ECONOMICS AS A SCIENCE

Cosmin-Cristian Florian
Andrei Cutur
I.C.E. - II

ABSTRACT
This homework is related to the idea that economics can be regarded as a science. The main aspects
debated are arguments that back this idea and concepts that deny it. After a brief introduction, there
will be presented different examples of people who,in time, have expressed their opinion on this
subject. Finally, some conclusions will be made.

Introduction
Economics is defined as the social science that studies the behavior of individuals, households,
and organizations (called economic actors, players, or agents), when they manage or use scarce
resources, which have alternative uses, to achieve desired ends. In other words the science which
studies human behavior as a relationship between given ends and scarce means which have alternative
uses." ( Lionel Robbins, An Essay on the Nature and Significance of Economic Science )
But many individuals think of physics, medicine or chemistry when they hear the word science.

What is a science and how is economics different?

At first glance, a science is a way of thinking that emphasizes putting forward basic hypotheses
and then doing controlled experiments that are set up to distinguish in stark relief whether each
hypothesis is right or wrong. Clearly economists cannot usually do controlled experiments in a
laboratory. Economists often are stuck with using historical or cross-country evidence to tease out what
might merely suggest a result. Political viewpoints and the everyday language used in economics make
unbiased statements or interpretations of results, or the understanding of ideas, imprecise and easily
misinterpreted. Economics is a science in some ways but not others.

Is economics a science?
There are only two possible answers to this question: yes or no.
Many people have expressed their opinion regarding this question throughout the last century by
mean of books, articles, debates. In the following pages I will present some of their arguments.
1. Yes, Economics Is a Science
According to Raj Chetty, a professor of economics at Harvard University, in his defense of the field
in The New York Times, the answer is: YES!
There is an old lament about the economist profession: if you ask three economists a question,
youll get three different answers.
This saying came to mind when the Nobel Memorial Prize in Economic Science was awarded to
three economists, two of whom, Robert J. Shiller of Yale and Eugene F. Fama of the University of
Chicago, whom might be seen as having conflicting views about the workings of financial markets. At

first blush, Mr. Shillers thinking about the role of irrational exuberance in stock markets and housing
markets appears to contradict Mr. Famas work showing that such markets efficiently incorporate news
into prices.
The sense among skeptics is that disagreements about the answers to certain questions suggest
that economics is a confused discipline, a fake science whose findings cannot be a useful basis for
making policy decisions. That view, however, is unfair and uninformed. It makes demands on
economics that are not made of other empirical disciplines, like medicine, and it ignores an emerging
body of work, building on the scientific approach of the above mentioned winners, that is transforming
economics into a field firmly grounded in fact. It is true that the answers to many big picture
macroeconomic questions, like the causes of recessions or the determinants of growth, remain elusive.
But in this respect, the challenges faced by economists are no different from those encountered in
medicine and public health. Health researchers have worked for more than a century to understand the
big picture questions of how diet and lifestyle affect health and aging, yet they still do not have a full
scientific understanding of these connections. Some studies tell us to consume more coffee, wine and
chocolate; others recommend the opposite. But few people would argue that medicine should not be
approached as a science or that doctors should not make decisions based on the best available evidence.
As is the case with epidemiologists, the fundamental challenge faced by economists, and a root
cause of many disagreements in the field, is the limited ability to run experiments. If we could
randomize policy decisions and then observe what happens to the economy and peoples lives, we
would be able to get a precise understanding of how the economy works and how to improve policy.
But the practical and ethical costs of such experiments preclude this sort of approach. (Surely we dont
want to create more financial crises just to understand how they work.)
Nonetheless, economists have recently begun to overcome these challenges by developing tools
that approximate scientific experiments to obtain compelling answers to specific policy questions.
Today, the most prominent economists focus on testing old theories and formulating new ones that fit
the evidence.

2. No, Economics Is Not a Science

Economists have faced a deluge of negative press in the past few years, ranging from criticisms
over the failure to forecast the financial crisis, to the more recent disbelief over the granting of the
Nobel Prize in Economics to three economists, two of whom hold views that can be said to be polar
opposites, as I mentioned in the previous paragraph. Indeed, the reputation of mainstream economics,

specifically macroeconomics, is arguably at its worst since the formation of the field in the 1930s, with
the beginning of the Great Depression.
It seems as though economics is fighting for its right to stay in the exclusive group of fields
deemed worthy enough to be called science, where subjects such as physics, chemistry, and
molecular biology reside comfortably. Some instead opt to call economics, along with psychology and
sociology, a social science, a vague term, often blurred with humanities, which is neither here nor
there. Nevertheless, the underlying implication behind this battle is that to be a science is to be
credible.

"If we expect an economic theory to behave like a theory of physics, with non-trivial predictions
about the future, we're never going to get one." - Charles Hugh-Smith of OfTwoMinds blog.

During the course of an online debate started in August 2013 on Mr. Hugh's blog, many
commentators have noted the obvious, that economics is a pseudo-science rather than a real science:
beneath the fancy quantification and math, economics is fundamentally the study of human behavior,
and that complex mix of dynamics cannot be reduced to a tidy econometric model that spits out
accurate predictions. One key element of science is that the results must be reproducible, that is, the
same experiment/conditions should yield the same results time and again. Economic models are not
applicable across all times and situations; a model might "work" in one era and in a very specific set of
circumstances, but fail in another era or in a similar set of circumstances.
Another reason all economic theories fail as scientifically verifiable models is that economics
boils down to a very simple dynamic: those in power issue financial claims on resources as a "shortcut"
way of gaining control of the resources without actually having to produce the resources or earn the
wealth via labor and innovation.

Conclusion
The advance of behavioral economics is not fundamentally in conflict with mathematical
economics, as some seem to think, though it may well be in conflict with some currently fashionable
mathematical economic models. And, while economics presents its own methodological problems, the
basic challenges facing researchers are not fundamentally different from those faced by researchers in
other fields. As economics develops, it will broaden its repertory of methods and sources of evidence,
the science will become stronger, and the charlatans will be exposed.

References
Lionel Robbins - An Essay on the Nature and Significance of Economic Science (1945);
Robert J. Shiller - Is Economics a Science? article from www.project-sindicate.org
(November 2013);
Alan Y. Wang - No, Economics Is Not a Science article from www.thecrimson.com
(December 2013);
Raj Chetty - Yes, Economics Is a Science article from www.nytimes.com (October 2013);
Charles Hugh-Smith - Why isn't there a demonstrably correct economic theory? blog article
on www.oftwominds.com (August 2013);