In Defense of Economics

I’ve generally been quite sympathetic to Jim’s recent criticisms of the science (or “science”, depending) of economics, but it seems to me that his demand for economic principles to be put through the gauntlet of “rigorous, replicated falsification trials” ends up setting the bar a bit too high. For one thing, unlike in the “hard” sciences, it’s very often unclear what such a process could be in the case of economics: we’re usually dealing with large-scale human societies, after all, so running experiments under sufficiently controlled or randomized conditions isn’t a possibility; and by analogy, we don’t want to end up saying, for example, that the theory of evolution is junk science because its primary objects of study (whole species, huge stretches of time, the very distant past, and so on) aren’t subject to tightly controlled experiment. Yes, the range of possible experiments is limited, but in economics as in any other science we do (or at least: try to do) the best we can with what we’ve got.

Secondly, and with reference to Jim’s demand for more precisely quantified predictions, it’s worth keeping in mind Aristotle’s dictum about not demanding more precision than the subject-matter admits of: human beings are tremendously complex, human societies tremendously more so, and it is the mark of an educated man to look for precision in each class of things just so far as the nature of the subject admits. Want to know the exact amount by which a given change in the minimum wage is going to affect employment levels? Economics can’t tell you, but that’s largely because a human society isn’t a closed system: there are too many background factors, both known and unknown, that will alter the outcomes in ways we’re not in a position to quantify. These problems could be mitigated, of course, if we could run large-scale randomized control trials – but as per the above, we can’t, so we do (or at least: try to do) the best we can with what we’ve got.

Thirdly and finally, it’s certainly not as if economic theories are entirely untested or non-predictive. For example, the claim that minimum wage increases tend to have negative effects on the rates of unemployment is a claim that runs counter to at least some intuitive ways of thinking about how human society works, and while there is (to say the least!) plenty of controversy over whether the available empirical data tend to support or falsify that theory, this is arguably (once again) more a matter of the inherent imperfection of the data than the unscientific character of macroeconomic theories. And it’s not as if the presence of controversy over the collection and interpretation of data is the sole property of economics or even the human sciences in general: there’s never such a thing as an experimentum crucis, and given our inherent human limits all that we can do is to do (or at least: try to do) the best we can with what we’ve got.

Perhaps Jim has in mind some more concrete ways in which economics could be set on the solid footing of a more rigorous science; if so, those ideas are worth exploring. And I’m certainly sympathetic to Jim’s demand that pro- (and, presumably, anti-) stimulus economists toss some predictions out there, so that we can use this (hopefully!) once-in-a-lifetime event to test how well their models work, as well as his more general caution against the perils of false certainty, so perhaps once we’ve hashed things out in the comments it will turn out that the two of us don’t really disagree after all. For now, though: economists aren’t perfect, and I’ll gladly admit that we shouldn’t actually let them run the world, but that doesn’t mean we shouldn’t do (or at least: try to do) the best we can with what we’ve got.