In aggregate, it sometimes makes sense to model participants as rational, but this is a very simplistic model that does not always apply. There are lots of economists studying how asymmetric information or irrational participants can cause market failure or other outcomes.
Additionally, a significant number of social scientists aren't scientists.
There is a lot of gray area, for example is medicine a science? Many treatments or diagnoses are based on probabilistic or empirical models -- that doesn't make them worthless.
Medicine is not generally considered a science.
And never was it implied that things that aren't science are worthless.
I think the issue here is more that economics is describing human behaviour, and we don't fit well in to a mathematical formula.
You cannot study economics in a vacuum...in other words you cannot conduct the "test" part of the scientific method, because the real world will always produce some other unknown imperfect variable that affects the theory.
This is why behavioral economics are so important. IMHO it's the first truly concerted attempt at isolating economics to its core science in a repeatable and testable form (albeit not perfect). For example - understanding things like anchoring, recency bias, nudging, etc.
It's tested all the time.
Add tariff, demand drops. That's also economics and works well in 2019.
This stuff is now so obvious we've forgotten it and can now argue about whether economists can predict recessions.
So it's hard to see economics as a valid science. There are no consistent theories and exceptions to everything.
“Science” is not some kind of shorthand for “ultimate understanding of the world”. It is just a process for validating and understanding the limitations of theories.
Absolutely no theory in economics passes even the most basic quantitative testing.
Really. That is an observable fact. It's not an opinion.
Empirical economics is barely even a thing, and even when it's a thing it's mostly nonsense, based on poor data and questionable methodologies.
https://www.livemint.com/Opinion/J7atYOViQO54PiBzSTdAYL/Empi...
Well this the point. Personnal experience is flawed and unreliable. In my personnal experience, something that weight more should fall faster. This is not the case.
Which economic theory enuce clearly the subset of conditions required to be true and fit the refutability criterion? For chemistry: all of them.
Humor me… can you give a more specific example? When I took chemistry classes I don’t remember learning a theory that was completely correct, but it has been a while.
Soft science like economics, psychology, sociology will have none of the 2: conditions vary, results vary, and even if you could ensure you start with absolutely identical conditions it's very implausible that the result won't be heavily influenced later on by random factors.
That does not mean there aren't theories, hypotheses, experiments (usually natural experiments, or small scale pop psychology demonstrations like the dollar auction), and so there is data and you can fit models.
And in economics the hard part is getting good quality data, knowing what to try to quantize, where to start. Some folks spend decades hunting for signal. And then we get priming, and turns out it was nothing. At the same time there's SBTC (skill-biased technological change) the theory describing what happens as automation progresses. But it takes a lot of work to correctly "apply" that theory, because the effects are complex, and you have to keep in mind what else can also affect your observables. (So confounders has to be managed.)
And in the end we get high quality insights, such as the David Autor paper (Why there are still jobs?).
And there are the long and even deeper dives like the "Why nations fail?" book, which talks about the problem of public choice economics (politics) and how to model good politics, how to measure, how to quantify, etc. It's naturally less dense than a paper, but the problem and the pondering is a very important part of science. (The hypothesis generation, the abductive reasoning part.)
There's no need for correcting for local variations that are needed in econ. Or from a different perspective the fact that we have simple laws in physics, and chemistry, and engieering, is because we are only considering/using a _very_ limited part of the whole universe.
The classic CH4 + 2 O2 = CO2 + 2 H2O is a gross oversimplification, because there are a few dozen other things going on at the same time, and NASA/SpaceX/BlueOrigin has to consider those when they burn in an athmosphere. But since we rarely encounter these problems we don't often find ourselves lacking enough data to fit a better theory. (But of course that's what's happening in post standard model physics, or in cosmology, or in trying to design fusion plants, we are very early in magnetohydrodynamics, and even designing a better corrosion resistant material for use in molten salt reactors is a challenge.)
So, just as we have models for ant ecologies we have for economics of states/countries, but just as neuroscientists have trouble figuring out how exactly an ant works and when does what and where ants will go to forage next economists have trouble predicting when the next crash will happen. (See also bee hive collapse syndrome, we still don't know what causes it, yet there's a lot of hives and we could even do experiments with them easily.)
I can't remember the source for this aphorism, but it resonates a lot with your comment :-)
[disclaimer: I'm a physicist]
That's not testing. That's just a real life interaction. You can't isolate the variables in supply & demand, so we can only theorize that supply & demand is universally true. If I mix copper and tin in a bowl, I will infinitely get bronze as a result. This can be tested again and again with no variation. I simply cannot reproduce people's behavior in a vacuum. We can only observe it in the real world and draw the conclusion. This goes for my comments about anchoring, etc. as well.
There is a whole field of economics ('behavioural economics') that explicitly doesn't make this assumption.
To quote Charlie Munger: “it economics is not behavioural, what the hell is it?”
It's not descriptive or empirical, and never has been.
The more honest economists will tell you it's considered part of moral philosophy.
https://www.goodreads.com/book/show/43267091-licence-to-be-b...
Use fixed universal prices regardless of location and you /will/ have problems. The Soviets tried unsuccessfully to do a value calculation for their existence.
Economics points out for instance that stopping smuggling without offering an alternative serves as a subsidy for the successful smugglers.
Doing the math to point out that say a deflationary currency would eventually become worthless as a currency is likewise objective.
It makes for good reading in the Harvard Business Review.
Macro investing literature is what you should read if you want to understand the economy. It's less focused on high level concepts and more on specific data points and how they relate to and impact one another.
While they investigated new topics (i.e. economics), their methodologies were 100% within the standard practice of social and cognitive psychology at the time.
They were then awarded the Nobel Prize for this work. Now, not everyone in the field came from psychology, but a lot did, and the methods used in behavioural economics are essentially indistinguishable from those used in psychology.
For references, Thinking Fast and Slow is probably the best source, as one of the original authors describes their research program.
Also, modern economics use some heavy mathematical tools, yet nobody says its a branch of mathematics.
And lastly, psychology is in my opinion one of the most important branches of science right now.
I agree with you on psychology's importance, but that's probably because I am a psychologist :)
Maybe so, but almost all of the irrational actors that still have any savings know not to get fancy in the securities market.
It is as much a science as any other study of a complex system. Meaning, yes, it is a science.
Economics can be deeply mathematical once you consider the game theory aspect, analysis etc.
Ultimately modern structured products creation and sales is basically just like old-school used car sales. Put sawdust in the motor, roll back the odometer, and tell the customer that it was driven by a little old lady that only took it to church and to the supermarket. Caveat emptor.
That is a terrible misunderstanding of the 2008 financial crisis.
I don't understand this criticism. All sciences are based on models that lie somewhere between incomplete and utterly wrong, but still these models are in fact useful and provide value. Take for instance physics, and how in some applications gravity is still modelled as a constant acceleration of 9.8m/s^2 pointing down. Although that model is very wrong it still works well enough to be useful.
In general you must choose a model on some scale between “accurate but too complex to be useful” and “easy to use but too inaccurate”. In the middle, hopefully, lies some theory which is simple enough to use in analysis and accurate enough to have applications.
For example, you wouldn’t see a civil engineer design a bridge with quantum field theory. They would generally use a less accurate, incomplete model of materials physics. Something simple enough that they can parameterize and run simulations.
Science is there in order for us to understand the limitations of these theories. This is why you can still e.g. use Lewis diagrams and get work done. They didn’t become “not science” just because they are an incomplete model of how bonding works, but through scientific experiment we have an understanding of how useful the model is.