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So, at what point does Economics become a Pseudoscience?
Posted: 20 January 2008 09:38 AM   [ Ignore ]   [ # 16 ]
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Ron Webb - 19 January 2008 08:19 PM

  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.

Most of the so-called “economists” who you see on TV or who write books trying to influence politicians aren’t economists at all. They are mostly cranks with economic ideas and little or no actual training in economics (Viz., people like Larry Kudlow on CNBC or the lawyer Robert Reich). Most real economists work in universities and only interact rarely with politicians.

For some real economists who have made a difference, and who have interacted with politicians in productive ways, see Paul Krugman, Amartya Sen, Alan Blinder, Jeffrey Sachs. If we want to figure out, for instance, how best to combat poverty, low standards of living, increase access to health care, and increase lifespans, one of the key studies will be economic in nature.

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Posted: 20 January 2008 09:46 AM   [ Ignore ]   [ # 17 ]
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mckenzievmd - 19 January 2008 09:45 PM

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.

Perhaps so. Although biology really doesn’t do very much predicting either. What biological laws do you know of? Perhaps there are some relating to evolution, but I think otherwise most of the predictions one finds in biology are more biochemical in origin.

There are some quite good economic laws, starting with the law of supply and demand, for instance. The problem for economics is that it is a very broad field. Just to begin with there are two quite separate disciplines within it: macroeconomics and microeconomics. Microeconomic models deal with substantially simpler and more localized phenomena; macroeconomics gets most of the headlines. In general, I would submit, people have a relatively decent handle on many macroeconomic phenomena. The problem is that getting any of them wrong can lead to disastrous results for large numbers of people.

Frankly, I would compare economics to weather forecasting. It is a real science, it has made advances, it is getting more accurate all the time (and is certainly leagues more accurate than it was fifty years ago), but any time someone makes a big blunder, it affects lots of people and gets huge amounts of negative press.

Perhaps the main difference that economics has from weather forecasting is that in weather forecasting one doesn’t usually have high-placed alternative forecasters reading from the Farmer’s Almanac each night on the news, and trying to influence policy based on the entrails of ducks. But that does happen with economics. There are plenty of fakes out there, and it’s often hard for a layperson to tell the difference between a mainstream economist and a crank or fringe economist.

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Posted: 20 January 2008 10:06 AM   [ Ignore ]   [ # 18 ]
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Well, as far as biology by comparison, of course I’m thinking primarily of cellular and organismal biology as well as biochemistry, which underlies clinical medicine, since that’s what I’m most familiar with. The level of understanding of basic physiological processes is pretty good, and this allows for effective manipulation of the system often. Now, there are huge gaps, of course, but I was just contrasting it with what seems to me a much less rigorous understanding and manipulative capacity in economics. We don’t necessarily call our basic principles laws, as they tend to in physics, but I think we understand the circulation of the blood or the regulation of serum potassium levels a lot better than we understand the relationship between interest rates and inflation. Of course it is something of apples and oranges we are comparing, but I guess I’m more skeptical of data, and the conclusions drawn from it, that involves people’s feelings and behavior (as in economics or psychology) than that which pertains to facts about the material world, since I think the level of complexity and subjectivity makes the former harder to quantify meaningfully, and so harder to draw reliable and stable principles from.

I also think there is an element of ideology in economic theories that doesn’t obtain nearly as much in traditional sciences, and this may be partly what people are getting at in identifying it as a branch of ethics. The variety of radically different theories with diametrically opposing ideas about which variables are key and how or if they should be tinkered with seems, in economics, to be greater and more based on values than data than is the case in most fields of science. Does rasing taxes and providing a social safety net with the money lead to more wealth over a broader segment of the population or does lowering taxes and allowing people to spend the money as they see accomplish this? A seemingly simple debate that decades of data seems unable to solve because, IMHO, it hinges more on values than scientific facts.

I think the comparison to weather forecasting is apt in terms of the scale and complexity of the problems, and the level of reliability to the predictions we make. But I still think weather is a qualitatively different phenomenon than human group behavior, and one likley to be more stable and reducible to fundamental objective principles we can all agree on (maybe-someday-and if chaos theory is wrong grin)

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Posted: 20 January 2008 11:08 AM   [ Ignore ]   [ # 19 ]
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In macroeconomics there is something called NET DOMESTIC PRODUCT that is almost never mentioned in the media.  It is not difficult to find if you know to look for it on the internet or in an economics textbook. 

It involves that DEPRECIATION business.  Those economists at the universities have defined depreciation as applying to capital goods but apparently the stuff purchased by consumers doesn’t depreciate.  So they don’t bother collecting data on it.  So we don’t know how much it is.

NDP = GDP - Depreciation

So astronomers try to find planets dozens of lightyears away that can have no effect on us but pollution is created on this planet to manufacture products whose depreciation is ignored by the entire economics profession.

We are supposed to regard this nonsense as a SCIENCE?

psik

[ Edited: 20 January 2008 11:11 AM by psikeyhackr ]
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Posted: 20 January 2008 12:06 PM   [ Ignore ]   [ # 20 ]
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mckenzievmd - 20 January 2008 10:06 AM

I also think there is an element of ideology in economic theories that doesn’t obtain nearly as much in traditional sciences, and this may be partly what people are getting at in identifying it as a branch of ethics. The variety of radically different theories with diametrically opposing ideas about which variables are key and how or if they should be tinkered with seems, in economics, to be greater and more based on values than data than is the case in most fields of science. Does rasing taxes and providing a social safety net with the money lead to more wealth over a broader segment of the population or does lowering taxes and allowing people to spend the money as they see accomplish this? A seemingly simple debate that decades of data seems unable to solve because, IMHO, it hinges more on values than scientific facts.

Yeah, but this is an artifact of what you’re likely to see on the news rather than something you might be aware of within the discipline. That is, economics is the study of certain sorts of mass behavior. This kind of study by its very nature has uses (benign or otherwise) at the political level.

Also, politicians have reasons to obscure or obfuscate economic ideas when they do not serve their political ends: here one good recent example was GW Bush’s mendacious use of the “fuzzy math” trope against Al Gore in 2000. Krugman was all over that one at the time, and caught Bush dead to rights on it, but the public barely noticed. Casual obscurantism on economics led to poorly reasoned cuts in tax rates for the wealthy as a direct result, and enormous deficits.

Many well-financed right-wing think-tanks do support crank economic theories for their own ends. But again, none of this is accurately described as mainstream economics. It’s all duck entrails, for the purpose of bamboozling the public long enough to get certain laws passed. (Nobody in mainstream economics believes that reducing taxes always increases tax revenue, for example. Yet for some self-styled TV economists that seems almost an item of faith).

My impression is very much that academic economists are aware of the difference between fact and value; most of them spend most of their time on the facts—gathering data and analyzing it for patterns. A few then use this data in value-laden enterprises and get headlines. Sometimes what they do is useful, sometimes it’s misdirected. But we’re condemned to act without perfect information, so we do the best we can.

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Posted: 20 January 2008 01:17 PM   [ Ignore ]   [ # 21 ]
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Hmm, I guess I wonder how one decides then which economists are “real” and which aren’t. I mean lots of the guys associated with the Mises Institute (a classic example of the sort of think tank you mention) have PhD’s in economics. They may be “quacks” as you say, but what they do is hard to distinguish methodologically from lots of other economists. I mean, you sound like you’re saying that the legitimate scientific practice of economics is the academic practice, and while that’s questionable in and of itself, it also ignores the fact that academic economists, not just media pundits, can easily found with ideas as divergent and, IMHO, poorly supported by rigorous data as those who work outside the academy. I guess I’m not convinced by what I see as your basic point, namely that economics is more of a science than it appears to be because the “real” scientific economics happens quietly and unseen in universities and what the rest of us see as the discipline is really just bogus media purveyors of economic quackery. You may be right, and I certainly don’t spend a lot of time evaluating the pronouncements of university economists in their peeer-reviewed journals, but I’m still skeptical.


I guess part of the problem, which we’ve discussed here before, is what qualifies as a science. Does using the method on fundamentally unreliable (or at least somewhat subjective) data constitute science, or is there some other key defining quality. I’m willing to accept that economics done by scientific methods as rigorously as possible can be legitimately called a science, but I am doubtful that it will ever lead to understanding as reliable, univrsally applicable, and relatively free from the kind of cultural bias the pomos are always talkiing about as the natural sciences can be.

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Posted: 20 January 2008 03:14 PM   [ Ignore ]   [ # 22 ]
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Well, as you know, Brennen, there are people with Ph.D.s who practice astrology, or who are in the front lines of the Intelligent Design debate. John Mack who studied UFO abductions worked as a tenured professor at Harvard. There are science Ph.D.s who work for the Discovery Institute. Etc. The mere possession of an advanced degree doesn’t thereby afford one any particular insight into what constitutes proper practice.

The only salient difference with economics is that the financial stakes are higher. In particular (and here I’d suggest reading some of Krugman’s articles and books, because he describes the phenomenon quite well) there is a lot of money floating about from wealthy, conservative businessmen of a libertarian persuasion. This money is used to found think tanks like the Mises Institute and siphon off the few hard-core conservative folks, probably in particular those who would have a hard time getting a tenured position at a decent university. These people are hired and paid to support particular economic ideologies that essentially amount to extreme libertarianism. Such beliefs are not widely popular in the academy. Indeed, if they were, there would be no need for the Mises Institute, would there?

wink

It is not easy for a lay person to tell the difference. The same is true in the other sciences, of course.

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Posted: 20 January 2008 05:01 PM   [ Ignore ]   [ # 23 ]
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“Science is simply common sense at its best that is, rigidly accurate in observation, and merciless to fallacy in logic.” — Thomas Henry Huxley (1825-1895), British biologist

So economists can’t observe the cars in the junk yards and apply their common sense to wonder about all of that DEPRECIATIONLOL

Maybe the question is wrong. 

Is economics a science and has it ever been?

Things changed in this country between 1900 and 1929.  The Wright brothers took off in 1903 and the Model-T was introduced in 1908.  Plus there was radio and the phonograph and typewriters etc. etc..  I’ve listened to that podcast and they talked about making shoes and pins.  Pins are the classic example from Adam Smith.  The trouble is economists are technological morons.  They don’t understand the modern technology that consumers buy any more than the average consumer does.  They can’t tell if a product is deliberately under-engineered.  They can only talk about the money just like they can for shoes and corn and wheat.  But your TV and your stereo and your computer are not like shoes and corn and wheat. 

So economics ceased to be a science as soon as consumer products went beyond the comprehension of the average consumer and economist.

It is not easy for a lay person to tell the difference. The same is true in the other sciences, of course.

A layman is someone who is supposed to be kept ignorant so the experts can run a snow job on him.  DEPRECIATION of automobiles is so HARD to understand.  At least for economists.  LOL

psik

[ Edited: 20 January 2008 05:15 PM by psikeyhackr ]
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Posted: 21 January 2008 06:03 AM   [ Ignore ]   [ # 24 ]
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Baloo,

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.

Well, no. First, there is peer review on economics research. Second, some persons are presented in the media as if the had some kind of paranormal power (for instance, Alan Greenspan) but it doens’t mean anything about economics as a science

2) The evil of a ‘Powerful Establishment’ is one of the key tenants of economics

Can you explain more?

3) Not only is there a measurement problem, but more seriously there is an attribution problem

Well, it is hard to stablish link between fact in complex systems and in system where there is no posibility to isolate things, it is even more dificult, but the improvement in computer aided simulation is changing this thing. For instance, I build a simple java applet to simulate a money market and prove that M/p = Yk - hi (M: monetary base, p: prices, Y: rent, i: interest rate, k and h constant that depends on certaint characteristic of the system as tendency to spend and iddle productive resources).

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.

It is hard to predict because the nature of the study subject: it is impossible to forecast a certain fact beyond any doubt because the prediction would change the behaviour of the players.

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’

No,as previously said, simulations is a key part in economic research. Mathematical models are also important. Both of them are not exactly ‘anecdotal evidence’. There is a point here: economics studies a thing that is changing fast because it is a man made thing (needless to say that the world economy was diferent during the 29 crack than now: there are new financials artifacts, a diferent speed of propagation of information and so on), so we need to change the models.

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?

As said before, the rules of economics change over time, the economic is not a natural thing, it is a thing that is changed by, among other things, by the the evolution of its study.

7) There are few social sciences that rely as heavily on all other sciences to explain their observations as economics.

I think it’s a good thing to be consistent with other sciences.

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Posted: 21 January 2008 06:10 AM   [ Ignore ]   [ # 25 ]
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dougsmith - 20 January 2008 09:38 AM

Most of the so-called “economists” who you see on TV or who write books trying to influence politicians aren’t economists at all

I couldn’t agree more. Even real economist sometimes have the tendency to try to pass their ethical convictions as part of the science, but it doens’t mean anything about the science.

For instance, the money market equilibrium equilibrium equation (the one I quouted before) has not any ethical position, it just describes what would happen in the money market when one of this variables changes.

I think that trying to jump to conclusions about economics reading the so called economist in the media (and even the real economist in the media) would lead to biased conclusiones.

[ Edited: 21 January 2008 06:12 AM by Barto ]
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Posted: 21 January 2008 08:34 AM   [ Ignore ]   [ # 26 ]
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Doug,

I guess I just don’t place as much faith in the academy as you do. Of course, I agree that a PhD doesn’t ensure sanity or reason in one’s theories. That’s why I brought it up. I’m not convinced a position as tenured faculty does either, which makes evalating the reasonableness of the practice based on the credntials of the practitioner a doubtful enterprise. I think the practice of economics has to be evaluated on its own merits if we are going to decide if it is science or not, and the idea that as long as it is taking place in a respectable university it is probably ok seems a bit too trusting for me. Sure, that probably means it’s more likely to be reasonable than the fringe versions elsewhere, but I don’t think it’s at all difficult to find nonsense inside the academy as well as without.

Now I’m not saying that I’m sufficiently informed to be the judge on the question, because I’m certainly not. I just have some basic skepticism about the fundamental objectivity of the data economists rely on and the thought processes they use to organize them. And I do take your point that most of what we as laypersons get to see of economics is proably not the best, most uanced work, so I understand what you’re saying. I just don’t think it definitively answers the questions raised about the “sceintific” nature of economics as a discipline.

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Posted: 21 January 2008 10:39 AM   [ Ignore ]   [ # 27 ]
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mckenzievmd - 21 January 2008 08:34 AM

... the idea that as long as it is taking place in a respectable university it is probably ok seems a bit too trusting for me.

Well, to be fair, that wasn’t what I was arguing. Indeed, I’d argued that John Mack and others were doing pseudoscience at respectable universities. Its being OK scientifically is something one gets a handle on by reading the economics itself and understanding what is being argued and how the arguments are being defended.

My only point there is that one doesn’t get an accurate picture of the discipline by listening to ideological think-tanks or by following self-described “economists” talking on the evening news, any more than one gets an accurate understanding of astrophysics by reading the astrology column in the daily newspaper.

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Posted: 29 January 2008 10:43 PM   [ Ignore ]   [ # 28 ]
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Has anyone ever taken a random sample of economic predictions (of the will happen/won’t happen variety) and computed their average accuracy?

If the accuracy is not substantially greater fifty percent, then economics is not a science. Yet.

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Posted: 31 January 2008 07:03 AM   [ Ignore ]   [ # 29 ]
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Astyanax, I think that the social sciences have a long way to go, but it doens’t make them pseudosciences. I could agree that they are proto sciences.

About your question, the economics predictions are quite accurate. Of course, I am not talking about the claims ussually published by the media where the economics are more interested in their agenda than in advicing the public, I am talking about models that predict that a strong emission of money would introduce inflationary tendencies, that a raise in the GDP would tend to raise importantions thus limiting the GDP’s raise, and a couple of think like this.

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Posted: 31 January 2008 09:58 AM   [ Ignore ]   [ # 30 ]
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Sorry my fellow skeptics, but most of the preceding discussion about economics is pure piffle.  I suspect it’s a symptom of the lack of emphasis on real and important topics in our education system.

Doug’s fairly consistently right, though.  Which is refreshing.  Especially when it comes to the tangent about credentials of (often dubious) practitioners.

I’ve studied economics for several years.  The study hasn’t been facilitated by moon-beams and navel-gazing, but by reading some of the most highly regarded texts in the field.  For those of you who are genuinely curious about the topic, but don’t wish to get knee-deep in a morass of graphs and equations, the basic principles, which have astonishing implications, can be obtained from a few excellent overviews.  One of the best is Wheelan’s book. I’ve also thoroughly enjoyed a newly-published book that hasn’t yet had time to become highly-regarded. As Doug says, Krugman’s books are also terrific.

There are two basic tenets fo economics, which lead to a whole galaxy of insight:
1) People act in their own self-interest
2) Scarce resources must always be allocated among competing alternative uses.

These two ideas lead to notions such as Smith’s “Invisible hand”, providing support for capitalism, competition and free markets, and to understanding why central-control economies inevitably fail when challenged by capitalist ones. 

Economics is indeed incredibly complex; as complex as all the resources, goods and services in the world, and all the people and organizations that make decisions about their allocation.  In general, we can assume such decisions will be self-interested.  Further, such self-interest is (almost) always a good thing as long as competition is not stiffled and laws are not enacted to interfere with comparative advantage.  On the other hand, laws SHOULD ensure the dissimination of complete, accurate and timely data.

Take movies for example:  The producers and studios that finance movies are interested in getting rich.  Period.  No artistic awards are given to producers.  Strangely enough, if they produce movies that have no artistic or entertainment merit, they don’t make money.  Even though it’d be very inexpensive for a studio to make a movie comprising 100 minutes of film of a concrete wall in winter, such a film wouldn’t sell.  It’s only those movies that consumers enjoy which bring revenue to their creators and financers.  Thus, the “invisible hand” ensures that in a society of free artistic/business expression, only the movies people like the best will succeed.  This necessity, of keeping the customers happy with one’s product as the ONLY means of making it rich, is the basis for much of the innovation and quality that comes out of “the corporate world”.  Now, if the government stepped in to mandate (or gods-forbid, create) movies based on something other than what people enjoyed, then imagine the lack of diversity and quality that would result.

People in free market economies literally “vote” with their money each time they decide to buy something (say, bubblegum) vs. something else (say, a foot-massage).  These collective votes keep the market tuned to supply exactly what we all want, in the quantities we demand, at prices just ever-so-slightly above the total manufacturing cost.

Such traumas as the housing bubble and planned obsolescence are too often the result of inappropriate government action, than of anything else.  In the case of the housing bubble, the vast number of financial derivatives that obscured true risk assessment from the buyers of said derivatives was a failure of regulation vis-a-vis disclosure.  Planned obsolescence only works so long as competetion is stiffled - for otherwise the result would be a spiral of “yes, but our cars last longer than their cars”, until cars lasted as long as mechanically possible for a reasonable price.  I think those cars are called Toyotas…

-Scott

[ Edited: 31 January 2008 10:37 AM by tscott ]
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