Economics is good for many things!

A few weeks ago, the NY Times recently published an article titled “What is economics good for?” The follow up comments to the article are available here.

I have read the article twice. The main argument in the article basically says that “the fact that the discipline of economics hasn’t helped us improve our predictive abilities suggests it is still far from being a science, and may never be.” I do not agree with the article for several reasons

1. Economics as a Social Science

Economics is commonly categorised as a social science. I definitely do not know who was the one who defined economics as a social science. I am certain that Economics definitely does not fit into the conventional definition of Science. But, the question here is: Does it matter?

Why are we arguing over whether Economics is a science?

2. Economists are never meant to predict anything! (I know there are many who agree and disagree with this.)

The article says that:

Economics has never been able to show the record of improvement in predictive successes that physical science has shown through its use of harmless idealizations. In fact, when it comes to economic theory’s track record, there isn’t much predictive success to speak of at all……What is economics up to if it isn’t interested enough in predictive success to adjust its theories the way a science does when its predictions go wrong?

The article compares how economics has fared with respect to physical science in terms of predictive successes.

I don’t know what happened over the years that led everyone to think that economists are people with crystal balls that could tell you about the future. We can’t! I think economists who are humble and with some humility will tell you that they can’t forecast the future with 100 percent probability of getting it right. But, we analyze the economy based on what has happened consistently in the past. Economists use the resources we have, make logical analysis and forewarn people about the possibility of an upcoming crisis, a possible “bubble” in the economy and so on. Forewarning people about an upcoming crisis is different from predicting what will happen definitely.

I believe economics as an area of study and profession is entering a new era, where people in the field are constantly trying to improve their skills, and to incorporate more characteristics of human behaviour into their models. In fact, to have a shot at “predicting the economy”, neuroeconomics/natural experiments might be the way to go. Even without our dismal predicting skills, I think economists have contributed a fair bit towards facilitating the understanding of the economy.

Let me end this post with something to ponder about:

If medicine hasn’t helped in certain areas, does it mean we stop trying?

(Well, I am really just trying to make people think about other disciplines. For example, a cure for HIV is not quite discovered yet, does that mean we should stop trying?)

 

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