Is Economics A Science?

As per previous post, the laws of supply and demand do not apply to the monopolist. If an individual within a specific competitive market attempts to move against the equilibrium price as indicated by the laws of supply and demand, they will loose business to the competition.

True, except as previously stated, the laws of supply and demand do not apply to monopolists.

Agreed. And if individual participants choose to deviate or act in an irrational manner, they will suffer a resulting economic loss which will ultimately become unsustainable.

As previously mentioned, when using econometric models to predict the future there are two significant problems faced by economics and any science that studies large complex systems (e.g. geology, astronomy, astrophysics, etc.)

1) Exogenous events

2) Insufficient data

So if you say economics is not a science because practical models used to predict future events don't always accurately predict events, then you are basically saying all science is bunk.

Isn't that what science is all about - trying to model and explain real world observation?

Economics is no more conjectural than string theory and probably even less so. Because in economics we have centuries of data, we can see what happened to economies under various conditions and draw some conclusions.

Quantum mechanics may be good at making predictions, but ultimately one day it may be scraped for a more compelling theory. And if you are saying that Quantum mechanics is without controversy, you are wrong.

Additionally economics is a big field. As with any science, you will find a core of knowledge that is little challenged but as you get to the fringe, the leading edge, issues become more controversial. But again that does not mean economics is not a science. Nor does it mean that it is all bunk.

There is always a risk in any science that until a theory becomes a law the theory may be broken. And that includes quantum mechanics.

I think you have just validated my previous comments. Did the Fed and Fannie Mae know about the fraudulent misrepresentation of MBO's? Did any of those economists factor into their models the fraud, lax SEC, and derivative trading? No.

As with all complex systems, you cannot model:

1) exogenous events
2) insufficient data caused by the need to make predictions before that data becomes available.

I agree with you about trusting economists from investment banks or brokerages. They should not be trusted as they are paid to sell an agenda. But then no one from from those businesses should be trusted. I would also add, that one should be very skeptical of the talking heads one sees on TV. A lot of those business folks are talking their books (selling an action that will benefit the speaker at the expense of the listener) rather than giving an honest opinion or recommendation.

But again, in the final analysis, this is not relevant to the question posed in this thread. Scientists are frequently purchased to advance a certain cause be it political, legal (tort or criminal hearings) or commercial.

 

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Even a monopolist still faces a demand curve, though and the supply curve in a market with a monopolist is essentially the monopolists own marginal cost curve. The difference for him is that the demand curve appears to have a positive slope. For a non-monopolist, effectively the demand curve he faces is a horizontal line at the market price.

That is not what I am saying, but real science must be falsifiable. While some of economics is, much of economics is not in practice. In fact, even some of what is already falsified is still treated as viable. For example, it is well known that you cannot aggregate utility functions of different individuals, yet that is what the demand curve is supposed to be.

Think about this, real markets never reach equilibrium, not even dynamic equilibrium (according to the technical definition). How do economists explain this? They say that equilibria are idealized solutions that never (or at least incredibly rarely) apply in the real world. So how do you falsify a theory that revolves around the notion of an equilibrium, when showing that you never see the equilibrium is nor evidence enough?

The problem with the models is that, while I take your criticisms of why they fail, they fail more often than they are right, and that failure is never considered to be evidence that the model may be wrong. Again, how do you falsify a theory that fails often enough, but all such failures are almost never taken to be evidence that the model may be wrong (only as evidence for the presence of exogenous events).

An interesting this is that exogenous events and complexity generally were the focus of what was called "complexity economics" which most economists thumbed their noses at, much as they did to econophysics. Most economists thumbed their noises at behavioral economic too (and when I was in school the faculty balked at the notion of even having a course in behavioral econ.)

Economists don't even want their models challenged. I used to rely heavily on DSGE models and quickly came to the same conclusions as Robert Solow: that they assume the economy can be modeled as it is were a single person, making strictly rational decisions (even when hit by occasional unexpected shocks). As Solow said, they don't pass the smell test.

To an extent, but real science starts with observation, then hypothesis based on the observations. Economics proceeds in a more rationalist fashion. We suppose marginal utility exists, and we assume it can be aggregated across different people, even though it can't, we then use our marginal utility theory to develop a model, then we compare it to the real world. If the real world deviates from the model, we declare "exogenous events" and we look into tweaking the entirely theoretical model that had no basis in observation to begin with.

Modern macroeconomics started in much the same way. Keynes was brilliant, but he didn't start with a detailed understanding of the economic data. If your read his general theory he deduces his theory of the economy from fundamental principles and accounting definitions. Little wonder it is so close to useless as a predictive guide.

That is why the econophysics movement started. Economists do not start with the data, then develop a model, they generally start with some theory.

If physics worked like economics, we'd start with the assumption that heavier objects fall faster, and then when we see that they don't, we don't reject the original theory, we simply decide that some exogenous force must have been operating on the heavier object to impede the "natural" rate at which it should fall.

Aristotle once believed that the only path to real knowledge was a rationalist one. You establish premises, you use logic to reach conclusions, and if the premises are correct, then so are the conclusions. At most, observation is conducted to verify the mental and logical construct you imagined in your head. That is largely how economists still proceed.

The curious thing is that the extreme of this rationalism is still championed by the Austrian school adherents (what they call "praxeology"), but it has its fingerprints all over the fundamental underpinnings of economics. Economists hate praxeology, but seem incapable of realizing that marginal utility theory grew from a fundamentally similar mechanism. The big difference is that mainstream economists use very precise mathematical logic rather than the Austrian's less precise plain language logic.

I disagree to some extent. String theory has a lot of data at least as to quantum mechanics, and it is consistent with that data. String theory is conjectural when it goes beyond the data and makes new predictions, obviously.

Modern economics has as its underpinning a number of dubious theoretical constructs like marginal utility theory and the notion of human rationality and a whole field has been built around them.

Economists are beginning to go back and revise those underpinnings and try to bring them more into line with the real world, but it's only just started to do so, and the scientific method is only observed by some of the people interested in that task.

Please show me where I said it was free of all controversy. First you can break QM down. Quantum electrodynamics is by some accounts (such as that of Richard Feynman) the single most accurate scientific theory that mankind has ever produced, by an order of magnitude. Quantum chromodynamics, on the other hand, has had its successes and is a very strong model, but it is not quite as robust as QED.

Economics cannot touch either QED or QCD, of course. Using these theories we can puzzle out what is occurring at the center of the Sun, despite the complexity of it. Economics has no successes that rival anything in quantum mechanics.

Since string theory incorporates quantum mechanics, it can, at least, claim to be a good description of the world as we currently know. Al the remains to be seen is if it's additional predictions hold up once we are finally able to test them.

Economics can only describe why certain events in the past occurred as they did, right now, and whether its descriptions of the causes of past events is correct is mostly conjectural.

I didn't say it was all bunk, but the fundamental theory, to the extent it rests on conjectural theories like marginal utility, of Keynesian models, doesn't explain all that much. Whether it is "science" or not, not all non-science is "bunk" by definition. In this sense the opposite of science is not "that which is wrong", but rather some other cultural object (such as philosophy or, even better, history would be).

Economics is very good at explaining a relatively stable market or economy...but not good at all at establishing that its explanations are in fact correct. To be somewhat flip, it can be likened to living in Phoenix, Arizona, and explaining all the warm, sunny weather they have by saying "the Sun God wills it so." If there is Sun god, it seems plausible, and it certainly seems to get the weather in Phoenix spot on 99% of the time. Sometime, though "exogenous events" occur and it rains, which definitely doesn't mean we should abandon our theory of the Sun god's control of the weather.

Less facetious, people once believed that heat was an invisible fluid called caloric that resided within objects and repelled itself, and was used to explain the properties of heat transfer. It was a very successful theory descriptively, since it made sense of why heat behaved the way it did. We have since abandoned the theory and no longer believe that it accurately described what is physically occurring, but that doesn't mean the theory was not useful as a guide to describing events. It was, in fact an improvement over the prior theory, the phlogiston theory of heat.

The good news for economics is that sometimes, data trumps theory, and so we can have some hope that eventually a correct theory will emerge. In the mean time though, we teach the current hodgepodge like it's fact (and central banks actually base policy decisions on the DSGE models, even though many economists will admit that they should never do that).

It may be that it is now or will soon proceed to a more strongly scientific basis. Certainly, as I said, it has aspirations to that. I am not convinced, obviously, that it has realized those aspirations any more than psychology or history has.

That doesn't mean that some of what we now think we know won't survive into future, more robust economic theories. Some likely will, but I would be surprised if, in 100 years time, the economics we teach today is still largely the staple. I think current economics is likely to be viewed in the way we view alchemy...as a sort of proto-chemistry, or like we view Caloric theory today, as a quaint reminder of the painful first steps of a new science.

Actually, a quibble, all science is falsifiable, even the "laws". The scientific distinction between them is that, in general, laws summarize a body of observations where no contrary observations have ever been noted, but do so without describing the underlying mechanism, whereas a theory described an hypothesis that has been repeatedly and solidly confirmed by evidence, and typically does describe the mechanism by which the phenomenon occurs. Theories give a proposed explanation for "why" the world works the way it does, where as laws just tell you the way the world works. Neither is necessarily more or less certain to be falsified in the future, and either would be subject to falsification if contrary evidence arose.

Right now, economists cannot objectively model the financial crisis even with all the data and incorporating the exogenous events. Instead economists looking at the question come up with their own explanation, which will differ in its details from that of other economists looking at the same issue. All the models agree that we were due for a collapse, but that's because each is a "just so" story of the collapse. Again, the Sun God theory explains the weather over the past year in Phoenix, but only because I constructed it to explain a string of warm and sunny days in Phoenix.

At present there is no one generally accepted explanation for the crisis (or the Great Depression, for that matter), but rather a multiplicity of them, despite mountains of data and 20/20 hindsight. They differ ways that make it impossible for them all to be completely right, so the best we can hope for is that they are all describing the same elephant. The reason these explanations differ is that subjective views color the analysis of the economists involved and that in turn affects their models. (That doesn't mean "partisan" subjectivity, mind you, but for many reflects things like a preference for explaining events based on the data they know best.)

The multiplicity of models is not such a problem, but one would hope, if these descriptions are indeed scientific to any degree, that each of these disparate models of the same calamity would eventually either be subsumed under the rubric of a single model or discarded as incorrect. There is a famous example of just that in string theory, coincidentally. For a while there were *five* different superstring theories, with arguments over which was "correct." Then in the mid-90's theorists developed "M Theory" and showed that the five different versions of string theory could be shown to be describing M Theory seen from different perspectives

I wouldn't hold my breath for such a consensus to develop in any area of economics, though, let alone in descriptions of the 1997 collapse.

If you want to call economics a "science," I don't mind and that is the tradition, but one should keep in mind how primitive it is compared to the hard sciences, and why we relegate it into the "mere" social sciences, in the first place. It may be science, but that doesn't mean anyone who knows economics knows what they are talking about when it comes to describing the real world. As you yourself say, any economist who makes statements about the real world need to add a cautionary note that he may be failing to account for unknown data and unexpected events, both of which *will* cause the real world to deviate from any description given.

Edit: I feel like I should add, "But for a discipline that purports to tell us about society that doesn't accurately describe the past, present or future, it's great!"

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