Martin, economics, as it now stands, may progress at a rate comparable to theology.
"Brown, Martin - ARP (NCI)" wrote: > In the last few weeks I have read Dava Salyor's Gallileo biography, reread > two great science classics, Gamov's Birth and Death of the Sun (orginally > published in 1939), David Bohm's great Quantum Mechanics textbook (1954) and > took a look at my son's current cell biology textbook. > > I must say, if one criteria for science is a field that produces a > continuous (but dialetic) accretion of knowledge throught theoretical > development and empirical testing, the track record of economics is pretty > pathetic compared to physics and biology. For example, comparing my son's > cell biology textbook to the one that I used 30 years ago, there is an order > of magnitude advance in the detail, comprehensiveness, theoretical > foundation and empirical evidence of the knowledge presented. And this is > an undergraduate class! Can anything like this be said of undergraduate > textbooks in economics. > > Both Gallileo and Gamov have some very unflattering things to say about the > "philosophers" of there time, as did Marx. I think the economics of the > last 50 years is a lot closer to this kind of philosophy than to anything > that looks like science. > > -----Original Message----- > From: ravi [mailto:[EMAIL PROTECTED]] > Sent: Monday, November 26, 2001 1:17 PM > To: Pen-L Mailing List > Subject: [PEN-L:19959] If Economics isn't Science, What is it? > > recently someone forwarded a bit to the list about the Nobel prize in > economics and whether it was meaningful, etc. reading through klemke, > hollinger, rudge: introductory readings on the philosophy of science, i > came across a piece that might be of interest. i have reproduced > sections from the piece below. my apologies if this is old or > uninteresting stuff: > > If Economics isn't Science, What is it? -Alexander Rosenberg > > In a number of papers, and in "Microeconomic Laws", I argued that > economic theory is a conceptually coherent body of causal general > claims that stand a chance of being laws. My arguments elicited no > great sigh of relief among economists, for they are not anxious about > the scientific respectability of their discipline. But others eager to > adopt or adapt microeconomic theory to their own uses have appealed to > these and other arguments which attempt to defend economic theory from > a litany of charges that are as old as the theory itself. Among these > charges, the perennial ones were those that denied to economic theory > the status of a contingent empirical discipline because it failed to > meet one or another fashionable positivist of Popperian criterion of > scientific respectability. With the waning of positivism these charges > have seemed less and less serious to philosophers, although they have > retained their force for the few economists still distracted by > methodology. But among philosophers charges that economics does not > measure up to standards for being a science have run afoul of the > general consensus that we have no notion of science good enough to > measure candidates against. This makes it difficult to raise the > question of whether economics is a science, and tends to leave > economists, and their erstwhile apologists like me, satisfied with the > conclusion that since there is nothing logically or conceptually > incoherent about economics, it must be a respectable empirical theory > of human behavior and/or its aggregate consequences. > > The trouble with this attitude is that it is unwarrantably complacent. > It is all well and good to say that economics is conceptually coherent, > and that there are no uncontroversial standards against which economics > may be found wanting, but this attitude will not make the serious > anomalies and puzzles about economic theory go away. These puzzles > surround its thoroughgoing predictive weakness. the ability to predict > and control may be neither necessary nor sufficient criteria for > cognitively respectable scientific theories. But the fact is that > microeconomic theory has made no advances in the management of economic > processes since its current formalism was first elaborated in the > nineteenth century. And this surely undermines a complacent conviction > that the credentials of economics as a science are entirely in order. > For a long time after 1945 it might confidently have been said that > Keynesian macroeconomics was a theory moving in the right direction: > although a macro theory, it would ultimately provide the sort of > explanatory and predictive satisfaction characteristic of science. But > the simultaneous inflation and unemployment levels of the last decade > and the economy's imperviousness to fiscal policy have eroded the > layman's and the economist's confidence in the theory. Moreover the > profession's reaction to the failures of Keynesian theory is even more > disquieting to those who view economic theory as unimpeachably a > scientific enterprise. For a large part of the response to its failures > has been a return the microeconomic theories which it was sometimes > claimed to supersede. The diagnosis offered for the failure of the > Keynesian theory has been that it does not accord individual agents the > kind of rationality in the use of information and the satisfaction of > preferences that neoclassical microeconomic theory accords them. The > alternative offered to Keynesian theory in the light of this result is > nothing more nor less than a return to the status quo ante, to the > neoclassical theory of Walrus, Marshall and the early Hicks, that > Keynesianism had preempted. This cycle brings economic theory right > back to where it was before 1937, and it should seriously undermine the > confidence of anyone's beliefs that economics is an empirical science, > with aims and standards roughly identical to other empirical sciences. > For the twentieth-century history of economic theory certainly does not > appear to be that of an empirical science. > > Of course, eighty years is not a long time in the life of a science, or > even a theory, so the fact that economics has not substantially > changed, either in its form or in its degree of confirmation, since > Walras, or arguably since Adam Smith, is no reason to deny its > scientific respectability. But it is reason to ask why economics has > not moved away from the theoretical strategies that have characterized > it at least since 1874, in spite of their practical inapplicability to > crucial matters like the business cycle, economic development, or > stagflation. On some views of proper scientific method, of course, > economists have been doing just what they should be doing. Since the > 19th century they have been pursuing a single research strategy, acting > in accordance with a ubiquitous and powerful paradigm. For, economists > have been steadily elaborating a theory whose form is identical to that > of the great theoretical breakthroughs in science since the 16th > century. Accordingly it may be argued that it would be irrational for > economists to surrender this strategy short of a conclusive > demonstration that it is inappropriate to the explanation of economic > activity. The strategy is that of viewing the behavior economists seek > to explain as reflecting forces which always move toward stable > equilibria that maximize or minimize some theoretically crucial > variable. In the case of microeconomics, this crucial variable is > utility (or its latter-day surrogates), and the equilibrium is given by > a level of price in all markets that maximizes this variable. This > strategy is most impressively exemplified in Newtonian mechanics and in > the Darwinian theory of natural selection. It is no surprise that a > strategy which serves so well in these two signal accomplishments of > science should have as strong a grip in other domains to which it seems > applicable. Moreover, the constraints on theoretical and empirical > developments that this strategy imposes can explain many of the > greatest successes of Newtonian and Darwinian science, and much of the > puzzling character of developments in economic theory. > > I call this strategy the extremal strategy, because it is especially > apparent in Newtonian mechanics when that theory is expressed in > so-called extremal principles, according to which a system's behavior > always minimizes or maximizes variables reflecting the mechanically > possible states of the system. In the theory of natural selection this > strategy assumes that the environment acts so as to maximize fitness. > This strategy is crucial to the success of these theories because of > the way it directs and shapes the research motivated by them. > > <...> > > These theories are all committed to explain everything in their domains > because of their extremal character. <...> An extremal theory cannot be > treated as only a partial account of the behavior of objects in its > domain, or as enumerating just some of the many determinants of its > subject's states; for any behavior that actually fails to maximize or > minimize the value of the privileged variable simply refutes the theory > tout court. In fact, the pervasive character of extremal theories > insulates them from falsification to a degree absent from non-extremal > theories. <...> The axioms of theories like Newton's, or Darwin's, or > Walras' do not embody even implicit ceteris paribus clauses. With these > theories the choice is always between rejecting the auxiliary > hypotheses - the description of test conditions - or reject the theory > altogether. > > <..> > > Extremal theories are an important methodological strategy because they > are so well insulated from falsification. This has enabled them to > function at the core of research programs, turning what otherwise might > be anomalies and counter-instances into new predictions and new > opportunities for extending their domains and deepening their > precision. Accordingly, it may be argued, economists' attachment to > their extremal theory represents not complacency, but a well-grounded > methodological conservatism. > > <...> > > But this conservative rationale for the attachment of economists to > extremal theories is vitiated by a crucial disanology between > microeconomics and mechanics or evolution. Economists would indeed be > well advised not to surrender their extremal research program, if only > they could boast even a small part of the startling success that other > extremal research programs have achieved. But two hundred years of work > in the same direction have produced nothing comparable to the > physicists' discovery of new planets, or of new technologies by which > to control the mechanical phenomena that Newton's laws systemized. > <...> There has been no signal success of economic theory akin to these > advances of extremal theory. <...> There is, of course, a vast > literature on why economics has so little in the way of predictive > content, and on how a theory so dependent on idealizations and > factually false assumptions as microeconomics can nevertheless > constitute a respectable scientific enterprise. This literature goes > back to John Stuart Mill and forward to, for example, Hal Varian. The > only two things clear about this literature are that economists have > found it almost universally satisfying and legitimating, and > non-economists have consistently been left unsatisfied, insisting that > methodological excuses are no substitute for attempting to do what > economics has hitherto not done: improve its predictive content. > > Having shaken free from the complacent attitude toward economic theory > evinced in Microeconomic Laws, I have come to think that the failure of > economics is not methodological, or conceptual, but very broadly > empirical. Despite its conceptual integrity, microeconomics, together > with all the sciences of human action and its aggregation, rests on a > false but central conviction that vitiates its axioms and so bedevils > the theorems deduced from them. Economic theory assumes that the > categories of preference and expectation are the classes in which > economic causes are to be systematized, and that the events to be > explained are properly classified as actions like buying, selling, and > the movements of markets, industries, and economies that these actions > aggregate to. The theory has made this assumption, because of course it > is an assumption we all make about human behavior; our behavior > constitutes action and is caused by the joint operation of our desires > and beliefs. > > <...> > > The real trouble with economics, the real source of its failure to find > improvable laws of economic behavior, is something that has only become > clear in philosophy's recent attempts to understand and improve the > foundations of another science in trouble: psychology, and particularly > behavioral and cognitive psychology. Philosophers have shown that the > terms in which ordinary thought and the behavioral sciences describe > the causes and effects of human action do not describe "natural kinds", > they do not divide nature at the joints. They do not label categories > of states that share the same manageably small set of causes and > effects, and so cannot be brought together in causal generalizations > that improve on our ordinary level of prediction and control of human > actions, let alone attain the sort of continuing improvement > characteristic of science. <..> This work has been devoted to > understanding "intentional" terms like "belief", desire", "action", and > their vast hoard of cognates. <...> The trouble with beliefs and > desires is that when people have them the propositions they "contain" > need not be true or false and the objects they are directed at need not > exist or even be possible objects. So we can't decide whether a person > is in a given mental state by determining either the truth or falsity > of any statement open to our confirmation, or the existence or > attainment of any object or end of human action. <section on problems > of behaviorism and identity theory> > > <...> > > Applying the new orthodoxy in the philosophy of psychology, it becomes > clear that economics' predictive weakness hinges on the intentional > typology of the phenomena it explains and the causes it identifies. Its > failure to uncover laws of human behavior is due to its wrongly > assuming that these laws will trade in desires, beliefs, or their > cognates. <...> Thus the failure of economics is traced not to a > conceptual mistake, or to the inappropriateness of extremal theories > and their elegant mathematical apparatus to human action, but to a > false assumption economists share with all other social scientists, > indeed with everyone who has ever explained their own or others' > behavior by appeal to the operation of desires and beliefs. > > <...> > > A better comparison for economic theory than Mendelian genetics is > phlogiston theory, whose failure is traceable to its incommensurability > with the oxygen theory that superseded it. Phlogiston theory is a > scientific dead end, because there is no such thing as phlogiston, > because the notion of phlogiston does not divide nature at any joint. > Phlogiston is not a natural kind. This is an empirical fact about > nature, and the claim that intentional notions are not natural kinds is > equally a contingent claim. Thus, economics and phlogiston theory are > not methodologically defective. They are simply false. > > <...> > > Bringing what little utility there is in economic theory into harmony > with my diagnosis of its ills is a task for which there are many > solutions. The first thing to note is this: although the laws of supply > and demand and other market-level general statements are deduced from > claims about the intentional determinants of individual actions, they > are logically separable from such claims, and, more important, they can > be shown to follow from assumptions which are the direct denial of > these general claims about rational action. From the assumption that > individuals behave in purely habitual ways, always purchasing the same > or the most nearly similar bundle of commodities available, no matter > what the price, the law of downward sloping demand follows, as it does > from the assumption that their purchases are all impulsively random. > The same can be shown for the choices of entrepreneurs. So surrendering > the extremal intentional approach to human behavior does not logically > or even theoretically oblige us to surrender these "laws". <...> Now > the fact that we can usefully employ false or vacuous general > statements, up to certain limits, is no mystery in the philosophy of > science at all. The clearest instance of such restrictedly useful > though false or vacuous general statements is Euclidean geometry. > > <...> > > Of course, economic theory has attained nothing like the success of > Euclidean geometry. But the apparent applicability of some of its > claims is to be explained by appeal to the same factors which explain > why we can employ, e.g., the Pythagorean theorem, even though there are > no Euclidean triangles and no Euclidean straight lines. We can employ > the laws of supply and demand, even though human beings are not > economically rational agents; that is, we can employ these "laws" even > though individuals do not make choices reflecting any empirical > regularity governing their expectations and their intentions. We can > employ them all right, but the laws of supply and demand cannot be > applied with the usefulness and exactitude of the Pythagorean theorem, > just because the kind terms of economic theory are different from the > real kinds in which human behavior is correctly classified. And this > difference is comparatively much greater than the difference between > the kind terms of applied geometry and those of physics. There are no > Euclidean triangles, but we know why, and we can calculate the amount > of the divergence between any physical triangle and the Euclidean > claims about it, because we have a physical theory to make these > corrections, the very one which showed Euclidean geometry to be > factually false. We can make no such improvements in the application > of the laws of supply and demand; we can never do any better than apply > them retrospectively or generically; we cannot specify their > parameters, or their exceptions, because the axiomatic system in which > they figure diverges from the facts very greatly, and because we have > no associated theory that enables us to measure this divergence and > make appropriate corrections for it. > > <...> > > Euclidean geometry was once styled the science of space, but calling it > a science did not make it one, and we have come to view advances in the > axiomatization and extension of geometry as events not in science, but > in mathematics. Economics is often defined as the science of the > distribution of scarce resources, but calling it a science does not > make it one. > > <...> > > Much of the mystery surrounding the actual development of economic > theory - its shifts in formalism, its insulation from empirical > assessment, its interest in proving purely formal, abstract > possibilities, its unchanged character over a period of centuries, the > controversies about its cognitive status - can be comprehended and > properly appreciated if we give up the notion that economics any longer > has the aims or makes the claims of an empirical science of human > behavior. Rather we should view it as a branch of mathematics, one > devoted to examining the formal properties of a set of assumptions > about the transitivity of abstract relations: axioms that implicitly > define a technical notion of "rationality", just as geometry examines > the formal properties of abstract points and lines. This abstract term > "rationality" may have far more potential interpretations than > economists themselves realize, but rather less bearing on human > behavior and its consequences than we have unreasonably demanded > economists to reveal. > > <...> > > We should neither attach much confidence to predictions made on its > basis nor condemn it severely when these predictions fail. For it can > no more be relied on or faulted than Euclidean geometry should be in > the context of astrophysics. Admittedly this attitude leaves a vacuum > in the foundations of public policy. For without economics we lose even > the illusion that we understand the probable, or potential, long-term > or merely possible consequences of choices that policy makers are > forced to make. Of course, the caution that loss of illusions may > foster is certain to be salubrious. On the other hand the vacuum may > attract a really useful foundation for decisions about the economy and > its improvement. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
