Economic Science is to Science as Fantasy Football is to Football
Friday, October 19, 2007 at 04:38PM
Skeptic in Economics, Economics--intellectual crisis, Free market fundamentalism

This week three gents won the Nobel Memorial Prize for "Economic Science."  The idea that the study of political economy is a science is misleading to the general public and, apparently, to a great many economists.  To call the field a "science" is to imply that it employs the "scientific method," developing hypotheses about cause and effect or other relationships in the physical world and attempting to disprove or confirm them empirically.  To the contrary, economists, especially macro-economists, are not able to test anything because the real world has a vast number of uncontrollable variables (including populations who refuse to cooperate). 

Wise economists recognize this and properly regard their ideas as merely insights or arguments in the legitimate (but unscientific) field of "political economy."  Economic "scientists," on the other hand, seem to deal with the real world by ignoring it when it does not agree with their beliefs.  The latter often develop mathematical models and run them through computers as though their field can be explained as simply and elegantly as Isaac Newton explained the laws of motion.  Unfortunately for them, the real world of macro-economics has a complexity more like that of the life sciences.  A principal focus of this blog is likely to be exposing the unreality of their views, which can do great damage when promoted by influential people. 

On the bright side, the recent Nobel prize was for work on "mechanism design theory."  That this sub-field exists is a challenge to free market fundamentalists who purport to believe that free markets yield the best solutions to all problems.  The fundamental tenet of this sub-field is that all markets have rules and that the particular rules chosen can have great influence on transaction outcomes.  For a brief and useful summary, see John S. Irons

Update on Saturday, October 20, 2007 at 10:15AM by Registered CommenterSkeptic

"Carping from time to time over the unworthiness or politics of a particular Nobel peace or literature laureate is expected.  But when it comes to economics, it's the award itself that sometimes comes in for sneers; even a couple of its winners have suggested it be abolished."  Today's New York Times.  The story quotes James K. Galbraith, "They're not engaged in the problems of the actual world."  1974 winners Gunnar Myrdal and Freidrich von Hayek were the two laureates who suggested there should be no prize for economics.  Myrdal "rejected the idea that the field of economics could claim a Nobel on the basis of its scientific rigor."  But they're still doing it, so I'll continue "carping." 

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