No one here has acknowledged the difference between classical economics and neoclassical economics (or even the difference with post-keynesian economics). Classical economics makes descriptions and predictions that can be falsified.
It also takes into account social context by understanding the social forces that come into play in a society at a given point. For example, the profit motive is understood as a historical force reinforced by capitalism itself.
All of this is modeled in a stochastic manner, which reflects both the variation in human behavior and the strong tendencies in human behavior. Once again, these models are testable.
All of this contrasts with the idealized and unscientific notion of economics that was cooked up at the end of the 18th century: neoclassical economics. This is what is taught to most people.
Neoclassical economics doesn’t seek to describe the forces that motivate human beings as much as assume that people are utility maximizers. Therefore, social context is explained reductively. Predictions are harder, because what leads the way isn’t evidence, but assumptions. Of course, there’s a political component to not show capitalism as a historical reality as much as both a reflection of universal truths of human nature and a desirable social arrangement.
It’s sad to confirm that neoclassical economics has dominated the economics departments and school curricula of the world. However, many scholars fortunate enough to be given a stable job despite not believing in the contemporary doctrine are doing amazing work. For example, Shaikh.
With this in mind, classical economics has to resemble physics to the extent that physics describes stochastic processes. In fact, Shaikh explicitly recognizes that pressure as a measure is a stochastic measure because, even though you can’t predict the trajectory of a single atom, you can predict how many atoms will interact on an aggregate level. The same happens with humans.
Pretty sure this isn’t that controversial of an opinion. Pretty sure any economist that disagrees with you is a shit economist. There’s a reason there’s a related field called “socioeconomics”
Also fuck this meme format. Stop using this facist for memes.
the number of comments here who use hard sciences’ criteria as the ones and only defining the validity of knowledge is concerning. Human sciences don’t have the same foundations, methodologies, etc. as harde sciences, they don’t have the same system of validation either, which doesn’t mean it’s less valid.
It's a branch of sociology dominated by people who refuse to accept sociological research practices in the name of deluding themselves that they're uncovering grand truths about the universe. It would be hilarious and sad if politicians and journalists didn't listen to them.
This is a normal standpoint for anyone who has any meaningful knowledge of the world. The whole study of economics depends on a social construction - the economy.
Economics is definitely a social science. Even the most business-bro economist would agree.
But I would actually argue it is closer to physics than philosophy*. At the macroeconomics scale, there are very solid trends and predictions to be made with very solid hypotheses as to why they occur. And in a small town, you can generally get away with a lot of the higher level aspects of microeconomics and make solid predictions. Gas stations thrive on this shit. But high frequency trading, as well as sites that let individuals buy whatever stocks they want, really do narrow the region that can actually be considered either one and instead we are looking at having to apply “micro” concepts across entire countries worth of people.
Which… is physics. Drop a ball from a platform? You can math out when it will hit the ground to the nearest second pretty easily. Want to go milliseconds? Now you probably need to take into account air resistance, but you can probably do that with some not overly complex simulations and wind tunnel experiments. But as the height increases and you start putting a rocket engine on the back of that device, just doing a fluid mechanics simulation in your CAD program of choice stops being viable and you start needing to consider the underlying material properties and possibly even doing molecular dynamics simulations under the hood.
And… that is kind of where we are with economics. We have the high level math and simulations. Newton’s Three Laws have been discovered and people can get a long way. But nobody really understands the underlying causes well enough to find the economic equivalent of the Theory of Relativity. And nobody has figured out how to run simulations that can take into account… still only a subset of the variables at play.
Personally? I supported a decent number of simulations of population movement and the like as part of the covid efforts. I strongly suspect there is some underlying “science of why humans do the shit we do” that nobody has properly codified yet, and Economics is a subset of that. Because the more you look beyond ECON 101 level concepts, the more it is clear that there IS strong logic underneath and that a lot of “predictions based on trends” are very much “I predict that if we kick the ball at this angle with this much force, it will go that distance” levels of science. But there are so many factors involved that nobody understand how to account for.
*: Going by the modern definition rather than the historic one where most hard sciences were wrapped up in philosophy. One of the reasons we have “Doctorate of Philosophy” for physics and the like. … Which also speaks to how naive this post is
We’ve had 3 “once in a lifetime” financial meltdowns in like 25 years now.
Our banks need bailing out like every 10 years.
The arrogance of thinking that we’ve figured out the economy even in the Newtonian sense is part of why, I think.
Like, I hear you, but at the same time it just doesn’t align with even the broadest observations.
And when a theory doesn’t align with observed data, I have to be critical of the theory…
I’m interested in if you can expand your explanation to account for it, though. It’s super low stakes and I don’t think it’s really possible to prove any of it so I think it’s a great subject for thought experiments.
You’re making the mistake of thinking of this from the perspective of an end user. By the time you or I see anything, we have already done all economically viable simulations and are using the only approximations that “make sense” to use.
That does not at all mean that the people running those sims even think it will work. That means that the same report saying “Look, this might work if we get really lucky and none of these four hundred events that we can’t account for occurs” that execs then ignored because they either don’t understand or, understand well enough to know there is nothing that can be done.
Which is the other side of this. So much of modern physics and engineering is proprietary for corporate reasons. If Hyundai suddenly were to gain some new understanding of material science, they are going to exploit that. And the same is true where fundamental flaws in car/whatever designs are often treated as “How can people be so stupid and irresponsible as to do this” rather than… pretty much anyone with an understanding of the underlying math saying “So glad we didn’t try and do that”.
As for Newton’s Laws: Understand that, even though we call them “laws”, they are still theories. It is incredibly unlikely that we discover some new concept that flips our understanding of the world on its head and we discover that an object in motion will actually accelerate on its own if you get it to the exact right speed and THEN paint it red, but there are enough unknowns that we STILL can’t rule that out entirely. We can rule it out to the point that we would laugh at anyone suggesting otherwise… but would probably check their math if they suddenly had a proof.
Like, let’s look at one of those laws: The simplified verison is that an object in motion will stay in motion unless acted upon by an outside force. Now, we are all smart enough to understand that those outside forces include things like gravity, friction on the ground, and even friction from the air. But as you increase the speeds at which objects are moving, you suddenly have a LOT more factors to take into account where, depending on the math, even radiation can become an “outside force” to slowly (over millenia, if memory serves) slow down an object (take that one with a grain of salt as I forget if that has been “proven” yet or if the argument is that it is still just the particles themselves causing the deceleration or not).
I STRONGLY encourage people go out for drinks with scientists if you ever have the chance. Not grad students and professors (although, many do think of the same problems) but the engineers who work for companies and think tanks and government labs. You will RAPIDLY reach the point of “I have no fucking idea why it does that but the database says I substitute a ‘4’ for this property and stuff mostly works.”. You might even get lucky and someone will go on a rant about how the entire field are idiots for not listening to them because approximation X is actually a fundamentally flawed one and under very specific circumstances it will fail so that dipshit in management better give them a raise".
But yeah. People very much overestimate how much “science” has its shit together. We are mostly bouncing around and making informed hypotheses on what would and would not work. We just have the advantage of most of what we do costing so much money and requiring so many people that it is “safe but slow” to advance. Although… read some stories about the early atomic weapons programs around the world if you want to have trouble sleeping. And some of that is very much because: Good science reporting ignores that. It presents “theories” as “fact”. Because people are stupid. And saying “We believe your car will not spontaneously melt” is actively harmful. Whereas “Your car won’t melt and the battery is contained to the point that the passenger cabin is safe to the extent of all of our testing”
Whereas economics? They don’t have the luxury to not do something. People are going to buy and sell widgets regardless and you either get in on the widget trading or you might as well not exist. So you work to the extent you can and cross your fingers it works out. Which… is a lot like the early pioneers of flight. We love the Wright Brothers but a LOT of people died because their math was wrong or they didn’t understand a concept and the Wrights very much benefited from past experiments.
I mean, we see the exact same uncertainty all the time in real-world applications of the hard sciences as well.
Weather prediction, for example, is still just as inexact a science as macroeconomics in its application, even though it’s entirely physics-driven and we have a pretty complete understanding of each of the variables involved on a theoretical level. The system is just complex and chaotic enough that understanding the theory of weather doesn’t mean that we can successfully model the real-world behavior of weather.
This doesn’t mean that we should conclude that all theory relating to weather is incorrect - that would we throwing the baby out with the bathwater - it just means we still have a ways to go when modeling the real-world complexities that come with the theory.
I still don’t see this as an oranges to oranges comparison. Or even oranges to mandarins. Or oranges to limes.
I accept that both systems (weather and economics) are both “chaotic systems”. That doesn’t make them equivalent though. Some infinities are larger than others.
Trying to model the behaviour of a single human is an incredibly difficult task. Trying to model the behaviour of billions is harder. Then you need to blend in their relationships to eachother. Then you need to blend in their relationships with their means of sustainance. With their individual values. Etc etc etc.
I accept that some PORTONS of the models are pretty sound. Supply and demand curves? Sure.
I’ll hit you with a thought experiment:
If it’s the case that it’s just a matter of reading your econ textbook and then you can accurately model the economy, or even a small part of it, then extracting disproportionate wealth becomes a simple matter of doing some math.
Why isn’t every econ grad wealthy? Why are there wealthy people who run exactly the inverse plays? Why do the most powerful institutions require bailouts?
I’m not saying that the theory is bad, but it’s a masterbutory exercise. Applying the theory results is such disparate actual outcomes make it more like legend then law.
However, I personally think that the frequent rejection of that reality serves a different psychological purpose, which is the need to translate wealth distribution to an explainable system… Specifically one that explains favourably to people who already have the wealth.
Why am I rich and you’re poor? It’s simple: I merely understand the physics of the economy. You don’t. If you did, you would be where I am.
And, if someday you gain great wealth, it will be as a direct result of the actions you took, made with confidence as a result of unmistakable stimuli, that anyone could have done.
Understand me when I say I’m not discounting economic theory wholesale… Not at all. I am just saying giving it more credence than it truly deserves has a peripheral benefit in providing a justification for some kinda shitty social structures that exist now… That ALSO have science backing them. For example, the study of social mobility.
Trying to model the behaviour of a single human is an incredibly difficult task. Trying to model the behaviour of billions is harder. Then you need to blend in their relationships to eachother. Then you need to blend in their relationships with their means of sustainance. With their individual values. Etc etc etc.
Trying to model the behavior of a single eddy of wind is an incredibly difficult task. Trying to model the behavior of billions is harder. Then you need to blend in their relationships to eachother. Then you need to blend in their relationships with the causes of those individual eddies. With their individual values. Etc etc etc.
If it’s the case that it’s just a matter of reading your econ textbook and then you can accurately model the economy, or even a small part of it […]
It’s not the case. My entire comment was about why that’s not the case at all. Extracting disproportionate wealth is hard for the same reasons weather forecasting is hard. Not because of the theory, but because of the complexity of the system the theory describes.
I’m not saying that the theory is bad, but it’s a masterbutory exercise. Applying the theory results is such disparate actual outcomes make it more like legend then law.
You still haven’t shown how this is any different to applying the theory of weather forecasting, or applying the theory of plate tectonics and still failing to predict earthquakes, etc.
However, I personally think that the frequent rejection of that reality serves a different psychological purpose, which is the need to translate wealth distribution to an explainable system… Specifically one that explains favourably to people who already have the wealth.
You’re conflating the science of economics with the meta-discussion surrounding the politics of economics.
This is just like someone arguing that weather science is bullshit because we can’t successfully predict the weather, and it therefore only exists as an excuse to implement more damn liberal environmental policies.
The economist’s fundamental assumptions are wrong. The free market rational actor model is wholly incompatible with the ability of a finance or marketing industry to exist because marketing could never inform or convince anyone of anything and contracts can provide anything financialisation does without giving 10% of your income to someone who did nkthing. Given that both exist and together dominate the industry of the wealthiest countries, we know that none of it is real, and that the people pushing it also know this.
Psychology and physics are founded in empiricism, not post-hoc rationalisations of what the powerful wanted to do anyway.
The economist’s fundamental assumptions are wrong. The free market rational actor model is wholly incompatible with the ability of a finance or marketing industry to exist because marketing could never inform or convince anyone of anything and contracts can provide anything financialisation does without giving 10% of your income to someone who did nkthing.
This is either an intentional strawman of economic theory or a naive understanding based off a single Intro to Economics class.
It’s like arguing that physics’ fundamental assumptions are wrong because basic physics problems assume that cows are spheres with no air resistance.
Psychology and physics are founded in empiricism
A significant amount of modern economic research is empiricist, but even if it weren’t, empiricism and rationalism go hand-in-hand in scientific inquiry. Rationalism is what allowed Mendel to posit “units of inheritance” over a century before the existence of DNA was empirically verified, and Schwarzschild to posit the existence of black holes almost a century before black holes’ gravitational waves were first measured. Decades of productive research were had in advance of these empirical discoveries thanks to models built on rationalist inquiry, so “it’s not empiricist” isn’t quite the insult you seem to think it is.
Oh. You were serious with the “it doesn’t matter if it conflicts with reality if I thought a bit because it’s ‘rational’ and directly contradicting reality is the same as an approximation” schtick?
Ah, I see that I’ve made the mistake of engaging in this conversation in good faith when that was never your intention. I won’t make that mistake with you again.
If air pollution policy was set based on assuming all humans are spherical cows in a vacuum, you might have a coherent point, but when the dominant controlling power in your field is based on the assertion that we should just remove the air to make reality more like the models then your field is a laughing stock.
If I posit for a moment that you actually come from a sub-field interested in describing reality rather than altering reality to suit the wealthy, then you should rename what you do or get rid of the ones giving you a bad name. Clean up your shit or call what you do if you want to be taken seriously. Otherwise you get to be lumped in with the feckless ghouls your field holds up as experts.
It’s like arguing that physics’ fundamental assumptions are wrong because basic physics problems assume that cows are spheres with no air resistance.
As an engineer: I feel attacked. If you can’t approximate things to the point that you can do the math on the back of an envelope then is it really science?
We have a fairly solid understanding of an ideal economy. If the economy was run according to current theory, we’d avoid a lot of issues (and find new ones we would address, of course).
However, the economy is run according to political whims, so most of the economic theory gets thrown out the window. It’s pretty easy to run into major issues when nothing stays consistent for more than a couple years, and the interests of those in charge do not include a stable and sustainable economy.
Yeah I might be making the mistake of thinking that economic policy is made by economic scientists.
We don’t do that with climate, energy, education, or health… So I guess it’s not fair to make the assumption for economic matters either.
I guess like many other areas of social policy (which… I assume we agree economic policy is) it that I’m very… I don’t know… “Aware”, maybe of the limitation of fields driven primarily by study as opposed to more hands on experimental methods.
Yeah, policy is not made by economists. Which is both good and bad! Ideally you don’t want somebody who only looks at their own corner of the world running things, because they’ll end up sacrificing everything else to make that corner look good.
“If reality was the thing we made up, the thing we made up would be science” isn’t a great defense. Neoclassical economics is not science, it’s barely even a semi-coherent fairy tale.
It’s more “if people quit trying to break the system to enrich themselves, and the politicians actually agreed to empower the agencies which are supposed to oversee and regulate large companies and financial institutions, and we actually listened to the data instead of the soundbites that sound good as long as you don’t think about them much, we’d be much better off.”
Economists are not in charge of anything, politicians and rich people are. And they aren’t incentivized to run things like an economist, because then they would make less money.
Just because the people with an incentive to blow up the economy to make money end up blowing up the economy to make more money every few years doesn’t mean economics is at fault for that. It’s like saying climate science isn’t real because earlier projections of global warming were more optimistic, when the real reason is the science was suppressed and downplayed by the people making boatloads of money off fossil fuels.
The correct analogy would be if the climate deniers working for Chevron were held up as field experts, and that the institution of climate science stood behind them, then anyone who pointed it out was just told we need to organise agriculture on more +4.5 degree compatible terms.
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