This is my response to Models tell us more than hindsight,  in which Tim Harford  defends economics and modeling against a critique of a historian-turned-journalist (linked here.)  I’ve been saying something like this for a long time and Harford’s piece just gave me another chance to say it.

My argument is that social reality is historical (the way physics and the realities it studies are NOT historical, and the way that evolution is historical*) and that the social sciences are really parts of history and tools of history. So if a model works, use it!

The big problem is that even though economists always put in little caveats about the limits of their models, at crunch time they aren’t nearly as careful as they should be. I have a particular grudge with regard to the present recession (the longest and deepest since 1929). The dominant theory of economics (Chicago School) was working with a model (efficient markets) that essentially said that this recession could not happen. The term “The Great Moderation” was floating around, which was a claim that a recent actual historical moderation and stabilization of the economy (consistent with the efficient markets theory and other components of the dominant paradigm) actually meant that the theory was right and that there could be no bubble or slump again. But the Great Moderation ended in 2006 or so. ( I have suggested that this big recession just be named The Great Moderation Recession, but no one has bit on that.)

Furthermore, the economists who were putting out these ideas are unrepentant. They’re institutionally entrenched and are able to claim that they were never interested in the practical applications of their theories and have not been implicated in the mistakes that were made (something which was not really true),  and also that their theories are unscathed, since with the insertion of a few jimmies and shims and kludges they still work pretty well.

I should add that an additional flaw in economics is that there was, within economics, no way for the rest of the profession to show that the efficient marketers were wrong, except by giving them control of the economy in order to see what would happen. Plenty of economists were suspicious, but there was no way for their suspicions to be brought effectively to bear against the orthodoxy. Economics is just too inconsistent, incomplete, and ill-formed for that to be possible.

As science has progressed from mechanics to thermodynamics, sub-atomic physics, evolutionary biology, and social science, at each stage there has had to be a redefinition of science and the renunciation of certain goals of the earlier sciences (eg. ,  predictivity). Economists have underestimated the degree to which this had to be done. (The whole complex of ideas around entropy, chaos, complexity, non-linearity, non-ergodicity, etc. add up to a powerful indictment of the formalisms used by mainstream economics, and people have been saying something like this since formalization became dominant in the 50s and 60s.)

It’s generally true that physicists, chemists, and biologists have been unimpressed by the accomplishments of the social sciences, and my belief is that they are right, ecxcept that many of them have the idea that if they had been the ones doing social science, they would have done it right. What I think is that the social sciences will never get the kinds of results that the “hard” sciences get, and it’s not because they’re doing it wrong but because that goal is inappropriate.

I’m also convinced that a lot of social-science scientism amounts to pulling rank and even fraud. Economists have been extremely arrogant in their claims because they’re “The smartest people in the room”, but this is bogus because they never really got the science right. (Alchemy is difficult too.) There are a lot of money and power at stake, and economists have not resisted the temptations that come with that.

In a way I’m just saying that history should be guiding theory of social science the way evolution is the guiding theory of biology.

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