NEW YORK — Maybe it's a deep-seated inferiority complex. Or a desire to be accepted, even respected by the great minds that have transformed mankind with their
Otherwise, how else to explain why some economists keep insisting that economics is a
The announcement last week of the winners of the 2013 Nobel Memorial Prize in Economic Sciences rekindled the science-or-no-science debate among practitioners, journalists and casual observers.
British economist Liam Halligan, writing in Britain's Telegraph, reminds us that economics is about human behavior in the allocation of scarce resources, not scientific certainties.
Raj Chetty, a professor of economics at Harvard University, makes the less persuasive counterargument this week in the New York Times.
Chetty admits that the "fundamental challenge" faced by economists is "our limited ability to run experiments." Economists may try to hold everything else constant — "ceteris paribus"— to test a single variable, but they can't. Nor can their econometric models, no matter what the economists claim.
Still, he says economists "have begun to overcome these challenges by developing tools that approximate scientific experiments to obtain compelling answers to specific policy questions."
I wonder how Chetty would use those tools to provide compelling answers to the following questions:
1. What is the expected rate of economic growth in conjunction with a 4 percent federal funds rate?
2. What is the effect on inflation of a 300 percent increase in the monetary base?
3. What is the effect — the multiplier — of a $1 increase in government spending on output?
4. What is the non-accelerating inflation rate of unemployment, or the jobless rate that triggers rising prices?
5. What is the wealth effect from a 20 percent increase in the major stock indexes? What about a 100 percent increase?
The answer to all five questions is, it depends. And that's one of the main reasons that economics isn't, and will never be, a science.
Isaac Newton, the English physicist, mathematician and philosopher, pretty much explained the fundamental difference between economics and the hard sciences more than 300 years ago.
With the physical sciences, we observe what happens in nature. Then we try to quantify it.