economics as science 1

8/12/2019 Economics as Science 1

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Vladimir Gligorov

Is there science of economics?

.(Y)our looking changes it. () Because our

minds... our minds get in the way. Looking at

something changes it. They call it the

Uncertainty Principle.The Man Who Wasnt

There

The position that Rosenberg and Curtain take is clearly untenable (What Is

Economics Good For?The Stone, NY Times, August 24). They have no support for their

claims and manage to contradict themselves.

They argue that economics looks like science, does what sciences do, talks like

science, but then claim that it is not a science because its subject matter is not scientific. And

the same goes, a fortiori, for practically all social sciences. That is startling in and of itself.

Assuming that can even somehow make sense, how do we know this? Economics has low

predictive power, so it must be the case that there are no stable regularities in economies,

societies, politicsthere are no laws to social behaviour. If there were laws, we could predict

what e.g. a specific policy intervention would achieve, but we cannot. In physics, we know

e.g. how to put a satellite in orbit around Mars, while in economics we do not know e.g. how

to manage monetary policy.

Why are there no stable regularities in human affairs? This is how Rosenberg and

Curtain explain: (T)he domain of economics includes a wide range of social

constructions They are made up of unrecognized but artificial conventions that people

persistently change and even destroy in ways that no social scientist can really anticipate. We

can exploit gravity, but we cant change it or destroy it. No one can say the same about the

socially constructed causes and effects of our choice that economics deals with. This, as far

as I can see, is all they give in the way of an argument and it surely is wrong even though it is

not clearly written.

First, they claim that social sciences cannot predict how institutions will change for

the very reason that they can change. That is obviously question begging. Perhaps the

argument is to be found in the claim that they, the institutions, are unrecognized, that is there

is lack of information. But that would be why there are social sciences. The other argument

might be that those are artificial. But that is also question begging. The fact that institutions


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are human made is aprima facieargument that they are predictable. The problem may be that

those are conventions, but again that would work for their transparency rather than against it.

So, there is nothing in the way of an argument to support the claim that economics lacks a

subject matter that can be studied scientifically.

One argument could be that we do not know what we are doing. For instance, people

are not perfectly or rational at all, so what they are liable to do is anybodys guess. Perhaps it

is all psychological, in which case, however, what people do would be rather predictable (this

generalises to any, shall I call it, naturalistic argument). Or it is that this persistent

institutional changes are unintended consequences of collective actions (consequences are

unintended because, that may be the claim, they are produced by collective action). But that

again does not imply anything about predictability. As an empirical matter the consequences

of collective actions may routinely not be predicted by those engaging in them, but that still

does not mean that they are unpredictable to the social scientist. Especially if these social,

constructed institutions display causal dependences, even if they are of our choice, as the

authors state. Indeed, in that case, even if there are no law-like regularities, if actions and

consequences are causally connected, the latter will be predictable in principle. Indeed,

predictability is usually taken to be one of the contributions of institutions and thus of

sociology or sociologically inspired economics, political science, or game theory.

At the end of their piece, which is about what is economics good for, Rosenberg and

Curtain suggest that an economic approach has much to contribute to the design and

creative management of institutions. Presumably because economic theory can predict the

consequences of institutions and help the construction of those which will protect us from

the knave. That does not just contradict their claim about economics not been capable to

predict, but it is a bit of a stretch when it comes to philosophy too. It also squarely contradicts

their claim that e.g. monetary policy should be more like art or craft (presumably that is what

creative here means), rather than guided by economic science. So, they do not have an

argument and they contradict themselves. Is there something to the case anyway?

As they spend some time discussing Friedmans claim that it is the predictions that

matter and not the truth of the assumptions, what does that mean? What one thinks about that

claim will of course depend on ones theory of truth, but if one wants to know whether the

theory will be descriptive or realistic, then the answer will be negative for some description,

e.g. on anecdotal evidence, or some folk-theory of reality. That is what Friedman meant by

saying that it did not matter whether the assumptions were true or theories were realistic and

what Popper meant by saying that the rationality principle is surely false, but explanatory (see


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model. The latter is exactly opposite to the purpose that Rosenberg and Curtain assign to

economics as a guide to political philosophy of institution building.

The interest in the issue of how scientific economics is and what is its predictive

power comes from the colossal blunder that is current crisis. It failed to be predicted by most

economists and was not prevented by policy makers like those in the central banks and in the

ministries of finance whose actions are informed by economic science. The policy failure is

not inconsistent with what is known in political economy, i.e. it was and still is predictable.

Still, economics has to go back to the drawing board, but that is not because its subject matter

is not scientific enough, whatever that means, but because some theories have been falsified

and some policies were wrongly designed or implemented. That also does not support the

claims that economics is not science.

economics as science 1

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