Monday, October 21, 2013

Is Economics a Science?

Yes, says Raj Chetty:
But the headline-grabbing differences between the findings of these Nobel laureates are less significant than the profound agreement in their scientific approach to economic questions, which is characterized by formulating and testing precise hypotheses. I’m troubled by the sense among skeptics that disagreements about the answers to certain questions suggest that economics is a confused discipline, a fake science whose findings cannot be a useful basis for making policy decisions.

That view is unfair and uninformed. It makes demands on economics that are not made of other empirical disciplines, like medicine, and it ignores an emerging body of work, building on the scientific approach of last week’s winners, that is transforming economics into a field firmly grounded in fact.
He then compares economics to medicine, which is a good example of another field fueled by scientific inquiry but with similar probelms of using 'social' data where cause and effect are hard to isolate.
Health researchers have worked for more than a century to understand the “big picture” questions of how diet and lifestyle affect health and aging, yet they still do not have a full scientific understanding of these connections. Some studies tell us to consume more coffee, wine and chocolate; others recommend the opposite. But few people would argue that medicine should not be approached as a science or that doctors should not make decisions based on the best available evidence.
He then goes on to talk about the advances in empirical economics that are driving the quest to find answers to these questions.

I think he is mostly correct though he overstates our ability to isolate causal links in data and over-sells the promise of economics experiments like those of Esther Duflo that are a lot different than in medicine as they are always in a specific context where the generalizablilty can easily be questioned.  [For example, you can easily question how applicable a specific educational intervention is to the rural northeast India villages in which it was conducted but the results of a test of a new drug among the same population is much harder to question]

On the other hand I think we are much easier to accept the limited evidence we have for health issues and act on the best available evidence.  In economics we suffer the delusion that we can find the real answer and only when we convince ourselves that we have do we feel comfortable to offer policy advice.


Tseten Namgyal said...

I think economics is more a math than science. You plug in inputs, you get outputs. Similarly thats how the investing world works too.

Thanks to the Fed to making Economics a fools game. Read Peter Schiffs opinion on this

Tseten Namgyal said...

Im not sure if my previous comment went thru or not. Anyways sorry if its a double post. Just wanted to clarify that Economics is not a science. Read more at Peter Schiff Blog
or Nouriel Roubini