The stuff we don't agree on is the fun stuff

A lot of people have been talking about the latest Economist article about why economics is different than “science”: whereas their peers in the natural sciences can edit genes and spot new planets, economists cannot reliably predict, let alone prevent, recessions or other economic events. Whenever I read this sort of article I am left with the impression that the author doesn’t understand economics or natural sciences.

1.      It is not true that economic theory cannot predict.

a.       In the late 1990s and early 2000s demand for and prices of organic milk increased rapidly. Economic theory suggests that in the absence of barriers to entry new firms will enter the market and increase supply. The Northeast Organic Dairy Producers Alliance reported that there was a 370 percent increase in the number of organic dairy cows between 1997 and 2001.  Between 1990 and 2003 the number of organic dairy farms in Vermont increased from 3 to 60 while the number of conventional farms fell from more than 2,000 to 1,400.  Events consistent with the predictions of basic microeconomics happen all the time. The point is that it is not news.  

b.      People make much of economists not predicting the financial crisis. The only problem is that Schiller, Rajan, Schwartz, Roubini, Baker and others all gave warnings. Moreover, the recession was predicted by this very simple tool. By the way, based on that tool I am not currently predicting a recession in the near future.

2.       No empirical research produces certainty. One of my primary objectives when teaching quantitative methods is to emphasize that statistical inference does not produce certainty. Whether you are historian sifting through primary sources or an economist analyzing a random sample or the population you are trying to understand a bigger picture that you can never actually see directly and fully. Statistical inference does not provide certainty; it enables you to quantify your uncertainty.

And by the way, economists didn’t do this.

3.       Not surprisingly, natural scientists do not possess a giant pile of knowledge that they all hold with certainty.

a.       How many universes exist?

b.      How many planets are in our solar system? Nine. No. Eight. Wait. It’s nine. I think.

c.       Until relatively recently, most astronomers thought that the expansion of the universe was decelerating.

4.       If they had such certain knowledge who would want to study them? Why would any intelligent and curious person want to study a discipline that has all the answers? Students in principles courses want the answers. People who go on to graduate school do it because of the questions. I really don’t think people become physicists because they want to be able to pass on all the known certainties about the universe. The stuff we don’t agree on is the fun stuff!

5.       As for the method of generating knowledge, McCloskey noted quite a while ago (apparently while no one was listening) that economists, physicists, sociologists, chemists, historians, etc. are all really doing the same thing. They are trying to come up with something new to say and then persuade other people that they are right. Natural scientists can often use controlled experiments to generate persuasive evidence, but not always. Economists often cannot run controlled experiments, but sometimes they can.  

6.       In short, I find the whole “Is Economics A Science” debate pointless.