Thursday, January 23, 2014

Rodrik on Our Science-ish-ness

On occasion, economists affect to be "scientists" - for example, I once was a TA for a professor who always gave his first lecture of the semester in a lab coat. Our papers sure do look science-y with all the greek letters and whatnot.  However, our scientific pretenses can leave us vulnerable to the charge of not being "real scientists" (or good ones), particularly when economists can be found on opposite sides of public debates.

While the question "is economics a science?" is a little pedantic - the answer is depends on how one defines science - raising it does sometimes lead to some useful reflections on what it is that we actually do.

In an essay for Institute for Advanced Study's Institute Letter,  "Economics: Science, Craft or Snake Oil?"  Dani Rodrik offers offers a number of characteristically interesting thoughts on the topic, including:
Economics, unlike the natural sciences, rarely yields cut-and-dried results. Economics is really a toolkit with multiple models—each a different, stylized representation of some aspect of reality. The contextual nature of its reasoning means that there are as many conclusions as potential real-world circumstances. All economic propositions are “if-then” statements. One’s skill as an economic analyst depends on the ability to pick and choose the right model for the situation. Accordingly, figuring out which remedy works best in a particular setting is a craft rather than a science.

One reaction I get when I say this is the following: “how can economics be useful if you have a model for every possible outcome?” Well, the world is complicated, and we understand it by simplifying it. A market behaves differently when there are many sellers than when there are a few. Even when there are a few sellers, the outcomes differ depending on the nature of strategic interactions among them. When we add imperfect information, we get even more possibilities. The best we can do is to understand the structure of behavior in each one of these cases, and then have an empirical method that helps us apply the right model to the particular context we are interested in. 
Or, as Keynes said: "Economics is the science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world."

See also related thoughts from Mark Thoma and Chris Dillow.  
 

7 comments:

Anonymous said...

A science forms a hypothesis (a model) and tests it. Economics forms a hypothesis and clings to it. Evidence in real science compels revision. Evidence in economics is ignored or assumed away. Political considerations -- the interests of the entrenched businesses, political camps and academic traditions -- swamp any science in economics.

Robert said...

I think the main problem most economists have when we try to think about natural sciences is that the only natural science they know of is Physics. Most actual natural scientists in the USA are biologists (for simple economic reasons).

It just isn't true that natural sciences all include precise mathematical formulas which always hold. That is the definition of physics.

Obviouasly organic chemists understand that that formulas they use don't apply inside of stars.

As anonymous noted, the difference is that in natural sciences theories, no matter how elegant, bow to facts.

Rodrik is an excellent economist (Keynes wasn't bad himself). But even they have too much respect for economic theory and too little for empirical work. The constructive part of economics is finding out which model (if any) fits the data of interest. Oh and developing new ones if no old one works.

The idea, however, is that the high status part of economics is the set of models and the empirical part is subordinate.

In fact, a huge fraction of current economic research is based on common sense and data (the assumptions required for identification being ones which seem obviously true to the average person and not ones which are incomprehensible until explained then absurd once understood).

Each result is fairly convincing. There is no grand theory. The mass of fairly convincing results is becoming a science. But economists (even the really smart, open minded and non theory addicted ones like Rodrik) still think that economics should be like physics.

It isn't the only branch of useful knowledge. It isn't even the only branch of successful natural science.

Bill C said...

Thanks for the comments. There is a great deal of empirical work going on in economics - the majority of journal articles involve regressions. But statistical evidence can be consistent with multiple explanations and the particulars of any econometric analysis can be disputed. Ultimately we need models to make sense of the data - ideally there's a constructive interaction between theory and empirical work. The difficulties of settling some of the questions in macroeconomics can come from the fact that we can't do controlled experiments, and that we are analyzing something that is itself changing over time (so, in that sense, our tendency to use a physics model may be problematic)

Roger said...

I'm thinking that as long as people like Hubbar,d Haskell, Mankiw and Taylor (the four horsemen oof Romneynomics) are granted high status economics is snake oil salesmanship, not science. Granted, three of those once made actual contributions to the field and really advanced knowledge, but they seem to have traded integrity for a mess of (hoped-for) porridge.

Bill C said...

Indeed. Some of the things Mankiw and Taylor say are troubling - they've both made major contributions (and Taylor was very gracious when I met him once) but sometimes it feels like they're twisting things to stay in the good graces of Republican pols. It is hard/impossible to really be a 'value neutral' social scientist, I suppose, especially if you're trying to be a commentator (and sell books) at the same time.

djb said...

Yea but then keynes showed us models that he thought did apply to the real world and criticized those that didn't. ..... he didn't stand on the fence......... "Oh everyone is right in their own way...lets go to the club and debate politely"

AndersH said...

I find it amusing, but also a bit sad, to see economists coming to terms with the fact that they're social scientists. I mean, these kinds of dilemmas about the social sciences (and now and then within the natural sciences) are not unknown, and there has been plenty of articles and books written about them.
The production of knowledge, the influence of power, what type of material gets an arena, reflecting on who you are and what you do, which interests are served, and the limits to what we can say and what we're allowed to say. These are all incredibly important issues that reach far beyond, say, an internal discussion on microfoundations.
Yet all of the literature that exists and the arguments that have been made seem to have passed the economic field by (at least I never see a hint of it even in the writing of liberal economists). Is it because acknowledging that kind of work (much of which springs from critical and post-modern sources) would brand you as a dirty f'n hippie and bar you forever from the kind of respectability that pretending to be a natural science affords? That's what I've started to suspect.