Quote of the Day: The Problem With Economics
From Matt Yglesias, talking about the current state of macroeconomic theorizing:
It's far too easy for people with the relevant skills to demonstrate just about anything.
Technically, of course, this is true of just about any field. I've seen plenty of sophisticated debunkings of Einstein's theory of relativity, for example. Luckily, it turns out that physics is a fairly simple field, which makes it possible for the physics community to gather enough empirical data to keep the cranks safely at bay. If your GPS device gets you safely home, then the theory of relativity can't be too wrong, after all.
At the same time, climate science is only moderately more complex than relativistic mechanics, and its standing in the relevant scientific community is very nearly as strong. What's more, there's a ton of empirical data suggesting that the globe is indeed warming dangerously. But that hasn't done it much good. In the end, it turns out that the reason the theory of relativity is widely accepted in the outside world has very little to do with how strongly the physics community believes it. It has to do with the fact that, unlike climate science, it doesn't gore any powerful oxes. (Oxen?)
Sadly, macroeconomics combines the worst aspects of just about everything. It's wildly complex. Its fundamental precepts change over time as the basis of the economy changes. Reliable experimental evidence is practically impossible to come by. Even the effect of fairly simple changes to basic quantities—hell, even the direction of the effect—is often contested. And of course, it's a field that gores just about every ox in existence. So there's always a ready audience for any result, no matter how strained an interpretation of reality it takes to get it.
The part I can't figure out is why there's so much contention even within the field. In physics and climate science, the cranks are almost all nonspecialists with an axe to grind. Actual practitioners agree pretty broadly on at least the basics. But in macroeconomics you don't have that. There are still polar disagreements among top names on some of the most basic questions. Even given the complexity of the field, that's a bit of a mystery. It's understandable that economics is a more politicized field than physics, but in practice it seems to be almost 100 percent politicized, with the battles fought out by streams of Greek letters demonstrating, as Matt says, just about anything. I wonder if this is ever likely to change? Or will changes in the real world always outpace our ability to build consensus on how the economy actually works?