Economics: Cult or Science?

Why the suspicions about economics, expressed in our question for the show? Because there is so much basic, public, disagreement among economists — way more than in most sciences. You’ve got the Chicago School of economics, supply-side economics, Keynsian economics, and on and on. Beyond the basic law of supply and demand, is there really much that they agree on?

This week we’ll be asking: is Economics a science, or a cult?

Of course, part of economics is a science. That’s been obvious for almost three thousand years, since the philosopher Thales cornered the market on olive presses. Thales is mostly remembered for thinking that everything was water. But he had a practical side too. One year, he noticed that the rains were unusually heavy and he predicted a bumper olive crop. He realized that come harvest time, in the fall, there would be a huge demand for olive presses. Of course, in the Spring, before harvest time, there wasn’t much demand for olive presses. So, he bought up every available olive press on the cheap in the Spring and sold them at a premium in the fall. Since then economists have observed markets under all kinds of conditions and have discovered all sorts of laws and principles — like the law of supply and demand — that help us predict and explain how markets work. So, why the suspicions about economics, expressed in our question for the show?

Because there is so much basic, public, disagreement among economists — way more than in most sciences. You’ve got the Chicago School of economics, supply-side economics, Keynsian economics, and on and on. Beyond the basic law of supply and demand, is there really much that they agree on?

The late Milton Friedman, champion of the Chicago School, used to say things like, “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” While modern day Keynsians like Paul Krugman say things like, “the very rich, who have had huge income gains over the last 30 years, should pay more in taxes.” And to top it off, both Krugman and Friedman are Nobel prize winners! What kind of scientific field gives Nobel Prizes to guys who have such diametrically opposed views? If economics were really a science, couldn’t they just go to the blackboard or to the lab and work out who’s right?
 
Of course, you could have two physicians who disagreed about what was best for a given patient; that wouldn’t mean they didn’t share an underlying biological theory that’s quite well-founded. But in the case of economics, there doesn’t seem to be a single underlying theory that they all agree on in the first place. The political conservatives, like Friedman, have their theory: monetarianism. The political liberals, like Krugman, have their theory: Keynsianism.
 
But maybe the conservative position is based on sound science, while the liberal position is based on wishful thinking. Or vice versa. Just because there’s disagreement, doesn’t mean there isn’t a right and wrong of the matter.

To be honest, I’ve got my own opinion on the matter. Throughout my life, I think Keynsianism has had a lot of predictive success, including the effects of fiscal policy. But Keynes’ prescription hasn’t been followed. That was, as I understand it, for governments to spend to stimulate economies out of recessions and depression, and to tax and save during economic booms, to keep inflation in check and budgets more or less in balance over the long term. The problem is politicians, from both sides of the aisle, like to follow the first part of the advice and ignore the second — they differ only on whether they prefer to flout it by increasing spending or lowering taxes. Monetarism seems like a consistent addition to Keynsianism for dealing with the details of monetary policy, but has been largely hijacked by so-called conservatives, who are mostly radicals. The divide between the two sides of monetarism can be seen in Friedman, between his sound scientific work and his ideology driven policy perscriptions. In people like Alan Greenspan and Paul Ryan, it is combined with the weird views of Ayn Rand. Yuk.

Photo by Sharon McCutcheon on Unsplash