The surprising thing about economics for me: it is not a science. What you learn is a perspective. But people sell their version hard. It gets dogmatic.
Nobody derived Navier-Stokes equations to reach the formulas that show the erosion of a river bank, or the discharge calculation of a weir. Doing so would be nearly impossible given the extremely high level of complexity.
So instead of trying to start with the fundamental equations and build "up", you start by analyzing the behavior and modeling it.
It isn't any different than what Kepler, Newton, Galileo, etc. did: you look at the real world and build models that describe the world with enough precision for what you need.
Sure, you might say that hydraulics isn't a science per-se, but an applied field and so on. In that case, so is economics.
There are absolutely academic economists who are doing a reasonable job trying to find the objective truth underlying human behaviour in economic life, understanding market forces, understanding relevant institutions, and so on.
However, the majority of what actually makes it into the public discourse is simply politically motivated reasoning, often in the form of hacks writing for think tanks that are paid for by special interests.
It's amazing to me that, at least when I was at university, the computer science curriculum had more content concerning ethics and our responsibility towards society than the economics curriculum.
No other field of knowledge is as poisoned by politics as economics, by far. That's why even though economics can be a decent science, a healthy amount of scepticism towards anything you read by (even supposedly academic) economists in the public discourse should be the default attitude.
"Many empirical controversies in economics are essentially disputes about whether or not certain variables constitute valid instruments" - Econometric Theory and Methods, Davidson & MacKinnon
Pretty broad statement. Some micro-economic theories, like the game theoretic models in auction theory, contract theory, mechanism design and behavioral economics are probably the most successful, accurate and impactful theories in all of social sciences, including psychology.
You may not realize how much your buying behavior, your salary, your interactions online and your use of technology are dependent on these models. But comparing their success and use to fields like sociology, management and even psychology, their track record is frankly amazing.
We already know that Macroeconomics amounts to modeling systems that do not aggregate meaningfully from these successful micro-models.
Saying economics is not a science based on this, is like saying physics is not a science because we still can not find a unified theory. Which is a pretty good analogy for a Macroeconomic model that forecasts GDP (aka, everything).
You've never looked at a macroeconomics model, have you?
Economics is complicated because it is modeling the behavior of human beings.
Math is easy, computer science is easy, modeling the collective behavior of humans is hard.
But macroeconomics is indeed based on a lot of things, and you seem to be very misinformed. Macroeconomics relies very heavily on mathematical tools such as calculus and topology to model the collective behavior of humans.
If you are really interested in learning more, I recommend "Knowledge and the Wealth of Nations: A Story of Economic Discovery".
"Andrew Lo, an MIT economist, said that while physics has three laws that explain 99% of the phenomena, finance has 99 laws that explain only 3%. Not only do we not fully understand how the economy works but also there is an endless debate on how it should function."
You can have your own science threshold. But I think calling economics science is doing disservice to science. It distorts the public's perception of science.
(IMHO, biology, which also deals in very complex systems, gets a scientific pass because so much of it is based on well tested chemistry and its methods are heavily experimental. (Aside from evolution, that is.) Likewise, cosmology benefits from its well-grounded bases in physics and geology.)
But that doesn't mean the study of such complex systems can't or don't employ scientific methods or standards that improve their utility greatly. For example, I'm a big fan of Piaget's work, though I would hesitate to call it science. Such work offers compelling insights, though with little real hope of us seeing farther by standing on the shoulders of giants.
Every science has its object (that's what Plato thinks anyway) and thus different tools and methods are required for different objects. The tools in the science of philosophy are different to those of biology, which are still different to psychology. This is not a criticism of economics, philosophy, or science, since I don't consider science to be purely the methodology of the natural sciences. The multiplicity of seriously considered and valuable views within both philosophy and economics (there are more examples though) is unheard of in the natural sciences to my knowledge.
To say that economics is a science in the same sense as the natural sciences requires excluding heterodox schools since their methodology leads to different conclusions to orthodox economics. That is to say, we would need to declare one methodology as absolutely correct and all others as incorrect. From my limited knowledge reading around heterodox economics[0], I don't think such an exclusion is warranted.
[0] The likes of Sraffa, Veneziani and Yoshihara, Shaikh, Kliman, Mohun, etc.
Similarly, heterodox schools are usually peripheral because they are peripheral to the current academic discourse. So for example Marxian primary material is a critique of past-tense economics. Post-Keynesians have a fetish for one particular concept or method (flows, MMT, crisis prediction) and reject everything outside of it. The Austrian School rejects the use of data and even formal modeling altogether, all while academic economics becomes more experiment based.
Nevertheless, there are heterodox professors even at universities ranked within the top 10, and numerous initiatives for inclusion. So given the wide chasm that needs to be bridged for academic discussion, I think the degree of exclusion is actually rather low.
Marxism has come a long way since Marx, though; a big part of the field today is the applicability of Marxian theories to aspects of modern economies, such as globalization, neoliberalism, imperialism and digital goods. By saying their critique is only aimed at political economy, you're charging them with irrelevance, which to me doesn't seem the case. Being ignored does not mean irrelevance.
Astronomy is not the study of things that resist being predicted and self-modify to be unpredictable upon being successfully predicted.
All that said here are some things we know in macroeconomics; In the long run inflation is caused by an increase in the money supply; If you unexpectedly increase inflation you will have an economic boom as people are fooled by the short run disequilibrium between their expectations of the real value of money and what their nominal money now buys, likewise an unexpected fall in inflation will lead to a recession; You can have at most two of control of inflation, control of the interest rate and a floating exchange rate. If interest rates go up you will attract investment and your currency will appreciate unless you have capital controls. If you want to maintain the value of your currency you have to keep your domestic real interest rate very close to the global real interest rate, unless you have capital controls. If you choose to forego capital controls and have a floating currency you can control interest rates and inflation but you may have large inflows and outflows of capital; If you contract the money supply like the Federal Reserve did after the 1929 stock market crash (30% decline in monetary base, 30%!) you will have a recession.
Re your third paragraph. You make many claims which may or may not be correct, but at the end of the day nobody has any kind of track record of prediction long term inflation rates of GDP numbers. This means that there is little value in counterfactual claims (if we did x then y would happen). Every study (such as your allusion to '29) are explanative, not predictive. Explanative studies have relatively little to do with what makes something a science (prediction).
Finally, this is not to say that there is absolutely nothing meaningful in economics. Surely if you arbitrarily set tax rate to 100% or 0% you would have negative consequences. Similarly, if Fed changes current rates dramatically, this would have consequences. It's just for "normal" changes in policy we have basically no predictive power other than something like nearest-neighbor search in historical observation.
Look for example at GDPnow forecast vs. reality. GDPnow is very spiky, since it changes constantly, but its performance is overall pretty accurate, and during each period its data use more than halves the RMSE. In other words, it has predictive power.
[1] -- figure 2 https://www.ft.com/content/60581224-3335-11e8-b5bf-23cb17fd1...
I assumed another reason Economics is so hard is because cycles are so long that there are not many to test theories with, especially once you consider unique contexts around specific cycles. Would appreciate if you could opine on this aspect of difficulty?
Also, I'm always amused that after so many years there is still such a two sided dogma on Keynesian vs non Keynesian economics - is one side being difficult or is there really room for debate?
The first decision you must conceptualize with a utility curve? Which dogma to choose.
[1] http://www.economicsdiscussion.net/economics-2/economics-is-...
While in physics, math, computer science, etc. it's way easier to stay politically neutral, because there are no politics involved. In these sciences, the money is also pointing in the right direction.
What I mean by that last part is, for example nutrition studies always have different parties that want the science to point to a different direction. Sugar, meat, ... industries try to influence those things a lot.
The issue, and I think this is something that most economists would definitely dispute, is that there are few real hard and fast "laws" of economic behaviour. And this leaves scope to construct theories and even test theories in a way that is not objective. This occurs in other sciences too ofc but there is far more scope for this in economics.
If we go into the meta: I think all disciplines go through this at some point. History went through it in the late 19th century, and eventually got over it by simply acknowledging that historians are human too. Economics is very far from this point but it will get there. And once it becomes more clear what actual knowledge looks like then I think economics will be on more solid footing (I don't think economists understand that no-one believes their bullshit about objectivity, I really don't and it reflects badly on them).
Also, the OP mentions finance...there is a big difference between finance and economics. First, things that get published in academic finance have an effect on the data. If you publish a strategy that works, returns will that strategy will drop off. Second, there is a lot of self-promotion. Finance is a fast-moving, aggressive field which is great because it leads to high output but a lot of the results can't be reproduced.
Hypothesis?