Economics is a science?!
from David Ruccio
The next time some mainstream economist stands up and says “Economics is a science” and, because it is a science, “We know what the effects of implementing this policy are,” just send them to the current debate about the minimum wage.
Catherine Rampell does a good job illustrating the absurdity of the view that economics is a science. There aren’t many topics in economics that have been the focus of as much theoretical modeling and empirical research as the minimum wage. And there simply isn’t any kind of consensus—among mainstream economists, let alone among all economists—about the effects of raising the minimum wage.
In referring to the results of the survey of the members of the IGM Experts Panel, Rampell observes that,
These responses do not necessarily reflect the beliefs of all economists, the way a traditional poll might aim to be; rather, the panelists are among the more elite members of their profession and were selected to represent some of the better-known conservative, liberal, young and old scholars. They include Nobel laureates, John Bates Clark Medal recipients, Econometric Society fellows, past presidents of both the American Economic Association and American Finance Association, past Democratic and Republican members of the President’s Council of Economic Advisers, and editors of leading economic journals.
Moreover,
of those who responded, about a quarter said they were “uncertain” about the proposition. Exactly zero percent said they either agreed or disagreed “strongly.”
So much for the idea that economics is a science!
I had a debate in the press several years ago with an economist professor at a local university and baited him into getting frustrated. When he was finally exasperated with me he wrote that Economics is an art not a science. My response was to agree and note that the predictions of economics were no more accurate than reading the entrails of chickens. And, of course, we all know that the purpose of reading the entrails of chickens was to justify political decisions wanted by those in power.
The fact that economists disagree on certain subjects does not mean that economics is not a science. Science does not mean having only one opinion. On the contrary reducing the debate to one opinion or one paradigm, that would be unscientific.
IMHO economics – to be more exact mainstream or neoclassical economics – is not a science for a different reason.
Firstly it defies logic. Neoclassical economists draw conclusions they apply to the real world from assumptions that are clearly counterfactual. They even believe that assumptions do not have to be “realistic” by which they mean that assumption do not have to be true. That is actually a refutation of logic itself.
Secondly it is based on willful ignorance. Neoclassical economist ignore all arguments made against their theories and keep teaching and applying those theories as if no criticism ever existed.
Those are the real reasons why (neoclassical) economics is not a science.
To me, what is more frustrating is the recurrent, permanent, ongoing (…) confusion between «science» (social or economic…) and «engineering» (social or economic)… The Roman empire engineers did build aqueducts and bridges without having a clue as to the nature of gravity, let alone the subtle difference between Newonian and Einsteinian theories of gravity. But did those bridges work?… Of course they did…
Now here is another topic which deserves more scrutiny along these lines, no where near as deeply researched as the effects of raising the minimum wage on job creation: the correlation, and explanation for it between historical efforts to balance the Federal budget and reduce the national debt, and the fact that six depressions and a serious recession resulted in the wake of all the efforts, which are listed in the following years by L. Randall Wray: the fiscal austerity years come first, the resulting troubles depression/recession, in ( ). 1817-1821 (1819); 1823-36 (1837); 1852-57 (1857); 1867-73 (1873); 1880-93 (1893);1920-30 (1929) and finally 1996-1999 (2001-2002).
I should add that James Galbraith has also taken note of the correlation, which I never hear mentioned in the present massive coverage of the debate in Washington.
Of course, in “theoretical” economics during what Polanyi called the “long” 19th century, the reigning policy orthodoxy was for a balanced federal budget, and the fact that it was rarely achieved even prior to social democratic measures should be taken note of (And yes, the orthodoxy was linked to the gold standard and international trade flows). And this was before the regulatory state, and much of it before central banking. In the United States, prior to the Guilded Age, this may have been capitalism’s “purest” institutional expression in terms of many small firms throughout the economy competing with each other, and I include agriculture and the family farm in that description. In some ways, the ability of so many people to fall back upon subsistence agriculture may have served as a form of stabilizer and human buffer from the very grim realities of what followed in the wake of 1819, and 1837 and beyond.
Historian Daniel Walker Howe, in his fine “What Hath God Wrought,” his history of Antebellum America up to 1848, says that 1819 “was the first time that the American public had experienced collectively what would become a recurrent phenomenon, a sharp-downward swing of the business cycle. Because it was the first time, people had no perspective from which to judge the events.”
But here we have two, in my opinion, good economists pointing out something very relevant for today’s debate, conducted between the Center and the Right, stating that the history of balanced budget attempts is not a happy one. I should point out as well, that Galbraith, in his “Predator State,” spends a good deal of time stating the near impossibility of balancing the federal budget when the nation is running a large trade deficit, stressing the macro economic accounting flows that say that if we have a large trade deficit either the public sector runs a large debt or the private sector does (which it did during the late 1990′s with the rise of massive credit/and mortgage based personal debt….) but they can’t both do it…
From this citizens perspective, these two topics would seem, given the current state of the debate and the economy, to deserve much wider, and deeper discussion.
Has anyone ever graphed or plotted how economist think on some issue X,
Vs.
How issue X affects, directly, economist pocket books ?
min wage inc has little or no effect; free trade has a big neg effect (most economist are in the upper two quintiles of the income distribution, so they benefit when jobs go overseas and return as cheaper goods)
PS: to who ever is running this site, the guidelines for comments sound a little, at least to me, pompous – maybe this is a language thing; in std Amer English, they do sound a little off
It probably is partly “a language thing”, Ezra, but as William Neil put it just before you, “From this citizen’s [i.e. my] perspective, [our] topics would seem, given the current state of the debate and the economy, to deserve [even] wider, and deeper discussion”.
Your question, Ezra sounds like a time-honoured method of foresnic science (i.e “follow the money”. As to whether economics is or is not a science, it seems to me it ought to be. The real question is whether so-called economists are or are not scientists, when they have so little interest in truth, use the label “economics” as a euphemism for what they do study (money making or “chrematistics”), and describe obscurely how that IS rather instead of explaining clearly how and why it WORKS (and as economics, doesn’t).
I have no problem with economists trying to pursue their work with as much analytical rigor as they are inclined to apply, including mathematics, but the dynamism of capitalism and the number of variables involved has to leave everyone with just a touch of humility. Let’s think about this correlation that James Galbraith and L. Randall Wray have put forward, an intellectual counter, based on economic history and the obsessions of the current debate – that economic life will be much better if the federal budget were balanced and the debt greatly reduced if not eliminated. Wray puts the correlation in a framework of sustained efforts to do just that (and he left out two panics from the late “founding periord” in the 18th century) and notices that depressions and one tough recession seem always to follow. I’ve just spent some time on Wikileaks looking at how the panics and accompanying years – they are really depressions, because they are running on 3-6 years, longer in some cases, and I couldn’t find a single instance where the fiscal austerity measures were mentioned….no the actual causal mechanism behind the correlation – my take – not necessarily one to one with wray’s – is that the psychology of credit expansion contraction that so drew Keynes interest is at play, but a time when capitalism was very young and banking lagging far behind. It is still not clear to me how the public effort to balance the federal books directly links to the triggering event – over production or classic gluts then falls in the price of cotton – other than we are deeply into a very ambivalent if not schizophrenic (and Robert Schiller, Richard Wolff here we come – both married ot psychologists therapists) pattern of animal spirits in the private sector (always credit and currency short in the 19th century – by theory a tight money, “hard money” economy) and a corresponding default setting to balance the public books. This was a time when the main sources of federal revenue were – James Galbraith are you listening – the tariff and various excise taxes on things like whiskey…so international trade is already figuring into that tight balancing equation that leads Galbraith to say you cannot run a trade deficit and a federal budget surplus unless the private sector turns debtor.
So let me back up a bit from these complex strands and say that I’d love to see someone write a book about the correlations between frequent panics and depressions – which ought to give any free market capitalist purest pause – because after all, has there ever been a “purer” brand of capitalism than the American Antebellum brand – and yes, undoubtedly it kept growing but the panics and derpressions were hell…just ask John Brown and the famous Union generals who failed as businessmen…and see if in that book we can tighten the correlation-cause between public austerity and private, increasingly universal depressions. Science? I don’t know, doubt it…
And it may be far easier to prove the reverse: that “sound money” practiced at the federal budget is not guarantor/guarantee of happy economics for the nation…it looks to me, following either strand, that the good old days that so many conservative and even middle of the road economists want to take us back to are the key to future prosperity.
And let me conclude that as the surviving Founders looked out upon “what they had wrought” in the second and third decade of 19th century, they were more than a bit horrified at the universal participation in “getting ahead,” which seemed to them to have taken the young republic far from its classic roots in the Atlantic republican tradition (Gordon Wood’s take…). It’s a reminder of what I have said and written at a number of points: if the Right, if not the bulk of the economics profession ever got the true logic of their field, that we should all be inventing, striving young capitalists, always anxious for re-invention, and to prevent (hi tom Friedman) ourselves from becoming “road kill” we would have a society not too far removed from the spectacle of one in the act of constantly tearing itself to shreds – my phrasing of part of Wendell Berry’s Jefferson lecture from 2012. So let the “factions” be unleashed: who will balance them today in the public’s long term interest? What econometric equation will answer that for us?
oops, sorry, that should have been Wikipedia, not Wikileaks. And using Wikipedia on economics as sort of a weathervane for the dominant currents in the field, and the politics.. No mention of federal fiscal austerity being tried and failing in all the discussions I read of the Panics and Depressions of the 19th century, which get individual coverage at Wikipedia… And to condense my broader point about Galbraith’s and Wray’s gambit on the correlation between public budget austerity and the depressions: it will be easier to show that the budget balancing didn’t lead to any economic panacea or magic than it will be to show prove that these attempts caused the depressions…especially when the triggering event was in an international trading commodity or credit market…but I could be missing something and I encourage them to elaborate further…it time to start a public discussion of what they have broached….
A scientific approach would contain the absolute number of respondents.
Reblogged this on Kezban KARABOĞA.