Paul Krugman announced some good news this morning, Keynes Is Slowly Winning. It seems that the OECD has changed course from its devastating focus on fiscal austerity toward stimulus. In fact, it has appointed one of Krugman’s old students, Catherine Mann, as its chief economist. But I was struck by one line in Krugman’s article. After noting that “the ground is shifting,” he said, “It has taken a while.” Indeed, it has. And it highlights something that has been on my mind: economics is no kind of science.
I think most people understand very well that economics is not like physics. Physics allows scientists to run experiments and really break down the world into discrete parts for study. So generally, economics is seen more like climate science. They are both fields where the phenomena are very complex and one must depend upon macroscopic observation and computer models. Yet economics doesn’t behave much like climate science. And it doesn’t even have the excuse of running into the practical world with political ramifications — they both do.
At its best, science makes marginal progress. The idea of anthropogenic global warming was first suggested long before there was much empirical evidence for it. And the scientific community did not latch onto it. But as the evidence got stronger, the scientific consensus got stronger. There may be politically motivated hacks like Fred Singer, but that isn’t the field; there are similarly inclined deniers of evolution, but no one suggests that there isn’t a scientific consensus.
But what has happened in economics? In the 1970s, stagflation caused the economics profession to go crazy — throwing out the demand-side thinking of Keynes and adopting a radical new approach to macroeconomics. It’s only fairly recently that economists (on the “left”) have started to realize that stagflation was not cause for a radical new theory but for minor changes to the Keynesian model. And in the end, this period of scientific psychosis seems to have been caused by a kind of insecurity on the part of the economists. They wanted a field that was built on first principles, like the real scientific field of physics. They seemed not to notice that physics has never solved the many-body problem. Complexity requires different tools.
Similarly, after the financial crisis of 2008, it seemed to be open season on loony ideas. I think that it was the ultimate proof that the profession had totally messed up in the 1970s. So I guess it was understandable that the profession would be in crisis. But in general, it didn’t see it that way. Even people as reasonable as Noah Smith seemed to think there was only minor disruption and in the end it turned out that economists had a good bead on The Truth™. But even if that’s true, it doesn’t explain how economists on the right (The very idea ought to stop people from referring to economics as a science!) lapsed into what can only be called apologetics. “How can we justify our ideology?!”
In addition to this, the economics profession has quite respectable and clearly smart people like Greg Mankiw who are big believers in Keynesian stimulus — as long as a Republican is in the White House. And what is so aggravating is that the economists who are most inclined to think of themselves as “hard scientists” are the ones who operate most as apologists. I understand, for example, that Ken Rogoff is a serious scientist and his papers are careful. But that doesn’t stop him running around the world making broad — And wrong! — political statements.
Economics first developed out of the field of moral philosophy. And it still is moral philosophy. The fact that people use math doesn’t change that. And I think it’s perfectly fine that economics is part of moral philosophy. The problem is that modern economists — especially on the right — want to claim the mantle of objective science, even while they are pushing a philosophy — and one that even many liberal economists believe shows that the power status quo is just great.