Economics as a science?

ECONOMICS AS A SCIENCE?

By Johnny Fulfer

Illustration by Heske van Doornen.

Is economics a science? Could it be? Should it be? The debate is as alive today as it was in the early 20th century. This article reviews some of the key arguments in the discussion and provides a helpful backdrop against which to rethink the purpose of economics today.

In 1906, the influential American Irving Fisher argued that economics is no less scientific than physics or biology—all three aim to discover “scientific laws.” While they may not always be represented in reality, Fisher argued that scientific laws are fundamental truths in nature. Newton’s first law of motion, for instance, cannot be observed. Only if certain circumstances were met, a body would move uniformly in a straight line. Fisher concluded that the same holds true for economics.

But not everyone agreed. The discipline of economics was charged with unsound methods. Specifically, economists were accused of using the deductive method without the necessary level of precision. Jacob Hollander addressed the charges in a 1916 essay, arguing that scientific inquiry involves uniformity and sequence. Progression in science relies on the formation of hypotheses, which may at some point become ‘laws.’ Observation and inference are the first steps toward the creation hypotheses. The final step in the scientific process is verification, which is required before we move from theory to law. Without verification, he argued, “speculation is an intellectual gymnastic, not a scientific process.”

Hollander’s work reveals one of the questions at the heart of this debate: Is verification required, and even possible, given the complexities of economic phenomena? Scholars have a disposition to rely on the works of previous thinkers, Hollander argued, without endeavoring to move beyond familiar perspectives.

This question lives on today. In a 2013 opinion piece for the New York Times, Stanford economist Raj Chetty argues that science is no more than testing hypotheses with precision. Large macroeconomic questions such as the cause of recessions or the origin of economic growth “remain elusive,” Chetty writes. This is no different than large questions faced by the medical field, such as the pursuit to cure cancer. The primary limitation of economics, Chetty argues, is that economists have a limited ability to run controlled experiments for theoretical macroeconomic conclusions. The high monetary cost and ethical standards make these types of controlled experiments impractical. And even if we could run a controlled experiment, it may not matter in the long run, for society changes.

In a 2016 essay, economist Duncan Foley added to the discussion. He argued that the distinctions between the social and natural sciences are not clear. Both come from the same scientific revolution, and both are influenced by values. The notion that scholars in the natural sciences “pursue truth” is a flawed assumption. Foley argues that scholars in the natural and social sciences choose which problems to solve and the methodology they use. This choice involves values, since a scholar must value one research project more than another.

Examining the scientific nature of economics, John F. Henry, an economist at the Levy Economics Instituteexplains that neoclassical economics holds a position of influence in society because of its universal and abstract nature. Henry maintains that we should reexamine this assumption of universality. If economics is based on subjective values, how can it be considered universal? Should economists continue making ‘progress’ toward a more scientific structure of knowledge? This leads us to ask how we define progress. There is no end to this debate.

It seems unproductive to continue asking such questions. Rather than debating whether economics is or is not a science, perhaps we should shift the discussion toward questions that ask why economics needs to be a science in the first place. Where does this desire to be ‘scientific’ come from, and why is it so important for economics to be considered scientific? Perhaps the real issue is the determination to make economics a science.

This article was originally published on Economic Questions (formerly The Minskys).

2 comments

  1. Shahidul Islam

    I agree with Fulfer. Largely Science means to know the unknown.But we usually take any revolution for the progress. But this may not be true. Whether we are progressing or regressing it is a big question today. If progress means increase of happiness, the question arises that are we, the modern man possessing overflowing wealth and gadgets, more happier than the foragers? As for example, now we are living in plastic age.Plastic made our life more comfortable,but now Plastic is a devastating man made material which threatens human civilisation.Today’s economy is not beneficial to all the people of the world.So research must be done which type of economy will bring more happiness to more people. So it is a fundamental science.

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  2. David Punabantu

    Economists is a science. It is just that economists just don’t know it yet! An example, take a budget “X” it represents a certain percentage of the GDP to be produced over a year. If budget “X” represents 30 percent of the GDP then the monthly tax rate is 2.5 percent. If budget “X” was to consume the entire GDP then the tax rate threshold would be 8.3 percent per month. In reality taxes are over this threshold. If for example taxes are 30 percent every month, then in the first month 30 percent of the GDP is taken leaving 70 percent of the GDP. By the time you touch the fourth month or cycle it is 30 percent taxes facing 10 percent of the GDP which means in real terms the 30 percent tax is 300 percent. By the fifth month the budget starts to recycle it self. If means government collects the budget and spends it and recollects it, and respect it several times within a calender year. It is like printing money under Keynesian economics but recycling. Within this people’s wages buy less as government has already spent the wages and an economic crisis arises. At each intersection of a new budget price hikes occur which in turn affect human spending. The interface between the budget consuming all the GDP and no GDP creates an informal economy- non existent economy. In other words like in physics E=mc2 meaning half wave half matter, the economy becomes half formal and half informal. At that same interface government coffers usually run dry as all the GDP is consumed hence supplementary budgets and taxes move in. In other words there is a limit to government taxation that economists cannot grasp. Economists need to consult mathematicians!

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