There’s been some debate in economist circles about how to improve the field and apply a more empirical approach. For instance, Noah Smith says:
“what I actually propose is to create an econ “lab sequence” just for empirics, similar to what they do in physics.
I also think that there should be two versions of intro econ – one for econ majors, which is more advanced and mathematical, and one for people who just want to learn some economics ideas. This is also similar to how physics departments and math departments do things.”
This sounds great in theory. But the problem is that economics is nothing like physics. In physics you have an agreed upon set of general principles which form a basis of understanding. From there, physicists can use these principles to perform experiments on unknown hypotheses building on empirical evidence that has already been developed. In economics you have competing sets of general principles and various economists performing experiments using data that is generally useless (due to small or inapplicable data sets) to try to prove what is generally a political position.
This is why undergrads are upset with economics. Yes, there’s a lack of empirics, but more than that, it’s a lack of agreed upon general principles that give the appearance of a science that comes across more like political pandering than anything else (primarily because the various “schools” and their set of principles are built around political views more than empirical views).
I generally agree with Thomas Piketty who said:
“To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.”
This obsession with math and trying to perform experiments like the hard sciences can be problematic because there isn’t even an agreed upon set of general principles from which economists work. Frankly, I don’t know if there will ever be a time when economists all agree on general principles to the same extent that physicists do. The natural biases and lack of reliable data makes it very difficult to formulate an agreed upon set of general principles.
What is money? What causes inflation? What causes unemployment? These are questions that one would think should form the basis for a set of general principles, but modern day economists simply do not come close to agreeing on the answers to these questions.
As a non-economist trying to objectively view the field with constructive criticism I think this is a big problem because the inability to agree on a set of general principles means the rest of the discussion is mostly a waste of time that falls more along party lines than scientific lines.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.