economics - a few kicks against the pricks

If I were going to be aphoristically cruel, I’d call economics the science that can’t predict the future and can’t agree upon the past. In the Freakonomics column, my happy hunting ground for sophisms, Stephen Levitt worried that the state of macro-economics was in poor shape, especially as compared to the happy state of microeconomics. Matt Yglesias commented on the post, remarking that research programs in the sciences aren’t necessarily all captured by reductionist programs:

“But as a methodological matter, it seems deeply unsound. As a general principle for investigating the world, we normally deem it desirable, but not at all necessary, that researchers exploring a particular field of inquiry find ways to “reduce” what they’re doing to a lower level. To make that concrete, in the modern day we have achieved a decent understanding of how principles of chemistry are grounded in physics’ understanding of the behavior of atoms. But it’s just not the case that advances in chemistry were made by demanding that chemists ground all their models in subatomic physics. On the contrary, chemistry moved forward in the first instance by having chemists investigate issues in chemistry and see which models and theories held up. Similarly, though psychology is intertwined with the detailed study of the biology of the brain, it’s not deemed illegitimate to research psychological issues in the absence of a specific neurological theory.”

At this point, I’d object that we are confusing an epistemological issue with an ontological one: the division between micro and macro economics has nothing to do with the system of production per se, but is an epistemological convenience that allows economists to concentrate on certain special problems.

The comparison with chemistry is part of the bad habit of thinking that economics is some special human science. It isn’t. It is not a positive science, like chemistry or physics – it lacks a Baconian side. Economic experiments turn out to be things that are more likes sociology than particle physics. Now, it is true that economists love to make models, and they use masses of data in these models, and make the models out of mathematical relationships – but it is all a mimicry of physics. In reality, an economic model is just a poem. Now, a poem can burst open a human soul and pour the divine light of revelation on the world – but most poems don’t. Certain economists, like strong poets, have revealed the world – Smith, Marx, Veblen, Keynes, Polanyi. However, the light that streams from their models is not the same kind of light that streams from models in physics.

Mostly, though, the models reveal little or nothing. They are like the crossword puzzles IT likes so much. They merely plug in formulas, according to some outside cues (usually provided by ideology) and some internal connections (provided by the way the data is divided up). And once all the places are filled and the puzzle is done, the model is finished. But it is unlikely to do much to help us understand the economy – any more than the chance meeting of two words sharing a letter in a crossword puzzle – Georgics and borromean – will allow the puzzler to understand the language on some deeper level.