Is economics a science?

This is a question that popped up on twitter last night and I want to address it somewhat. First, I want to say up front that there is more agreement economists then the blogosphere and popular media would suggest. Here is Tyler Cowen making the same point, and I’d venture that most of the economist bloggers, even those who disagree with the mainstream on a lot, would agree with that.

That’s not to say there isn’t something to the critique. One of the strongest proponents of the un-scientific nature of economics is George Mason economist Russ Roberts. But I think even his criticism of the field is much more limited than most econ critics might think. His argument is that much of economics is a science, but a science like Darwinian biology:

Is economics a science because it is like Darwinian biology? Darwinian biology is very different from the physical sciences. Like economics it is a very useful way to organize your thinking about complex phenomena. But it is not a predictive or very precise science or whatever you want to call it…. Darwinism, like much of economics, exploits tautological reasoning. If the fossil record is incomplete or shows no change or vast periods or the pace of change is inconsistent with the fossil record, the theory is not discarded but modified with the concept of punctuated equilibrium. Is punctuated equilibrium true? There is no real way of knowing. It is our best hypothesis given very limited data. Is it a science? Sure. But it is a science that is unlike physics. That’s OK.  It is still a very useful way of organizing one’s thinking about evolution. And the “imperfection” of biology is fine unless you really want to know when the elephant got his trunk. Then you are in unscientific territory. It doesn’t matter whether our understanding of natural selection is imperfect or that we simply don’t have enough fossil data. Biologists understand the limits of their field.

This is to say economics is a science, but a more difficult one, and with real limitations on knowability. Russ argues that economists should have more humility about the precision and certainty of their estimates, and to do otherwise is to engage in what he calls “scientism”. I am a skeptic by nature, and so I find Russ’ strong statements of epistemic humility appealing. I also think that he is generally correct that economists, and all people for that matter, have to much confidence about their beliefs. We should be humble about what we know, and what our studies have shown.

But the question is what beliefs does such skepticism leave you with? If one is going to have very skeptical take on economics, then one should extend an appropriate (although not necessarily symmetric) amount of skepticism to other sciences. For instance, here is Russ applying his skepticism to climate science and comparing it to macroeconomics:

I remain agnostic on AGW. I am not a climate scientist. But I know something about multiple regression analyses with complex phenomena. It is my impression that like macro models, these models do not perform well with out-of-sample predictions. That is, they are fitted to the past and then used to make predictions about the future. When the future does not turn out to be like the past predicted, the models are tweaked (improved!). The problem with this methodology is that the tweakers of the models are prone to confirmation bias.

But even Russ falls short of applying his own rigorous skepticism. For example, here is Robin Hanson chiding Russ for his  uneven skepticism when it comes to his belief that handgun ownership deters crime.

The lesson to take from this isn’t that if you don’t believe economics is a science then you must reject climate science or believe guns deter crime. It’s that if you’re going to hold economics research to an extremely high burden of proof, then you should be prepared to subject all of your beliefs to such standards. What this will leave you with is mostly weak beliefs about the world for a lot of stuff that matters to you, whether it be about medicine, history, biology, psychology, criminal justice, climate science, or economics. Maybe widespread weak beliefs are a better approximation of the truth, I don’t know, but I do know very few people do or are willing to reason like that consistently. Maybe they should. But even here the vast majority of humanity has more belief changing to do than economists.

A final and related point I want to make is that macroeconomics is both science and engineering, as Greg Mankiw has argued in a paper that should be read (it’s very light reading, seriously) if you’re interested in delineating between the scientific and un-scientific parts of macro. Economics is also history, and moral philosophy, and contains many individual studies which in-and-of-themselves are not scientific. But economics as a field is a science in that all claims about reality must ultimately be rooted in empiricism, and models and paradigms must be falsifiable and eventually tested against reality.

It can oftentimes be difficult to see the scientific process at work in economics, as in other fields. Sometimes we are stuck at impasses where we are left with little more than theory to guide us, and sometimes empiricism is limited to testing particular model parameters, and ultimately our confidence should be limited by this. And sometimes what looks like pointless or tautological theorizing is really theorists attempting to build tools and lay groundwork for empiricists. It’s easy to look at some of this and think it un-scientific, but not all steps of the scientific process look like science.

Another question is, if economics weren’t a science, then would previous paradigms so have been done in by empirical outcomes? The old Keynesian Phillips Curve held that there was a tradeoff between inflation and unemployment. When that relationship broke down during the stagflation of the 70s, the Phillips Curve was invalidated, and this helped shift macro away from old Keynesianism and towards the new classical paradigm. Real Business Cycle models of the 80s were also invalidated by reality: it was clear that money mattered, and in the real world it was hard to find technology shocks to explain actual recessions.

The point here is that in the long-run economic paradigms and methodologies are judged by their ability to explain the real world. Even if individual contributions within the field may contain what looks like un-scientific analysis, the field proceeds as a science. Yes, it is a big field, and it isn’t hard to point to parts of sub-fields that are lacking in empiricism. But to wave you’re hand at economics in general and say it’s unscientific is to diminish a lot of important and useful work by researchers who’ve spent more time thinking hard about causality and empiricism than almost anyone who would make such a criticism. If you’re trying to convince people that economists should show more humility about what they know, then that is an awful arrogant way of going about it. People making such claims should be forced to sit down with James Heckman, John List, or Esther Duflo and explain to them why what they’re doing isn’t science and how they aren’t scientists.