Think Economically

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Maximum understanding, minimum average total cost.

Economics is a science. An awesome science. Newton, Feynman, Maxwell, Hooke, et al. would agree.

I wrote this in reply to a list-serv conversation with some criticisms of economics as a  science, and since I still work for my supper, I figured in addition to making lemonade, I would clone that lemonade with the handy-dandy Replicator function on my futuristic writing contraption. The names have been changed to protect the innocent (Not very much. Einstein was changed to Galileo, and Galileo was changed to Einstein. I just switched the ‘n’s in Newton, and the same with Feynman. With Hooke it was the ‘o’s. Maxwell is not innocent, so I left his name as is.).

Enjoy!

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I don’t want to wade in too deeply here. Everyone here is incredibly bright and articulate; had it continued, the debate would undoubtedly have cleared itself up without my presence.

I thought I might be able to speed it along, though. Economics is a science, and the notion that it is not, or that medicine is not, needs to be parried.

Maxwell, Newton, Feynman, Einstein, Galileo. Hmm. It’s hard to know where to begin. I have never heard that a correlation coefficient has to reach a certain level for it to qualify as science. Indeed, the use of statistics–even with high correlation coefficients–does not make something a science.

The example of physical science feels like a bit of a straw man. If I gave my four-year-old daughter a feather and a pebble, both with the same mass, and said they would fall at the same rate, and we did it again and again, in the wind, in the rain, etc, she wouldn’t believe me. The results would not be replicable.

Physical science is, in many or most cases, not very useful for making predictions about a lot of things. In principle, to a scientist, chemistry is just physics with two atoms, and biology is just organic chemistry with two molecules, and psychology is just biology. But physics can’t explain why my dog barks at the mailman every single day, because it’s too complicated; there’s no control; even to measure the conditions would be difficult.

So what is science? For one thing, Feynman argued that science is what scientists do–in other words, it is a permanent state of contingent belief and ultimate doubt. It is also a criterion for belief–if I see something, and other people see it, and we see it again and again in different places, then it doesn’t matter what we thought, what matters is what we saw. Science is an openness to the possibility that how you think the world works is totally wrong, and a willingness to trade up when a better story is told.

The other thing science is is a process: a story is refined into a theory which leads to a hypothesis which is tested by observation which is interpreted to adjust and improve the theory, and to improve the story. Science is this particular systematic pursuit of improvements in our understanding of the world.

Hooke was contributing to the advance of science when he drew one picture of one flea under a microscope. Economic journalists are contributing to the advance of science when they interview people on why they lost their house, or why they bought one they couldn’t afford, and then disseminate those stories. As long as we use the information to improve our understanding, and then put that new understanding to the test, this is science.

Social science is difficult and slow-going, compared to physical science. There are lots of moving parts. We can’t put people in a vacuum-sealed chamber. The IRB would get really upset about that.

Most economic models and most economic data come from dropping feathers and pebbles into tornadoes. Occasionally the wind dies down and we see a natural experiment. But we economists are improving our methods. Statistical analysis helps to account for confounding factors. Experimental methods have allowed us to introduce laboratory control to examine the conditions for and dynamics of bubbles, how behavior works in auctions, and how and when people will establish property rights.

Even with rudimentary methods, social science long has been science. There are excellent sociologists mapping the networks within and among financial firms to try to understand how conflicts of interest help and hurt society. Anthropologists and psychologists have models of human behavior that explain why factual information we disagree with makes us more certain that we are correct. Social science is on the frontier of human understanding. When physical science was on the frontier, it was the wild west, plagued by the nonexistence of correlation coefficients, epicycles to explain planetary regress, spontaneous generation, whispered tales of alchemical changes, radiation poisoning, and plenty of socially and scientifically atrocious stuff.

But that’s the exciting world of real scientific discovery–real science is not the models we’ve already validated. Real science happens when we don’t know what results we’re going to get, and you just watch and see. And it is stunning, and beautiful, and anxiety-inducing, and deeply weird and addictive. It is awesome.

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