Mark D. White

Mark D. White

I don't know how I missed this article, but thanks to the great folks at Coordination Problem and Cafe Hayek, I saw it, and it confirms so much of what I tell my students, especially in macro, as well as my intuitions regarding the proper role of economics.

The piece is Russ Robert's "Is the Dismal Science Really a Science?" from February 26's Wall Street Journal. Here are a few choice passages:

If economics is a science, it is more like biology than physics. Biologists try to understand the relationships in a complex system. That's hard enough. But they can't tell you what will happen with any precision to the population of a particular species of frog if rainfall goes up this year in a particular rain forest. They might not even be able to count the number of frogs right now with any exactness.

Exactly! I usually make the comparison to meteorology, also a complex system (perhaps not literally) but one made up of molecules and energy, neither of which has intentions, emotions, or quirks–they have no psychologies, and their course are determined by the basic laws of physics. But in a social science such as economics, we have persons, with intentions, emotions, and quirks–lots of them. Despite how they're reflected in economists' models, their actions are not determined solely by the forces around them, but also by the forces inside their heads–their preferences, beliefs, values, morals, principles, biases, prejudices, and so on. And if meterologists, with the aid of supercomputers and tremendously accurate data, cannot predict the weather in a week, much less a month or a year, with any accuracy, what hope have economists? As Roberts so wonderfully puts it,

The defenders of modern macroeconomics argue that if we just study the economy long enough, we'll soon be able to model it accurately and design better policy. Soon. That reminds me of the permanent sign in the bar: Free Beer Tomorrow.

But perhaps this passage struck me the most:

Perhaps what we're really doing is confirming our biases. Ed Leamer, a professor of economics at UCLA, calls it "faith-based" econometrics. When the debate is over $2 trillion in additional government spending vs. zero, we've stopped being scientists and become philosophers. Do we want to be more like France with a bigger role for government, or less like France?

I don't presume to know exactly how Roberts meant philosophers to take this, but regardless, I think the point is very important: the "big" questions are usually not economic, but more often philosophical.

As Roberts implies, if the government has already decided to spend around $2 trillion dollars, then economists may be able to contribute to determining the precise amount necessary to achieve the desired end. But if the government is deciding whether or not to spend that large amount of money at all, or whether to nationalize health care, or bring back significant financial regulations, and so on–massive, qualitative changes in the economy, rather than marginal, quantitative changes–then a broader perspective is necessary, and philosophy certainly has a lot to offer to that discussion.