Defending economics (again)

From time to time I read one of those articles that attack economics and economists. The latest article of this type has appeared in the Australian edition of the Guardian: if economics is a science, why isn’t it being more helpful? It is frustrating to reply to them but it this one was too bad to pass the opportunity.

The article argues that economists do not agree on anything–they do not agree on what efficiency means, what allocation means, what scarcity means. You get the idea. Take the following claim: “And some people refuse to believe that renewable electricity is a substitute for coal-fired electricity. Like everything else in economics, there is no right answer.

Well, there is a right answer. We might not know it at the moment–or the consensus might not be there–but there is. There is a right answer to whether we can use electricity only from renewable energy, and if possible at which price, and also if not possible how much it would cost to augment the capacity.  There are right answers to all of these questions. People sometimes refuse to believe science, even when they practice it themselves. “God does not play dice with the universe” is a famous quote by Albert Einstein that shows his difficulties in accepting quantum mechanics. Should we say that there are no right answers in physics because some people refuse(d) to believe quantum mechanics?

This brings us to the author’s comparison of economics to other sciences: “If physicists can agree on how to make an object move and physiologists can agree on how to resuscitate a heart that’s stopped beating, why can’t economists agree on how to boost Australia’s flagging wage and GDP growth?” Why didn’t he asked about whether physicists agree with the interpretation of quantum theory? Or the multiverse? Again, we do not define science with respect to how certain we are about our predictions. Weather forecasting is a science that gets it wrong many times. Because there is a high degree of uncertainty associated to it: the outcome depends on many factors, and small deviations can lead to big impacts. Exactly like economics–and especially macroeconomics.

The author admits that sometimes “There is no doubt that economists can sometimes use scientific methods to develop some conclusions to some questions, based on replicable and repeatable methods” But then he says that “Similarly, when it comes to decisions about increasing unemployment benefits or reducing greenhouse gas emissions, it is absurd and unhelpful to suggest that an economist – or any economic model – can determine what we “should” do.” He seems to suggest that economics is a positive science rather than a normative one. But then it is a science. In order to decide what we should do, we need to understand the consequences of our actions. The fact that there is disagreement about these consequences, again, does not mean economics is not a science. There are right and wrong answers to these questions.

What a lazy article. It closes with this claim: “Economists know the price of everything and the value of nothing. Values are entirely up to us.” But what are the values that he is referring to? Does he mean, for instance, values such as a desire to increase unemployment benefits? But are these values orthogonal to the consequences that they might create? To the extent that they are not, economics is necessary. To the extent that we need to understand the mechanisms at play in the economy when we raise unemployment benefits, we need economics.

This entry was posted in Uncategorized and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s