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So, at what point does Economics become a Pseudoscience?
Posted: 19 January 2008 09:29 AM   [ Ignore ]
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I had an interesting discussion this week here:
http://www.econtalk.org/archives/2008/01/munger_on_the_n.html#comments

bruce boston: me
Mike Munger: Professor, and Chair, Departments of Political Science, Economics, and Public Policy, Duke University

I’m not trained in Economics, just really enjoy discussing it, but one thing that really surprised me about the conversation was just how many times my questions were left unanswered, and how often the subject was changed, and how often I was told to ‘go read this book’.  Had this been someone promoting some sort of alternative medicine, I would have gotten really skeptical really fast, but it was Economics. 

So question, is there a similar way to get skeptical about Economics?  Is there anyone out there reexamining the ‘science’ of Economics to see just how much of it is based on the ‘scientific method’ and how much is just as baseless as any of the Pseudosciences?

Economics is such an important part of our everyday life, but just the same as religion, or medicine, or our understanding of nature is, does that mean that we give it a free pass?

-baloo

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Posted: 19 January 2008 10:46 AM   [ Ignore ]   [ # 1 ]
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Economics is not a science.  It may look like a science because of its use of objective data and mathematical models, but for all of that it remains a branch of ethics, which makes it part of philosophy.  You are right to be skeptical about it.

Economics studies various methods of achieving the optimal allocation of scarce resources.  The trouble is, there is no objective standard for what is “optimal”.  Most people believe that there should be some measure of personal autonomy involved, in that people should be allowed to keep that which they produce.  On the other hand, most people also believe that compassion and charity should also play a part, which would require those who have plenty to provide for those who have little or nothing.  That is the core of the left-versus-right debate between communism and capitalism; but is it an ethical debate, and it can’t be settled by scientific methods.

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Posted: 19 January 2008 11:04 AM   [ Ignore ]   [ # 2 ]
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Ron Webb - 19 January 2008 10:46 AM

Economics is not a science.  It may look like a science because of its use of objective data and mathematical models, but for all of that it remains a branch of ethics, which makes it part of philosophy.  You are right to be skeptical about it.

Economics studies various methods of achieving the optimal allocation of scarce resources.  The trouble is, there is no objective standard for what is “optimal”.  Most people believe that there should be some measure of personal autonomy involved, in that people should be allowed to keep that which they produce.  On the other hand, most people also believe that compassion and charity should also play a part, which would require those who have plenty to provide for those who have little or nothing.  That is the core of the left-versus-right debate between communism and capitalism; but is it an ethical debate, and it can’t be settled by scientific methods.

Hi Ron,

Would you say that Religious Studies is also a branch of philosophy?  If so, any thoughts on why Skeptics put so much time and energy into debunking religion, and what appears to be not nearly as much time into debunking Economics?  I mean compare debate of Intelligent Design to Evolution, surely economics has a more direct and relevant effect on our personal lives than any outcome of that debate, no?

Or is it perhaps, that religion is too often the source of bad economic thought, and so people are debunking the source first?  But even then, it seems like there is plenty that we can do in the meantime as we make progress in that debate.

-baloo

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Posted: 19 January 2008 12:35 PM   [ Ignore ]   [ # 3 ]
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Economics is the most scientific of the social sciences, in that at least a good fraction of what is studied there is easily quantifiable—viz., money. One can opt to call all social sciences “pseudosciences” insofar as one has physics-envy, but I think that is not an apt criticism. I have done some reading in economics and have some friends who have been in econ departments. The main problem with it, as with any social science, is that the material under study is extremely complex.

The worst thing one can say about it is that it is perhaps a proto-science.

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Posted: 19 January 2008 02:06 PM   [ Ignore ]   [ # 4 ]
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dougsmith - 19 January 2008 12:35 PM

Economics is the most scientific of the social sciences, in that at least a good fraction of what is studied there is easily quantifiable—viz., money. One can opt to call all social sciences “pseudosciences” insofar as one has physics-envy, but I think that is not an apt criticism. I have done some reading in economics and have some friends who have been in econ departments. The main problem with it, as with any social science, is that the material under study is extremely complex.

The worst thing one can say about it is that it is perhaps a proto-science.

Hi Doug,

The most scientific?
So, let’s list out the key social science areas….

(also let me say that I do have a great deal of admiration for a high number of people in the field, and it is probably unfair to prescribe guilt by association, that said, all the more reason why we could use more skepticism in this area)

a. Anthropology
b. Economics
c. Education
d. Geography
e. History
f. Law
g. Linguistics
h. Political science
i. Psychology
j. Sociology

Now, let’s walk through the VooDoo Science test that you posted in November.
http://www.nyas.org/snc/update.asp?UpdateID=31

1. A discovery is pitched directly to the public.
2. A “powerful establishment” is said to be suppressing the discovery.
3. An effect is always at the very limit of detection.
4. Evidence for a discovery is anecdotal.
5. A belief is said to be credible because it has endured for centuries.
6. An important discovery is made in isolation.
7. New laws of nature must be proposed to explain an observation.

Is Economics really the one with the least amount of VooDoo?
(ok, I guess you could have a high degree of VooDoo, and still have the most amount of Science, perhaps that’s the case?)

Then we can list out how many of each of these, that the social science has a tendency to transgress.
So, economics, or what is done in the name thereof

b. Economics
1) peer review, what peer review?  The top Economists in the field are often seen to possess some sort of magical power beyond the comprehension of either the public or anyone else in the field.
2) The evil of a ‘Powerful Establishment’ is one of the key tenants of economics
3) Not only is there a measurement problem, but more seriously there is an attribution problem
4) Few limits to anecdotal evidence in Economics.  The key clue being the fact that predictions lag well behind the various explanations for past events.
5) Is there another social science that relies more heavily on the Authority Argument?  Seems like the most important question in Economics is ‘who made the argument first?’ followed closely by, ‘what else they said in the same book’
6) Is there any lack of examples where some ‘new’ discovery is the explanation for why some market is breaking all known rules of economics?
7) There are few social sciences that rely as heavily on all other sciences to explain their observations as economics.

This isn’t to give other fields a free pass, or to say that there isn’t great work being done here, but perhaps one of the ways skeptics help Economics along the path is to help question the VooDoo.

I have a theory which is that if you filter out everything you don’t want, we will either have what we want or nothing.  My guess is that with economics, there will still be plenty left after the filtering.

-bruce

[ Edited: 19 January 2008 02:10 PM by Baloo ]
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Posted: 19 January 2008 04:55 PM   [ Ignore ]   [ # 5 ]
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Baloo - 19 January 2008 11:04 AM

Hi Ron,

Would you say that Religious Studies is also a branch of philosophy?  If so, any thoughts on why Skeptics put so much time and energy into debunking religion, and what appears to be not nearly as much time into debunking Economics?  I mean compare debate of Intelligent Design to Evolution, surely economics has a more direct and relevant effect on our personal lives than any outcome of that debate, no?

Well, if you can’t classify religion under fantasy, then I guess it would come under philosophy, but so what?  We debunk religion because it’s bunk, not because it’s philosophy.  Besides which, IMHO religion has far greater relevance than economics.  Life goes on pretty much regardless of the ups and downs of the economy, but religion meddles in life-and-death decisions all the time (abortion, euthanasia, contraception, etc.).

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Posted: 19 January 2008 05:04 PM   [ Ignore ]   [ # 6 ]
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dougsmith - 19 January 2008 12:35 PM

Economics is the most scientific of the social sciences, in that at least a good fraction of what is studied there is easily quantifiable—viz., money. One can opt to call all social sciences “pseudosciences” insofar as one has physics-envy, but I think that is not an apt criticism. I have done some reading in economics and have some friends who have been in econ departments. The main problem with it, as with any social science, is that the material under study is extremely complex.

The worst thing one can say about it is that it is perhaps a proto-science.

I suppose to the extent that economists stick to reporting and quantifying the allocation of resources, then we could call it a science, or maybe a branch of statistics.  But that isn’t the primary purpose of economics.  The goal of economics is to make claims about how resources ought to be allocated, and IMHO that is all about ethics.

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Posted: 19 January 2008 07:13 PM   [ Ignore ]   [ # 7 ]
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Ron Webb - 19 January 2008 05:04 PM

The goal of economics is to make claims about how resources ought to be allocated, and IMHO that is all about ethics.

The goal of economics is to describe economic behavior generally. They are working towards predictive laws. Basically economics is a theory of mass psychology. There is nothing necessarily normative about it. Of course, if you have particular normative ends, you can use the discoveries of economics to pursue those ends. But I would wager that if you get ten economists in a room you will get ten different ends. The main issue is in data discovery and in trying to find persistent regularities.

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Posted: 19 January 2008 07:13 PM   [ Ignore ]   [ # 8 ]
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Ron Webb - 19 January 2008 05:04 PM
dougsmith - 19 January 2008 12:35 PM

Economics is the most scientific of the social sciences, in that at least a good fraction of what is studied there is easily quantifiable—viz., money. One can opt to call all social sciences “pseudosciences” insofar as one has physics-envy, but I think that is not an apt criticism. I have done some reading in economics and have some friends who have been in econ departments. The main problem with it, as with any social science, is that the material under study is extremely complex.

The worst thing one can say about it is that it is perhaps a proto-science.

I suppose to the extent that economists stick to reporting and quantifying the allocation of resources, then we could call it a science, or maybe a branch of statistics.  But that isn’t the primary purpose of economics.  The goal of economics is to make claims about how resources ought to be allocated, and IMHO that is all about ethics.

I’m not sure that indictment is really accurate.  We’ve got to be careful to differentiate between the discipline and the people involved.  I’d change your last sentence to read, “The goal of many economists is to make claims about how they think resources ought to be allocated, and in my not so humble opinion that’s unethical (if they claim they are doing economics at that point).)

Occam

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Posted: 19 January 2008 07:19 PM   [ Ignore ]   [ # 9 ]
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Baloo - 19 January 2008 02:06 PM

Now, let’s walk through the VooDoo Science test that you posted in November.
http://www.nyas.org/snc/update.asp?UpdateID=31

1. A discovery is pitched directly to the public.
2. A “powerful establishment” is said to be suppressing the discovery.
3. An effect is always at the very limit of detection.
4. Evidence for a discovery is anecdotal.
5. A belief is said to be credible because it has endured for centuries.
6. An important discovery is made in isolation.
7. New laws of nature must be proposed to explain an observation.

Is Economics really the one with the least amount of VooDoo?
(ok, I guess you could have a high degree of VooDoo, and still have the most amount of Science, perhaps that’s the case?)

Then we can list out how many of each of these, that the social science has a tendency to transgress.
So, economics, or what is done in the name thereof

b. Economics
1) peer review, what peer review?  The top Economists in the field are often seen to possess some sort of magical power beyond the comprehension of either the public or anyone else in the field.
2) The evil of a ‘Powerful Establishment’ is one of the key tenants of economics
3) Not only is there a measurement problem, but more seriously there is an attribution problem
4) Few limits to anecdotal evidence in Economics.  The key clue being the fact that predictions lag well behind the various explanations for past events.
5) Is there another social science that relies more heavily on the Authority Argument?  Seems like the most important question in Economics is ‘who made the argument first?’ followed closely by, ‘what else they said in the same book’
6) Is there any lack of examples where some ‘new’ discovery is the explanation for why some market is breaking all known rules of economics?
7) There are few social sciences that rely as heavily on all other sciences to explain their observations as economics.

I’m sorry to say that I don’t see a single one of these as being an accurate description of economics as practiced at the university level. I have to assume you’re learning about it from economic hacks rather than actual economists. There are plenty of economic hacks around—virtually everyone you see interviewed on television who has an opinion on economics is a hack.

There is a wide variety of opinions about economics in the academy, of course, just as there are a wide variety of opinions about every social science. (By which I mean sciences like anthropology and sociology, BTW). There are also a wide variety of opinions about biology—very trenchant disagreements between Dawkins and Gould, just to take two.

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Posted: 19 January 2008 08:19 PM   [ Ignore ]   [ # 10 ]
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dougsmith - 19 January 2008 07:13 PM

The goal of economics is to describe economic behavior generally. They are working towards predictive laws. Basically economics is a theory of mass psychology. There is nothing necessarily normative about it. Of course, if you have particular normative ends, you can use the discoveries of economics to pursue those ends. But I would wager that if you get ten economists in a room you will get ten different ends. The main issue is in data discovery and in trying to find persistent regularities.

I think you’re describing econometricians, not economists.  Perhaps there are economists whose work is purely descriptive, but they aren’t the ones who write books or influence politicians.  In short, they aren’t the ones who matter.

Perhaps many economists sincerely think of themselves as objective observers and describers, but that is only because they have internalized their “normative ends” to the point where they regard them as axiomatic.  But every school of economic thought, and every economist of any note (think of Keynes, Friedman, Galbraith, Marx, Mises…) represents an ethical interpretation of how resources ought to be allocated.

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Posted: 19 January 2008 08:24 PM   [ Ignore ]   [ # 11 ]
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Occam - 19 January 2008 07:13 PM

I’m not sure that indictment is really accurate.  We’ve got to be careful to differentiate between the discipline and the people involved.

It wasn’t intended as an indictment.  There’s nothing wrong with economics — that is, nothing that wouldn’t be fixed by recognizing that it is a branch of ethics and that economists are expressing ethical opinions, not scientific facts.

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Posted: 19 January 2008 09:45 PM   [ Ignore ]   [ # 12 ]
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Personally, I think economics may use scientific methods, but I think its ability to predict is so poor that it can’t claim to be on a par with the “hard” sciences, or even biology. I like Doug’s characterization as a protoscience. It attempts to identify regularities in human economic behaviors and model them so as to be able to predict those behaviors, but it does a pretty poor job most of the time. I think it gets more credit than it deserves because it is math heavy, which the non-scientis may associate with science, but which really doesn’t by itself validate the practices involved unless they actually work.

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Posted: 19 January 2008 10:45 PM   [ Ignore ]   [ # 13 ]
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Oh no, don’t get me started.  LOL

Go to an automobile junk yard.  Walk around looking at all of the piled up cars.  Suppose for the sake of discussion that each junk car is worth $500.  How much was each car when purchased new?

$15,000   $20,000 $30,000

The difference between that purchase price and the $500 is DEPRECIATION. There were 231,000,000 cars in the US in 2003.  If each one of those cars depreciated by $1,500 per year what does that amount to every year?  Why don’t we ever hear economists talk about this?  Is planned obsolescence going on in automobiles?  John Kenneth Galbraith mentioned it in The Affluent Society in 1959, a decade before the moon landing.  I don’t know of Milton Friedman ever saying anything about it.

I think you need to look at economics via Game Theory and the smart people want the dumb people to stay dumb and that is why there is so much bullshit in economics.

“All warfare is based on deception.” - Sun Tzu [“The Art of War” 500BC]

The Economic Wargame is a continuation of the Military Wargme by other means.

http://www.spectacle.org/1199/wargame.html

http://booksliterature.com/showthread.php?t=236

psik

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Posted: 19 January 2008 10:49 PM   [ Ignore ]   [ # 14 ]
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The point I’m trying to make is that the pronouncements that economists make are essentially ethical pronouncements, no matter how much they may be couched in mathematical terms.  For instance, if an economist says, “the central bank must raise its prime interest rate,” what he’s really saying is that investors deserve more money in return for their investments.  He may then go on to explain how higher rates will encourage more investment, which will create jobs, attract foreign capital, broaden the tax base, or reduce tooth decay; but none of that changes the fact that giving more money to investors is an ethical decision—as are the assumptions that jobs, foreign investment, and/or tax revenue are themselves ethically valuable goals.

I’m not necessarily questioning the value of any of these things.  What I’m saying is that they are values, not scientific principles.  By making economics into a science we tend to forget that every economic decision is a collective decision about how we want our society to work.

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Posted: 19 January 2008 11:03 PM   [ Ignore ]   [ # 15 ]
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psikeyhackr - 19 January 2008 10:45 PM

The difference between that purchase price and the $500 is DEPRECIATION. There were 231,000,000 cars in the US in 2003.  If each one of those cars depreciated by $1,500 per year what does that amount to every year?  Why don’t we ever hear economists talk about this?  Is planned obsolescence going on in automobiles?  John Kenneth Galbraith mentioned it in The Affluent Society in 1959, a decade before the moon landing.  I don’t know of Milton Friedman ever saying anything about it.

Exactly, because to Friedman obsolescence is a good thing, as are all those workers making cars to replace the ones that get junked and the jump in the GDP when those new cars are purchased.  In fact, there’s nothing, in Friedman’s economic view, quite as beneficial as a good war to stimulate the economy.  But this is just scientific reality, right?  No ethics involved, eh? wink

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