I cannot disagree more, having hand waved away economics for 20 years, actually learning it has totally transformed my world view into a dramatically clearer and far more functional one.
The pandemic era fiscal and monetary policy was pretty much a 5x speed (because of the scale of everything) display of economics at work, and understanding all the levers while they were pulled made it clear that no, economics is not bullshit, people just really don't like what economics has to say.
Tariffs. Economic theory tells us that tariffs are terrible. Populists want them because they think manufacturing will come back(have their cake) but the downsides are much, much worse(eat it too).
inflation is another one. The government is running massive fiscal deficits every year which has forced the fed into extremely hawkish monetary policy. Then politicians complain about that even though their crappy fiscal policy is what required it. Neither party has any interest in balancing the budget so hostilities between fed and congress/president will likely continue.
And which is the right course of action that economy "tells us" to do, but people don't like what it says?
I believe economics is inherently political and it cannot be divorced from its political goals, so that means it's not clear cut which is the "right" course of action, unless you define those goals (and it's probably unavoidable a subset of people will disagree with them). Something like decreasing inflation is not, by itself, a political goal.
Our country needs to raise taxes and cut spending. The excess money used to pay down debt.
Instead we will almost certainly inflate away our debt, which will mean mostly suckers who don't have equities or assets will pay for it (read: lower class).
It's because economists don't understand politics or that politics matters.
If you do something unpopular, you lose, and then the economic outcome is worse. Economists do not understand this. They say, "why do politicians do things bad for the economy?"
Because the stakes are high. People might die, people WILL protest. Hard to have a good economy when nobody is working, huh?
Look, there's a lot we can do, right now, to "save" our national debt. Get rid of the military. Get rid of medicaid and SS. Matter of fact, just dissolve SS and pocket all the money.
But when bodies start piling up in the streets because we have nothing for old people, and I can't drive to work because there's too many rotting corpses on I-90, we might have some more economic issues.
Economists, in their supreme naivety, believe costs get removed. No, they get moved. What happens if you move them somewhere where they can't be paid?
I've taken issue with economics being considered a science since my first econ class in high school.
It can be very useful for quantifying and comparing the past, but there's absolutely nothing scientific about the process and no matter how much modelling is done it can't reliably predict future outcomes.
Economics can be practised as a science or not, depending on the individual. Austrian economics, for example, is more of a religion while mainstream economics is more scientific.
Economics is a science of human behaviour, which is not exact. Economic models are like weather models. They cannot be exact because what they are modelling (weather, human behaviour) is incredibly complicated with millions of parameters.
Science is about observing something, forming a hypothesis about why it is that way, and then testing the hypothesis to determine whether it is correct.
Many Economics researchers do all of the above, so they are scientists.
Totally agree that economists observe behavior and crest hypothesise, and model what might happen. That doesn't make it science though, especially when they can't really run any type of controlled studies that support the results and hypothesise claimed.
In the EU, inflation surged in the wake of the double-whammy of COVID and Russia's invasion of Ukraine. The standard economic prescription for high levels of inflation is to raise interest rates, and that is what the ECB did. Inflation duly sank back again and the level is now hovering around the ECB's ideal of 2%.
I agree that this doesn't match the definition of a scientific experiment, in that there is no control group within the bloc to which the higher interest levels were not applied. Nonetheless, it seems to be a textbook example of an economy proving to be manipulable in exactly the way that economic theory suggests it will be.
I agree that in that case the economy ended up moving in the direction one would expect given the economic policy response taken, but without any way of ever being able to scientifically support causality we simply can't make the claim.
Its too easy with economics to look backwards and retroactively attribute what happened to a cause that would have made sense. It seems likely that Covid and the Russian war were causes of inflation, but we don't really know even that. For one thing, during the pandemic in the EU most stores and restaurants were closed. One could look at the economic relief (money printing) and expect inflation, but one could also look at the massive drop in spending and expect deflation instead. Had we seen deflation I fully expect today's economic analysis would be that lockdowns and business closures were clearly going to lead to deflation.
> when they can't really run any type of controlled studies
In that case, is geology a science?
I too am sceptical about economics (mostly macro, the micro stuff is fine) but there are lots of places where you can't run experiments and some of them are science.
This touches on another area I view as wholely unscientific - quantum physics. The most fundamental hypothesis of the field is untestable by design.
We will never know if quantum state exists or if probability clouds collapse upon observation because by that very principle we will never know the state prior to observing it.
We have technology that only works because quantum physics is a thing. Lasers, LEDs (particularly blue LEDs), GPS and MRIs and semiconductors are some examples. Computer chips are getting small enough that quantum tunneling is a real engineering concern. Quantum entanglement has been experimentally verified numerous times.
Calling it "wholely unscientific" makes you seem like a crank.
We have technologies that work, and we believe that quantum theory plays a part. We don't know that and we simply can't given that (a) its a theory and (b) it is untestable as I said earlier.
How would you propose we could test quantum state and collapse to validate that the concept is actually correct?
How can it be science if you can't follow the scientific method? It can be a field of study for sure and it can be useful too. My argument isn't that only scientific study is useful, I'm arguing that economics isn't scientific.
Science doesn't require experimental designs, certainly they are incredibly helpful but they don't work for everything.
Like (I grumble about this approach a lot) observational studies at a population level are certainly science, even though there's no experiments. Granted, in medicine at least they end up feeding into RCTs and controlled studies which is good, but in a lot of cases (child development is a big one) lots of hypotheses can't ethically be tested using experimental designs.
We can't get sets of identical twins and raise one in a rich home and another in a poor home, holding everything else constant. Does this mean twin studies aren't science?
I actually kinda agree that a lot of economics is very poor science (far too much maths on far too little data) but that's reflective of the difficulty of collecting such data rather than an indictment of the approach.
Any study based entirely on modelling is unscientific in my opinion. Chemistry doesn't fall into that category as far as I understand, I don't know much about meteorological research.
I don't know where you get that economics is based entirely on modelling. Economic decisions happen constantly on all levels, and their effects are studied heavily.
The models follow from observation, the same as they do in chemistry or meteorology. And just like those two, the models are weak compared to actual observation.
But you can't study the effects directly. Economic system are complex, any changes made are impossible to isolate and any changes in economic indicators have to be assumed to be related to the changes made.
I argue that economic research is entirely based on modelling because the research results produced always depend on modelling and either don't include any type of control group or use a controlled study so small that the odds it accurately reflects the entire economy are low.
The first I think is self explanatory, for the second I'd point to studies of UBI that are done on small populations within a larger economy that doesn't have a UBI. The results of the small group are effectively meaningless because that group has a comparative advantage against the rest of the economy, and those studies are never able to create a bubble in which the UBI population is entirely cut off from the real economy while still mimicking well enough all other systems, industries, and motivations of the real economy.
We can forecast the weather pretty accurately 7 days out, and we have never had a "control" climate or the even the ability to run experiments. We can predict climate effects decades out riding the same theories.
I'm sure you would agree that climate change is pretty hard science (it is) so you must have a misconception or confusion about economics, because really they are the same kind of science at heart.
Models based on observation are used to predict future behavior, and while often wrong, it's critical to understand why they are wrong so you can understand where they are right.
Weather predictions are very different than economic predictions.
Weather predictions are made and shared out only at the level of what will happen over the next few days. Weather predictions aren't used to predict exactly why it rained, only that it did rain (though surely the why is used as feedback for modelling).
Economists take a different tact, they attempt to claim why GDP, CPI, wages, etc changed. With predictions they look much further out than weather and attempt to not only claim what economic indicators will do, they attempt to claim precisely why it will have happened.
I'm sorry but I think you have a lot of misguided confusion here. Climate modeling encompasses everything from the weather tomorrow to scientists telling us back in the 80's to cut CO2.
Economics modeling is the same way. From how to price your lemonade at your kids stand to how to size government stimulus.
I wasn't arguing anything about climate modelling, only weather predictions.
Regardless, modelling can be interesting to use as an indicator for future research but modelling is never scientific, or more specifically its never scientific in a way that is in anyway meaningful in the real world. A model isn't testing against reality and only ever factors in the conditions someone though to include and deemed relevant, and those factors are only as useful as the person's ability to accurately code them in.
That's also not true. By now there are so many similar but different situations that you can look at. And there are so many massively multiplayer games which are fantastic economic worlds where again, a multitude of ideas can be tried and tested - and are.
> […] and no matter how much modelling is done it can't reliably predict future outcomes.
A physicists once remarked that his job would been much harder if particles had free will. But that is exact economists have to do: predict what humans will do. There is an entire sub-field of study on the non-rationality of people and how it feeds into how that effects money, finance, and economies:
But there have been instances of models working. When QE started a group of folks made predictions:
> We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
Another group of folks (often called "Keynesian") made different predictions based on their model(s) / understanding of how things work.. One turned out correct and other incorrect in their predictions.
See also predictions about "tax cuts pay for themselves":
> But that is exact economists have to do: predict what humans will do
Economists have agency. They don't have to predict what humans will do. They believe they can predict it, attempt to make their predictions, then claim that's what will happen.
That works in reverse as well, attempting to predict why humans did what they did in the past and then attempt to attribute those predictions as an explanation of quantified economic indicators.
In both case, past behavior and future behavior, their predictions are untestable. How is that scientific?
> Economists have agency. They don't have to predict what humans will do. They believe they can predict it, attempt to make their predictions, then claim that's what will happen.
Economists study the economy which is made of… a bunch of humans doing stuff with money.
> In both case, past behavior and future behavior, their predictions are untestable. How is that scientific?
What is this not testable about:
> The planned asset purchases risk currency debasement and inflation […]
Was there (USD) currency debasement? Was there US inflation? No? The predictions were wrong. The same day it was published (in the WSJ) there were critiques about it, e.g.:
When QE2 went forward and was about to stop there were many predictions (generally involving piles of money), some of which were accurate and others less so:
Do you have a model that tries to explain what tariffs with do to the USD? You can make a prediction and win/lose a lot of money buy shorting/longing the dollar.
That's simple, QE wasn't tested in any scientifically valid study. They made predictions of what QE may do, they enacted QE policies in an uncontrolled economy with no control group, and stuff happened. Afterwards they attempted to read the tea leaves and claim what precisely causes economic changes.
That isn't scientific at all. That also doesn't mean they were wrong, you can absolutely be right when you go off educated guesses or plain old intuition. My claim is that how economics is studied is not scientific in that it never has, and never can, follow the scientific method.
Economics is a science in the sense that it is a field of study. Weather science couldn't, for a long time, accurately predict the weather, but study and model refinement progressed to the point where weather prediction is more reliable now than in the past.
Economics is the science of human behavior at scale, and as such, does indeed have predictive power. It is not always reliable as there are dynamic conditions and incomplete data that make the models not always fit. That doesn't disqualify it from being a science (especially the data-oriented part of it).
Economics practice falls on its face when you attempt to inject ideology, though.
Because we do not control perception. We have to presume multiple scenarios each of have a dimension of perception. Perception always become a determinant factor.
Practical economics is exclusively about controlling perception.
The Fed, for example, may have modelling that indicates we have a downturn coming in 6 months. Those models aren't predictive though, and the Fed announces their economic outlook and what they may do with rates in the future they are only attempting to modify public perception and nudge behavior to make the future they actually want happen; it has nothing to do with predicting where the economy will be.
And we have very rigorous models that confirm that that is true. Perception shapes the economy more than actual fundamentals, specially when predicting the future.
I’ll say that when I read business and economics it often feels like it is starting from the assumption that it is right and then trying to perform the language of science until you believe them.
Add to that the wild level to which economists seem to think their economics knowledge generalizes to telling other disciplines and I tend to approach with distrust.
Economic models that have strong empirically demonstrated predictive power are called finance, not economics, because any economic predictive model that actually works can be used to make money.
Yeah - but mainstream economics is far more a state religion than it is just-a-religion. The priesthood is superficially concerned with the welfare of the masses, theological consistency, etc. - but the actual priority is divining what words, doctrines, and predictions would best serve the interests of the wealthy and powerful, and regularly pronouncing those. And vehemently denouncing any heretics who get too interested in the actual welfare of the masses, or the track record of the priesthood's predictions, or other dirty truths.
So long as you have the right mindset, being a priest of a generously supported state religion is a very cushy job.
Yeah man, we are only to serve the rich, not because we are trying to solve the problem of scarcity nor we toot about the welfare state. Stop listening to popular economists, read about the science. We've figured this out, the problem is political.
That is not true. Markets are moved by traders not economists. Professional traders have a very skeptical view of economists, because economists are simply wrong so often about the future. Economists from the world bank and such institutions are usually on the wrong side of forecasting for instance.
For instance Scott Bessent opinion:
"I will take the market-based indicators over the so-called 'experts' all the time! That’s how I made my 35-year career, was listening to the market."
The traders are all operating within the windows established by the policy choices of economists using fake money generated by economists to satisfy their own invented metrics.
And traders are not themselves predicting the future as you put it, but they are predicting the future sentiment of other traders.
The absolute classic would be Hal Varian, afaik still chief economist at Google. Still proud of working through Microeconomic Analysis. He has an introduction into micro as well. His books are so full of worthwhile thoughts. Micro introduced me to platform economics before the internet was a big thing.
There's some truth to this take but it's not nearly as bad as most people think.
Many people look at the economy and see that it is bad and so they think the economists must be bad at their job, but in many cases people in power simply don't listen to economists.
The best example of this in my opinion is land value tax.
Milton Friedman is an Nobel prize winner on the libertarian side who called lvt the best tax policy. Joseph Stieglitz is a Nobel prize winner who is a socialist who also advocated for lvt. A recent survey showed something like 83% of economists saying that lvt would significantly increase growth.
And yet zero countries have implemented an lvt rate that is much higher than inflation.
Good and smart policies do not need to be accepted by economists to be implemented. They need to be accepted by those in power and by the general population.
In my opinion, if anything we should have way more economists on the news talking about the economy than the political pundits that you typically see - not the other way around!
> Economics seems more like a religion than science […]
Science makes falsifiable statements that are then tested (per Popper). When QE started a group of folks made predictions:
> We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
Another group of folks (often label "Keynesian") made different predictions based on their model(s) / understanding of how things work.. One turned out correct and other incorrect in their predictions. Perhaps we should follow the models that accurately predicted things.
Governments / politicians run economic experiments every time there's a major policy rollout, and they do so based on what they predict will happen:
Economics is kinda like weather prediction. Most people don't understand what economists are saying and they react based on what they think economists are saying. The same is true for things like rain predictions in that people don't understand what the prediction is, so when it doesn't rain people think "the weatherman is never right" when that isn't what the prediction was saying in the first place.
