Tuesday, February 23, 2010

Economics as astrology?


John Emerson over at Trollblog asks a very good question:
How flawed is economics?
And then he continues:
How deep does the problem go? I can’t prove anything, but we need to consider the possibility that the problem goes all the way down. Everyone except Eugene Fama knows that there’s a serious problem, but they’re mostly trying small tweaks and trying to make sure that their faction comes out on top. I’m suggesting that the larger claims of the science of economics are fundamentally unjustified.

One comparison is with alchemy and astrology. There was a great deal of truth in those sciences and they provided the foundations for chemistry and astronomy, but their largest claims were flatly wrong. The link they saw between their data and their empirical predictions and practical claims (the transformation of metals, eternal life, the prediction of the future) was nonexistent. The grand claims were bogus.

The second problem with economics is related to the first. Even within the orthodox schools (after excluding Austrians, Marxists, and other alleged fossils) there’s incredibly wide disagreement about critically important questions. You can always get an economist to say what you want them to say. (No, this is not true of climatologists).

...

What economics really is is a form of expert advocacy, like law. No one says lawyers don’t know anything. They’re very bright and knowledgeable and, in the context of our society, necessary and powerful. They do know a lot, but no one calls them scientists. If economics isn’t alchemy (or unscience), it’s law. Economists are highly skilled mercenary advocates within an sloppy, open system which is always in the process of redefining itself. And like most mercenaries, economists are most sympathetic to those who can afford them.

There's quite a bit more. And the comment section is very interesting, too.

I would suggest, off the top of my head, that the real problem of economics is that economists, having succeeded in creating a number of simplified models of reality, have forgotten that these are simplified models of reality. Early approximations, not THE ANSWER. I have criticized what I know of Freakonomics and related exhibitionist exercises for exactly that kind of tunnel vision. In that case, smug tunnel vision.

Image: an astrological vision of the universe. Pretty, isn't it?

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