(Paul Krugman, cited by Brad DeLong)
How flawed is economics? 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). They don’t have to be fake economists — they can be from the best schools, and none of them will ever be disbarred, defrocked, or expelled. When economics is being taught in college there are definite right and wrong answers, and economics is made to seem like a coherent system. But the minute that something important and real is discussed, economists start mumbling around and arguing. In a science you have a large area of agreement and small areas in dispute, mostly at the frontiers of the discipline. But in economics almost everything is up for grabs. It’s like the days when naturopaths, homeopaths, osteopaths, chiropractors, herbalists, allopaths, and Christian Scientists all contended on equal terms.
Economics is too ill-formed, inconsistent, and incomplete to be the rigorous formal science it pretends to be. What it is instead is a bag of tricks, many of which work most of the time. Economics functions as 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. (“The Magnificent Seven” was a myth. The samurai never protected the peasants, any more than economists or lawyers work for you and me).
That’s as far as I can go. I’m an outside observer of economics, motivated by the power that economics has over my life, and I can’t get down to the nuts and bolts level. Only an economist could do that, and why would they? Economics is their bread and butter.
(One installment of an intermittent series called “Trying to quit”.)