Is economics a science?

[Red Iron Crown]

But then you have the issue of some economists arguing that markets should never be corrected. That's ideology.

"Correction" in market economics is generally a euphemism for "horrendous crash".

Lots of ideology in other sciences, too, for that matter. People twist science to deny climate change and evolution for ideological purposes, though it's usually easier to demonstrate where the flaws in their methodology lay than with economics.

[78stonewobble]

Economists routinely predict when the market needs a correction, and they do. The problem is that there is a lot of "pseudoscience" in economics where observations and statistics are manipulated to support conclusions or theories based on political agendas, which muddies the waters in finding what is accurate and what is not. Meteorology suffers from this when it comes to climate change models.

You do have a good point that weather is much easier to model accurately than large scale human economic behavior, so I guess one could say that meteorology is a "harder" science.

Similarly, an economist can predict no market crashes every day for a year with >99% accuracy.

If I remember correctly from a "documentary", experts: Ie. economists are just about as accurate, in their predictions, as pure random guessing, actually... a little less.

[CaptainKipard]

My biggest worry with this topic is mentioning things like the "rising tide" and "trickle down" effect. Are these even real, or is that just something business people say.

Edited April 26, 2014 by Cpt. Kipard

[Red Iron Crown]

If I remember correctly from a "documentary", experts: Ie. economists are just about as accurate, in their predictions, as pure random guessing, actually... a little less.

Not to harp on the point, but I've seen similar analyses of meteorological predictions. Such critiques generally cherry-pick the most difficult predictions to make, while ignoring the easier predictions that are almost always correct (within statistical limitations).

I'm not going to argue that economist's predictions are always accurate, or even that there is consensus about which models are the most accurate. But such things do not a science make. Science is the development of mathematical models to explain and predict real world observations; at its heart that's what economics is about, too.

Edit to add:

My biggest worry with this topic is discussing this topic is mentioning things like the "rising tide" and "trickle down" effect. Are these even real, or is that just something business people say.

"Trickle down" is the 80s Republican theory that by providing financial breaks to the wealthy they will spend more and their additional wealth will "trickle down" to the less fortunate. It's generally been discredited as it just further concentrates wealth in the upper classes.

Not familiar with "rising tide" so I can't speak to it.

Edited April 26, 2014 by Red Iron Crown

[rkman]

Economists routinely predict when the market needs a correction, and they do.

Nice of you to move the goal posts, but it's about total failure to predict crashes, not about corrections. Whatever need for corrections they predict, it is not preventing crashes.

The problem is that there is a lot of "pseudoscience" in economics

Well then you agree with me that economics is an immature science.

[xcorps]

"Trickle down" is the 80s Republican theory that by providing financial breaks to the wealthy they will spend more and their additional wealth will "trickle down" to the less fortunate. It's generally been discredited as it just further concentrates wealth in the upper classes

Only discredited by statists and other liberals who have a fundamental vested interest in revisionism.

If by "further concentrates wealth in the upper classes" you mean "increase the earnings and spending power of every demographic of the population" the you'd be correct because that's what really happened.

I'd love to debunk what the college professors and mainstream media teach (with real sources and facts, not rhetorical vacuum buttressed with propoganda) but just by replying to your post I think I've evidenced the impropriety of this subforum for economics as a science. :-)

[Red Iron Crown]

Nice of you to move the goal posts, but it's about total failure to predict crashes, not about corrections. Whatever need for corrections they predict, it is not preventing crashes.

As I mentioned in a previous post, "market correction" is a fairly standard euphemism for "crash", so there's no goal post shifting here. Preventing crashes is one of the big goals of economics, but we haven't discovered a method to do so yet. Predicting crashes is fairly routine for reasonable accuracy, i.e. no one can say what day a crash will occur, but it is possible to narrow it down to a window of a year or two.

Well then you agree with me that economics is an immature science.

Not at all, though I agree with you that it is a science. Economics have been studied since humans started to count (I would argue it's why we started to count). Accounting and bookkeeping, the basic tools of economics, are mostly solved problems with very little ambiguity. Most economic analyses are far smaller scale than the big macroeconomical problems that are almost impossible to solve. Those smaller scale types of economics are mature and reliable.

My point about "pseudoscience" was that, because of the nature of what economics measures and predicts, people often have strong ulterior motives to misinterpret or distort economic observations and predictions, and this is made easier by the low level of economic education possessed by the general population. It's far from the only science with that problem, though. Nutrition/fitness is crawling with people hawking bad theories, climate modeling has become a mockery in the global warming debate, etc. That doesn't make nutrition and climate modeling any less scientific; it just means there's a lot of bunk out there being passed off as fact.

[Red Iron Crown]

Only discredited by statists and other liberals who have a fundamental vested interest in revisionism.

If by "further concentrates wealth in the upper classes" you mean "increase the earnings and spending power of every demographic of the population" the you'd be correct because that's what really happened.

I'd love to debunk what the college professors and mainstream media teach (with real sources and facts, not rhetorical vacuum buttressed with propoganda) but just by replying to your post I think I've evidenced the impropriety of this subforum for economics as a science. :-)

I think we may be straying into the forbidden "politics" category of discussion here, so I'd rather just let it slide. I'd be happy to discuss it further by PM if you like.

That said, because different theories exist doesn't make economics unscientific, it just means that some phenomena aren't well understood.

[xcorps]

That said, because different theories exist doesn't make economics unscientific, it just means that some phenomena aren't well understood.

I agree, but you can't have a discussion of economics without it delving into into politics, even discussing something as mundane and theoretical as the Laffer Curve.

At some point every non-homework discussion ends up being a debate about Keynsian vs Austrian, even if the participants don't realize it.

[Red Iron Crown]

I agree, but you can't have a discussion of economics without it delving into into politics, even discussing something as mundane and theoretical as the Laffer Curve.

At some point every non-homework discussion ends up being a debate about Keynsian vs Austrian, even if the participants don't realize it.

That's so true, at least for high level economics.

Most people forget all the solved lower level problems in economics, though, and that's a shame.

[78stonewobble]

Not to harp on the point, but I've seen similar analyses of meteorological predictions. Such critiques generally cherry-pick the most difficult predictions to make, while ignoring the easier predictions that are almost always correct (within statistical limitations).

I'm not going to argue that economist's predictions are always accurate, or even that there is consensus about which models are the most accurate. But such things do not a science make. Science is the development of mathematical models to explain and predict real world observations; at its heart that's what economics is about, too.

Edit to add:

"Trickle down" is the 80s Republican theory that by providing financial breaks to the wealthy they will spend more and their additional wealth will "trickle down" to the less fortunate. It's generally been discredited as it just further concentrates wealth in the upper classes.

Not familiar with "rising tide" so I can't speak to it.

How is it with meteorological predictions? After 3-5 days something their accuracy falls to around 50 percent? I think the problem with economics is that, some people, expect even better accuracy for that. In some ways human interactions are probably even more unpredictable than the weather and if we can only predict the weather a week ahead? Then you're bound to have problems if your betting you're correct a year, 5 years or even 10 years ahead with your economic predictions.

[Red Iron Crown]

How is it with meteorological predictions? After 3-5 days something their accuracy falls to around 50 percent? I think the problem with economics is that, some people, expect even better accuracy for that. In some ways human interactions are probably even more unpredictable than the weather and if we can only predict the weather a week ahead? Then you're bound to have problems if your betting you're correct a year, 5 years or even 10 years ahead with your economic predictions.

For large scale problems, yes, the accuracy is not as good as many would like. For small scale problems, sometimes it's just basic arithmetic.

A very simple economic problem with a simple solution, just as an example (don't pick apart my numbers, I know jack about farming):

A small agrarian town has 50 inhabitants. By empirical observation they've seen that they eat an average of 1kg of food per day and one person can farm 1000kg of food from an acre of land in a year.

Questions:

How many acres of land need to be farmed to make the town self sufficient in food?

How many acres of land would need to be farmed to support 100 non-farmers? What would the minimum population have to be for this to occur?

This is at the very, very simple end of the specturm, but there most certainly are problems for which economics provides useful, reliable results. Some of which are much more complex than the overly simplistic example given.

[jwenting]

I think we may be straying into the forbidden "politics" category of discussion here, so I'd rather just let it slide. I'd be happy to discuss it further by PM if you like.

That said, because different theories exist doesn't make economics unscientific, it just means that some phenomena aren't well understood.

economics IS politics... there's many schools of economics, each based solidly on the political ideology of its inventor.

- - - Updated - - -

For large scale problems, yes, the accuracy is not as good as many would like. For small scale problems, sometimes it's just basic arithmetic.

A very simple economic problem with a simple solution, just as an example (don't pick apart my numbers, I know jack about farming):

A small agrarian town has 50 inhabitants. By empirical observation they've seen that they eat an average of 1kg of food per day and one person can farm 1000kg of food from an acre of land in a year.

Questions:

How many acres of land need to be farmed to make the town self sufficient in food?

How many acres of land would need to be farmed to support 100 non-farmers? What would the minimum population have to be for this to occur?

This is at the very, very simple end of the specturm, but there most certainly are problems for which economics provides useful, reliable results. Some of which are much more complex than the overly simplistic example given.

that's mathematics, not economics...

economics would add 'now what if the government subsidised the farmers to not grow food by $100 per acre, then subsidised food production by $10 per ton, how much food would end up being produced?"

[CaptainKipard]

If by "further concentrates wealth in the upper classes" you mean "increase the earnings and spending power of every demographic of the population" the you'd be correct because that's what really happened.

Yeah I'm not sure that's correct. You seem to be repeating talking points, so if you have the numbers then show them.

As far a I know:

Adjusted for inflation, lower and middle class wages in America have risen remarkably slowly compared to the wages of the upper class.

Adjusted for inflation and productivity, lower and middle class wages have actually dropped, meaning people are working disproportionally harder than what their wages reflect.

I think when people say that "trickle down" works, what they're really saying is that "trickle down" could work. The data doesn't seem to bear that out, probably because a businessman is first and foremost responsible for the growth of the company, not for providing unusually high pay. And in a deregulated environment a living wage is sometimes considered unusually high.

Can you say "Walmart"?

Edited April 26, 2014 by Cpt. Kipard

[Red Iron Crown]

economics IS politics... there's many schools of economics, each based solidly on the political ideology of its inventor.

No. Economics is the study of scarcity and how people deal with it. Politics is the application of power and influence. While they are intertwined, they are not the same thing.

that's mathematics, not economics...

economics would add 'now what if the government subsidised the farmers to not grow food by $100 per acre, then subsidised food production by $10 per ton, how much food would end up being produced?"

It's mathematics applied to a simple economic problem. Science! Your example is a much more complex one requiring a less clearly-defined model, but it's the same breed of cat.

[xcorps]

Yeah I'm not sure that's correct. You seem to be repeating talking points, so if you have the numbers then show them.

As far a I know:

Adjusted for inflation, lower and middle class wages in America have risen remarkably slowly compared to the wages of the upper class.

Adjusted for inflation and productivity, lower and middle class wages have actually dropped, meaning people are working disproportionally harder than what their wages reflect.

I think when people say that "trickle down" works, what they're really saying is that "trickle down" could work. The data doesn't seem to bear that out, probably because a businessman is first and foremost responsible for the growth of the company, not for providing unusually high pay. And in a deregulated environment a living wage is sometimes considered unusually high.

Can you say "Walmart"?

I love how people these days drop to the default "TALKING POINTS" attack as an attempt at a rebuttal.

First, a little sidenote in history:

In 1980 the top 1% of income taxpayers paid 19.1% of total income taxes, but by 1988, when marginal rates had been roughly cut in half, the top one-percent paid 27.5% of the total.

the country was beset by double-digit inflation in 1979, 1980, and 1981. Second, that inverse harbinger of confidence in all paper currencies, the price of gold, was pushing $900 – and silver was also at an all-time high. Third, the U.S. dollar had weakened steadily, since its link to gold had been severed by Nixon in Aug. 1971.

the tax system was becoming punitive even for middle-class families, “bracket creep†raised rates from 22% in 1965 to 49% in 1980 – and the highest income taxpayers faced a 70% federal marginal rate, and an 11% D.C. tax on top of that.

1)Using a weighted-average method of estimating expected price increases, expected inflation fell from about 12% in 1981 to only 2.5% in 1988

2) Tax revenues increased by 375 billion by 1989

3) From 1980 to 1995 24 million new jobs were created. Contrast to the EU with a population 1/3 higher and only creating 9 million jobs in the same time period

4) Overall employment increased by 17%. Hispanic employment increased by 45%, Blacks by 30% and women by 20%. 90% of new jobs were full time skilled positions.

5) Looking at the Japanese yen, the exchange rate rose from 180 in 1980 to 260 yen in 1985

6) From 1980 to 1985, the dollar also rose by 37% against a basket of ten major currencies, with significant negative implications for the U.S. export sector’s competitiveness. This led to the so-called Plaza Accord, where the G-5 agreed to bring the dollar down to a more competitive level.

7) President Carters administration created a "Misery Index". This measure involves adding the unemployment rate and the rate of inflation. Nearly 20 in 1980, under Reagan this index declined to just under 10 by 1989. It was 7 in 2000.

8) 5% of those in the bottom income group in 1975 were still there in 1991. 2 percent of the bottom fifth failed to attain higher living standards by the early 1990's.

9) Only 171 of the original 400 richest Americans listed in Forbes magazine in 1982 were listed in the magazine’s 1991 issue

10) Overall, non- monetary benefits as a percentage of wages increased by a third from 1970-1991, with the biggest hikes beginning in 1985 when the driver of new job growth became manufacturing. If we add these fringes to calculate total compensation, we find a cumulative gain in total compensation of more than 17 percent.

So yeah, I got some numbers.

Thanks to Professor Viksnins of Georgetown, Michael Cox and Richard Alm formerly of the Dallas Federal Reserve Bank and economist Lawrence Lindsey.

Edited April 26, 2014 by xcorps

[CaptainKipard]

I love how people these days drop to the default "TALKING POINTS" attack as an attempt at a rebuttal.

No, the rebuttal came after. It was an observation. I expected you to know the difference, and not accuse me of not knowing it. We're just having a conversation. Can we do that?

As for the numbers I already see problems with your copy-paste job but it'll take a wall of text to rebut this. That's the problem with logical mistakes. They take minutes to make and days to fix. I'm going to have to get back to you.

[xcorps]

No, the rebuttal came after. It was an observation. I expected you to know the difference, and not accuse me of not knowing it. We're just having a conversation. Can we do that?

As for the numbers I already see problems with your copy-paste job but it'll take a wall of text to rebut this. That's the problem with logical mistakes. They take minutes to make and days to fix. I'm going to have to get back to you.

LOL, good luck with that.

[CaptainKipard]

LOL, good luck with that.

Thankyou such a nice fellow.

Edited April 26, 2014 by Cpt. Kipard

[rkman]

Predicting crashes is fairly routine for reasonable accuracy, i.e. no one can say what day a crash will occur, but it is possible to narrow it down to a window of a year or two.

It's just that those economists who do (correctly) predict crashes, have essentially no influence in business and politics. Economics may be a science, but applied economics in politics and business including the financial sector, is dominated by economists with "ulterior motives".

It is as though the field of applied biology (medicine) would be dominated by creationists. Proverbially (sometimes literally) people are dying left and right under the hand of medical doctors, but hey it's the best they can do. And this while the knowledge to do much better is available.

Given the broad importance of the economy to society, this is a much worse state of affairs than quackery in fitness.

...if economics is a science, does that mean economists are scientists? Or can it be argued that many if not most so-called economists are the equivalent of engineers?

[CaptainKipard]

xcorps, why didn't you include any new data?

Also why didn't you talk about real wages? I just realised everything in that "ANALYSIS" of yours was a red herring. You didn't respond to what I said at all.

It took me a few minutes of googling only to find that since the '70s productivity has increased while real wages have been slowly decreasing. Where's the trickling down? It doesn't exist.

[Red Iron Crown]

It's just that those economists who do (correctly) predict crashes, have essentially no influence in business and politics. Economics may be a science, but applied economics in politics and business including the financial sector, is dominated by economists with "ulterior motives".

It is as though the field of applied biology (medicine) would be dominated by creationists. Proverbially (sometimes literally) people are dying left and right under the hand of medical doctors, but hey it's the best they can do. And this while the knowledge to do much better is available.

Given the broad importance of the economy to society, this is a much worse state of affairs than quackery in fitness.

Nobody likes the bearer of bad news, and politicians are desperate to not have bad news delivered during their terms that they can't blame on their predecessors. It's a rare political type that has the moral courage to say, "This really bad thing is about to happen, here's my plan to avert it or mitigate the damage." Especially when their opponents can say, "Nothing bad is going to happen, that other guy is a Chicken Little," which the electorate is likely to believe and then conveniently forget when the crash comes.

I think the best solution to this problem is better economic education for everyone, but I'm not holding my breath.

...if economics is a science, does that mean economists are scientists? Or can it be argued that many if not most so-called economists are the equivalent of engineers?

It's a not a perfect correlation, but the economists develop the theories so they are the scientists. The political and financial system leaders are responsible for creating laws and policies that put those theories into practice, so they're the engineers.

[vger]

I think the best solution to this problem is better economic education for everyone, but I'm not holding my breath.

Heh, not going to happen. The paradox is, while everyone is whining about better education... educated people are bad for business. They make more calculated decisions, which means they're more thrifty and independent. Businesses want us to be impulsive, not critical thinkers. And they definitely don't want us to be able to spot all of the classic marketing tricks that get employed in every TV ad.

Edited April 27, 2014 by vger

[CaptainKipard]

And they definitely don't want to be able to spot all of the classic marketing tricks that get employed in every TV ad.

Yep. There was a study that showed people will buy an item more readily if it's marked as "on sale" compared to an item that costs the same amount but is "not on sale". Shops do that very often. One clothing company I think (I forget which one) even lost a lot of money after doing the honest thing and showing people actual prices (e.g. $50) instead of doing this trick (was $70, now $50).

*sigh*

Edited April 27, 2014 by Cpt. Kipard

[xcorps]

xcorps, why didn't you include any new data?

Also why didn't you talk about real wages? I just realised everything in that "ANALYSIS" of yours was a red herring. You didn't respond to what I said at all.

It took me a few minutes of googling only to find that since the '70s productivity has increased while real wages have been slowly decreasing. Where's the trickling down? It doesn't exist.

What new data? We're talking about historically established fact.

What do you mean I didn't respond? I stated that real wealth and purchasing power increased directly as a result of Reagan's economic plans, then I proved it with facts.

Productivity is not a measure of purchasing power or wealth. If the poorest quintile see's an increase of wealth that brings 95% of it's demographic UP the wealth scale, that's a clear indicator of a wealth increase.

More people went from the bottom quintile to the top quintile of income during the recovery of the 1980's than at any other time in history. More new millionaires were created during that time period than at any other time in history.

Those facts are indisputable. You cannot dispute the fact that economic growth was equal to about the size of the economy of West Germany, or that the GDP rose faster than the previous 3 administrations.

In fact, the only argument I ever hear against the true economic growth of the period is the (terribly irrelevant) "income disparity" argument...an argument created by liberal and statist economists that is deeply flawed with logical fallacy.