Is economics a science? Yawn!

Matt has written a long post discussing Rosenberg and Curtain’s NYT article about the science of economics. Their basic point is that economics has a poor forecasting record so it’s not a science and we should just treat it as a useful art. Matt’s response engages directly with the philosophy of science but I think an interesting perspective is raised by Paul Krugman in his reply. He first points out that economists’ models have actually performed very well throughout the crisis and Bernanke is far from an artist:

…far from acting as a free-spirited improviser, Bernanke has been largely implementing recipes developed in the academic literature years before.

These are easy points to score against the philosophers, who appear completely clueless about economics. Worse, they spend all their time attacking the strawman of logical positivism, which has never really described the way economists or other scientists actually work. But I’m going to leave that argument to Matt because I think, in one key respect, Paul Krugman goes too far. He concludes by claiming that economists fail as scientists because they refuse to allow their models to be falsified:

While economists using textbook macro models got things mostly and impressively right,… it’s hard to find any economists who changed their minds when their predictions, say of sharply higher inflation, turned out wrong.

The first thing to remember is that economists don’t get to conduct experiments, so all tests of a causal connection are very noisy. Since we don’t know the counterfactual it’s difficult to know the outcome of even ‘natural experiments’. That means we should be cautious in updating our beliefs based on individual observations, which sensibly leads to sticky priors.

More importantly, I’m not sure what Krugman expects from the profession. If my counterfactual were the acknowledged hard sciences I’d be inclined to think we aren’t doing so badly. As Max Planck observed sixty years ago

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

  • “That means we should be cautious in updating our beliefs based on
    individual observations, which sensibly leads to sticky priors.”

    Very very true – conceptually this fact appears to fit neatly into philosophy of science type conversations, but many people are just more interested in scoring points by attacking economics based on prediction! Rosenberg has been doing this for a long time, and I thought he had changed his tune a few years back – seems not!

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