Two weeks ago, Eugene Fama, Lars Hansen and Robert Shiller were awarded the Nobel Prize in Economic Sciences for their contributions to “Trendspotting in Asset Markets.”
Since then, some thinkers have questioned whether economics deserves to be called a “science”.
Here is a round-up of their arguments:
Liam Halligan (Telegraph UK): “Time to stop this pretence — economics is not science”
- Economics isn’t a science, and as a field, doesn’t deserve a Nobel along with the hard sciences like Physics, Chemistry and Medicine.
- Unlike scientists, economists don’t provide solutions to the broad, macro problems humans face today.
- The research findings of the 2013 winners don’t agree with each other, which is the opposite of what “science” is.
- Economics relies too much on “soft” fields like politics, sociology and history to be a science.
“Economics is a study of human behaviour — above all, the allocation of scarce resources between competing ends. It requires the analysis of economic, commercial and financial life in all its institutional richness, or it is nothing. A solid grounding in theory and numeracy is essential but so, too, are broad dashes of politics, history, sociology and common sense.
Recent “Nobel” recipients have been rewarded, instead, for work that claims to have established “certainties”, made “findings” and discovered “relationships” — all of which, when it comes to economics, is bunkum.”
Raj Chetty (New York Times): “Yes, Economics Is a Science“
- Just because economists disagree does not mean that economics is a “fake” science. Economists today are approaching problems using an empirical, scientific method.
- While economists may not be close to solving the big picture, “macro” issues with the economy, they have had considerable success with empirically testing “micro” solutions.
- “Big data” has also helped, as economists now have access to millions of data points which enables them to isolate causal relationships. For example, a Harvard research study he conducted with a 2.5 million student dataset was able to isolate the causal effect of high-quality teachers on students’ outcomes as adults.
“Consider the politically charged question of whether extending unemployment benefits increases unemployment rates by reducing workers’ incentives to return to work. Nearly a dozen economic studies have analysed this question by comparing unemployment rates in states that have extended unemployment benefits with those in states that do not. These studies approximate medical experiments in which some groups receive a treatment — in this case, extended unemployment benefits — while “control” groups don’t.”
Paul Krugman (New York Times)- “Maybe Economics Is A Science, But Many Economists Are Not Scientists“
- Economics is a science because it can be approached scientifically, and its theories can be tested.
- However, economists aren’t scientists because most of them are too politically polarised to view their findings objectively.
“Whole subfields of economics, notably but not only business-cycle macro, have spent decades chasing their own tails because too many economists refuse to accept empirical evidence that rejects their approach…all too many economists treat their field as a form of theology instead.”
Caroline Baum (Bloomberg View)- “Economists Should Get Out of the Science Lab“
- With hard sciences like physics, scientific results can be repetitively duplicated, whereas the answer to most of the big economic questions is usually “it depends”.
- Chetty cites examples of studies in unemployment that use the scientific method, but similar studies on the same topic have given wildly varying results.
“Chetty admits that the “fundamental challenge” faced by economists is “our limited ability to run experiments.” Economists may try to hold everything else constant — “ceteris paribus” — to test a single variable, but they can’t. Nor can their econometric models, no matter what the economists claim.”
Whoever can put an end to this debate may or may not deserve a Nobel Prize.