rejected the idea that their wisdom is perfect and above second-guessing by mere mortals.

We need a theory of inefficient markets that understands the nature, causes and remedies for their inefficiencies. You can’t get there by assuming efficiency, perfect information, perfect rationality, etc.

The EMH is like a subset of physics that only deals with frictionless spheres of uniform density: yes, the models are simpler, but you can’t answer many important questions when you have simplified out important features of the phenomenon you were trying to understand in the first place.

To come full circle, this analogy implies that awarding the Nobel to a theory and its refutation maybe isn’t so crazy after all: even an incomplete theory may be better than the previous state of the art, but the demonstration of its incompleteness is a necessary step towards improving it into something better. It’s not a contradiction to consider both Newton and Einstein great physicists.

44

chris 10.15.13 at 12:44 pm

@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.

45

Walt 10.15.13 at 12:45 pm

studyboo, you have literally no understanding of what the EMH says.

46

stubydoo 10.15.13 at 12:55 pm

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.

47

Jerry Vinokurov 10.15.13 at 2:06 pm

Ah, so if people have transparently false beliefs and act on those beliefs, then nothing bad can happen. All we need to do now is to convince people to hold the false beliefs; problem solved!

The parallels to religious dogma are telling.

48

ezra abrams 10.15.13 at 2:18 pm

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

49

Walt 10.15.13 at 2:19 pm

stubydoo: Sure you would. If rents are going up, the housing prices will go up. You would buy a house on credit for the same reason you would buy anything on credit — consumption smoothing. The life-cycle hypothesis, which is compatible with the EMH, suggests you would borrow when young.

50

Pat 10.15.13 at 2:34 pm

“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.

51

CJColucci 10.15.13 at 2:39 pm

Would EMH be true if everyone believed it and acted on it? Or would there cease to be enough information for the market to act on more or less efficiently? Relatedly, I think, if everyone who ought to, i.e., nearly everyone, bought index funds rather than individual securities, what would the index funds be an index of?

52

mud man 10.15.13 at 3:00 pm

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.

53

Walt 10.15.13 at 3:15 pm

The joint Fama-Shiller award has got to be the result of log-rolling on the part of the committee. Fama alone would be embarrassing, and probably Shiller alone couldn’t get enough support, so passed as a package deal. It’s like the Hayek-Myrdahl prize way back when.

54

Sebastian H 10.15.13 at 3:25 pm

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.

55

In the sky 10.15.13 at 3:37 pm

As per usual there is an considerable amount of misinformed BS polluting the airwaves here. Ezra abrams asks how many people here are qualified to really interpret the EMH and the question is poignant.

@Jerry Vinokurov

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.

I am happy to report that the last twenty years of microeconometrics has been almost solely dedicated to this point. 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. 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. Of course, the best trajectory is probably somewhere in between. (Incidentally the fetish for “science”, when cast in this light, always struck me as ironically dogmatic.) 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.

Pat’s comparison (post 49) to a joint award to Olson and Ostrom is excellent. Both Olson and Ostrom contributed greatly to understanding economics. The same is certainly true for both Fama and Shiller.

56

In the sky 10.15.13 at 3:42 pm

@ 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.”

57

Walt 10.15.13 at 3:48 pm

In the sky, you’re a microeconomist, right? How much do you actually know about financial economics?

58

Jerry Vinokurov 10.15.13 at 4:11 pm

@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?

59

Zamfir 10.15.13 at 4:19 pm

@In the sky, economists can take strong stands, and still admit they do not have a physics-like understanding of the stuff they are talking about. That happens all the time in all kinds of affairs. In that situation, economists would discuss the economy on a basically equal footing with other opionated people with relevant experience and interests.

The great annoyance comes when economists (American academic economists more than any) claim a special status as scientist-experts, and insist that debates are held on their terms, applying their views and models, with their internal debates as the main disagreements of importance. That people have to have an intricate understanding of their jargon and their field before they are qualified to have an opinion on the matter at hand, and that the best insights on the economy come from people who have high status among professional economists.

That happens a lot, for a wide range of important topics, and a surprisingly large number of people go along.

60

Squirrel Nutkin 10.15.13 at 4:27 pm

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

61

Squirrel Nutkin 10.15.13 at 4:29 pm

I seem to have been beaten to the punch (by someone who added several other blows as well) – curse my slow typing!

62

adam.smith 10.15.13 at 4:30 pm

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.

63

TF79 10.15.13 at 4:32 pm

@57 In the sky is speaking to empirical exercises and econometrics (which is probably >75% of what most economists do, despite the perception here), where there is much emphasis in applied microeconomics on “identification.” The theoretical models are certainly causal in the sense you describe (“what drives what”), the challenge is when you take it to the data.

Because natural experiments with randomized changes in the independent variables are difficult to construct, current applied micro leans heavily on random-ish “quasi-experiments” (instrumental variables, differences-in-differences, regression discontinuity) that in principle allow you to causally identify the affect of X on Y. So you construct a casual theory about the effect of X on Y, and then try to find a quasi-experiment to empirically identify that effect. What in the sky is alluding to is that some in the discipline have argued that this emphasis on identification and quasi-experiments has led to too many cutesy studies where the effect of X on Y is well-identified through some clever method, but the question itself is irrelevant or has limited external validity. They then argue that the “big” questions about important issues are ignored because it is difficult to identify their effects, or there is no clever method or quasi-experiment to take advantage of.

Noam Scheiber had an article in TNR a few years back about this, where he argued that too many smart grad students were spending time tracking down random quirk in Manitoba tax laws from the 1960s, rather than working on the “big” problems like unemployment, poverty, etc.

64

Anderson 10.15.13 at 4:41 pm

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.

65

Jamie Cohen-Cole 10.15.13 at 4:43 pm

The Newton analogy is not quite on target. This is not as though the Sveriges Riksbank gave an award to Newton in 1700 or 1800.

By giving the award to Fama and Shiller at the same time, it is as though the bank had given the prize to Newton and Einstein; Eudoxus and Copernicus; or even Blondlot and Robert Wood at the same time?

66

Jerry Vinokurov 10.15.13 at 4:45 pm

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.

67

stubydoo 10.15.13 at 4:50 pm

Walt @48

You missed the word “speculative” in my post. The crisis was not caused by consumption smoothers.

68

roger gathman 10.15.13 at 5:37 pm

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.

69

roger gathman 10.15.13 at 5:38 pm

ps – oops, I meant carrying fruit and having the sailors eat them. Of course.

70

Shatterface 10.15.13 at 7:35 pm

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.

71

Shatterface 10.15.13 at 7:51 pm

By giving the award to Fama and Shiller at the same time, it is as though the bank had given the prize to Newton and Einstein; Eudoxus and Copernicus; or even Blondlot and Robert Wood at the same time?

More like giving it to Uri Gellar and James Randi at the same time.

72

UserGoogol 10.15.13 at 7:53 pm

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.

73

John Emerson 10.15.13 at 8:41 pm

Well, anyway, if no one else wants to talk.

I’m one of those liberal arts types who’s been gloating. I’ve never understood the technical criticisms of economics very well, though by reading the writings of competent critical economists I have come to believe that there are a lot of them, above all when you consider economics to be a way of understanding social reality rather than an entirely autonomous construction which relates only to the aspects of social reality that it has decided are important.

The main reasons for my antipathy aren’t technically sophisticated. Mostly it’s because I think economists tend to be corrupt and self-serving ideologues. Even the liberal good guys among mainstream economists (Samuelson when I was young) seem that way, complacent, excessively well fed, and supremely sure of their benevolence and of the transcendent power of their science. But then, I’m an envious humanities type.

As far as scientificity goes, I think that that criticism is valid in the following way: there are really enormous areas of chemistry, physics, and biology which are standard and unquestioned and can be relied upon by engineers. There’s always a frontier of research, and there are often differences in terminology, etc., but the amount of agreed on fact is enormous. I don’t think that that’s true of economics, and I think that when economists claim to be True Scientists (Lazear) they are claiming for economics exactly what it doesn’t have. (This has nothing to do with the question of reductionism, or whether economics should be expected to be similar to physics in this wya or that. It’s about the way economists are, in effect, fraudulently trying to hitchhike on the prestige of more powerful, more complete science when they talk about their own scientificity.

Nonetheless, there’s something there. There are times when you need an economist the same way that there are times that you need a lawyer. In both cases the thing you have to know at the beginning is that the guy is actually working for you and not for someone else (for example, himself alone). Lawyers and economists do know something, they’re just not scientists.

And finally, if some of the wisest and most brilliant representatives of a profession say things like “I don’t even know what a bubble is” or “There’s no such thing as unemployment; some people just choose leisure instead of income”, that’s a really crappy profession regardless of anything else. If that kind of person is most highly honored by his fellow professionals, that’s a shitty profession, even if most members know better. This isn’t like a Nazi physicist or a Stalinist biologist; unemployment and bubbles are part of the subject matter of economics (besides being painfully important to pretty much everyone in the world).

74

John Emerson 10.15.13 at 8:48 pm

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

75

Matt Nolan 10.17.13 at 4:55 pm

I am still a little nervous of the premise this relies on for the purpose of the Nobel – the idea that “science” us a well defined block of methodology isn’t true! The purpose is more about giving research into social science a heads up, is to show it had become a discipline deserving of systematic analysis – rather than being subject to naive intuitionism.

An even bigger concern with the post is the purpose given for the prize. Pinning the Nobel’s purpose solely to science ignores the fact that the humanities also make a showing (I am unsure of the scientific qualities of literature, or peace) – calling it a prize regarding in subjects that aim to increase the wellbeing of man has always made more sense, and social science would been put if it had truly existed when he made the prize!

That is why the concern I find more valid is the fact other social sciences get pissed – why is it an economics prize, and not a general contribution to social science prize?

Regarding the post I’d also note that the methodological concerns appear to be attacking one area of the discipline. I wouldn’t call it a fully fair attack but even if it was there are far more ‘scientifically rigourous’ elements of economics than macro – namely the entire rest of the discipline (this is debatable depending on how we start to define science – but this is stretching the bow in comments :P). Since Becker has started stretching the bounds of the base economic method, it has been applied in across the social sciences.

The ‘rational man’ has provided an ideal type we can just to help understand deviations from, and interpret data transparently. This is a necessary condition for doing analysis, and as a result the economics prize made less sense until these applications came into being. Now some will criticise the rational man as ‘untrue’ but this misses the point of why it is used for, and what ideal forms are used for in scientific (and literary) analysis in the first place. It is a tractable and testable form which we can easily extend upon. Calling economics “prescientific” in the way done in the post reads like a pejorative term for economic thinkers he disagrees with – not a descriptive term ;)

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