Re: The Problem with Economics (was: Re: LVT: a discussion with a center/left economist)


"Zerge" <zerge@xxxxxxxxxxx> wrote in message
news:1132695590.389941.124420@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>
> William F Hummel wrote:
>> On 21 Nov 2005 15:10:57 -0800, "Zerge" <zerge@xxxxxxxxxxx> wrote:
>> >
>> >In natural sciences you can observe a phenomenon,
>> >repeat the phenomenon in the lab, and then proceed to build a
>> >mathematical model that will describe and even predict the phenomenon.
>> > In social sciences in general, and in economics in particular, it is
>> >EXTREMELY difficult to repeat the phenomenon in a lab. Is not easy to
>> >take a country and pull its economic policy levers in different
>> >combinations to see how the different variables react, because if you
>> >do so millions of people may starve to death in the process. So the
>> >only thing we can do is observe phenomenons, then try to build models
>> >that describe and predict those phenomenons, and in a VERY limited way
>> >suggest economic policies and record the results that usually take
>> >YEARS to show themselves. So we can build models much, much faster than
>> >we can gather the data to prove them. So we wind up arguing for YEARS
>> >about models we aren't even sure are real.
>>
>> > That's why the science of economics advances at such a slooooooow pace.
>>
>> The main problem is in macroeconomics. The appeal for the student is
>> in the mathematical models which themselves are perfectly rigorous.
>> But the models abstract from the real world which is messy and
>> complex. They are necessarily full of simplifying assumptions and
>> ceteris paribus arguments which ignore significant effects.
>>
>> Over time, the errors become imbedded in the literature and repeated
>> by successive authors who don't bother to make a critical study of the
>> underlying assumptions. In effect, students are indoctrinated in a
>> particular school of thought, and after having spent so much time and
>> effort learning, they are naturally loathe to see it overturned.
>
> Totally agree. But the same thing happens in natural sciences. The big
> difference is that in natural sciences you can prove wrong a model much
> faster than in social sciences, thus natural sciences evolve faster.

The problem is much worse than that. Economics is an applied science, and
the advice of economists has an enormous impact on the distribution of
wealth.

Applying economists' own theory of human incentives to economists, we can
posit that their hypotheses will be greatly biased in favor of arguments
which, when instantiated as public policy, will favor the rich and powerful.

Of course, other sciences aren't "pure" either---scientists going beyond the
evidence to favor their own school of thought, etc. But the incentives are
much smaller than those found in economics.

Of course, I imagine there are plenty of "workaday" economists who these
observations might not apply to. But I think it's clear that it applies to
the field as a whole. The best evidence is that economists rant and rave
about the harm of distortionary taxes, yet most speak not a word about land
value taxation.


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