Monday, July 28, 2014

The Science of Economics

I often get some heat when I make the claim that economics isn't science. Science is not a field of study but a method of study, they say, which is sort of true. Alright then, let's be more precise.

Economics is the scientific study of "the economy" in the same way that theology is the scientific study of God.

Theology is a very peculiar kind of science, because the object of study — God — does not reveal himself to those that engage in the studying. Nobody has ever interviewed God. Nobody has even seen him or can prove his very existence, so nobody can know what God really thinks or wants (not that this fact stops some people from acting as if they did). Now, of course, you can still do science and study revelation and religious practice and rituals using the historic texts (e.g. the Bible), but you will only learn what people thought God wanted, what people believed, and what people did to share that belief — even with people that didn't care. So the study of God (the literal meaning of "theology") is not so much about God but about the people who do the studying. So it's really like doing alien research, for example by interviewing people who claim to have been visited or abducted by aliens. Here again, through these interviews will learn absolutely nothing about aliens. You will only learn about the people (and the minds of those) that make these alien claims.

In the same way that theology (or alien research) is not the scientific study of God (or aliens), economics is not the scientific study of the economy. Now, in contrast to (earth-visiting) aliens there is an economy to study, but the science of economics does not care about the real thing. As I've shown in an earlier post: when confronted with facts in the real economy that contradict claims in their economic theory they dismiss the former by saying that you needn't bother with facts as they don't matter. Only economic theory does. In the words of David Stockman: "People will never agree about the facts, but it's logical..." (Here's the video. The quote is at 7'30").

There is ample literature that shows that the science of economics distorts inconvenient facts in their textbooks (1), replaces hypotheses that are both plausible and empirically observable by other hypotheses that are neither (2), but that just so happen preserve the desired ideological properties of the economy (e.g. equilibrium), or simply makes stuff up and presents it a logically derived theory (3).

Here are a few books that prove all the above claims, and much more. I can only recommend that everybody who cares about the well-being of the economy in general or the middle class in particular reads some (or all) of these books to inoculate oneself against the nonsense that is economic "theory"
  1. The Economics Anti-Textbook by Rod Hill and Tony Myatt
    This book serves both to teach and debunk microeconomics. Each section starts with a summary of the theory as presented in a textbook, and then proceeds to show where ideological bias, logical inconsistency or simply empirically unfounded invention taints, distorts or invalidates the theory. Hill and Myatt don't always disprove the theory but show convincingly that more plausible alternatives exist. Helpful questions for your professor allow economics students to probe their teacher's openness to reasoned debate.
  2. Zombie Economics by John Quiggin
    Quiggin's book is particularly enlightening about economics' unwillingness to accept empirical evidence. Analyzing the most important factors that led the world into the financial crisis of 2007 he shows a) how these theories contributed to the crisis, b) how the crisis disproved important claims of these theories, but most importantly c) how the economics profession keeps defending these refuted claims tooth and nail, despite all the evidence that the crisis piled on their doorstep.
  3. Economics for the Rest of Us by Moshe Adler
    Adler does not actually debunk any of the theories he's discussing in the book, but he shows that they were conscious choices by economists in the face of better, more plausible theories because they had ideological bias against these theories or any of their (sometimes distant) implications.
Each of these books shows convincingly that the so-called value-free science of economics consciously chooses theory that fits its ideological pro-market bias and summarily dismisses any that contradicts it (or that leads to an ideological conflict down the road). This pre-determinism alone is sufficient to disqualify economics of the label "science". But what these choices also show is that economics does not really care about the economy "out there". Instead, economics is an attempt to indoctrinate the peoples with a certain purely made up conception of the economy where the Free Market guides everything perfectly and flawlessly with its Magical Invisible Hand. In that respect, economics is not that different from theology.

No comments:

Post a Comment